*Official* Shiny Things club - Part 2

[Ilovemathstutor]

Hi, I posted this in a different thread but hope you guys will allow me to repeat my question here.

I'm new to investment in general, so I'm hoping to get some advice about my future investment.
I was very keen on getting one of the roboadvisors for its simplicity and convenience but after reading more about its fees, I decided against it.

I initially wanted to choose a couple of stocks to invest for the long term (5-10 years) but I'm flooded by choices and not sure I'm heading in the correct direction or not. Might be too influenced by bloggers.

Currently, I'm thinking to split my investment as such:

- Hang Seng (2800): 20%
- CaptiaLand Retail China Trust: 5%
- S&P500: 25%
- NASDAQ: 15%
- Mapletree Commercial Trust: 10%
- Mapletree Logistics Trust: 10%
- Phillip Sing Income ETF: 10%
- Netlink Trust: 5%

Probably rebalance once a year.

Am I investing too much into US Tech? Would this portfolio be suitable for long term wealth growth?

get a copy of Shiny Things book...
it will answer your questions.

 

[Ilovemathstutor]

No, there’s no continental or regional bias required to explain this. Plenty of people are conditioned to think that their uncle or their neighbor is more trustworthy than a “far” entity, even if the latter is better regulated, insured, and, well, far. (“Far” is darn important if “near” ever has a systemic problem.) Everywhere in the world that happens, and everywhere in the world uncles and neighbors disappoint fairly often.


SIPC, FDIC, and NCUA are not insurance companies. They are U.S. federal government guaranteed backstops. As long as the U.S. federal government is a going concern, they will be, too.

The U.S. has had “too big to fail” failures, already. Depositors and account holders were fully protected, up to coverage limits. Nobody has ever lost even a penny, on a fair market value basis, of insured deposits/holdings at SIPC, FDIC, and NCUA protected institutions.

You can’t say that about institutions in Singapore, I’m afraid.


Leaving aside the eastern/western notion which I reject completely, how’s that working out? Private institutions fail, and we’ve got a long string of such failures in Singapore.

We’ve also had at least one major custodial failure: the SGX’s Central Limit Order Book (CLOB). That happened only 20 years ago, in the midst of the Asian Financial Crisis. Anybody remember that?


The proposal on the table seems to be to put all your assets in the hands of custodians in Singapore. Nobody is arguing that a resident of Singapore should place all his/her wealth outside Singapore.

I reject the proposal on the table completely. It’s risky. You should diversify at least reasonably well, including in your custodians. Arguing that IB is less safe than Standard Chartered — that specific broker safety comparison — is backwards, as it happens.

seriously,
please re-read this 50 times and if u still have doubts on IB, don't.
cause... education probably failed u.

 

[Shiny Things]

thanks, Shiny. Is there a better way to transfer SGD to USD for scb settlement account? Or just use scb's rate?

Not really. Just use Stanchart's rate.

Hi Shiny, as your an Aussie, i have the below question for you...
Assuming the following scenario: A Singaporean migrates to Australia as a Permanent Resident still hold part of his asset in Singapore like CPF, Investments and money in SG bank account etc.

Will he be taxed on capital gain on them when he eventually liquidate his portfolio of ETF, shares and interest earn on CPF, interest earned on SG bank account etc?

So I don't actually know anything about this (I haven't been an Aussie taxpayer for over a decade) but the ATO says that for CGT purposes, the date you became a PR is the date you're deemed to have acquired the shares.

[...]
Currently, I'm thinking to split my investment as such:

- Hang Seng (2800): 20%
- CaptiaLand Retail China Trust: 5%
- S&P500: 25%
- NASDAQ: 15%
- Mapletree Commercial Trust: 10%
- Mapletree Logistics Trust: 10%
- Phillip Sing Income ETF: 10%
- Netlink Trust: 5%

Probably rebalance once a year.

Am I investing too much into US Tech? Would this portfolio be suitable for long term wealth growth?

