Historical Rolling Returns - DCA into STI

[akwl88]

actually it dosent require STI to break new high for DCA to generate positive (and reasonably decent) returns.

if STI no break new high, how does DCA STI generate decent returns?

2900 to 3000 in 20 years time?

what chiu talking?

 

[Perisher]

if STI no break new high, how does DCA STI generate decent returns?

2900 to 3000 in 20 years time?

what chiu talking?

Dividends will grow mah unless dividends also stagnant but dividends depends not on stock price.
If the dividends keep growing while the STI remains range bound for 20 years, you are likely to collect 6-7% dividends annually, not to mention those bought earlier get higher dividends.

 

[akwl88]

Dividends will grow mah unless dividends also stagnant but dividends depends not on stock price.
If the dividends keep growing while the STI remains range bound for 20 years, you are likely to collect 6-7% dividends annually, not to mention those bought earlier get higher dividends.

moi ish see div yield ard 3%

if sti no grow and break new high, ishnt it the same as a bank savings acct?

 

[Perisher]

moi ish see div yield ard 3%

if sti no grow and break new high, ishnt it the same as a bank savings acct?

Better than bank savings account if the dividend growth rate is decent.

 

[Darkzi0n]

if STI no break new high, how does DCA STI generate decent returns?

2900 to 3000 in 20 years time?

what chiu talking?

unless the index stay flat (i.e. no up or down at all everyday) or go down perpetually for the next 20 years, chances are u will be buying more at low and less at high (embedded mechanism of DCA in case u ask). And how decent it would be depends on the return profile and when u sell it.

 

[Darkzi0n]

moi ish see div yield ard 3%

if sti no grow and break new high, ishnt it the same as a bank savings acct?

simplified example:

current high 4000

u buy at 2000,3000, 3500, 2500. u sell at 3000. no break new high but positive return.

 

[akwl88]

simplified example:

current high 4000

u buy at 2000,3000, 3500, 2500. u sell at 3000. no break new high but positive return.

moi means sti stuck btw 2900 and 3000 for the next 20 years

but moi ish gets what chiu means

 

[hindsight]

simplified example:

current high 4000

u buy at 2000,3000, 3500, 2500. u sell at 3000. no break new high but positive return.

Yea as long as earnings doesn't collapse and dividends don't get cut over the next 20 years, lower price simply gives an investor a better entry point.

 

[nomoreliaola]

eh conclusion is what? to discredit ST's DCA on STI? i not trolling. i just wana know whats the conclusion

 

[Mecisteus]

eh conclusion is what? to discredit ST's DCA on STI? i not trolling. i just wana know whats the conclusion

Assuming your DCA period is 20 years long. You invest monthly and regularly for exactly 20 years. Considering all the 20-year windows (end period is ANY month), you are 95% likely to achieve positive annualized returns on your capital excluding dividends. Average returns is 3+%.

 

[winguy]

Plus dividends reinvested it will be roughly 6%? Seems decent enough and a simple enough retirement approach for the layman

The next qn is then the "vehicles" available to execute it. The most hands off one is philips sbp but you lose 1% of dividend, i.e. roughly 0.03% anually

 

[Mecisteus]

If you believe STI is low now, total returns can be slightly higher or more than 6%. Look at some of the months ending in 2014. They go up to ~4% pa excluding dividends.

You can choose not to reinvest your dividends. Your total returns is the same. Of course the final value is lower.

There are already 4 regular purchase programs in the market now (Phillip, OCBC, DBS, KE). I think it is more of a preference on which one to choose. Personally, I prefer Phillip because this was the one I participated before.

 

[awful999]

I had already started using POSB, anyone think before will the fund house that run the STI ETF collapse ? will that happen ?

So may be is safe to have at least two account on different fund house ?

 

[wahkao3]

As promised, I have updated my findings. This is to take into account the regular period of capital injections.

The findings remain the same. That is, you stand a better chance of making positive and higher returns if you DCA for a longer period. But the numbers have gone up.

