*Official* Shiny Things club - Part 2

[peripheral]

Hmm - don’t forget the FX spread on the Stanchart trades. You’ve got the fees right, but the Stanchart side is going to have some extra hidden costs from FX that won’t be reflected in the fees.

You are missing the FX conversion which is about 0.5% one way. If you intend to have the units remain in SC all the way until you sell, you will have to count both ways.

If you are investing $1200 every 4-5 months into IWDA, then SCB may be better. If you are buffering up $1200 per month to invest every 4-5 months into IWDA, then IBKR will be better.

The rule of thumb is to estimate whether you can reach US$100k value (inclusive of capital gain) in less than 7-8 years.

This is where I'm puzzled by the math. Yes, buying USD/SGD with SCB subjects me to a spread of ~90pips per way as opposed to IBKR of almost 0. With the example of $1,200 it's about $5.80 per month (1.36 vs 1.369 for simplicity) due to larger FX spreads.

Buying IWDA for 5 months in a year with SCB would subject me to an additional $29 per year, while employing IBKR would result in me paying an additional $95.20 per year (US$10 x 1.36 x 7) for minimum commission on months without transactions.

Assuming the above are true, it would suggest that I'd have to invest at least $4,000 for 5 months in a year for IBKR to be superior. Also, it appears the fewer the number of months IWDA purchases are made, the worse IBKR performs in terms of overall commissions. Of course, the calculations vary based on quite a few factors such as the applicable USD/SGD spot rate, but should be representative of the case.

A one-way spread with SCB is used in this case, as the assumption is that a transfer will be made to IBKR once the value of IWDA holdings exceed US$100k.

 

[swordsly]

This is where I'm puzzled by the math. Yes, buying USD/SGD with SCB subjects me to a spread of ~90pips per way as opposed to IBKR of almost 0. With the example of $1,200 it's about $5.80 per month (1.36 vs 1.369 for simplicity) due to larger FX spreads.

I'm looking at SCB now and it's 1.377593 (vs 1.36). So that's an extra ~$21 per conversion, 1 way.

Buying IWDA for 5 months in a year with SCB would subject me to an additional $29 per year, while employing IBKR would result in me paying an additional $95.20 per year (US$10 x 1.36 x 7) for minimum commission on months without transactions.

FTFY.
FX fees are considered transaction fees and thus offsets the $10 minimum account fee.

Assuming the above are true, it would suggest that I'd have to invest at least $4,000 for 5 months in a year for IBKR to be superior. Also, it appears the fewer the number of months IWDA purchases are made, the worse IBKR performs in terms of overall commissions. Of course, the calculations vary based on quite a few factors such as the applicable USD/SGD spot rate, but should be representative of the case.

So if you buy via SCB, you pay 10.70USD ($14.55) + $21, which is ~$177 for 5 trades. (or ~$170 if it's flat 10USD)
Via IBKR, it's 10USD flat, which is ~$163 for 12 months.

I think my numbers are... right?

 

[BBCWatcher]

Buying IWDA for 5 months in a year with SCB would subject me to an additional $29 per year, while employing IBKR would result in me paying an additional $95.20 per year (US$10 x 1.36 x 7) for minimum commission on months without transactions.

Let's exercise the numbers a bit more.

With Interactive Brokers you'll pay US$120 per year, all-in. Let's call that S$163.20 (1.36 exchange rate). Simple.

With Standard Chartered and 5 months of S$1,200 purchases (S$6,000 per year), you'll pay US$53.50 in commissions (S$73.24 at 1.369) plus S$29 in additional currency conversion costs. That's S$102.24 total. S$102.24 is a lower number than S$163.20, so Standard Chartered wins when you buy S$1,200 of IWDA in 5 transactions per year....

....But that's not quite the whole story, because there's an opportunity cost involved in delaying your IWDA purchases long enough to amass S$1,200 per purchase. You could be purchasing S$500 of IWDA per month, every month, and that'd also cost S$163.20 at Interactive Brokers. And why would you do that? Because you expect IWDA to increase in value over time, on average. Let's assume (very roughly) that you're delaying a total of S$3,000 by one month (half your S$6,000 per year), and let's suppose you expect IWDA to have a long-term average net yield of 6% per year above a cash deposit. One month of delay is thus worth 0.5% in cost (lost yield), plus compounding. That's another S$15 of loss (not including the compounding), so we add that to the Standard Chartered figure to arrive at S$117.24 per year of total investment cost....

