Challenging ShinyThing assumptions.

[limster]

Good idea. However a lot of banks do not allow leveraging on ETFs.

You can try asking around.

DBSV, iOCBC and UOBKH 100% guaranteed that ES3 is marginable though the rates are not fantastic.

Kindly share which bank do not allow leveraging of ES3?

 

[happykapy]

Hi.

What rates can kindly post ?

DBSV, iOCBC and UOBKH 100% guaranteed that ES3 is marginable though the rates are not fantastic.

Kindly share which bank do not allow leveraging of ES3?

 

[3dfxplayer]

Those events are quite rare though...once every twenty or thirty years,even the worst crash back in 2008 the market only fell by 40%.maybe there's a way to hedge against these tail risks while leveraged using options or something?

The S&P500 fell 50% from 2000 to 2002 and 56% from 2007 to 2009, so 50+% declines have actually occurred twice in the last 17 years, its pretty rare but more common than you think. You'd have been completely wiped out if you were leveraged during these bear markets.

Markets can also move sideways for long periods so options won't necessarily help.

 

[3dfxplayer]

Buying a house with bank loan is equivalent to leverage. Even if its an investment house, most people will do bank loan.
If you can find an investment as worthy as you deem as your house, you might want to use leverage?

Maybe using Govt TDSR 60% as your guideline for investment leverage will be a start ?

Say $100,000 in ES3+A35, leverage and make it into $160,000 in ES3+A35 ?
(But make sure your cost of borrowing is low enough for it to make sense.)

Anyway, just my 2 cents.

TDSR? I think you mean LTV? 60% LTV is 2.5x leverage, meaning you are borrowing 150k for every 100k you put in, a 40% decline will completely wipe you out, though in reality you will most likely be margin called/liquidated into oblivion way before the market hits -40%.

 

[alocacoc]

TDSR? I think you mean LTV? 60% LTV is 2.5x leverage, meaning you are borrowing 150k for every 100k you put in, a 40% decline will completely wipe you out, though in reality you will most likely be margin called/liquidated into oblivion way before the market hits -40%.

Mm, my bad. What i meant was borrow 60K for every 100K you invested.

Actually, 2.5x leverage is possible too if it suits you.

 

[Mecisteus]

The average retail investors don't need to deal with leverage.

Even if you opt to and you are absolutely certain of what you are doing, you can make a baby step into leveraging. Try leverage between 1.2 to 1.5x for a start.

 

[Shiny Things]

Buy and hold is a well known strategy. But the significant question is how much of your savings should be placed in investment? Seems like ShinyThing think this ratio is arbitrary?

Ahh, I get you. You're asking what percentage of savings should be held in cash, and what percentage should be held in "non-cash things" - which includes stocks, bonds, commodities, whatever.

So let me give you a quick crash course first: you're confusing everyone because you're mis-using the term "leverage", and talking about "risk of ruin" and "Kelly criterion". Leverage refers to using borrowed money to invest. I don't advocate doing that; I think it's too risky for most investors. You seem to be under the impression that this is a trading strategy; it's not. The point of this strategy is that you don't actively trade in and out; you buy and hold.

Now, getting back to your original question: you don't want to hold too much cash, because cash just sits there and doesn't add much to your returns. Cash is a drag.

My preferred rule of thumb for how much cash to hold is not a percentage rule - it's "six months' worth of expenses". That way, you've got enough cash on hand that you can get by in case of an emergency without having to smash the piggy bank of your long-term investments.

And if you're investing for a shorter time period than your retirement - say you're buying a house in five years, or saving for a wedding in two years - then you need to hold a higher percentage in cash, or cash-like things.

Have you backtest your strategy? If so, how long?

Yep, and you can test it for yourself if you'd like. Go to PortfolioVisualizer.com and play around with their "Backtest Asset Class Allocation" tool; you can see how a buy-and-hold-and-rebalance portfolio performs against cash, against no rebalancing, against whatever you'd like.

 

[BBCWatcher]

Leverage refers to using borrowed money to invest. I don't advocate doing that; I think it's too risky for most investors.

I agree as a generalization, but there are at least a couple interesting, common exceptions:

1. Student loans, especially government subsidized ones. Sometimes it makes great financial sense to borrow this money even if you don't need to.

2. A reasonably sized mortgage on owner-occupied housing, especially if there's a tax advantage and/or government subsidy.

 

[revhappy]

I agree as a generalization, but there are at least a couple interesting, common exceptions:

1. Student loans, especially government subsidized ones. Sometimes it makes great financial sense to borrow this money even if you don't need to.

2. A reasonably sized mortgage on owner-occupied housing, especially if there's a tax advantage and/or government subsidy.

The main reason why property everywhere in the world is so overpriced is because of leverage. If leverage was not allowed, I am sure prices would have been much more sane. Conversely if leverage was allowed in stocks to the same tune, without this mark to market margin requirement, I shudder to think how high stock markets would have been

Sent from Xiaomi REDMI NOTE 4 using GAGT

 

[Sai777]

Financial products are complex and almost all that I know can be leverage including stocks. A CFD account with a local brokerage is one of them.