Returns(5Y) Returns(10Y) Returns(15Y) Returns(20Y)
<0% 73 64 17 5
>0% 211 160 147 99
>3% 182 131 114 80
>5% 133 82 55 6
Average returns 3.83% 2.83% 3.76% 3.59%
% of positive returns 74.30% 71.43% 89.63% 95.19%

suggest improvement
instead of using average returns, its better to use median returns

 

[alocacoc]

Assuming your DCA period is 20 years long. You invest monthly and regularly for exactly 20 years. Considering all the 20-year windows (end period is ANY month), you are 95% likely to achieve positive annualized returns on your capital excluding dividends. Average returns is 3+%.

My assumptions
20 years holding period
Invest purely for retirement
$3000 per month from pocket
additional $1000 per month from leverage
Dividend yield never fall below 3%
leverage cost 1.5%~2.5% p.a, average 2%
stop leverage when exceed 2.5%
ignore transaction cost

So if etf is at $3, it means you gotten 1500 shares, 1000 shares + 333 shares from leverage
Interest can be pay down through dividend as long as dividend yield > leverage cost

Since theres a 95% chance of generating 3+% in 20 years, will this method be able to squeeze more return ?

Sorry im a noob, my point here is to find out why most people are against leverage. What will be the conditions needed for leverage to best perform ?

 

[Mecisteus]

suggest improvement
instead of using average returns, its better to use median returns

usually for price returns data, it is recommended to use average. unless there are huge outliers.

for salaries data, it is then recommended to use median.

anyway, i did median on those returns. the numbers will adjust slightly higher. so i think it is better to stay on the conservative side.

 

[wahkao3]

My assumptions
20 years holding period
Invest purely for retirement
$3000 per month from pocket
additional $1000 per month from leverage
Dividend yield never fall below 3%
leverage cost 1.5%~2.5% p.a, average 2%
stop leverage when exceed 2.5%
ignore transaction cost

So if etf is at $3, it means you gotten 1500 shares, 1000 shares + 333 shares from leverage
Interest can be pay down through dividend as long as dividend yield > leverage cost

Since theres a 95% chance of generating 3+% in 20 years, will this method be able to squeeze more return ?

Sorry im a noob, my point here is to find out why most people are against leverage. What will be the conditions needed for leverage to best perform ?

leverage does increase returns without reducing risk
so no use

 

[chopra]

i explain! IN LAYMAN TErM!!!

to determine if DCA works, the best way to do is to sample a group of people who did DCA in the past. You want to sample As many as possible.

Now these people may buy at different time. And have different time periods of purchase.

Some may have done DCA for 5 yrs. Some 20 years.
some may have started in June. Some started in Aug
So many combinations! How to determine? The way to determine is to grab all their results and see the pattern.

For me, I think a distribution curve is the best way to visualize.

5star post. As good as Shiny Things

 

[Mecisteus]

My assumptions
20 years holding period
Invest purely for retirement
$3000 per month from pocket
additional $1000 per month from leverage
Dividend yield never fall below 3%
leverage cost 1.5%~2.5% p.a, average 2%
stop leverage when exceed 2.5%
ignore transaction cost

So if etf is at $3, it means you gotten 1500 shares, 1000 shares + 333 shares from leverage
Interest can be pay down through dividend as long as dividend yield > leverage cost

Since theres a 95% chance of generating 3+% in 20 years, will this method be able to squeeze more return ?

Sorry im a noob, my point here is to find out why most people are against leverage. What will be the conditions needed for leverage to best perform ?

DCA is usually a plan for the conservative investors. these investors prefer certainty and peace of mind. they might be doing DCA as part of their DIY approach to replace some insurance policies like endowment/whole life. as such, leverage is definitely out of the equation.

if you leverage, it becomes more risky. what happens if you need to pay back your principal and your STI is not at a favorable price? you may be forced to sell your shares at a loss.

i am not really against leverage. in fact, i practice some leverage with stocks through Interactive Brokers. in short, use the correct leverage instruments through a good broker which offers low financing charges.

 

[Mecisteus]

5star post. As good as Shiny Things

1) The charts are based on the older data. New data has been updated.

2) The 5th chart is a bit meaningless. Not supposed to combine them. It is like ranking all swimmers who are short, long distance, breast, free and butterfly together.