*Official* Shiny Things club - Part 2

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Shiny Things

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Thank you Shiny for your insights .

Interestingly, IB FYI did also sent me a message telling me to place order between the bid and ask spread as it may earn me rebates for adding liquidity and yield significant price improvement ... Never seen a broker helping me to save some money!

This is true! For liquid stuff like S&P 500 equities, where the spread's only a tick or two wide, working an order within the spread is overkill - just pay the offer or hit the bid. (We had a saying on the desk: "don't be a d*ck for a tick": that is, don't try to chisel an extra tick or a half-tick if you're going to do the trade anyway, because more than likely you'll miss the trade and regret it.)

But if you're trading less-liquid stocks, or options, it's worth remembering that the price on the screen is just the lit market, and there may be interest to buy or sell inside the spread. (I run into this occasionally with US muni-bond ETFs, that tend to trade 0.1-0.2% wide - I can usually squeeze out a few extra bips by working a bid and letting the market come to me instead of just paying the offer.)

I disagree with this reply as a generalization.

First of all, if you're dabbling (or more than that) in individual stocks, shutting out U.S. listed stocks is going to really limit your choices.
[…]

Anyway, there's no need to be completely allergic to taxes. Just factor them into your decision as a cost of doing business, that's all. (And some "tax diversification" is helpful. Governments can change their tax rates and tax rules, and some of them -- Singapore, for example! -- can do so literally overnight.) If you're a non-U.S. person trying to choose between a global stock index fund and VWRL (Vanguard's global stock ETF domiciled in Ireland and traded in London), you'll probably want to go with VWRL for dividend and estate tax reasons. But other comparisons might be different.

This is true, and I was a little bit flip with my original generalization (US-listed equities aren’t bad, it’s just that if you’re only looking for index ETFs there are better options than the US-listed vehicles.

An obvious example of a US-listed vehicle that works in a Singapore tax environment is GLD. It’s the most liquid way to buy gold (unless you want to chuck it around in the futures market, which you probably don’t, not at a >$100k contract size), there are no dividends, and it’s easier to trade than the atrocious Singapore-listed vehicle. The only problem is that now you own gold.

In other words, nothing in life is guaranteed, except death I suppose. However, there is nearly always some investment that we can point to as the safest, as the benchmark, with everything else having more risk...slightly more, a lot more, or practically infinitely more risk. In Singapore, in Singapore dollars, SGSes and SSBs are those benchmark safest assets.

I like this way of putting it.

The American Stock Exchange really doesn't exist any more. The New York Stock Exchange -- actually NYSE Euronext -- acquired it. The legacy names occasionally live on in spirit.

"ASE" is pretty confusing since it seems like it might be the Australian Stock Exchange. Or Austrian Stock Exchange? ;)

NYSE Euronext, now a division of the ICE, sic transit gloria mundi. Austria has the amusingly-named Wiener Boerse.

And you’d be surprised how long some of those names can stick around. My absolute favorites were from some of the old late-90s banking mergers: RBS bought Natwest in 2000, but their Reuters Dealing code was still NWOK (NatWest Options hong Kong) at least as late as 2009, probably even later. SBOS (Swiss Bank Options Singapore) was still an active code in the late-2000s as well, even though the UBS/SBC merger went through in 1998(!).

Still, it’s kind of a shame that some of the old names have disappeared without trace. Nobody (except the people who worked there) remembers the old pioneering options names like O’Connor, Chemical, Manny-Hanny, or Cooper Neff; Bankers Trust’s world-beating markets business has been entirely subsumed into Deutsche, and the only remnant I can find is that its name lives on as the branding for Westpac’s funds management business; even my old shop Dresdner is just a Wikipedia page these days.

Shiny, nice to meet you. I just bought your ebook and it was a pleasure reading it.

Would you agree with my next steps?
1) Redeem half of G3B to get it down to 40%
2) Put the cash from redemption of G3B towards IWDA (all at once?)
3) Add A35 to POSB Invest Saver to gradually reach the 20% target

Mmm… I don’t think piling it all into IWDA is a great idea. If you have a lump sum from redeeming your G3B, you’ll want to put some of it into A35 (you can buy it through Stanchart or another broker as well as through POSB Invest-Saver), otherwise you’re going to be super tilted toward equities.