Yeah, no, that would not be suitable for long-term wealth growth. It's way too skewed to the USA and Hong Kong; you're chasing performance (you're buying US stocks because they did so well in the past, which doesn't mean they'll do well in the future), you're putting too much into REITs, which doesn't make sense when you're a new investor and don't need the dividends...

Anyway, yeah, I think you've been reading too many bloggers. Keep it simpler.

I would recommend replacing the 40% that you've allocated to US stocks with IWDA (which gets you a whole world of global stocks); put another 40% in Singapore stocks (you don't want to just own REITs - you want to own the banks as well, and the Jardines, etc etc etc); and don't forget an allocation to SGD bonds!

Sorry BBC, i was meaning brokerage and not companies.
I think why MFGlobal failed because they do their own trading, when lose money, they tapped into customers deposits, and that also lose money. I hope Ibkr have only a small inhouse trading desk.

IBKR doesn't have an in-house trading desk, as far as I know. They used to own Timber Hill, which was a pretty active (and profitable!) options market-making business, but they flogged it a couple years back.

Since IB is a member of SIPC which protects up to 500k securities and cash, it is safer compared to SCB, even though there are a few caveats here:

Securities loaned out by you under the IB yield enhancement program may not be protected by SIPC. Anyone who think the gain is not worth the risk should not join the yield enhancement program.

First, mate, ouch, getting caught up in the MF Global imbroglio can't have been fun.

So what you said above is true, but if you lend out securities through the yield enhancement program, you get cash—cold hard cash, to the full value of the shares you lend out—as collateral for your loan. If the lender doesn't return the shares, you get to keep the cash.

While Interactive Brokers LLC (IB LLC) is a member of SIPC, Interactive Brokers UK (IB UK) is a subsidiary of IB LLC but it is not a SIPC member. The important thing is which entity is actually holding your investment.

Anyone has answer to no. 2 here since it seems quite crucial?

As best I know, all the equity positions sit at IB LLC; I think the IB UK entity is only used for CFDs, but I don't know for sure.

Could someone with an IBKR account who owns some IWDA check something for me? Go into Account Management; go to Reports / Statements; and run a Daily Activity Report.

The entity name at the top of the report should say "Interactive Brokers LLC" (the US entity) or something like that.

Anyway, no matter where those shares are held, they're still covered by the multi-hundred-million-dollar insurance policy that IBKR pays for to cover its clients. Equity accounts are a lot more tightly protected than CFD or futures-trading accounts, which I think is what you had at MF Global?

One should just get the facts and do your own due diligence. Contrary to the views of some experts, there is no single 'right answer'. If there was, then the financial industry wouldn't need to exist, we would only have one broker and one ETF.

Throwing your hands up and saying "it's all too complicated, there is no right answer" is a pretty nihilistic view, and expecting everyone to do their own due diligence is way too much to put on people. You shouldn't have to have a view on counterparty credit risk before you start investing, right?

(I mean, even back when I was doing this for a living, the only time I took a view on the credit risk of my counterparties was the Wednesday before Lehman exploded, when I decided "ooh boy I've got a lot of positions on with Lehman, and if they go bankrupt all those trades will get torn up, I should probably buy some more options in case those Lehman positions get torn up". Turned out I got that one epically right, but if BoA or Barclays had decided that Lehman was worthy of being saved, I'd have been absolutely incinerated the Monday after because I'd have been doubly long options that I didn't need to own.)

Anyway, I agree that the right answer isn't always the same between different people—that's why I recommend one set of brokers for small investors, and one set of brokers for larger investors. But that doesn't mean that you can't say a few things:
1) There are some brokers that are obviously worse than others. DBS Vickers, which charges 0.3% with a 25-pound minimum for UK equity execution, is obviously worse than Stanchart which charges 0.25% with a 10-pound minimum for the exact same service.
2) The risk of big brokerage houses like IBKR or DBSV or Stanchart going under is small enough, and the investor protections that are in place are strong enough (especially in the USA), that worrying about this is a waste of your time. They're all really safe, so you might as well go for the cheapest one.

Also, fun fact: Interactive Brokers is huge. Their market cap is nearly as big as OCBC's, and three times the size of the SGX.

