*Official* Shiny Things club - Part 2

[nyl3v3]

I am getting a little confused now about which platform to use:

110- 30 = 80

40% IWDA
40% ES3
20% MBH

Investing 1k SGD per month

POSB IS = ES3 and MBH
Stanchart = IWDA

Is that correct ? in what situation does one need to look at using IBKR (beside investing more than 1k per month) ?
And why are others using Stanchart for ES3 and MBH ?

Like what swordsly said, there isn’t ES3 and MBH in POSB IS and your alternatives would be G3B and A35. I would suggest you be slightly diligent to read a few pages before this where BBCW suggested the use of OCBC BCIP over POSB IS as a point of reference. It’s a bit of personal choice when comes to selecting the places and what to buy.

As for IWDA, same thing, personal choice. IB apparently is slightly more expensive because it costs 10 USD even if you don’t use them every month (esp if you intend to batch up your buying, be it quarterly or half yearly). However, IB is more cost effective as compared to SCB because of the exchange rate when you convert the currencies (experts, do correct me if I’m wrong) and we are all buying these for Long term. The 10USD fees will be stopped when you hit 100k inside IB also (if I didn’t rmb wrongly).

Just remember to assess your own situations and justify your own buyings (know exactly why and what you’re choosing.) not blindly hug ST’s book (someone is doing so i think?) and also not buy exactly what he suggested in the book (just because he said so). Because ever since his last edition, a few things have changed. Hope that helps!

 

[Rknight]

Thanks guys for the help

 

[FnangB]

Hi guys, I'm a french dude working in Sg

As I'm planning to retire in France, (but later, I'm trying to dodge those terrible taxes as much as I can )
I'm uncertain on two points :

I'm currently buying MSCI World ETF and planning to add CAC40 or STOXX 600 ETFs but I'm afraid I may end up with an over-representation of Europe as its already well included in the MSCI World.
Whereas for Singaporeans investing in STI, the result is more diversified as it's less represented in the MSCI.
Any thoughts on that point ?

Also for Bonds, the French bonds have currently a negative yield -0.34%, but buying other country bonds would expose me to FX risks right ?
For now the solution I've found is buying an euro fund with guaranteed capital which have an annual return of 3% (last 5 year average) but take 0.6% of fees /year.

This fund is composed by :
- 64.9% bonds
- 22.5% real estate
- 12.3% stocks
- 0.3% investment capital

Else the second one eur fund of available on my contract have a 2,48% annual return (5 yr average), 0.6% fees and is a bit more conservative with :
- 85% bonds
- 6% real estate- 7% stocks
- 1% investment capital

What is your thoughts on this ? Could it be a good replacement for direct bonds investment ?

Thx

 

[BBCWatcher]

I'm currently buying MSCI World ETF and planning to add CAC40 or STOXX 600 ETFs but I'm afraid I may end up with an over-representation of Europe as its already well included in the MSCI World.
Whereas for Singaporeans investing in STI, the result is more diversified as it's less represented in the MSCI.
Any thoughts on that point ?

If you're uncomfortable with a particular portfolio allocation to stocks listed in France, just reduce the percentage you allocate to a low cost index fund of stocks listed/traded in France, that's all.

Also for Bonds, the French bonds have currently a negative yield -0.34%, but buying other country bonds would expose me to FX risks right ?

No, not necessarily. There are plenty of euro denominated bonds that aren't French government bonds specifically. The London listed iShares fund IEAA, for example, has a weighted yield to maturity of 0.29% and an expense ratio of 0.20%, so it's running 9 basis points on the positive side.

For now the solution I've found is buying an euro fund with guaranteed capital which have an annual return of 3% (last 5 year average) but take 0.6% of fees /year....

....What is your thoughts on this ? Could it be a good replacement for direct bonds investment ?

No, I don't think so.

First of all, bond funds have done rather well lately. You're recoiling in horror because euro bond prices, particularly those issued by high quality European governments, are rather high right now. They could go even higher -- it's possible. In which case, you would be happy if you have a long position. When you dollar cost average you're automatically buying fewer expensive bonds (through the fund) and more cheap bonds. Do that over multiple decades, and it works quite well.

