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Old 04-12-2015, 11:47 PM   #1
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things I learnt from Shiny Things & money mind

SIMPLE USEFUL INVESTMENT CONCEPTS
- if it's not simple enough for me to understand, it won't be listed here.
- if it's not useful for long term financial protection & growth, it won't be listed here.
- I have 0 financial performance / measurement background & I wish to tabulate the collection of wise investment concepts, so that we can use this as a reference for our financial education journey.


1. Long-Only Investing for Retail Investors

- Invest in Stock & Bond ETFs.
- For Sg Stock & Bond ETFs, that's ES3 & A35.
- Use [ 110 - your age ] for the Stocks : Bond ETF ratio.
- Rebalance once every year. Buy & Sell to bring your stocks & bonds to that [ 110 - your age ] ratio.
- Consider exposure in other markets, eg. S&P500, China Large-Cap ETFs, etc, for diversification & growth.
- US-listed ADRs aren't subject to US div withholding tax, 30%.
- NASDAQ is sort of a growth stock market while S&P is more of a fundamental value stock market. NASDAQ has outperformed S&P / Dow over the years.
- If an ETF shuts down, its assets get handed back to the shareholders.
- A 100%-equities portfolio is also a bad idea.
- STI's more tightly linked with economies like China and Malaysia and Indonesia than it is with the US and EU.
- In the long run, an investor's return is measured as earnings per share growth + dividends + changes in valuation(PE ratio).


2. Lump-Sum Investing / Dollar-Cost-Average?

- Consider dumping it all at once / in 3 portions.
- To minimise buying high, split into 03 parts.
Invest 1 part each month, until you are fully invested.
That way, if the stock goes up, at least, you bought some.
If the stock goes down, you have cash to buy more at discounted prices.
- Avoid making many trading transactions per month, as that amounts to a high trading fee.


3. Why is investing in Gold silly?

- Gold is an unproductive asset, it does not provide dividends yield.
- It relies solely on capital gains.
- Physical Gold storage requires security expenditure & Paper Gold account requires a monthly expenditure.
- Investing in Gold = Shorting Interest Rates.
Gold / Cash / Long Bonds are direct / indirect bets that interest rates are going down. ( interest rates set by FED )
- Over the long term, Stocks provide better returns than Bonds & Gold.
- 2-5% of your portfolio in Gold is acceptable.


4. Investment Horizon.

- if you need the money within 2 years or so, it should be in cash.
- if you need the money within 5 years, it should be in cash / bonds.
- if you don't need the money within 5 years, it can go into stocks, or ( even better ) the 110-minus-your-age stock / bonds mix.


5. About ETF Types.

- Invest in ETFs that actually holds the stocks / bonds that they claim, so that in events of distress, say, Great Financial Crisis, etc, the ETF would not vanish into thin air.
- there's many types of ETFs...
Leveraged ETFs, Inverse ETFs ( Short ETFs ), Futures-Based ETFs... all have their own problems.

- Stick to Vanguard & iShares. Ignore everything else.
Because they are ETFs that really hold the stocks that they target to be vested in.


6. Suggested Portfolio Mix.

"110 minus your age in stocks; the rest in bonds; and 50-50 split between local and global stocks"

- Allocation to Singapore equities (including your ETFs, stocks, and REITs).
- Allocation to international equities (including DM and EM).
- Allocation to Singapore bonds.
- You can keep a 5% fun-money account around for that sort of punting.


7. When to rebalance your ETF?

- Doing it at the end of December is a bit silly, because that's when liquidity is at it's absolute worst.
- "Markets are seasonal" sounds like witchcraft, but there does appear to be a bit of seasonality in the US markets.
- The old "Sell in May & Go Away" doesn't have much validity, but re-balancing in November, after the end of the May-October seasonal weak pretty, is a pretty good idea if you want to have a slightly better chance of capturing the turning points in the markets.
- If you are re-balancing once a year, I would pick November.
- If you are doing it twice a year, May & November ( 6 months apart ) is a good idea.
- Rebalancing is done periodically regardless of economic situations and market conditions.


8. Which broker to use?

- for SG stocks, use Stanchart.
- for US & other markets, use Interactive Brokers (IB).
- for US only, with Sg office, use TD Ameritrade (TD).
* Interactive Brokers is the absolute best.


