*Official* Shiny Things club - Part 2

[revhappy]

Hi all,

Are there any things to look out for when it comes to buying FROM THE Hongkong Exchange, and where ETF is denominated in HKD?

Limster is the Hong Kong expert. One problem with HK etfs is very low volumes and wide spreads.

Sent from Dont Take Any Of My Statment As Investment Advice. Do Your Own Due Diligence. using GAGT

 

[celtosaxon]

BBCWatcher - how did you get to be so exceptionally well informed? You are in the top deciles. The tip you gave to make IRA contributions with nonexcluded employer CPF contributions was a great one for those who can exploit it. Unfortunately I don’t have CPF so what I do is use the physical presence test and shift the 12 month period outside of the current tax year just enough to avoid excluding too much income for my Roth contribution each year - took some study to figure that one out, but it works well.

 

[BBCWatcher]

BBCWatcher - how did you get to be so exceptionally well informed?

Lots and lots of research, and more practically every week.

The tip you gave to make IRA contributions with nonexcluded employer CPF contributions was a great one for those who can exploit it.

Here's the IRS's guidance, and hopefully I'm reading/interpreting it correctly. I'm not aware of any more recent CPF-related guidance.

Note that one spouse is ordinarily able to contribute into the IRA of his/her spouse, if married filing jointly. So the employer's CPF contribution for one spouse can sometimes be enough to support IRA contributions for both spouses. (The maximum possible compulsory employer contribution to CPF is S$17,340 per year.)

To my knowledge there's no earned income requirement to be eligible to contribute to 529 plans, please note.

Unfortunately I don’t have CPF so what I do is use the physical presence test and shift the 12 month period outside of the current tax year just enough to avoid excluding too much income for my Roth contribution each year - took some study to figure that one out, but it works well.

That's a little dodgy and certainly difficult. The IRS has certain rules about flipping in/out of the Foreign Earned Income Exclusion that you have to be careful about. Hypothetically you could work a couple weeks while physically in the U.S. and end up with enough for an IRA contribution, depending on your hourly rate. For example, if you work 80 hours in the U.S. then you'd need $68.75 per hour to hit the US$5,500 IRA contribution cap (under age 50). That's also enough to keep Social Security Disability Insurance (SSDI) coverage going, although it's easier to clock some Social Security taxable income since you can do that via self-employment income anywhere in the world.

 

[chainer22]

No, I would not split IWDA and EIMI 50-50. See below....


That's not a great idea either at a few hundred dollars per month. How about the single fund VWRD? VWRD is equivalent to a combination of about 90% IWDA and about 10% EIMI, but it's one trade versus two. Then batch up the purchases and make them bimonthly (6 times per year), for example. Or quarterly.

Hi BBCWater, im intending to put in about 1700sgd per month and am using IB. what do you recommend for the ratio between IWDA and EIMI?

 

[celtosaxon]

the IRS's guidance, and hopefully I'm reading/interpreting it correctly. I'm not aware of any more recent CPF-related guidance.

Yes, I’ve come across that before, prior to this guidance the taxability of CPF by the IRS was different. Seeing the level of detail they go into, it is really a bit unsettling for anyone outside of compliance!

Note that one spouse is ordinarily able to contribute into the IRA of his/her spouse, if married filing jointly.

Yep, wanted to do that, but filing separately as head of household and keeping my spouse as a nonresident alien is just too attractive from a tax shelter point of view.

That's a little dodgy and certainly difficult. The IRS has certain rules about flipping in/out of the Foreign Earned Income Exclusion that you have to be careful about.

That was my first thought too - but after a lot of research and running it past several reputable international tax preparation consultants, it turns out to be legit. I even filed some amended returns to legalize past IRA contributions made with all income excluded - the IRS accepted them. You are correct about flipping in and out, once you discontinue FEIE there’s like a 5 year waiting period to use it again!

 

[BBCWatcher]

Hi BBCWater, im intending to put in about 1700sgd per month and am using IB. what do you recommend for the ratio between IWDA and EIMI?

VWRD has about 10% in emerging markets last I checked since that’s what the market capitalization weighted percentage ought to be. That works.

One simple way to handle that is to make every 10th monthly purchase an EIMI purchase. Or just make it once per year and declare it close enough.

 

[celtosaxon]

Hi BBCWater, im intending to put in about 1700sgd per month and am using IB. what do you recommend for the ratio between IWDA and EIMI?