What you might do, if you feel strongly enough about it and have a sufficiently long time horizon (or longer), is to reduce the percentage of your portfolio that you'd ordinarily allocate to bonds, with the argument that these are "special, exceptional circumstances." But I don't think you need to pay some fund manager 0.6% per year to make decisions you can easily make on your own at a much lower cost.

 

[FnangB]

Thanks for the quick reply

If you're uncomfortable with a particular portfolio allocation to stocks listed in France, just reduce the percentage you allocate to a low cost index fund of stocks listed/traded in France, that's all.

I see

No, not necessarily. There are plenty of euro denominated bonds that aren't French government bonds specifically. The London listed iShares fund IEAA, for example, has a weighted yield to maturity of 0.29% and an expense ratio of 0.20%, so it's running 9 basis points on the positive side.

Not sure if I understood the Bond mechanism correctly ( I need to read more doc on it), but does it mean it gonna bring me back +0.09% ? seems quite low and under inflation rate..
Or it's +0.09% + coupon ?

But I don't think you need to pay some fund manager 0.6% per year to make decisions you can easily make on your own at a much lower cost.

Actually for this one it's the brokerage account fee / year in total, these 2 eur fund are free inside, it's a special kind of french account that offer tax reduction if you withdraw after 8+ years, this company is the "best one" and cheapest except 0.6% as totally decentralized.
If I buy an ETF inside

Else with a classic brokerage account you get 30% tax on benefits..

I'm planning to open an IBKR account as soon as I'm totally " under Singaporean tax", and keep the previous account open but empty so the 8 year clock start to run for using it later when I go back to France

I'm currently in a weird situation where I don't pay tax in any country for 2 yr..

 

[Shiny Things]

I am getting a little confused now about which platform to use:

Investing 1k SGD per month

This shouldn't be confusing. If you're investing $1k SGD or more a month, use Stanchart for your local stocks and Interactive for your IWDA.

I meant I can't do larger 50, 100 lots, can't put up that much margin. But yes, Ive been thinking should I even do that much.

Yeah, to be really blunt: the CL futures (for example) on the CME are already about 10x leveraged (you're posting $6k-ish of capital to get exposure to $60k-ish of the black stuff). If you need more than 10x leverage to make your trading worthwhile... you probably shouldn't be getting involved.

I can do the reply with quote on shiny cause the post will exceed 2000 char.

So here’s my reply

1) the time horizon really depends, but generally between 1-3 years depending on the house availability.

Then you should leave it in the bank. One to three years is a very short time horizon all things considered.

Hi Shiny may I ask can you summarize a tldr summary of what to do if I want to buy iwda, irish domiciled s n p 500 etfs and buy in a crash and hold for the long term, ie a john bogle 3 fund portfolio without the bond fund,[...]

I don't think you've thought this out very well.

Why are you buying IWDA and an S&P 500 ETF?

Why are you waiting for a crash instead of starting now?

Why aren't you including a bond fund?

I think you should probably start from scratch.

Hi all,

I like to find out more about Japan's meltdown in 1990s, any good readings on it?

How likely is it that US or Sg markets suffer similar problems?

Erm. I'm reluctant to recommend any books that I haven't at least peeked into myself, and I suspect if you google for it you're going to get at least a few cranks. But there's a pretty good paper here from the Minneapolis Fed.

To your second question, it's really not likely, especially not right now. The Japanese "lost decade" occurred after one of the most gigantic rips higher that anyone has ever seen, and Japanese stocks ended up trading at some frankly stupid valuations.

Singapore isn't anywhere near there, and neither is the USA.

Thank you ST. Is there an ETF which tracks just the first section of the Tokyo Stock Exchange ?

That's awfully specific. Why not go for one of the two I pointed to earlier?

Hi guys, I'm a french dude working in Sg

Ca va bien?

I'm currently buying MSCI World ETF and planning to add CAC40 or STOXX 600 ETFs but I'm afraid I may end up with an over-representation of Europe as its already well included in the MSCI World.

Nah, I wouldn't worry too much about this. The point of owning a local-stocks ETF is to give you exposure to your home country's economy, so of course your home country's going to be a bit over-represented. (And the European stock market isn't huge in the MSCI World, all things considered. You'll have plenty of exposure to the US, Japan, Australia, the North Atlantic Archipelago... as well.)