I know your book recommends IWDA. But I've also seen many mention EIMI here. Is IWDA still more recommended than EIMI? There's no mention of EIMI in the book.

As people have mentioned above, they’re different things. IWDA owns global developed-market stocks; EIMI owns emerging-market stocks. You don’t need to worry about owning EM stocks until your portfolio gets bigger—six figures is my usual threshold for this stuff—because they’ll only be a small amount of your portfolio, and you don’t want to run up transaction fees buying tiny 3-5% clips of these stocks.

Uhh, does anyone know if Singaporeans residing in Singapore need to declare dividends on ETFs purchased via IB, such as VWRL? How about accumulating ETFs like IWDA?
1: No (unless, as mentioned above, you’re trading “professionally”, and I don’t know where IRAS draws the line; ask your accountant).
2: IWDA doesn’t have dividends so there’s nothing to declare.

我的超酷故事;113976550 said:
Does anyone have experience trading in TSE? I wish to know if Singaporeans investing in stocks listed in TSE would be subjected to tax. And if so, which kind? Thanks!

Which TSE: Tokyo or Toronto?

(Yes, I know Toronto’s usually “TSX”, not “TSE”, but, see above re “ASE”… I’ve seen weirder initialisms.)

Thanks for your detailed reply shiny. The name you gave Donny cracked me up :s13:

Not my idea, but I wish I could take credit for it!

It seems that you're describing the current status of the two countries and maybe the near future, like 2-5 years. But what about a very long term commitment like 20 years?

Even if what you suspect turns out to be true and the china market goes downhill, a consistent investment into china during the downturn would reap even bigger rewards if the assumption that "china will grow and rise to No.1" is true. Meaning that after they've gone down, in another decade they might recover and bounce back even more?

I believe in investing in the intrinsic value that companies are creating, and it seems that china govt and companies are in a much better position to do that in the long term compared to US. Does this statement make sense, or does it even matter?

It does make sense, and I think reasonable people can disagree on what the long-term outcome’s going to look like - whether China’s productivity will pick up and the economy will outdo the US. I do think that’ll happen at some point, simply due to weight of numbers, but I’m not convinced that you need to pull the trigger and pile into China right now, just given the state of Chinese listed companies at the moment. There’ll be better opportunities.

Rebalancing isn't something that you need to be maniacal about. Some people think you have to keep your 20-80 allocation at age 35 (for example) rebalanced daily or monthly to 20-80. No, not actually. It's OK to let it drift a bit and rebalance, say, once per year -- or even every couple years.

This is excellent advice. I’d maybe make one suggestion—that it’s OK to look at your balances once a month, when you’re choosing what to buy in any given month, and you’ll want to buy whatever you’re short of—but a full-on rebalancing is something you really only need to do annually, maybe semi-annually. Any more often than that and the benefit of rebalancing is very small, maybe even negative once you factor in transaction costs.

Hi ST,
what are your thoughts on this :

USD 5YNC1Y Steepener with first coupon fixed

Product highlights:

· USD denominated
· Structured to return principal at maturity
· First year coupon at 5.00%, no condition
· High coupon multiplier factor of 10x CMS 10-2 spread
· Callable after the 1st year
· Coupon payable subject to a minimum of 0.10% p.a. and maximum 8.00% p.a.
· Quarterly observation

The short end is likely to continue to go up and the curve may remain flat for a while. Yes, that’s why we have a nice coupon of 5% for year 1 while waiting for the curve to steepen after that. The longest period in the last 20 years where 10-2 CMS spread is less than 0.5 is 2 years and 5 months, from May 2005 to Oct 2007.

Let’s do the math.

Year 1 Coupon: 5% fixed, no condition
Year 2 to 5 Coupon: 10* CMS 10-2 spread, floored at 0.1%, capped at 8%, fixing in Arrears (which means coupon is determined at the end of each period)

HOLY F*CKING SH*T THIS THING IS HORRIFIC. FIRE YOUR BANKER.