....Standard Chartered still wins this comparison. But it also suggests that 5 times per year may be too frequent at SCB, because you could reduce broker commissions (US$10.70 per event) by making less frequent IWDA buys -- every 4 months (3 times per year), let's suppose, or S$2,000 per buy. That's a nice round number, isn't it? And that's probably the "sweet spot" to minimize costs, or at least it's closer to the mark. The loss attributable to time out of the market goes up a bit, but I think the US$21.40 reduction in commissions should more than compensate.

If Swordsly is correct -- that the foreign exchange costs even more at SCB -- then IB starts to look much better in comparison.

 

[peripheral]

I'm looking at SCB now and it's 1.377593 (vs 1.36). So that's an extra ~$21 per conversion, 1 way.

The rate of 1.36 was more illustrative than accurate - subtracting 90 pips from your price seems about right based on current spot rates. I've been tracking my own transactions each time since Dec 2018 and they've ranged between 87-91 pips each time, unless they've increased spreads lately.

Let's exercise the numbers a bit more.

With Interactive Brokers you'll pay US$120 per year, all-in. Let's call that S$163.20 (1.36 exchange rate). Simple.

With Standard Chartered and 5 months of S$1,200 purchases (S$6,000 per year), you'll pay US$53.50 in commissions (S$73.24 at 1.369) plus S$29 in additional currency conversion costs. That's S$102.24 total. S$102.24 is a lower number than S$163.20, so Standard Chartered wins when you buy S$1,200 of IWDA in 5 transactions per year....

....But that's not quite the whole story, because there's an opportunity cost involved in delaying your IWDA purchases long enough to amass S$1,200 per purchase. You could be purchasing S$500 of IWDA per month, every month, and that'd also cost S$163.20 at Interactive Brokers. And why would you do that? Because you expect IWDA to increase in value over time, on average. Let's assume (very roughly) that you're delaying a total of S$3,000 by one month (half your S$6,000 per year), and let's suppose you expect IWDA to have a long-term average net yield of 6% per year above a cash deposit. One month of delay is thus worth 0.5% in cost (lost yield), plus compounding. That's another S$15 of loss (not including the compounding), so we add that to the Standard Chartered figure to arrive at S$117.24 per year of total investment cost....

....Standard Chartered still wins this comparison. But it also suggests that 5 times per year may be too frequent at SCB, because you could reduce broker commissions (US$10.70 per event) by making less frequent IWDA buys -- every 4 months (3 times per year), let's suppose, or S$2,000 per buy. That's a nice round number, isn't it? And that's probably the "sweet spot" to minimize costs, or at least it's closer to the mark. The loss attributable to time out of the market goes up a bit, but I think the US$21.40 reduction in commissions should more than compensate.

If Swordsly is correct -- that the foreign exchange costs even more at SCB -- then IB starts to look much better in comparison.

Now this is getting interesting, greatly appreciate everyone entertaining my thoughts and calculations. Thanks for simplifying the equation, knew there had to be a better way to draw the comparison across both brokers.

I fully agree with your thought process - for clarification, the scenario was riding a previous question where the monthly investment was $1,200 for continuity. Personally, I'm engaging in larger monthly investments (shuffling between IWDA, ES3, MBH across months) as the opportunity costs of waiting to deploy outweigh commission savings from pooling across months (commission currently <0.5%).

Working backwards from IBKR's annual commission of US$120 (S$163.20 @ 1.36), SCB would have to charge >US$23.84 in commissions per month of IWDA purchase for IBKR to be superior (S$163.20 divided by 1.369 over 5 months).

There also appears to be value in using SCB over IBKR for IWDA, to contribute toward the AUM while working toward SC Priority - this in turn reduces commissions for ES3 and MBH as well which may need to be factored in for a holistic picture.

All in all, SCB still appears to be superior despite the large FX spreads up until the total value of IWDA holdings exceed US$100k, which puzzles me why many older posts recommend IBKR over SCB for similar profile investors.

 

[BBCWatcher]

All in all, SCB still appears to be superior despite the large FX spreads up until the total value of IWDA holdings exceed US$100k, which puzzles me why many older posts recommend IBKR over SCB for similar profile investors.

If you're doing anything (such as IWDA) monthly, IB wins running away. And a lot of people do that, with merit.

Another way IB is quite useful is if you happen to have a U.S. bank or U.S. credit union account and are converting Singapore dollars to U.S. dollars to then route through an attractive U.S. debit and/or U.S. credit card for overseas spending. (As an example.)

