Bond ETF vs UT

[bei_ge_wang]

Hi all, i hope to have your insights and views..

Currently i am vested in bonds unit trusts. I am holding for monthly cash payout, and it is my permanent portfolio towards financial freedom.

My friend has constantly told me to switch to bond ETF for the lower recurring fees. I am aware of the difference between UT and ETF.

My reason for holding UT is because i believe the active management by fund manager can help my portfolio be of better quality within the assigned risk bandwidth and also because i can get cash payout via UT monthly.

Am i missing out on anything? What are your views please?

 

[parallelyy]

Personally, if the bond unit trust fund can give a higher return to justify the higher expense ratio, then there isn't a reason to switch. More importantly, you should be looking at the sector and the credit ratings of bonds invested by the fund

 

[unhinged_loon]

Hi all, i hope to have your insights and views..

Currently i am vested in bonds unit trusts. I am holding for monthly cash payout, and it is my permanent portfolio towards financial freedom.

My friend has constantly told me to switch to bond ETF for the lower recurring fees. I am aware of the difference between UT and ETF.

My reason for holding UT is because i believe the active management by fund manager can help my portfolio be of better quality within the assigned risk bandwidth and also because i can get cash payout via UT monthly.

Am i missing out on anything? What are your views please?

Compare yield? Compare risk? Compare the underlying bonds in the active and passive funds?

 

[Mecisteus]

Most importantly, you didn't even mention the fund name. How can we evaluate.

Generally, bond funds have higher expense costs.

 

[hwmook]

Hi all, i hope to have your insights and views..

Currently i am vested in bonds unit trusts. I am holding for monthly cash payout, and it is my permanent portfolio towards financial freedom.

My friend has constantly told me to switch to bond ETF for the lower recurring fees. I am aware of the difference between UT and ETF.

My reason for holding UT is because i believe the active management by fund manager can help my portfolio be of better quality within the assigned risk bandwidth and also because i can get cash payout via UT monthly.

Am i missing out on anything? What are your views please?

I invested in bond UT and not ETF. It's like buying stock vs buying index. Bond UT have a huge range with different performance and frankly many does not justify their higher expense ratio. You need to do some homework to pick those that consistently does well. If you are not willing to do homework then stick to ETF. If you want to buy UT then you need to do homework and study the funds.

 

[bei_ge_wang]

thanks all for the invaluable inputs!

reason why i have no specific UTs, is because this question is meant as a general scenario..

 

[BBCWatcher]

OK, generally unit trusts sold in Singapore are high cost crap.

....Any questions?

 

[Maeda_Toshiie]

thanks all for the invaluable inputs!

reason why i have no specific UTs, is because this question is meant as a general scenario..

First of all, I think you need to evaluate your needs.

 

[Shiny Things]

Hi all, i hope to have your insights and views..

Currently i am vested in bonds unit trusts. I am holding for monthly cash payout, and it is my permanent portfolio towards financial freedom.

My friend has constantly told me to switch to bond ETF for the lower recurring fees. I am aware of the difference between UT and ETF.

My reason for holding UT is because i believe the active management by fund manager can help my portfolio be of better quality within the assigned risk bandwidth and also because i can get cash payout via UT monthly.

Am i missing out on anything? What are your views please?

Right, great questions all; let’s start from the top.

Firstly, I’m going to challenge the basic premise of your question. You’re investing for “financial freedom”, so I’m going to assume that what you care about is getting higher returns, over a longer period of time, so that eventually you can hit your f*ck-you-money target and have more freedom to do what you want instead of the ol’ nine-to-five. Hit it, Dolly.

If that’s what you’re trying to do, being 100% in bonds is not the way to do it. Bonds are for conservative investors who are willing to take lower returns in exchange for lower volatility. You want the opposite: you don’t mind the swings and roundabouts if it gives you better returns.

And a monthly payout doesn’t seem very useful either. Perhaps I’m misunderstanding your situation, but you’re not living off these investments, right? If you have a job, then you don’t need a monthly payout from you investments, because you’re getting a regular paycheck. (Separately, “monthly payout!” as a selling point always seems a bit weird to me; is there really any difference between getting $x once a month, or getting $3x once every three months?)

So my first thing I’d say is that you shouldn’t be all-in in bonds; you should be mostly invested in stocks.

Secondly, you can see for yourself whether your fund manager is actually adding any value to your investments - whether you’re making enough from him to offset the higher fees. You can look at the fund’s historical returns and see whether he’s outperforming other funds in his space, or a bond ETF. (Don’t just look at the benchmark they print on the fund fact sheet; fund managers juke their benchmarks all over the place so they can point at it and say “look, we beat our benchmark!”)

What’s the fund you’re wondering about? We can look at it and tell you whether your fund manager’s actually adding some value or just leeching off you to fund his gold-plated Lambo.

 

[alocacoc]

Since TS is being generic, hope you don’t mind me hijack your thread.
What about the below bond fund ?
Bloomberg code:
IUSHHXS:LX
ABGATSH:LX
ABAATSH:LX

 

[bei_ge_wang]

Thank you all for the very insightful comments, do let me reply this evening..

Appreciated!

 

[unhinged_loon]

Right, great questions all; let’s start from the top.

Firstly, I’m going to challenge the basic premise of your question. You’re investing for “financial freedom”, so I’m going to assume that what you care about is getting higher returns, over a longer period of time, so that eventually you can hit your f*ck-you-money target and have more freedom to do what you want instead of the ol’ nine-to-five. Hit it, Dolly.