Firstly it’s just a dumb trade; the curve’s not going to steepen while the Fed is hiking.

And secondly, if the curve does steepen, the note’s going to early-redeem and you’ll only get one year of those phat coupons. But if it flattens, which is a lot more likely, you’re going to be trapped in this note earning zero yield until the Fed starts their next cutting cycle, which is going to be years away.

I’m not even going to bother pricing the CMS spread option to find out how much the bank’s ripping you off. Just don’t do it.

Hi ST! I know you advocate index investing and I personally practiced that. But I'd still like to hear your views on this interesting portfolio approach : Free Lunch portfolio http://www.chaiwithpabrai.com/blog/the-free-lunch-portfolio

Thanks!

I don’t really have too much of an opinion on it, to be honest, since I’m not good at individual stocks, but it seems a bit scattershot?

There’s limited evidence on this either way, but companies that heavily buy back their own stocks (as long as they’re sensible about it) do seem to outperform. I don’t get the “shameless cloning” or the “spinoffs” strategy, though. Shameless cloning doesn’t make sense; you want to own the originals, not the clones. And you generally want to own both sides of a spin, not just the spinco; I though that was the rule.

any comments on SPDR® MSCI World Small Cap UCITS ETF (WDSC.LSE), with fund size of approx. GBP211m ? considering whether to add a small % allocation to this .

If you’re specifically looking for an allocation to small-caps, you’ll want to go with WSML as BBCW suggested, but why are you overweighting small-caps in the first place?

I recall Shiny's recommendation is that if you require the funds between 3 - 5 years time, you should keep it in a mix of cash and bonds.

However, I have started investing into IWDA, ES3 and ABF 2 years ago and currently only has emergency fund in my bank.

Is it necessary/recommended to squeeze out perhaps $200 to DCA every month so as to capture the market movements while accumulating the funds needed for future expenses in cash?

You can do both, but if you’re already actively saving for retirement, you should think about how much you’re going to need to save for those short-term expenditures, and make sure you’re saving enough for those (in cash!) to be able to pay for the house and the wedding when they come up. The excess can go to your retirement fund.
 
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Listopad

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Shiny Things;114026973 If you’re specifically looking for an allocation to small-caps said:
the thought process behind this is to give some weightage % to small caps (WDSC/WSML) , and some weightage % to value coys (IWVL.LSE) to take into consideration the fact that value and small-cap stocks may outperform markets on a regular basis. this is on the premise that value stocks outperform growth stocks. Similarly, small-cap stocks tend to outperform large-cap stocks. But bulk of my portfolio allocation % are in IWDA & EIMI of course.

appreciate comments / views.
 

w4rdsg

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the thought process behind this is to give some weightage % to small caps (WDSC/WSML) , and some weightage % to value coys (IWVL.LSE) to take into consideration the fact that value and small-cap stocks may outperform markets on a regular basis. this is on the premise that value stocks outperform growth stocks. Similarly, small-cap stocks tend to outperform large-cap stocks. But bulk of my portfolio allocation % are in IWDA & EIMI of course.

appreciate comments / views.

I would ask you why you think these things and if they are correct why has the market not priced it in?

These factor plays do work for a while but for the life of your portfolio? Maybe not. Last I heard value stocks got blown away by growth in the current bull.
 

osirisx

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New to this thread, any idea where can I get the book?
Is the one on gumroad the updated version?

Current portfolio consists of
equities, sti & abf bond etf, robo advisors, p2p lending
Am also looking at ssb
Any comments/advice on my portfolio mix?

Sent from Samsung SM-G935F using GAGT
 

soulblader_89

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New to this thread, any idea where can I get the book?
Is the one on gumroad the updated version?

Current portfolio consists of
equities, sti & abf bond etf, robo advisors, p2p lending
Am also looking at ssb
Any comments/advice on my portfolio mix?

Sent from Samsung SM-G935F using GAGT

Yup, u can pm shiny thing to give u the link

it is a good book
 

Shiny Things

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New to this thread, any idea where can I get the book?
Is the one on gumroad the updated version?