 

[tangent314]

I just checked the SCB FX prices against xe.com and looks like it is 90bp for SGD->USD and 80bp for USD->SGD.

The breakeven seems to be around S$1000/month quarterly, which comes out to be $12000 * .0009 / 1.37 + $40 * 1.07 = US$121.63/year

Another small factor would be the cost of transferring the holdings from SCB to IBKR once you reach $100k, which is about $59 IIRC.

Personally, when I first started out, I went all in on IWDA to reach the US$100k as fast as possible before looking into STI ETF. I don't bother with bond funds since I consider CPF to be sufficient for my bond portfolio.

 

[widishi]

New player enters

Guys, exciting news, the big V launched a new ETF that might be a better option than IWDA without the hassle of EIMI.

Ticks all the boxes, domiciled in Ireland + Accumulative, just launched 2 days ago.

FTSE All-World UCITS ETF (USD) Accumulating (VWRA)

VWRA! has 5+% in China.

 

[andymarsh]

Guys, exciting news, the big V launched a new ETF that might be a better option than IWDA without the hassle of EIMI.

Ticks all the boxes, domiciled in Ireland + Accumulative, just launched 2 days ago.

FTSE All-World UCITS ETF (USD) Accumulating (VWRA)

VWRA! has 5+% in China.

Not much info online. What's the TER compared to IWDA and EIMI?

 

[sonicho2]

Can't find any online factsheet either.

Guys, exciting news, the big V launched a new ETF that might be a better option than IWDA without the hassle of EIMI.

Ticks all the boxes, domiciled in Ireland + Accumulative, just launched 2 days ago.

FTSE All-World UCITS ETF (USD) Accumulating (VWRA)

VWRA! has 5+% in China.

 

[kehyi4]

Guys, exciting news, the big V launched a new ETF that might be a better option than IWDA without the hassle of EIMI.

Ticks all the boxes, domiciled in Ireland + Accumulative, just launched 2 days ago.

FTSE All-World UCITS ETF (USD) Accumulating (VWRA)

VWRA! has 5+% in China.

Not much info online. What's the TER compared to IWDA and EIMI?

Can't find any online factsheet either.

It's the same fund as VWRD, just accumulating instead of distributing:
https://www.vanguard.co.uk/adviser/investments/product.html#/fundDetail/etf/portId=9679/assetCode=equity/?overview

TER is 0.25%, AUM is US$2.7b, same as VWRD

btw, VWRD/VWRA is 3.5% China, based on the index. Where did "5+%" come from?

 

[stu4rt86]

USD.SGD United States dollar
1.36793 +0.00053 0.04%
500K x 1.36794

1M x 1.36792

Realtime Price
Buy 3200 USD.SGD
Order Type Limit
Limit Price 1.36
Time-In-Force DAY


Amount 4,352 SGD
Commission (est.) 2.73 ... 3.42 SGD
TOTAL NA


Margin Impact Current Change Post-Trade*
Equity w/Loan 4,501 0 4,501
Initial Margin 0 0 0
Maint. Margin 0 0 0
*This is a current projection and is subject to change.




Hi guys. I just transferred in 4.5 k to IB and i need help trying to convert the SGD to USD. I am not sure if is this the right way to do it on the desktop version of IBKR ( i tried following keykeytravels blog but i dont see the same thinigs on the app)? I transferred in 4.5k and i want to convert as much SGD into USD as possible.. what should i put my limit as? sorry noob newbie here..

 

[widishi]

TER is 0.25%, AUM is US$2.7b, same as VWRD

btw, VWRD/VWRA is 3.5% China, based on the index. Where did "5+%" come from?

My bad for posting at 4am . So with the higher TER, is it a meh? other than slight convenience.

 

[Zink00]

Is the US$2 charge for changing sgd to usd counted towards US$10 min activity fee or is it a separate thing?

 

[CWL84]

Yes, it counts.

 

[sgbsgb]

Hi to bbcwatcher and shinything, i would like to seek your opinion on the latest vwra funds. Given that it is accumulating funds, is it good enough to switch to it from iwda?

Sent from HUAWEI LYA-L29 using GAGT

 

[peripheral]

If you're doing anything (such as IWDA) monthly, IB wins running away. And a lot of people do that, with merit.

Another way IB is quite useful is if you happen to have a U.S. bank or U.S. credit union account and are converting Singapore dollars to U.S. dollars to then route through an attractive U.S. debit and/or U.S. credit card for overseas spending. (As an example.)

