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BBCWatcher

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A couple of hundred dollars.
OK, let's suppose that's S$300/month, equal to S$3,600/year. One possible approach for a long-term investor (who is not a U.S. person) would be this combination:

1. POSB Invest-Saver: S$100/month into G3B (=S$1,200/year).

2. S$1,900/year (or S$950 every 6 months) invested in IWDA or VWRA via Standard Chartered. [Or, if IBKR Lite becomes available in Singapore in the future, switch to S$950 every 6 months into IWDA or VWRA via IBKR Lite.]

3. S$500/year into a Singapore Savings Bond or into MBH via OCBC's Blue Chip Investment Plan (BCIP). BCIP is a monthly program, so you'll need to issue two instructions to OCBC per year according to their deadlines: one "resume investment" instruction, then another "suspend investment" instruction.

The input allocations according to this combination would thus be:

Singapore Dollar Denominated Bonds: ~13.9%
SGX Listed Stocks: ~33.3%
Globally Listed Stocks: ~52.8%

And that'd be a decent split for a long-term investor planning to retire in Singapore. I wouldn't even worry about rebalancing for the first 5 years or so. Thereafter, and as your monthly savings flow increases, you can rebalance once per year.
 

celtosaxon

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BBCWatcher said:
... U.S. tax returns

All good points. I was not aware about the foreign post mark timing. I have always gotten my returns in the mail at least a month prior to the April deadline, never needed the automatic extension. The only issue I have had is not knowing if the IRS received my return. So what I’ve been doing is requesting a transcript around July, and it takes 4-6 weeks to receive it (just so I can be sure they got my return). Fortunately I have been diligent about this from the very beginning, but it took many, many years to learn all of the ins and outs.

Even now I spend about 40 hours each year doing my taxes, keeping myself updated and doing in-depth research in new areas. It never ceases to amaze me how complex the US tax code is, at times it seems like it was purposely written to maximize future employment of people to support it.

I think you could take just about any US person living abroad and after some digging, easily find something (if not many things) outside of compliance. Technically speaking, even a stored value card with a small balance could be reportable, or a credit card with a credit balance at any time during the year. How about a deposit held by Singtel, SP Services or Starhub? Are those reportable, and are they considered a trust? Seems like there is no end to the insanity.

Hopefully the proposed residency based taxation and same county exemption laws will be passed someday, but it seems doubtful.
 

BBCWatcher

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The New York Times has published an important OpEd from David Leonhardt that's getting a lot of justified attention. He reports that, according to the most recent (2018) statistics compiled by economists Emmanuel Saez and Gabriel Zucman, and for the first time in history, the 400 wealthiest American households pay a lower net effective tax rate (local, state, and federal taxes combined) on their income than every other income group does. Their net effective tax rate was 23%, lower than for every other income group. In 1950 the 400 wealthiest American households paid a net effective tax rate of 70%, and in 1980 it was 47%.

The online edition of the OpEd (linked above) features an infographic showing the striking progression of net effective tax rates on income by income group from 1950 through 2018. Net effective tax rates have plummeted for the wealthiest households and crept upward for practically everyone else.

What happened? Most recently, the Trump/Republican Party-supported tax changes have enhanced the "S Corporation loophole" and reduced the top marginal tax rate for the wealthiest Americans, so that's helped them. But it's been a long war of attrition, and the wealthiest Americans have won big.

Leonhardt writes: "The American economy just doesn’t function very well when tax rates on the rich are low and inequality is sky high. It was true in the lead-up to the Great Depression, and it’s been true recently. Which means that raising high-end taxes isn’t about punishing the rich (who, by the way, will still be rich). It’s about creating an economy that works better for the vast majority of Americans.

"In their book, Saez and Zucman sketch out a modern progressive tax code. The overall tax rate on the richest 1 percent would roughly double, to about 60 percent. The tax increases would bring in about $750 billion a year, or 4 percent of G.D.P., enough to pay for universal pre-K, an infrastructure program, medical research, clean energy and more. Those are the kinds of policies that do lift economic growth.

"One crucial part of the agenda is a minimum global corporate tax of at least 25 percent. A company would have to pay the tax on its profits in the United States even if it set up headquarters in Ireland or Bermuda. Saez and Zucman also favor a wealth tax; Elizabeth Warren’s version is based on their work. And they call for the creation of a Public Protection Bureau, to help the I.R.S. crack down on tax dodging."

It's highly likely the same sort of phenomenon is present in Singapore. Singapore doesn't have any general wealth, estate, inheritance, gift, dividend, interest, or capital gains taxes. Singapore levies a goods and services tax (GST), excise taxes (on tobacco, alcohol, and petrol as examples), some import duties, property taxes, some stamp duties, a nascient carbon tax, income tax primarily on earned income (income from work), and a corporate profits tax. I'm not aware of any efforts similar Emmanuel Saez's and Gabriel Zucman's to measure the net effective tax rate that Singapore's wealthiest households pay -- does anyone know where such statistics are available? -- but it's hard to imagine it wouldn't be a lower rate than what Singapore's middle class households pay.
 