If that’s what you’re trying to do, being 100% in bonds is not the way to do it. Bonds are for conservative investors who are willing to take lower returns in exchange for lower volatility. You want the opposite: you don’t mind the swings and roundabouts if it gives you better returns.

And a monthly payout doesn’t seem very useful either. Perhaps I’m misunderstanding your situation, but you’re not living off these investments, right? If you have a job, then you don’t need a monthly payout from you investments, because you’re getting a regular paycheck. (Separately, “monthly payout!” as a selling point always seems a bit weird to me; is there really any difference between getting $x once a month, or getting $3x once every three months?)

So my first thing I’d say is that you shouldn’t be all-in in bonds; you should be mostly invested in stocks.

Secondly, you can see for yourself whether your fund manager is actually adding any value to your investments - whether you’re making enough from him to offset the higher fees. You can look at the fund’s historical returns and see whether he’s outperforming other funds in his space, or a bond ETF. (Don’t just look at the benchmark they print on the fund fact sheet; fund managers juke their benchmarks all over the place so they can point at it and say “look, we beat our benchmark!”)

 

[antonpoh]

OK, generally unit trusts sold in Singapore are high cost crap.

....Any questions?

Only this UT is doing very well.

Used my CPF OA to buy this UT at 74c (aro 2014). The latest price now is S$1.276.

https://secure.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=PPGTFS

 

[BBCWatcher]

Only this UT is doing very well.
https://secure.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=PPGTFS

No, information technology stock prices have surged over that period of time. The correct way to evaluate whether that unit trust has done well is whether your shares would be more, less, or equal in value to the unit trust, after all costs, if you had made the same bet using the closest matching alternative vehicle, such as a low cost exchange-traded fund (ETF) that invests in substantially the same stocks.

It's possible that, in 2014's Singapore, that particular unit trust was the only plausibly realistic way for a small investor to make that specific bet (on technology stocks), even if it was horrible (high costs) by global standards. But that certainly isn't true in 2017 from what I can tell. As a notable example, Blackrock has an information technology sector ETF domiciled in Ireland, symbol IUIT on the London Stock Exchange, with a total expense ratio of 0.15% -- less than one tenth (!) that unit trust's annual expenses -- and only broker trading commissions and currency to get in/out. And those buy/sell costs can be quite low via Interactive Brokers, as an example. Compare that to an initial sales charge of up to 5% (!!) for that particular unit trust. Ouch.

 

[antonpoh]

No, information technology stock prices have surged over that period of time. The correct way to evaluate whether that unit trust has done well is whether your shares would be more, less, or equal in value to the unit trust, after all costs, if you had made the same bet using the closest matching alternative vehicle, such as a low cost exchange-traded fund (ETF) that invests in substantially the same stocks.

It's possible that, in 2014's Singapore, that particular unit trust was the only plausibly realistic way for a small investor to make that specific bet (on technology stocks), even if it was horrible (high costs) by global standards. But that certainly isn't true in 2017 from what I can tell. As a notable example, Blackrock has an information technology sector ETF domiciled in Ireland, symbol IUIT on the London Stock Exchange, with a total expense ratio of 0.15% -- less than one tenth (!) that unit trust's annual expenses -- and only broker trading commissions and currency to get in/out. And those buy/sell costs can be quite low via Interactive Brokers, as an example. Compare that to an initial sales charge of up to 5% (!!) for that particular unit trust. Ouch.

There is no sales charge if you buy it online using poems.

 

[BBCWatcher]

There is no sales charge if you buy it online using poems.

Now it does, fabulous, good to know....

....Now what about the order of magnitude greater management expenses?

 

[antonpoh]

Now it does, fabulous, good to know....

....Now what about the order of magnitude greater management expenses?

So you rather they do it for free? Don't need to rent a office just pitch a tent and operate this fund and find volunteer to do it at zero cost?

Not going to happen la.

 

[BBCWatcher]

So you rather they do it for free?

I don't care because I won't touch that unit trust. However, for anybody considering touching that high cost turkey, I'm sure it'd be better (for Singapore's long suffering financial consumers) if the unit trust's managers not enrich themselves over 10 times more than Blackrock's not suffering fund managers do.

Yes, OK, there's some fixed overhead(*), and the unit trust is smaller than Blackrock's ETF. But >10 times the management fee? That's utterly indefensible. Get back to me when they're merely twice as expensive as Blackrock.

(*) No, that doesn't include the hookers and blow.

 

[anfielder]

Something I read just the other day.

Even the Experts Can’t Beat the Market. Why Would You?

https://www.thesimpledollar.com/even-the-experts-cant-beat-the-market-why-would-you/

...there is no consistency to the performance of these professional investors. The vast majority of those who are outperforming are doing so out of pure luck and are more likely to significantly underperform the market going forward than they are to continue beating it.

 

[Mecisteus]

I don't care because I won't touch that unit trust. However, for anybody considering touching that high cost turkey, I'm sure it'd be better (for Singapore's long suffering financial consumers) if the unit trust's managers not enrich themselves over 10 times more than Blackrock's not suffering fund managers do.

To be fair also, Blackrock probably has more than 10x assets under management. So they can bring down the expenses substantially and still earn a good profit.

In Singapore, AUMs are typically << 1B for 1 fund.