Aye, no contest that IBKR is superior where monthly investments are done. It's another question whether that has greater merit over pooling investments to investment in one counter per month. If investing in IWDA alone incurs commissions of 0.5%, investing across IWDA + ES3 in the same month would incur almost double at 0.8-0.9%. Unless IWDA has a significantly higher expected return than ES3, I'd lean toward pooling funds and investing in a different counter each month.

Going back to the root of the question, in order to assess whether SCB or IBKR is superior, it's a question of whether SCB spreads or IBKR fees on inactivity fees are larger. With FX of 1.36 vs 1.369, IBKR approximately comes out ahead of SCB with monthly investments above the following sizes:

7 months a year in IWDA - >S$1,300
6 months a year in IWDA - >S$1,900
5 months a year in IWDA - >S$2,700
4 months a year in IWDA - >S$4,000

The threshold monthly investment amount also increases if USD strengthen against SGD (>1.36), and decreases if it weakens (<1.36).

Starting to see how the math works out, thanks for the enlightenment. This suggests though that it's very situational - IBKR may not be superior especially when dealing with smaller monthly investment sizes.

The next step is also to start overlaying the potential costs of engaging in IBKR and slowing down AUM progress toward SC Priority

 

[hwckhs]

TER is 0.25%, AUM is US$2.7b, same as VWRD

My bad for posting at 4am . So with the higher TER, is it a meh? other than slight convenience.

It is not a meh. You cannot compare VWRA's TER to IWDA's. They are not apple to apple, because VWRA contains EM exposure (and IWDA doesn't). EM exposure has higher costs.

Vanguard is usually cheaper than iShares.

DM only
iShares MSCI World, Acc (IWDA): 0.20% TER
Vanguard FTSE Developed World, Dist (VDEV): 0.18% TER (lower cost)

DM+EM
iShares MSCI ACWI, Acc (ACWI): 0.32% TER
Vanguard FTSE All World, Acc/Dist (VWRA/VWRD): 0.25% TER (lower cost)

 

[iceblendedchoc]

Aye, no contest that IBKR is superior where monthly investments are done. It's another question whether that has greater merit over pooling investments to investment in one counter per month. If investing in IWDA alone incurs commissions of 0.5%, investing across IWDA + ES3 in the same month would incur almost double at 0.8-0.9%. Unless IWDA has a significantly higher expected return than ES3, I'd lean toward pooling funds and investing in a different counter each month.

Going back to the root of the question, in order to assess whether SCB or IBKR is superior, it's a question of whether SCB spreads or IBKR fees on inactivity fees are larger. With FX of 1.36 vs 1.369, IBKR approximately comes out ahead of SCB with monthly investments above the following sizes:

7 months a year in IWDA - >S$1,300
6 months a year in IWDA - >S$1,900
5 months a year in IWDA - >S$2,700
4 months a year in IWDA - >S$4,000

The threshold monthly investment amount also increases if USD strengthen against SGD (>1.36), and decreases if it weakens (<1.36).

Starting to see how the math works out, thanks for the enlightenment. This suggests though that it's very situational - IBKR may not be superior especially when dealing with smaller monthly investment sizes.

The next step is also to start overlaying the potential costs of engaging in IBKR and slowing down AUM progress toward SC Priority

$1000 a month not worth it better lump into $4000 every quarter

 

[limster]

It also depends on what is your % split between Singapore and overseas ETF. If your portfolio is more than 50% Singapore shares, it may be more worth it to work towards getting SCB PB and no min comms for SG shares first.

With SCB PB, you can get a US$ debit mastercard for your online purchases (2% cashback offsets the 1% overseas transaction fee, and there is no overseas transaction fee for US$ purchases using paypal SG - treated as local transaction, full 2% cashback).

Some also like the priority pass that comes with SCB PB, but I don't find that useful

 

[peripheral]

$1000 a month not worth it better lump into $4000 every quarter

Yes I understand this, they're breakeven costs across a scale for better illustration of the calculations. Do note though that the more you pool money across months for a periodic investment, the further ahead SCB performs as compared to IBKR.

The benefits of IBKR shine when monthly investments are large and/or frequent. Given the limitation of balancing minimum commission costs as a ratio of investment size, I'd reckon most people are better off pooling and investing in IWDA somewhere between 4-6months.

Assuming that, it appears that it may generally be better off using SCB over IBKR, even with its larger spreads if the AUM of US$100k cannot be hit.