 

[smart alex]

tot of dca into VUSD, the return for 5 years is very similar to IWDA, but higher return base on historical chart

How is the selling of stock process in SCB like?

if I click sell how long must I wait before the fund credit into the USD securities account?

 

[BBCWatcher]

I would say CDP is still the safest and Singapore is not the only country where shares bought by retail investors are kept in a central securities depository. Most of the newer national stock exchange have a central securities depository. Unfortunately CDP is only for shares listed in SGX so we can only use brokerage firms with custodian account when buying foreign shares.

The CLOB experience in the late 1990s is a reasonable counterargument to this point of view. The depository is only holding an asset as listed/traded on the exchange. The asset was really a cross-listing, and ... well, we know how that story turned out.

Just stay at least reasonably well diversified, that’s all. Nobody is suggesting you custody all or even most of your wealth with a single broker or custodian — or even nation state.(*) However, as it happens, if you want to compare broker safety, IB is likely safer than Standard Chartered.

(*) I’ll allow a couple exceptions for this last one, such as the “I’ve just celebrated my 58th birthday and have no retirement savings. What do I do?” scenario. (Answer: Pile into CPF.)

 

[BBCWatcher]

So I don't actually know anything about this (I haven't been an Aussie taxpayer for over a decade) but the ATO says that for CGT purposes, the date you became a PR is the date you're deemed to have acquired the shares.

Good point. You have to be careful since countries’ tax rules vary. Australia evidently calculates the cost basis for taxable capital gains based on the date when the person’s Australian immigration status became effective. The U.S. is different. If you (currently a non-U.S. person) emigrate to the U.S. and thus become a U.S. person, as soon as you physically step foot in the U.S. all your assets fall under U.S. capital gains tax rules. Even a “look see” trip can count as “stepping foot.” (Yes, I know, that’s ugly.) And the cost basis is whatever the cost was when you acquired the asset, not some later date. So, strictly prior to emigrating to the United States, it can be a good idea to reset the cost basis on appreciated assets. Although you have to be slightly careful about this since there’s something called a “wash sale” rule that might apply. The IRS takes a dim view of selling assets and then too quickly buying back the same assets. Make sure you understand that rule, too, if you try to pull off this maneuver. Usually this isn’t going to be a problem. For example, you might be selling IWDA before you emigrate to the U.S. then, after you arrive, buy FZROX and FZILX. Shifting quickly from IWDA to FZROX+FZILX shouldn’t trigger the wash sale rule.

All countries are at least slightly different in their tax rules, to summarize.

As I understand it — knowing only a thimble-full about Australian tax rules — Singapore and Australia have a tax treaty that offers a little bit of help.

 

[happylcw]

So what you said above is true, but if you lend out securities through the yield enhancement program, you get cash—cold hard cash, to the full value of the shares you lend out—as collateral for your loan. If the lender doesn't return the shares, you get to keep the cash.

Thanks Shiny on clarifying on share lending issue. I read the FAQ from IB and arrive at the same conclusion. Sorry I do not have enough post count to put the FAQ link here.

Shiny, I suppose you do not have an IB account because of you are a staff of an investment bank?

 

[happylcw]

The CLOB experience in the late 1990s is a reasonable counterargument to this point of view. The depository is only holding an asset as listed/traded on the exchange. The asset was really a cross-listing, and ... well, we know how that story turned out.

Just stay at least reasonably well diversified, that’s all. Nobody is suggesting you custody all or even most of your wealth with a single broker or custodian — or even nation state.(*) However, as it happens, if you want to compare broker safety, IB is likely safer than Standard Chartered.

(*) I’ll allow a couple exceptions for this last one, such as the “I’ve just celebrated my 58th birthday and have no retirement savings. What do I do?” scenario. (Answer: Pile into CPF.)

Thanks BBCWatcher.