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MajeMaje

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OK, let's suppose that's S$300/month, equal to S$3,600/year. One possible approach for a long-term investor (who is not a U.S. person) would be this combination:

1. POSB Invest-Saver: S$100/month into G3B (=S$1,200/year).

2. S$1,900/year (or S$950 every 6 months) invested in IWDA or VWRA via Standard Chartered. [Or, if IBKR Lite becomes available in Singapore in the future, switch to S$950 every 6 months into IWDA or VWRA via IBKR Lite.]

3. S$500/year into a Singapore Savings Bond or into MBH via OCBC's Blue Chip Investment Plan (BCIP). BCIP is a monthly program, so you'll need to issue two instructions to OCBC per year according to their deadlines: one "resume investment" instruction, then another "suspend investment" instruction.

The input allocations according to this combination would thus be:

Singapore Dollar Denominated Bonds: ~13.9%
SGX Listed Stocks: ~33.3%
Globally Listed Stocks: ~52.8%

And that'd be a decent split for a long-term investor planning to retire in Singapore. I wouldn't even worry about rebalancing for the first 5 years or so. Thereafter, and as your monthly savings flow increases, you can rebalance once per year.

Thank you so much for your detailed recommendation!
 

celtosaxon

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BBCWatcher said:
... effective tax rate of 23%...

That is still higher than Singapore’s top tax rate of 22%. Eventually a “soak the rich” policy just leads to an exodus of wealth. Money always goes where it is treated best. But I do find it strange that CEO compensation in the US is so extreme, do shareholders really think they are getting their money’s worth?
 

BBCWatcher

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That is still higher than Singapore’s top tax rate of 22%.
That's Singapore's top marginal income tax rate.

Emmanuel Saez and Gabriel Zucman calculated total net effective tax rates. For those taxpayers in Singapore in the top marginal income tax bracket, their total net effective tax rate will be pushed down in one direction (due to their taxable income in lower income tax brackets) and pushed up in another direction (due to other taxes -- and I listed them). We don't have such statistics for Singapore (that I'm aware of anyway) to know what the outcome is.

Eventually a “soak the rich” policy just leads to an exodus of wealth.
No it doesn't. Not in the U.S. context anyway, which has status-based taxation, an expatriation tax, etc. Emmanuel Saez and Gabriel Zucman debunk that myth quite convincingly, and the OpEd (please go read it) summarizes some of their debunking. One compelling point they make is that the U.S. actually had 60+ percent total net effective tax rates on the very wealthiest households for decades. Other countries still do. (Denmark, Norway, and Sweden are lovely places to live!)

But let's suppose for sake of argument a higher net effective tax rate on the wealthiest households leads to an "exodus of wealth." What does that even mean, and why would it be bad? Wealth accumulation and preservation has astonishingly little to do with productivity, talent, innovation, creativity, etc. Quite the opposite. For example, Bill Gates helmed Microsoft, and under his watch the company was convicted of illegal monopolistic behaviors. I don't think there's any serious debate against the proposition that Microsoft stymied and retarded innovation for a decade or more in the technology sector. But Bill Gates, among others, became very wealthy in the meantime -- and Bill Gates, among others, happens to favor higher total net effective tax rates on the wealthiest Americans.

Let's take hedge fund managers who enjoy the carried interest loophole as another example, and let's suppose they essentially didn't exist. What social and economic value would be lost? Would the U.S. economy have any difficulty efficiently allocating capital in their absence? No, that's absurd on its face.

I really, really don't think you're making strong arguments.
 

celtosaxon

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celtosaxon said:
I really, really don’t think you’re making strong arguments

I read the article. I do not disagree with the wealthy paying their fair share, however, they site historical evidence from the 70’s as a basis for predicting what would happen if tax rates were increased like they were back then. Today we live in a far more globalized world. Corporate inversions and renunciations are at an all time high, and global competition for capital and wealth has never been more intense (refer to the two articles below). Not saying higher taxes would open the floodgates, but the trend will surely continue.

https://www.wsj.com/articles/invers...r-tax-edge-from-foreign-addresses-11564662353

https://www.forbes.com/sites/robert...ip-hits-new-record-tax-bill-wont-change-that/
 

BBCWatcher

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Today we live in a far more globalized world.
In some ways, but keep in mind there were no immigration controls to speak of until the 1920s. Also, global jet travel has well over 50 years of history.

Corporate inversions and renunciations are at an all time high....
Got any data on that? Regardless, the economists presenting these new data have an excellent answer: a corporate minimum tax. It’s already happening, with Europe leading the way at the moment.

This stuff isn’t rocket science, honestly. Governments know how to levy and collect taxes if they want to. In fact, they’ve got more and better tools than ever, such as “Big Data” and analytics tools. The political actors agitating for even lower taxes on the wealthiest entities ably demonstrate this basic fact; otherwise they wouldn’t be trying so hard.
 

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Hi BBC,

I have 800 - 1000 SGD per month to spare for investment. Could you kindly provide some insights to invest in stocks or bonds/ both?
I had invested in SSB but the rates are too low now so I have stopped after Jan 2019.