BBCWatcher, please correct me here but IWDA gives market capitalization weighted exposure to developed world equities, and EIMI (emerging markets) only represents 10% of the world’s market cap, so a 9:1 ratio seems prudent. However, since 80% of the world economic growth comes from emerging markets, if prepared to hold long term, one might consider an 8:2 ratio or more depending on risk appetite.

 

[Calpha K]

For non-U.S. persons, including those who are resident in Singapore, no. That’s a U.S. domiciled fund, so there are tax-related issues. EIMI is a better match.


Same problem, and it’s also a rather expensive fund. I don’t have a substitute recommendation, in part because I don’t recommend overweighting stocks in one country or region, with the possible exception of modest overweighting in your country of retirement.

Thanks BBCW for the insight.

When looking at a fund's total expense ratio, do we look solely at expense ratio? Or do we add Current Management Fee + Expense Ratio, to get Total expense ratio?

Take the ETF KWEB for example, it has
Current Management Fee of 0.68%
Expense Ratio of 0.7%

In this case, which number am I supposed to look at? Just 0.7% or add the both of them and get 1.38%?

Side note, why is it that Bloomberg tells us the current management fee but Yahoo states only the expense ratio?

 

[celtosaxon]

I have a question for BBCWatcher. I know you have some knowledge of US estate tax impact on US situs assets held by nonresident aliens. For this reason, most non-US persons should avoid US situs assets like the plague. However, in the case where one spouse is a nonresident alien (NRA), and the other is a US citizen, I believe the unlimited spousal exemption applies from NRA to a USC spouse, and the $11m estate tax exemption applies from USC to an NRA spouse. The only “trap” is when US situs assets flow from the estate of the NRA spouse to the USC children, then only $60k exemption applies, with 40% estate tax on the rest... but an unlimited exemption applies to non-US situs assets. Is this your understanding as well?

 

[spartan117]

Choosing an appropriate bond ETF

I have been trying to pick a suitable bond ETF for my portfolio. currently, I am buying A35 using POSB Investsaver through DCA.

I was wondering whether a US treasury bond ETF like TLT would be better compared to A35 for the bond component of my portfolio?

I do not plan to retire in Singapore (probably would retire in a place like Sri Lanka/Thailand), so I do not foresee a significant USDSGD forex risk.

Thank you in advance for your input.

 

[malthead]

For the equity component, if i decide on ES3, IWDA and EIMI, what should be ratio?

50:35:15?

 

[celtosaxon]

I have been trying to pick a suitable bond ETF for my portfolio. currently, I am buying A35 using POSB Investsaver through DCA.

I was wondering whether a US treasury bond ETF like TLT would be better compared to A35 for the bond component of my portfolio?

I do not plan to retire in Singapore (probably would retire in a place like Sri Lanka/Thailand), so I do not foresee a significant USDSGD forex risk.

Thank you in advance for your input.

TLT appears to hold bonds with 20 year durations. That means every 1% increase in interest rates will result in roughly 20% drop in the bond price. Why take on so much interest rate risk in the current environment? I would only recommend very short duration bond exposure right now. And if going for treasuries, consider buying direct rather than through a fund, that way you can at least hold to maturity and not realize bond price losses if interest rates rise.

 

[Morning Sunshine]

How does one pass hand the ETF holdings in Interactive Brokers to the dependents when one is no longer around? I thought of the following solutions:

1. list ETF holdings down in the will. Executor will present the Grant of Probate to IB who will then create an Estate Acocunt to hold the ETFs. Executor will then sell the holdings.

2.give password to beneficiary so that he/she could sell the ETFs, then transfer the proceeds to deceased’s local bank account. However, would the bank question about the date of influx of funds being later than deceased's death date?

Does anyone have personal experience of this situation or heard of another’s experience ?

 

[kingboonz]

How does one pass hand the ETF holdings in Interactive Brokers to the dependents when one is no longer around? I thought of the following solutions:

1. list ETF holdings down in the will. Executor will present the Grant of Probate to IB who will then create an Estate Acocunt to hold the ETFs. Executor will then sell the holdings.

2.give password to beneficiary so that he/she could sell the ETFs, then transfer the proceeds to deceased’s local bank account. However, would the bank question about the date of influx of funds being later than deceased's death date?

Does anyone have personal experience of this situation or heard of another’s experience ?

Very good question. I intend to bypass the estate tax via method 2, but I am not sure of the implications, if any.

 

[Morning Sunshine]

The Estate Account has nothing to do with the estate duty. It is merely an account to hold the stocks/ETFs.
The Irish-domiciled ETFs are not subject to US estate duty ( this is what I gather from the posts here).