Current portfolio consists of
equities, sti & abf bond etf, robo advisors, p2p lending
Am also looking at ssb
Any comments/advice on my portfolio mix?

Sent from Samsung SM-G935F using GAGT

1) Yep, the Gumroad (and Amazon Kindle Store) page is the latest version. (You can also get to those links from the book's website, which I'm not allowed to post here, but it's got its own dot-com.)

2) Well, here's a thing: "robo-advisors" is not an asset class. Robo-advisors own equities, ETFs, bonds, even some other weird stuff. You're probably sufficiently diversified, but without looking at the actual portfolio, it's not possible to say whether you're invested in weird, non-optimal things.
 

Shiny Things

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the thought process behind this is to give some weightage % to small caps (WDSC/WSML) , and some weightage % to value coys (IWVL.LSE) to take into consideration the fact that value and small-cap stocks may outperform markets on a regular basis. this is on the premise that value stocks outperform growth stocks. Similarly, small-cap stocks tend to outperform large-cap stocks. But bulk of my portfolio allocation % are in IWDA & EIMI of course.

appreciate comments / views.

So yeah, the value and small-cap effects are real; over the VERY long term (like, multiple decades), it does seem that "value" companies and small-caps tend to outperform the index at large.

Couple of problems, though:
1) This effect is a bit hard to define - what's "value", for example? What's a "small" cap? does it include midcaps, etc etc etc.
2) The effect only really works on extremely long timescales. Value has systematically underperformed the broad market for about the last decade in the USA, for example, and it's entirely possible that the value effect is just one of those things that doesn't work any more.
 

revhappy

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It is interesting that currency cushions the impact of both gains and losses. When IWDA and EIMI were going up, USD was falling and now markets are tanking and USD is going up.

Sent from Xiaomi REDMI NOTE 4 using GAGT
 

revhappy

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Why is Chinese markets falling so much? It was supposed to be cheap and someone here was very bullish on China.

ZZ0EJu9l.jpg



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limster

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Why is Chinese markets falling so much? It was supposed to be cheap and someone here was very bullish on China.

When I look at the P/E ratio I wouldn't say China cheap from a value investor's perspective.

I am vested in China via EM ETFs, and China unit trusts, but I feel that it is more of a speculative growth market. :s13:
 

Xanthyon

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Hi folks, I've finally decided to stop procrastinating and start investing (for real).

Just a quick question:

1. What kind of bank account specifically do I need to open with StanChart before I can buy IWDA? I currently don't have any account with SC, so do I open a USD High Account, transfer some USD in there and then open an Online Trading account?
 

Xanthyon

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Btw, I just setup my RSP with POSB-IS for G3B, seems like the sales charge is no longer 1% with no minimum....

It's now 0.82% with no minimum! :)

Vyiv6rb.png
 

makav31i

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Hi folks, I've finally decided to stop procrastinating and start investing (for real).

Just a quick question:

1. What kind of bank account specifically do I need to open with StanChart before I can buy IWDA? I currently don't have any account with SC, so do I open a USD High Account, transfer some USD in there and then open an Online Trading account?

You need to open a bank account with SCB before you can open a Trading Account...Will recommend opening the e$aver account...
 

KeytoFreedom

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Why is Chinese markets falling so much? It was supposed to be cheap and someone here was very bullish on China.






Is mainly due to recent US sanctions against China products and companies...today was mainly focused on US probe on Huawei.
 

Xanthyon

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You need to open a bank account with SCB before you can open a Trading Account...Will recommend opening the e$aver account...

Can this e$aver account be in USD? I would like to do a one-time lump sump transfer from an SGD account to this SCB USD account. This way i only incur 1x currency conversion fee, instead of getting that every time i buy IWDA.
 

jacky817

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Can this e$aver account be in USD? I would like to do a one-time lump sump transfer from an SGD account to this SCB USD account. This way i only incur 1x currency conversion fee, instead of getting that every time i buy IWDA.