Also for Bonds, the French bonds have currently a negative yield -0.34%, but buying other country bonds would expose me to FX risks right ?

Yeah. Look, frankly the solution is to suck it up. Negative yields are here to stay, and there are plenty of worse things to own than OATs if they're your home-country asset. (If you can find a bank deposit that pays zero interest, that's fine too.)

What is your thoughts on this ? Could it be a good replacement for direct bonds investment ?

Thx

God knows what kind of junk-ass EUR bonds those funds are holding if they've got 60-80% of the portfolio in bonds and they're still returning >2%.

But also, as BBCW pointed out: those returns are past returns, and EUR bond markets have absolutely roared higher over the last five years. You can't expect that those returns will continue. (Heck, I wouldn't even expect that capital guarantee to continue; that's going to end up costing them a ton of money at some point.)

Hi all,

Out of curiosity: do more 'ethical' ETFs exist? Those that track index funds of companies that are environmentally friendly and actively avoid unethical business practices?

They do, but honestly they're kind of lame. The fees are higher, and the criteria they use for picking "ethical" stocks (depending on what your definition of "ethical" is) tend to be opaque.

I say this to people who come in wanting Sharia-compliant ETFs as well, but... if you really want to filter your portfolio for ethical concerns, you're probably going to have to do it yourself.

 

[ftpofmpo]

For locals, why should they invest in mbh rather than a global investment grade bond etf?

Is the risk adjusted return of mbh superior?

 

[Shiny Things]

For locals, why should they invest in mbh rather than a global investment grade bond etf?

Because when you're about to retire, or when you're about to drop a bunch of money on a house, you want to be sure that the money will be there, and that it won't suddenly have ten or twenty percent of its value evaporate because of the swings and roundabouts of the market.

And when you buy bonds that aren't denominated in your home currency, you suddenly have a huge lump of currency risk. If the currency that your bonds are denominated in depreciates, then you'll end up with a lot less money in terms of your home currency. If you buy SGD-denominated bonds - whether that's through MBH, or SSBs, or direct SGS - then you don't have that currency risk. You can be more confident that the money will be there when you need it.

 

[BBCWatcher]

Not sure if I understood the Bond mechanism correctly ( I need to read more doc on it), but does it mean it gonna bring me back +0.09% ? seems quite low and under inflation rate..
Or it's +0.09% + coupon ?

Neither. 0.09% is the current net expected annual yield to maturity on bonds within that fund if its bond portfolio remains the same and if bond prices remain flat. Neither assumption is true. The value of your shares in a bond fund goes up if bond yields go down. If you have a confident forecast that bond prices have peaked and will fall (bond yields have bottomed and will rise), then just underweight your allocation to bonds, that’s all.

Actually for this one it's the brokerage account fee / year in total, these 2 eur fund are free inside, it's a special kind of french account that offer tax reduction if you withdraw after 8+ years, this company is the "best one" and cheapest except 0.6% as totally decentralized.
If I buy an ETF inside

OK, the tax break is now more interesting, an important detail you omitted. How much is the tax break worth, and do the tax savings continue to grow, continue to offset the higher management cost, if you leave the funds in place?

And when you buy bonds that aren't denominated in your home currency, you suddenly have a huge lump of currency risk. If the currency that your bonds are denominated in depreciates, then you'll end up with a lot less money in terms of your home currency. If you buy SGD-denominated bonds - whether that's through MBH, or SSBs, or direct SGS - then you don't have that currency risk. You can be more confident that the money will be there when you need it.

We’re assuming here at least a reasonably high quality, convertible, spendable currency. I don’t think you should pile into a Vietnamese dong bond fund, for example, even if you plan to retire in Vietnam. In that case, and others like it, the bond leg of your portfolio should probably be a global, investment grade, corporate bond fund such as CRPA. If you’re somewhere in between — a decent but not great currency, not sure where you’ll retire, two or more retirement countries (3 months in country X, 9 in country Y) — then you can mix CRPA with a single currency bond fund.

 

[Visa4550]

This shouldn't be confusing. If you're investing $1k SGD or more a month, use Stanchart for your local stocks and Interactive for your IWDA.