9. BOOBY TRAP / made-in-USA IED.

- Using IB or TD, it is subjected to 30% US estate tax for accounts > US$65k.
- Buy a Term Insurance of 30% X [ US Portfolio Value - US$65k ], so that in the event you die... the term insurance offsets the 30% estate tax.
- If you are a Singaporean, consider taking up Aviva SAF term life, to defray the 30% US estate tax.


10. On Insurance

- Buy Term Insurance + Personal Accident Insurance.
- Buy Hospitalisation Insurance.
- Buy Mortgage Insurance, if you have any outstanding mortgage loans.
- Invest the rest.

- Do not buy Life Insurance.
- Do not buy ILP, Investment-Linked Products.
Mixing Protection ( essentially, Insurance ) & Investment in a product, eg. ILP, Life Insurance, Endowment Plan, is a terrible idea, because these events are mutually exclusive & it should not cause liquidation.

- Cheapest Term Insurance in SG : Aviva SAF
This is the first insurance you should get, if you don't have any for Death & TPD. ( Total Permanent Disability )
- Limited to SG$1m Sum Assured.

- 2nd Cheapest Term Insurance in SG : go to CompareFirst.sg
Select from the DPI scheme : Direct Purchase Insurance.
It cuts away the insurance agents to give the consumers a lower premium.
- Limited to SG$400k Sum Assured.
- Currently, it's AXA Term Lite, that's the 2nd cheapest ( as of Dec 2015 ).

- TPD Vs Personal Accident, PA.
TPD : You need to lose 2 limbs to make a claim.
PA : You can make a claim, if you lose 1 limb
* must be permanent loss, unless you are wolverine.

- Limited Life Insurance.
I would buy a limited life insurance / term insurance for a baby.
Because of the cheap premiums, due to the age.
In the future, they would see the value of a cheap premium insurance.


11. Growth-Centric / Dividends-Centric?

- If you are near retirement age, opt for dividends-centric stocks / Bonds ETF.
- Generally, you buy stocks for growth gains, not dividends.

One of the most dangerous things an investor can do to a portfolio is to seek bond-like returns from the stock market, while taking de facto equity risk on the fixed income side. In English - to turn their bonds into stocks & their stocks into bonds.

Buy high-yielding dividend stocks for their current income and pretending they are "bond-like" is a recipe for nasty surprises at some point down the line. But this is precisely what many in the industry have been doing - Financial advisors, ETF providers, money managers - everyone's playing.

From "Downtown Josh Brown"


12. Diversify.

Hold a diversified assets in different countries.


13. ETF
ETF : Exchange traded fund, basically tracks / holds a bunch of something.

ES3 is an ETF the tracks 30 sg-based companies, i.e. DBS, OCBC, SingTel, Keppel, etc.

It's safer than buying 1 company and rises with the economy.

During a crisis, you can be sure this ETF won't disappear, can't say the same about any single company.

A35 is a bond ETF, it holds many bonds to maturity. One can treat it like a bond. It's stable and yields about 2%.

ES3 and A35 are stock code.
Their name is STI ETF and ABF SG BOND ETF.
You can buy / sell them on the stock market.

The Top 7 of STI are heavy weighted in Banks and a smaller spread on Telcos, Real Estate, Oil & Gas where they made up of 60% of STI.


14. on SG Reits ( Aug 2015 )

If you buy a bunch of REITs, you're explicitly making a bet on real estate prices - they're nothing to do with the STI really.

The STI is mostly banks, real estate companies (not REITs, the companies like Capland that run the REITs) and Singtel.

REITs are a tiny tiny slice of the index, like 3.5% of it.


15. Avoid punting on FX if you are an unsophisticated Long-Only blue chips / ETFs investor.

- Compared to investing in equities, when the price goes below your FX position, you have to fund it. Meaning you have to pay to maintain the position OR cut loss and sell the position.

- Going Long-Only on blue chips, ETFs, Reits, won't make you rich, but it won't make you poor either.

- From 1928 through 2014, the S&P 500's compound rate of return was 9.8%, enough to transform a $100 investment at the start of 1928 into $346,261 over 87 years.


16. Pro Tips About Trading.

Don't trade after-hours OR in the pre-open.
Spreads are WIDE & you don't know what the "real" price is.