The esaver acc is your savings account. Min. 1k SGD balance in it to avoid charges. Only after you have a stan chart savings account, are you able to create an online trading account. Each currency you opt for opens up another trading account. The USD one takes a week or more coz the US govt need to make sure that you aren't a terrorist or some **** like that.

When I went there, I simply set up both accounts together, with 1k cash transfer.
 

jacky817

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the thought process behind this is to give some weightage % to small caps (WDSC/WSML) , and some weightage % to value coys (IWVL.LSE) to take into consideration the fact that value and small-cap stocks may outperform markets on a regular basis. this is on the premise that value stocks outperform growth stocks. Similarly, small-cap stocks tend to outperform large-cap stocks. But bulk of my portfolio allocation % are in IWDA & EIMI of course.

appreciate comments / views.

As far as theories go, it's supposedly legit. There is risk premium to be found when you move from bonds to stocks, big to small cap, growth to value. I guess I was like you who got really hung up on the finer details of fully optimizing the asset allocation. Probably still am :s13:

I'd say, if you're in your twenties and is determined to follow this through for at least 2 decades, then just go for the higher risk and (supposedly) higher reward. Just bear in mind that all these theories are based on past data, and it doesn't necessarily predict the future. Although statistics can be really powerful in predicting stuff that involve large numbers and probabilities (basically everything lol).

If I sound schizophrenic, it's because I probably haven't made up my mind yet :s22:(my total asset is currently small enough for me to tilt to whichever side I prefer).

Check out All about asset allocation by Richard Ferri, if you haven't. Cheers! =)
 

Falcondiaz

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Hi ST and fellow members, I bought ST's book 2 days ago and finished reading it in hours, it was basically much of my bits and pieces of research over the net well strung together into one neat user guide which affirmed my beliefs in investing. I would like to start investing now but need some advice:

I want to dump a lump sum (about 25-30k) into the recommended allocations according to my age (i.e. IWDA, ES3/G3B, A35), then start my monthly allocation of about $800. The recommended guide in the book tells me IWDA in SCB which is alright, but what about the other two? Looking at the rates between POSB and POEMS, should I go purely for POSB for both lump sums and monthly savings plan, lump sum in POSB then monthly savings in POEMS (which means I have more accounts to track), or purely go for POEM, which has a cheaper monthly savings plan but higher lump sum fee.

This is looking from the perspective of lowering my charges to buy the ETFs..
 

eitherland

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1) Yep, the Gumroad (and Amazon Kindle Store) page is the latest version. (You can also get to those links from the book's website, which I'm not allowed to post here, but it's got its own dot-com.)

2) Well, here's a thing: "robo-advisors" is not an asset class. Robo-advisors own equities, ETFs, bonds, even some other weird stuff. You're probably sufficiently diversified, but without looking at the actual portfolio, it's not possible to say whether you're invested in weird, non-optimal things.

Hi ST,

Thank you very much for answering all the questions here. It's been really helpful.

Just a quick question, what book will you suggest ppl to read if someone is really want to learn how to trade options. I know John Hull's book is great but is there something more practical?
 

Shiny Things

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When I look at the P/E ratio I wouldn't say China cheap from a value investor's perspective.

I am vested in China via EM ETFs, and China unit trusts, but I feel that it is more of a speculative growth market. :s13:

Depends which sector you look at. Chinese tech is obviously trading at some pretty spicy valuations, but the banks are trading at ridiculously low P/Es: the big four Chinese banks' HK listings are trading at an average P/E of about six.

(The reason it's so cheap is because of the denominator - the "E" side of the P/E ratio. The market thinks the future streams of earnings are going to be impaired because of the giant quantities of bad loans hiding on and around Chinese banks' balance sheets; someone's eventually going to have to take losses on those loans, and the only question is whether it's WMP investors, the banks themselves, or the government through some sort of loss-sharing or nationalisation.)

Why is Chinese markets falling so much? It was supposed to be cheap and someone here was very bullish on China.

"Cheap can get cheaper", as they say. Valuation is a useful guide to whether a particular stock, sector, or country is cheap; but that doesn't mean that the price will immediately go higher as soon as you decide that it's "cheap".
 
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