Yeah, to be really blunt: the CL futures (for example) on the CME are already about 10x leveraged (you're posting $6k-ish of capital to get exposure to $60k-ish of the black stuff). If you need more than 10x leverage to make your trading worthwhile... you probably shouldn't be getting involved.



Then you should leave it in the bank. One to three years is a very short time horizon all things considered.



I don't think you've thought this out very well.

Why are you buying IWDA and an S&P 500 ETF?

Why are you waiting for a crash instead of starting now?

Why aren't you including a bond fund?

I think you should probably start from scratch.



Erm. I'm reluctant to recommend any books that I haven't at least peeked into myself, and I suspect if you google for it you're going to get at least a few cranks. But there's a pretty good paper here from the Minneapolis Fed.

To your second question, it's really not likely, especially not right now. The Japanese "lost decade" occurred after one of the most gigantic rips higher that anyone has ever seen, and Japanese stocks ended up trading at some frankly stupid valuations.

Singapore isn't anywhere near there, and neither is the USA.



That's awfully specific. Why not go for one of the two I pointed to earlier?



Ca va bien?



Nah, I wouldn't worry too much about this. The point of owning a local-stocks ETF is to give you exposure to your home country's economy, so of course your home country's going to be a bit over-represented. (And the European stock market isn't huge in the MSCI World, all things considered. You'll have plenty of exposure to the US, Japan, Australia, the North Atlantic Archipelago... as well.)



Yeah. Look, frankly the solution is to suck it up. Negative yields are here to stay, and there are plenty of worse things to own than OATs if they're your home-country asset. (If you can find a bank deposit that pays zero interest, that's fine too.)



God knows what kind of junk-ass EUR bonds those funds are holding if they've got 60-80% of the portfolio in bonds and they're still returning >2%.

But also, as BBCW pointed out: those returns are past returns, and EUR bond markets have absolutely roared higher over the last five years. You can't expect that those returns will continue. (Heck, I wouldn't even expect that capital guarantee to continue; that's going to end up costing them a ton of money at some point.)



They do, but honestly they're kind of lame. The fees are higher, and the criteria they use for picking "ethical" stocks (depending on what your definition of "ethical" is) tend to be opaque.

I say this to people who come in wanting Sharia-compliant ETFs as well, but... if you really want to filter your portfolio for ethical concerns, you're probably going to have to do it yourself.

Shiny things, sorry may you comment what is wrong with my invesment strategy? I'm a complete newbie with etfs and I have just bought your book, the yield curve just inverted so waiting for a crash is fine?

Sent from Samsung SM-N960F using GAGT

 

[FnangB]

Ca va bien?

Oui très bien et toi Objets Brillants ?

Yeah. Look, frankly the solution is to suck it up. Negative yields are here to stay, and there are plenty of worse things to own than OATs if they're your home-country asset. (If you can find a bank deposit that pays zero interest, that's fine too.)

Well If I keep it in cash in a basic bank account, there is a return of 0.75% which is super low, but better than -0.34%...
that's why I'm eyeballing those eur funds present in all AV contracts (the special account with lowered tax) they offer a return between 1-2-3% (average between all was 1.8% last year, but the ones of my broker did well recently)

They all guarantee the capital by law, I'm thinking it can't be worse than plain cash or negative rate... In worst case scenario I'll have a rate of 1% ?

God knows what kind of junk-ass EUR bonds those funds are holding if they've got 60-80% of the portfolio in bonds and they're still returning >2%.

Actually the global rating is A- with 82% of bonds coming from:
- France
- US
- UK
- Germany
- Netherlands

27.1% of sovereign
47.2% Corporates
25.7% Financials
(can't link the official report post number restriction)

Seems not to bad, as long as the capital is guaranteed

OK, the tax break is now more interesting, an important detail you omitted. How much is the tax break worth, and do the tax savings continue to grow, continue to offset the higher management cost, if you leave the funds in place?

With this contract you only pay tax when you withdraw and something like 24% instead of 30% and you're also allowed to withdraw around 5k without tax /year
Im seeing this 0.6% as the equivalent of inactivity fee at IBKR..
But for now, I'll let the minimum in this account and enjoy as much as I can the no tax on benefits in Singapore to grow capital here..