Thank you!
 

dgenex

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Hi, been reading your advice on the forum and its been really helpful for beginner investor like me!

Wanted to ask are there big differences between A35 and MBH?

And whats the reason for suggesting MBH over A35?

Thanks!

Sent from Xiaomi REDMI NOTE 7 using GAGT
 

ChinoGirl

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Hi BBCWatcher,

Is there a tipping point before we should consider rebalancing? I have been investing small amounts since 3 month plus ago, and have invested about usd18,500 in IWDA (via IBKR); SGD1600 in MBH (via OCBC) and SD2800 in G3B (via POSB).
MBH doesn’t seem to be moving much (yet) so I doubt I will be able to sell it and buy more IWDA/G3B when November comes.

Plan to rebalance once or at most twice a year.
There has also been a change of plans-initially wanted to put Sd100 k in my entire portfolio but my spouse has some other plans for my SGD50k. I am left with SGD50k, and it will take me one more month to reach my target allocation in IWDA (65%), 9 months for G3B(15%), and 5 months for MBH(20%).

Should I just dump the whole sum in for G3B and MBH, and incur the much higher sale charges, or just follow the flow of time to get the money in?
 

BBCWatcher

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I have 800 - 1000 SGD per month to spare for investment. Could you kindly provide some insights to invest in stocks or bonds/ both?
What are you saving for, and how far away is that goal?

Wanted to ask are there big differences between A35 and MBH?
And whats the reason for suggesting MBH over A35?
A35 invests in Singapore Government Securities, and MBH invests in high quality Singapore dollar denominated corporate and agency bonds.

For long-term investors planning to spend Singapore dollars in the future (and who are not U.S. persons), MBH is generally a better choice since it's likely to have a higher return while still offering a reasonable risk profile.

Plan to rebalance once or at most twice a year....
That's fine.

Should I just dump the whole sum in for G3B and MBH, and incur the much higher sale charges, or just follow the flow of time to get the money in?
Why is there a higher sales charge? Do you mean in absolute dollars (but the same percentage)? That shouldn't dissuade you. The cost percentages are what really matter.
 

OneBen

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Hi

I'm saving for retirement and looking for a stable investment if possible.
30 this year and intend to save for a long period. maybe 25 - 30 years.
What would be your recommendations? Thanks.
 
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BBCWatcher

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I'm saving for retirement and looking for a stable investment if possible.
30 this year and intend to save for a long period. maybe 25 - 30 years.
What would be your recommendations?
And where do you plan to retire?
 

kram62

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And where do you plan to retire?
Not OP but what when one doesn't know where to retire. My wife and I are from different countries with different rights to abode (non overlapping), we are currently settled for the foreseeable future in sg (no time limit for now).

Don't really plan for now to live and/or retire in any of our respective home countries. Where we'll be in 10, 20, 30 years is a big question mark.

So for now I am mostly following the approach to invest in worldwide ETFs (IWDA for starter) with SSBs from last year as emergency fund and starting bond component.

Any other tip for someone who doesn't know where retirement will be?
 

jagaga

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I'm saving for retirement and that will be another 30-35 years (currently 28 y.o). SG citizen and most likely retire in SG.
 

celtosaxon

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Why do you mention “stable investment if possible” if you have a 25-30 year time horizon?

Would it bother you if your investments lost half their value after 5 years if they still ended up doubling after 20 years?

Generally, the longer your time horizon, the more risk you can (and should) take on, which means less stability in shorter term (greater risk) but higher returns in the longer term (compared with safer investments).

However, if large swings in the market are going to keep you up at night, it may not be worth the roller coaster ride, for you.

Hi

I'm saving for retirement and looking for a stable investment if possible.
30 this year and intend to save for a long period. maybe 25 - 30 years.
What would be your recommendations? Thanks.
 

BBCWatcher

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I'm saving for retirement and that will be another 30-35 years (currently 28 y.o). SG citizen and most likely retire in SG.
You could certainly go with the "standard three fund package" of a Singapore dollar bond index fund (MBH), a Straits Times stock index fund (ES3 or G3B), and a global stock index fund (IWDA, VWRA, or LCWD). I tend to prefer a 20%-80% split between bonds and stocks (when you're more than 7 to 10 years away from retirement), so in this case MBH would be about 20%. Then I like to keep the STI fund at 20% or less, so let's pick 20% there. Then 60% in global stocks. But that's my preferred split in these circumstances (non-U.S. person, planning to retire in Singapore).

Not OP but what when one doesn't know where to retire. My wife and I are from different countries with different rights to abode (non overlapping), we are currently settled for the foreseeable future in sg (no time limit for now).

Don't really plan for now to live and/or retire in any of our respective home countries. Where we'll be in 10, 20, 30 years is a big question mark.

So for now I am mostly following the approach to invest in worldwide ETFs (IWDA for starter) with SSBs from last year as emergency fund and starting bond component.

Any other tip for someone who doesn't know where retirement will be?
That's a pretty good combo. You could consider adding some CRPA (multi-currency investment grade corporate bond index fund) into the mix if you wish.
 
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