17. SeekingAlpha.com for US-centric stocks / investment-related news.


18. the most basic books about investing.

- millionaire teacher
- the coffeehouse investor
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Last edited by newjersey; 05-12-2015 at 09:53 PM..
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Old 04-12-2015, 11:50 PM   #2
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3 Brokers : Interactive Brokers / TD Ameritrade / Stanchart

1. Interactive Brokers

Pros :
1.1.1. cheapest trading fees,
1.1.2. instant FX exchange with the lowest spread
1.1.3. access to many stock markets

Cons :
1.2.1. needs to trade a min number per month
OR
be charged US$10 a month
BUT
waived if u place US$100k value of monies / stocks
1.2.2. no physical office in sg for telephone enquiries.
1.2.3. initial US$10k deposit


2. TD Ameritrade

Pros :
2.1.1. have a physical office in sg, you can call them, etc.
2.1.2. significantly cheaper than local brokers.
2.1.3. no monthly fees.

Cons :
2.2.1. need to fund the acc, by local bank transfers only.
( I change the $$$ in POEMS for better FX rates )
2.2.2. limited to US stock market only.


3. Stanchart

Use this, if you like to invest in SG stocks / bonds.


4. All other local brokers.

They are expensive ( about 4% of your trade ) & charge imaginary fees, i.e. custodian fees.

That's what happens when the gov protects the big boys, where they become dull, entitled babies.
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Last edited by newjersey; 04-12-2015 at 11:54 PM..
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Old 05-12-2015, 12:11 AM   #3
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Great effort for the comprehensive summary!
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Old 05-12-2015, 12:56 AM   #4
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Interactive Brokers Need-To-Knows'

- Trading Fees : US$1 for every 200 shares.

- Minimum Activity Fees : US$10 / month.

- 1 Free Withdrawal / Month.

- No fees for T.T. ( local bank transfer to IB's sg bank account ).

* Monthly Activity Fees Waiver : Minimum US$100k cash / equities.

- Select FAST Tract Application for Individual Traders.

- COST Plus OR FLAT Plus ?
Stick to Flat Plus, for retail investors.

- Spread for USD / SGD : 1.5 pip & 0.2 pip commission or minimum US$2.50 for each FX transaction.
(This beats all the money changers' rates in SG!!!)

- PRO Tip on FX conversion for USD / SGD.
Buy USD during the daytime in SGP.
Spread on USD / SGD tighter during SGP hours than NY trading hours.

- Use Portfolio Margin : for lower margins.
or Reg. T margin. ( Portfolio Margin is better than Reg. T Margin )
I am not keen on this aspect though.

- STOCK LENDING PROGRAM.
Stock Yield Enhancement Program available.
In short, the stocks you purchased is loan to short-sellers and IB shares the profits with you. Sounds awesome for the long-only investor.

- 30% US Estate Tax, in event of death.
Use a term insurance to defray : 30% x [ US portfolio value - USD65k ]

- Use SMART when trading US Stocks on IB.
NEVER USE "MARKET" ORDERS!!!

- CONVERTING SGD TO USD ON IB.
1. Add a new "USD.SGD" on TWS.
2. Click on [ ASK SIDE ] of USD.SGD Quote, to buy USD.
3. Select the Amount to Buy.
4. Set Routing to FX.CONV, NOT IDEAL.PRO.
FX.CONV : Just converts the cash.
IDEAL.PRO : Creates an actual FX position & the appropriate P&L takings.
5. Hit BUY.
6. You are done.

- DIFFERENT TYPES OF MARKET ORDERS.

1. MKT : Market Order. AVOID @ ALL COSTS.
- eg. buy me 100 shares of Apple @ any price.

2. LMT : Limit Order.
- eg. buy me 100 shares of Apple @ no more than US$123/px or less.
+
I can wait, indefinitely.

3. IOC : Instant or Cancel.
- eg. buy me 100 shares of Apple @ no more than US$123/px or less
+
Buy what you can & Cancel the Rest.

4. STP : AVOID @ ALL COSTS.
- eg. Apple is @ US$123/px & if it trades @ US$122/px, I want to sell 100 shares immediately @ ANY PRICE.

5. STP LMT :
- eg. Apple is @ US$123/px.
If it trades @ US$122, I want to place a limit order to sell 100 shares @ no worse than US$121.50/px.