The challenging from TS is not incorrect but it is not what ST's philosophy of long term investing; in other words, different school of tots. With ST's approach, investing can be straight forward and simple, those who started with his methodology since 2015 has seen returns.

Surely there are others product that provide higher yields, let's just say, those are not for novices and investors need to read a lot to have the level of comfort in order sleep well at night. More importantly there is game plan when the market is against investors.

 

[BBCWatcher]

The main reason why property everywhere in the world is so overpriced is because of leverage. If leverage was not allowed, I am sure prices would have been much more sane.

I don't think there's much evidence for this hypothesis, at least framed this way. Mortgages have been around a very long time -- centuries, really.

 

[limster]

I don't think there's much evidence for this hypothesis, at least framed this way. Mortgages have been around a very long time -- centuries, really.

i think so too.

the reason why something keeps on rising in price is because the people buying believe that the price will still go higher

you can have all the leverage in the world, but would you use it to buy something you believe will go down in price?

 

[BBCWatcher]

the reason why something keeps on rising in price is because the people buying believe that the price will still go higher

That hasn't been happening in Singapore for the past few years. Nominal real estate prices have been falling since 2013. Maybe they haven't fallen fast enough because of owner price expectations, but they have been falling.

Somebody has to live in residential housing, eventually. Businesses have to occupy office space, eventually. If you want to find an explanation for real estate valuations, at least over the medium to long term, look to those factors (household incomes, business activity) as key drivers. And that's why I'm not particularly bullish on real estate in Singapore, at least not bullish enough to make an extraordinary, sector-specific bet. If someone wants to offer a plausible argument how household and business demand is going to drive real estate in extraordinary ways, I'll keep an open mind. But I see a LOT of vacant and underutilized property in Singapore right now, there's still a lot of construction, and the demographic trends are not going to help property owners.

 

[ExtremeWays]

That hasn't been happening in Singapore for the past few years. Nominal real estate prices have been falling since 2013. Maybe they haven't fallen fast enough because of owner price expectations, but they have been falling.

Somebody has to live in residential housing, eventually. Businesses have to occupy office space, eventually. If you want to find an explanation for real estate valuations, at least over the medium to long term, look to those factors (household incomes, business activity) as key drivers. And that's why I'm not particularly bullish on real estate in Singapore, at least not bullish enough to make an extraordinary, sector-specific bet. If someone wants to offer a plausible argument how household and business demand is going to drive real estate in extraordinary ways, I'll keep an open mind. But I see a LOT of vacant and underutilized property in Singapore right now, there's still a lot of construction, and the demographic trends are not going to help property owners.

Singapore has potential Black Swan. I don’t know what the government is hiding

 

[Mecisteus]

Singapore has potential Black Swan. I don’t know what the government is hiding

I think you have been reading too much extreme views and theories.

Just keep your investment simple.

 

[limster]

I think you have been reading too much extreme views and theories.

Just keep your investment simple.

Almost sounds like that other guy who got banned... username start with D or something

 

[Mecisteus]

Almost sounds like that other guy who got banned... username start with D or something

Daemon

Some guys are very good at theories and views because they read too much. Then they tend to make complicated investment decisions.

 

[Knight_Rider]

I agree as a generalization, but there are at least a couple interesting, common exceptions:

1. Student loans, especially government subsidized ones. Sometimes it makes great financial sense to borrow this money even if you don't need to.

2. A reasonably sized mortgage on owner-occupied housing, especially if there's a tax advantage and/or government subsidy.

Most banks are offering "overdraft" You put in $1M in Insurance/Investment and they lend you $2M. With low interest rates most Priority customers are doing it. You put in say a 5% income fund just pay the 1.3% interest I do think it's a no brainer.

 

[Mecisteus]

Most banks are offering "overdraft" You put in $1M in Insurance/Investment and they lend you $2M. With low interest rates most Priority customers are doing it. You put in say a 5% income fund just pay the 1.3% interest I do think it's a no brainer.

Where got no brainier.

1) Your banks must have eaten you with high fees from the $1M insurance/investment. Ouch.
2) Your interests payable are guaranteed and may go up.
3) Your borrowed $2M is not guaranteed to earn from the income fund.

 

[Knight_Rider]

Where got no brainier.

1) Your banks must have eaten you with high fees from the $1M insurance/investment. Ouch.

What fees? You can pledged an existing policy with cash value.

2) Your interests payable are guaranteed and may go up.

Not 5% anymore dream on. If payable reach 5% put in FD lah. Objective is to get the leveraged product free.

3) Your borrowed $2M is not guaranteed to earn from the income fund.

You can switch anytime. Big names like Schroders are quite consistent in their payout

You really need to sit down with your banker or your existing banker not bery competent.