Please correct me if I am wrong. I thought the CLOB issue was due to Malaysia banning trading of their shares outside the country. In that case, even if you bought the share using a custodian broker like IB, if the shares are kept in a custodian account outside Malaysia, you will not be able to sell the shares also? It seems to me that this is a different risk from the failure of the security holding entity (be it a central security depository or custodian account).

 

[BBCWatcher]

Please correct me if I am wrong. I thought the CLOB issue was due to Malaysia banning trading of their shares outside the country. In that case, even if you bought the share using a custodian broker like IB, if the shares are kept in a custodian account outside Malaysia, you will not be able to sell the shares also? It seems to me that this is a different risk from the failure of the security holding entity (be it a central security depository or custodian account).

As I understand it, the CLOB issue (scandal) was all Singapore’s harm to bear, really. The press reports indicate that 95% of CLOB investors were Singaporeans.

If you did business with a random broker somewhere in the world back in the 1990s — if you were a Nomura customer in Japan, for example — and if you purchased shares of Malaysian stocks, then about 99 times out of 100 your broker purchased those shares on the Kuala Lumpur Stock Exchange (KLSE), the predecessor to Bursa Malaysia. And that was all fine, well, and good. Nobody buying shares that way got burned, and the Malaysian government of the time wasn’t quite that stupid.

That’s not what happened when you bought shares of Malaysian stocks via cross-listings on the SES, the predecessor to the SGX. When the KLSE and SES split in 1990, the CLOB was formed to continue to trade Malaysian stocks on the SES. It was a cross-listing mechanism, all supposedly proper. Until it wasn’t. In 1998 the Malaysian government banned overseas (i.e. non-KLSE, i.e. SES CLOB) trading of Malaysian stocks, effectively refusing to recognize CLOB title to those shares. (Not overseas ownership. KLSE traded shares were OK, albeit subject to Asian Financial Crisis-era capital controls like everything else.) CLOB investors had their assets frozen for a couple years and lost about 2/3rds of fair market value, generally speaking. Certain Malaysian government ministers personally enriched themselves in the process — that’s a matter of historical fact now, too.

And all of that happened only 20 years ago, here, in Singapore. About 180,000 Singaporeans got ensnared in that debacle. The CLOB disaster spurred the formation of the SIAS.

 

[BBCWatcher]

There’s another “fun” story in Singapore’s shorter financial history: Pan-Electric, in 1985. The Pan-Electric collapse was so catastrophic that trading on the whole SES (SGX predecessor) was suspended for three days back in November, 1985!

....Anyway, there are plenty of horrific tales to tell. Singapore just hasn’t been a perfect model of financial stability. The solution is simple: always be at least reasonably well diversified in all major dimensions, that’s all.

 

[Ilovemathstutor]

Not really. Just use Stanchart's rate.



So I don't actually know anything about this (I haven't been an Aussie taxpayer for over a decade) but the ATO says that for CGT purposes, the date you became a PR is the date you're deemed to have acquired the shares.



Yeah, no, that would not be suitable for long-term wealth growth. It's way too skewed to the USA and Hong Kong; you're chasing performance (you're buying US stocks because they did so well in the past, which doesn't mean they'll do well in the future), you're putting too much into REITs, which doesn't make sense when you're a new investor and don't need the dividends...

Anyway, yeah, I think you've been reading too many bloggers. Keep it simpler.

I would recommend replacing the 40% that you've allocated to US stocks with IWDA (which gets you a whole world of global stocks); put another 40% in Singapore stocks (you don't want to just own REITs - you want to own the banks as well, and the Jardines, etc etc etc); and don't forget an allocation to SGD bonds!



IBKR doesn't have an in-house trading desk, as far as I know. They used to own Timber Hill, which was a pretty active (and profitable!) options market-making business, but they flogged it a couple years back.



First, mate, ouch, getting caught up in the MF Global imbroglio can't have been fun.

So what you said above is true, but if you lend out securities through the yield enhancement program, you get cash—cold hard cash, to the full value of the shares you lend out—as collateral for your loan. If the lender doesn't return the shares, you get to keep the cash.



As best I know, all the equity positions sit at IB LLC; I think the IB UK entity is only used for CFDs, but I don't know for sure.