STP vs STP LMT

STP : ensures that the stock is sold NO MATTER WHAT, but exposes you to selling @ any price.

STP LMT : ensures that the stock is sold @ the price you want, but it does not ensure that you sell the entire inventory.

6. Trailing Stop Limit Order [ THE MOST USEFUL ONE ]

A trailing stop limit order is designed to allow an investor to specify a limit on the maximum possible loss, without setting a limit on the maximum possible gain.
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Last edited by newjersey; 05-12-2015 at 07:35 AM.. Reason: addition / refinement of information
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Old 05-12-2015, 02:19 AM   #5
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GOOOOOD THREAD!! MORE MORE
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Old 05-12-2015, 05:57 AM   #6
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Well done!
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Old 05-12-2015, 06:29 AM   #7
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Great stuff mate, this is tremendously useful. There's a lot of good info floating around on these threads, but it takes a lot of time to consolidate it into one place - appreciate the effort.
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Old 05-12-2015, 06:59 AM   #8
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wow....very good summary. I read the original threads and I cannot do a better job summarising than ts. Thank you.
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Old 05-12-2015, 07:00 AM   #9
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Advantages of AVIVA SAF Term Life

1.1. Cheapest premium for SG$1m Sum Assured, Coverage is up to Age 65.
* Insured members can extend coverage till age 70.
* From age 65 to 70, Sum Assured options @ SG$50k / SG$100k only.

1.2. Level Premium throughout based on desired Sum Assured.
* The purchase must be before age 55.

1.3. Can extend to Spouse & Children.
* Coverage cease for Female Child @ Age 25 / upon Marriage, whichever earlier.
* Coverage cease for Male Child @ Age 20.

1.4. Enables you to buy the Cheapest Personal Accident Rider.
- Sum Assured of SG$100k : Monthly Premium SG$04.17 + GST
- Sum Assured of SG$200k : Monthly Premium SG$08.33 + GST
- Sum Assured of SG$300k : Monthly Premium SG$12.50 + GST
- Maxxed Out @ SG$300k


Disadvantage of AVIVA SAF Term Life.

2.1. Premiums are subjected to CHANGES, as negotiated by SAF / MINDEF periodically.


Advantages of AXA Term Lite
- ( Accurate as of Dec 2015 ) Through the DPI, direct purchase insurance program, it is the 2nd cheapest term life insurance, as it eliminates the insurance agent from the equation.

3.1. Insurance Premium locked in by Age, not subjected to further changes. Very Important Feature, unlike Aviva SAF.


Disadvantage of AXA Term Lite

4.1. Maximum Sum Assured of SG$400k only.


My Recommendation.

- buy the Aviva SAF term insurance first, if you have very little disposable cash.

- switch to AXA Term Lite, when you become more financially stable / Buy this first, if you have the disposable income.
( because the premiums are locked-in by age )

- buy more / maxxed out Aviva SAF term insurance @ SG$1m, when your networth / debt-liabilities increases to SG$1m. ( Example, bank loan from pty purchase ).

- go to pub.
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Last edited by newjersey; 05-12-2015 at 08:26 AM..
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Old 05-12-2015, 07:07 AM   #10
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Great stuff mate, this is tremendously useful. There's a lot of good info floating around on these threads, but it takes a lot of time to consolidate it into one place - appreciate the effort.
hi Shiny Things,

I am only a parrot, the content-provider for most of the info is from you.

Thanks for sharing generously throughout all these years, it's really amazing for us to have you on an embarrassingly, mostly singlish forum.
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Old 05-12-2015, 07:32 AM   #11
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Can we make this thread sticky for these gathered pieces of nuggets?
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Old 05-12-2015, 07:52 AM   #12
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Book mark, I need it.

Can TS meet up or someone coach me on IB setup? I am still confuse though the information is there.
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Old 05-12-2015, 08:03 AM   #13
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Maybe you can add on for Aviva SAF term is that you can also buy CI portion and disability income portion, though the premiums will be higher
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Old 05-12-2015, 08:44 AM   #14
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Aviva SAF term may not be the cheapest, depending on your age of entry.

Generally the older you are the more it favours SAF term, if you're younger than try personal term plans.
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Old 05-12-2015, 09:21 AM   #15
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Great effort. Thumbs up
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