 

[Johnpierpontmorgan]

Hi passive investors

What is your opinion of this guy call?

Michael Burry, (the character from big short) who made millions after predicting the US housing crisis of 2008, called passive investing a "bubble"


Disclaimer: I also buy etf but not my major allocation

 

[kram62]

Hi passive investors

What is your opinion of this guy call?

Michael Burry, (the character from big short) who made millions after predicting the US housing crisis of 2008, called passive investing a "bubble"


Disclaimer: I also buy etf but not my major allocation

Just read the answer a few posts earlier. This question has already been asked very recently.

 

[dullthings]

Dear Shiny and friends, Stashaway is launching this new SGD portfolio that’s a mix of 54% bonds (MBH, QL3, A35), 10% STI (G3B), 35% REITs (CLR, CFA). Any views?

 

[Shiny Things]

Wow, I realise I've gotten a bit grumpy lately. Let's fix that.

Michael Burry, (the character from big short) who made millions after predicting the US housing crisis of 2008, called passive investing a "bubble"

Yeah, I posted about Burry's interview a few pages back. I'll just quote it here:

Sure. I think he's wrong to talk about "ooh equity index ETFs are like subprime mezz CDOs!" (they're not), though he does have a point in a few edge cases. This one pops up all the damn time, usually from big investors who should know better.

The existence of equity index ETFs does not cause overvaluation in large-cap stocks. If anything, the R2K (an index of small-cap US stocks) trades at a higher P/E multiple than large-caps, which says large-caps are undervalued if anything.

The Nifty Fifty craze in the fifties led to a huge bubble in large-caps, well before index ETFs (or even index futures!) were a gleam in a structurer's eye.

And equity index ETFs (the vast majority of them, anyway) are unlevered—the thing that made subprime mezz CDOs explode so abruptly and entertainingly was the HUGE leverage and leverage-upon-leverage embedded in them. That doesn't exist with, say, SPY.

Now, Burry's not an idiot. He dives deep into esoteric stuff like Japanese small-caps, where I'm sure there's some opportunities just because the free float is so thin, analyst coverage is so weak, and the BoJ Death Star is hoovering up large-cap ETFs like they're candy. But in most cases, no, I think equity ETFs are a good thing.

Dear Shiny and friends, Stashaway is launching this new SGD portfolio that’s a mix of 54% bonds (MBH, QL3, A35), 10% STI (G3B), 35% REITs (CLR, CFA). Any views?

Too many bonds and too many fixed-income-ish things. That's overly conservative for most investors; you can absolutely do better by yourself.

Oui très bien et toi Objets Brillants ?

Très bien, merci.

Well If I keep it in cash in a basic bank account, there is a return of 0.75% which is super low, but better than -0.34%...

Yeah, this is one instance where keeping it in a bank account may be better than buying bonds. Usually I try to dissuade people from doing that, because in Singapore at least, those high interest rate bank accounts require you to jump through a lot of hoops and they have caps on the maximum balance. If neither of those apply, then you might as well take +0.75% at your bank over -0.34% in OATs.

that's why I'm eyeballing those eur funds present in all AV contracts (the special account with lowered tax) they offer a return between 1-2-3% (average between all was 1.8% last year,

They all guarantee the capital by law, I'm thinking it can't be worse than plain cash or negative rate... In worst case scenario I'll have a rate of 1% ?

Hmm. I'll be blunt, I don't know enough about these accounts to make a meaningful call on whether they're a good idea or not, especially given the different tax treatment on them.

They don't seem crazy as a choice for your "bonds" allocation, but I think you'd still do better owning a mix of IEAC LN (the iShares EUR investment-grade corp bond ETF) and HIGH (the same thing, but with high-yield bonds). The fees will definitely be lower, at least.

Actually the global rating is A- with 82% of bonds coming from:
- France
- US
- UK

Ahhhh, there's your answer. The US and UK bonds have a much higher yield than the European bonds, but they come with currency risk (which I bet you they're not hedging away).

Shiny things, sorry may you comment what is wrong with my invesment strategy? I'm a complete newbie with etfs and I have just bought your book, the yield curve just inverted so waiting for a crash is fine?