Could someone with an IBKR account who owns some IWDA check something for me? Go into Account Management; go to Reports / Statements; and run a Daily Activity Report.

The entity name at the top of the report should say "Interactive Brokers LLC" (the US entity) or something like that.

Anyway, no matter where those shares are held, they're still covered by the multi-hundred-million-dollar insurance policy that IBKR pays for to cover its clients. Equity accounts are a lot more tightly protected than CFD or futures-trading accounts, which I think is what you had at MF Global?



Throwing your hands up and saying "it's all too complicated, there is no right answer" is a pretty nihilistic view, and expecting everyone to do their own due diligence is way too much to put on people. You shouldn't have to have a view on counterparty credit risk before you start investing, right?

(I mean, even back when I was doing this for a living, the only time I took a view on the credit risk of my counterparties was the Wednesday before Lehman exploded, when I decided "ooh boy I've got a lot of positions on with Lehman, and if they go bankrupt all those trades will get torn up, I should probably buy some more options in case those Lehman positions get torn up". Turned out I got that one epically right, but if BoA or Barclays had decided that Lehman was worthy of being saved, I'd have been absolutely incinerated the Monday after because I'd have been doubly long options that I didn't need to own.)

Anyway, I agree that the right answer isn't always the same between different people—that's why I recommend one set of brokers for small investors, and one set of brokers for larger investors. But that doesn't mean that you can't say a few things:
1) There are some brokers that are obviously worse than others. DBS Vickers, which charges 0.3% with a 25-pound minimum for UK equity execution, is obviously worse than Stanchart which charges 0.25% with a 10-pound minimum for the exact same service.
2) The risk of big brokerage houses like IBKR or DBSV or Stanchart going under is small enough, and the investor protections that are in place are strong enough (especially in the USA), that worrying about this is a waste of your time. They're all really safe, so you might as well go for the cheapest one.

Also, fun fact: Interactive Brokers is huge. Their market cap is nearly as big as OCBC's, and three times the size of the SGX.

I checked w IB 3 times...

first us$250k is insured by SIPC

the next us$250k is insured by another entity, that essentially spells unless their gov fails...

the balance is on IB's liability.

to keep it simple, if anyone is worried... just keep 2.75m usd max on IB.

but again, I seriously think the above isn't the global average for most retail investors.

On top of the pittance commissions per trade and spot-rate for FX convert, IB has a deep moat.

I loitered from a couple of brokers, from local to TD before I landed on IB.

Because IB allows us to trade in various markets, which TD does not.

 

[InvestingDummy]

Sorry, didn’t follow this for a while - just wanna check if Stanchart is still better than IBKR as long as account value < USD 100k?

Thanks!

 

[BBCWatcher]

first us$250k is insured by SIPC

OK, SIPC insures up to US$500,000, with a sublimit of US$250,000 for cash (in any currencies). SIPC unambiguously insures positions in any U.S. listed securities. Non-U.S. listed securities such as IWDA are a bit of question mark.

The insurance is for fair market value. If you're a day trader or otherwise taking significant trading risk via options, futures, etc. then you might not be happy with FMV. For a typical long-term investor, FMV is perfectly fine.

Citizenship and residence are almost entirely irrelevant. If you're doing business with a SIPC covered institution and have SIPC covered assets, you're good. With the possible exception of being on the U.S. government's short list of notorious individuals, such as internationally wanted illegal arms dealers.

SIPC will always go to bat for investors at failed institutions to try to recover all amounts, including amounts above insured limits. That's what happened with MF Global. It took a while, but all MF Global account holders were made whole at FMV. It didn't take a while at and below SIPC limits, please note. As soon as the SIPC can determine who the account holders were and what their positions were when the institution failed, that part (the insured limits) is settled as quickly as possible directly from SIPC assets.

IB also carries some Lloyds of London insurance, but this insurance is only in the aggregate and really isn't much in terms of account holder assets. In practice this supplemental insurance, plus the SIPC, should be more than enough to pay trustees and accountants to resolve a hypothetical collapse. That's something.