 

[peipei1]

Oh my ST, the US market finally crashed? This is a bad end to the week and a bad start to the last quarter. This year has thrown the stocks history books out, months that were s'posed to be bad, turned out ok, months that are known to be good are bad, and this mid-term elections quarter has a worrying contrarian start.

This time is different, my guts tell me to expect ok or beats earnings, but lowered forecast going into 2019, this will drive the market lower out of fear, mass selling will happen!

China will start work next week, and expect panic selling, new reports of bear economy, more political drama with US. EIMI going down to 20.

I was thinking can we have bought EEM, the US listed equivalent instead, this because of the EM volatility, it is smarter to hold shorter term 12-18 months, buy and sell out of the market. The US EEM has cheaper brokerage and more liquid.

A lesson learnt is not to jump in, i should have let the Fed meetings and jobs report settle down. Instead i got hooked into the Intel pump this week. I was thinking to buy on means reversal but now it went from gain to stuck loss.

USD/SGD keeps growing stronger, feeling more expensive to buy IWDA. On bright side, i held back IWDA for past months, i think i can get some DCA cheaper on Monday, scant consolidation.

 

[celtosaxon]

Oh my ST, the US market finally crashed? This is a bad end to the week and a bad start to the last quarter. This year has thrown the stocks history books out, months that were s'posed to be bad, turned out ok, months that are known to be good are bad, and this mid-term elections quarter has a worrying contrarian start.

This time is different, my guts tell me to expect ok or beats earnings, but lowered forecast going into 2019, this will drive the market lower out of fear, mass selling will happen!

China will start work next week, and expect panic selling, new reports of bear economy, more political drama with US. EIMI going down to 20.

I was thinking can we have bought EEM, the US listed equivalent instead, this because of the EM volatility, it is smarter to hold shorter term 12-18 months, buy and sell out of the market. The US EEM has cheaper brokerage and more liquid.

A lesson learnt is not to jump in, i should have let the Fed meetings and jobs report settle down. Instead i got hooked into the Intel pump this week. I was thinking to buy on means reversal but now it went from gain to stuck loss.

USD/SGD keeps growing stronger, feeling more expensive to buy IWDA. On bright side, i held back IWDA for past months, i think i can get some DCA cheaper on Monday, scant consolidation.

It sounds like you might be watching the market a little too closely. DCA is not about catching good timing, it’s about reducing the risk of bad timing. DCA is definitely the right approach at this time with the market just a fraction below all time highs in the US, and EM still doesn’t seem to have hit bottom, so DCA is also a good approach there as well. As long as you are committed to investing (at least a decade) you will be fine. In the famous words of John Bogle, don’t peek!

 

[revhappy]

Oh my ST, the US market finally crashed? This is a bad end to the week and a bad start to the last quarter. This year has thrown the stocks history books out, months that were s'posed to be bad, turned out ok, months that are known to be good are bad, and this mid-term elections quarter has a worrying contrarian start.

This time is different, my guts tell me to expect ok or beats earnings, but lowered forecast going into 2019, this will drive the market lower out of fear, mass selling will happen!

China will start work next week, and expect panic selling, new reports of bear economy, more political drama with US. EIMI going down to 20.

I was thinking can we have bought EEM, the US listed equivalent instead, this because of the EM volatility, it is smarter to hold shorter term 12-18 months, buy and sell out of the market. The US EEM has cheaper brokerage and more liquid.

A lesson learnt is not to jump in, i should have let the Fed meetings and jobs report settle down. Instead i got hooked into the Intel pump this week. I was thinking to buy on means reversal but now it went from gain to stuck loss.

USD/SGD keeps growing stronger, feeling more expensive to buy IWDA. On bright side, i held back IWDA for past months, i think i can get some DCA cheaper on Monday, scant consolidation.

This might be the beginning of the big crash. I have my allocation in place. I am not going to average down. Imagine US is still close to its highs and rest of the world has fallen so much. Now when US starts falling everything else will continue to fall even more. I see some major losses over the next 2 years. I won't sell my current allocation though. But continue to accumulate cash. 2 years from now there will be so many bargains out there and equities, ETFs and DCA all will be very bad words.

Sent from Dont Take Any Of My Statment As Investment Advice. Do Your Own Due Diligence. using GAGT

 

[Shiny Things]

(re KWEB)
Same problem, and it’s also a rather expensive fund. I don’t have a substitute recommendation, in part because I don’t recommend overweighting stocks in one country or region, with the possible exception of modest overweighting in your country of retirement.

If OP explicitly wants exposure to Chinese tech stocks (hint, you probably don't), you can get near-enough to KWEB with an equal-weight portfolio of Tencent (700 HK), BABA, BIDU, and NTES. They probably don't actually want this, though; they just saw "China" and "internet" in the one product and got an inexplicable boner.

[snip]
I think I am nearly at the end of this psychological battle with myself... Just hoping for the seal of approval from more experienced people here to see if everything checks out fine in term of risks and returns.

The best bet for that degree of handholding would be to work with you directly; large clients and people with specific needs are the people who benefit most from working with me as a consultant. Drop me a PM if you want more info.

New comer with intention to invest about 1k per month.
Which platform should i use? i read that Standard Chartered is strongly recommended, whats the diff between SC and dbs vickers?

The diff is that Stanchart is way cheaper for London-listed stocks.

Regarding IB, you mentioned the currency conversion fee is practically zero. Is it because the conversion fee they charge (can be found on their website, but I'm not sure whether I can put link here) is counted toward fulfilling the min $10 monthly fee?

Another thing is about changing broker. If I want to change broker, am I right to say that there are two ways to do so:
1. Transfer stocks, in which some fees may charged.
2. Liquidate stocks and buy again , in which forex spread and commissions may be charged?

And, what's your take on changing broker?

1. That’s part of it - but also the spread is basically zero as well.
2. Yes, that’s right.
3. I’m strongly in favor of changing brokers if your current broker isn’t cheap enough. Keeping your costs low is the single best thing you can do to improve your returns.

EIMI for YTD doesn't look very attractive.

You know how they say “past performance is not indicative of future results”? That.

Is IWDA 50% and EIMI 50% a good portfolio as a regular monthly contribution of a few hundred dollars with IBKR?

No. That’s WAY too much in emerging markets.

TLT appears to hold bonds with 20 year durations. That means every 1% increase in interest rates will result in roughly 20% drop in the bond price. Why take on so much interest rate risk in the current environment? I would only recommend very short duration bond exposure right now.

Nah, couple of things here.

1) Slightly nitpicky, but TLT's duration is about 17, not 20.
2) At this point, if you think we're close to the cycle high in rates (that is, the Fed is going to stop hiking rates sometime in the next year or two), TLT would be the thing to buy, because the price would go up if people start forecasting cuts and that makes yields drop.

Personally I don't agree with point 2—I think the risk is that the Fed hikes more aggressively, and I'm mostly camped out in the short end at the moment myself—but after the big move in the long end over the last few days I think the long end's starting to look less awful.

Also, since TLT seems to have made an appearance a lot in the last couple of days: TLT is a very aggressive bond-trading vehicle that probably isn’t suitable for most people! It owns the long end of the curve, so it takes a lot of risk, it moves around a lot… it’s a pretty high-stakes way of getting to exposure to bonds. I wouldn’t recommend it to anyone, quite frankly.

For the equity component, if i decide on ES3, IWDA and EIMI, what should be ratio?

50:35:15?

50:50:0. You don't need EIMI until your portfolio starts to get bigger - above $100k or so. Otherwise you'll own like a few hundred dollars' worth of EIMI and the costs will outweigh any returns you might make.

I was wondering whether a US treasury bond ETF like TLT would be better compared to A35 for the bond component of my portfolio?

I do not plan to retire in Singapore (probably would retire in a place like Sri Lanka/Thailand), so I do not foresee a significant USDSGD forex risk.

Yeah, if you're saving for retirement and you're not planning to retire in Singapore, then you should be looking at a global bond ETF instead of a Singapore bond ETF.

A good pick is CORP, listed in London. Corporate bonds give you a slightly higher yield; it holds a wider range of maturities, as opposed to TLT which aggressively owns the long-end; and because it's not US-listed you don't have any potential weird tax corner cases.

Oh my ST, the US market finally crashed?

The S&P 500 is 1.5% away from its all-time closing highs. It's off 2% from its all-time intraday high. And it's still up 6.5% on the year, not even counting dividends. This is not a "crash".

I'm not going to dignify the rest of your post with a response.

You need to switch to decaf.

 

[Shiny Things]

This might be the beginning of the big crash. I have my allocation in place. I am not going to average down. Imagine US is still close to its highs and rest of the world has fallen so much.

For crying out loud, people, the US market is off 2% from its all-time highs. That sort of dip should happen multiple times a month in normal markets.

Dips happen. This is the reason you dollar-cost-average: so that if the market dips 2%, or 5%, or 10%, you can keep buying and get more for your money.