As yet another line of defense, if you're holding a large cash balance at IB -- which is U.S. estate taxable by the way -- then you can sign up for IB's cash sweep program. That program pushes the cash into a set of banks. Hypothetically IB could do something naughty and not sweep your cash -- any broker could, hypothetically, screw up intentionally or unintentionally -- but if that part of IB is not screwed up, your cash should be somewhat better protected. I don't think there's any harm in signing up for it, and it might help.

My personal rule is that I don't keep any more than half of my household's wealth in the hands of any one custodian. Likewise, I don't recommend you keep all or most of your wealth concentrated at any single broker, custodian, geography, or sector, with rare exceptions. Reasonable portfolio diversification across all major dimensions is quite important.

Sorry, didn’t follow this for a while - just wanna check if Stanchart is still better than IBKR as long as account value < USD 100k?

No, not always.

If you're doing anything monthly or more often -- buying a low cost global stock index fund monthly, as a notable example -- then IB is going to beat Standard Chartered. If you're under the age of 26, IB is generally going to beat Standard Chartered, at least until your 26th birthday. (You could move to Standard Chartered or another broker at age 25 and 11 months, if you wish, if advantageous.)

 

[Calpha K]

My personal rule is that I don't keep any more than half of my household's wealth in the hands of any one custodian. Likewise, I don't recommend you keep all or most of your wealth concentrated at any single broker, custodian, geography, or sector, with rare exceptions. Reasonable portfolio diversification across all major dimensions is quite important.

How does one achieve this?

If I keep piling IWDA in IBKR, wouldnt that gradually work towards half of my wealth?

 

[hwckhs]

How does one achieve this?

If I keep piling IWDA in IBKR, wouldnt that gradually work towards half of my wealth?

BBCW includes property, CPF etc. That brings the percentage of IWDA down. Anyway, if the percentage is too high for your comfort or your portfolio is large, feel free to use additional brokers (eg. IBKR + SCB). Just make yourself comfortable without being paranoid.

 

[Calpha K]

Hi all,

Does LSE open at 3pm or 4pm Singapore time?

As per my last search, the opening hour is 8.15 am London time.

However, I had a mental note to enter 15minutes after 4pm because of a past fluke entering pre-market open.

Did something change?

Or did this 4pm rule come about because of the "1 hour after market consolidation"?

 

[InvestingDummy]

Thanks BBCWatcher!

Since I intend to DCA IWDA annually id just stick with Standard Chartered....and I just crossed the 26 age limit

 

[hwckhs]

As per my last search, the opening hour is 8.15 am London time.

You are right, it opens at 8:15am London time. However, do take note of daylight saving:

• When daylight saving is in effect (last Sunday in March to last Sunday in October), London time is GMT+1, which means 3:15pm Singapore time.
• The rest of the time when daylight saving is not in effect, London time is GMT+0, which is 4:15pm Singapore time.

To save yourself from having to remember that, just bookmark this page.

 

[Shiny Things]

Shiny, I suppose you do not have an IB account because of you are a staff of an investment bank?

I've had an IB account for six or seven years now; I use it for the vast majority of my net worth.

tot of dca into VUSD, the return for 5 years is very similar to IWDA, but higher return base on historical chart

That's just because US stocks have outperformed the rest of IWDA's universe over the last five years, and that may not (in fact, probably won't) continue.

 

[swan02]

sell the HDB ?

Guys,

Should I sell my HDB and buy a much cheaper HDB or even rent ?
If only I'm 55 and could have bought a flexi flat.

Proceeds will be reinvested into an actual investment (IWDA, reits etc) as opposed to a guaranteed zero /depreciating HDB. Might consider freehold property given the right conditions.

I calculated/estimated the IRR of a HDB to be about 3.3 percent to 3.5% or worse from now on.-Can someone confirm the IRR ?

What are your thoughts about the HDB flat, after all I have always perceive anything of monetary value is an investment as long the cash flow warrants the expected rate of return which the HDB flat, given its risk is not justifying.

Thanks guys