This is a fair question. Here's my answer:
1) It's not clear to me why you don't want a bond allocation. Bonds are important! They provide a source of income, and they're much less risky than stocks, so they give you something with more stable value that you can sell to buy stocks when they're cheap;
2) Owning IWDA and an S&P 500 index fund is doubling up on risk, because IWDA is 50% made up of S&P 500 stocks already;
3) "Waiting for a crash" is not a thing that you can do. You don't know when a crash will come, you haven't said what a "crash" means, and there's no guarantee that when the market does sell off by 10% or 20% or whatever that it will be any cheaper than it is today.

I think you might be misunderstanding what people say about yield curve inversions, as well.

Firstly, the yield curve that inverted was the US yield curve, not the Singaporean yield curve, so it doesn't have (much of) an effect on Singapore.

Secondly, yield curve inversions tend to lead the economy, not the stock market. (and it's not even a guaranteed relationship, either.)

Thirdly, yield curve inversions tend to lead a downturn in the economy by anywhere between eighteen months and three years.

So your strategy of "the yield curve inverted so I'll wait for a crash" is wrong in three ways: it's the wrong country, it's two years too early, and it doesn't even predict what you think it does.

You'd do a lot better with a stock-standard 110-minus-your-age portfolio instead of trying to outsmart the market, and you'd do best to start investing now. That way, if there is a crash at some point, you'll already be comfortable with investing and you'll be able to buy more when things are cheap.

 

[BBCWatcher]

Well If I keep it in cash in a basic bank account, there is a return of 0.75% which is super low, but better than -0.34%...

You're getting +0.75%/year interest on a euro bank account? That's rather good, actually!

I can think of a couple other possibilities here. If you expect to retire in France (for example), I suppose you could buy a modest, retirement suitable home, rent it out (and reinvest any net rental income), and then live in the home later on. That's something of a long-term currency hedge. You could also investigate high quality life insurers offering euro denominated deferred life annuities, preferably insured by a high quality government (if available), probably joint/survivor or joint/contingent if you have a spouse or partner, and maybe inflation-linked (if available). It's possible in the currently "wacky" Eurozone that you could position a deferred life annuity as something of a bond fund substitute, and it might even be a better value all around.

With this contract you only pay tax when you withdraw and something like 24% instead of 30% and you're also allowed to withdraw around 5k without tax /year
Im seeing this 0.6% as the equivalent of inactivity fee at IBKR.
But for now, I'll let the minimum in this account and enjoy as much as I can the no tax on benefits in Singapore to grow capital here..

Are you allowed to cycle funds through these accounts, and does that make sense? In other words, you push euro into one end, and some greater number of euro pop out the other end 8 years later that you can then reinvest in a lower cost way? And you get the full tax benefit that way?

I'm also a little confused how you would get a tax benefit as a non-U.S. person who is resident in Singapore paying no tax to the French government. Are you referring to a tax benefit that kicks in when you move back to France?

Stashaway is launching this new SGD portfolio that’s a mix of 54% bonds (MBH, QL3, A35), 10% STI (G3B), 35% REITs (CLR, CFA). Any views?

I agree with Shiny Things. That looks like a defensible (but not ideal in my view) portfolio allocation for a retiree or near retiree in Singapore. What is Stashaway's cut?

Secondly, yield curve inversions predict the economy.

Maybe. It's possible for policy responses to delay or block the predicted outcome.

 

[Shiny Things]

Maybe. It's possible for policy responses to delay or block the predicted outcome.

Yeah. I should rephrase: yield curve inversions tend to lead the economy, not the stock market.. I'll ninja-edit it upthread.

 

[Shiny Things]

You're getting +0.75%/year interest on a euro bank account? That's rather good, actually!

Now that I look at it, that is really good. You could swap that back into USD through the FX futures and it'd be the equivalent of earning 3.5% in a US bank.

 

[dullthings]

Hi BBC, thanks for the reply. By cut, you mean the fees? Starts at 0.8% p.a., gradually sliding to 0.2% pa after SGD 1 million. Yup, I know this forum regards these fees as unnecessarily high, and shiny has mentioned many times that someone should start a singapore robo that’s cheaper and more efficient (less ETFs).

Hi Shiny, thanks for the reply. So the message is it is overly conservative? And certainly the fees are .

Dear Shiny and friends, Stashaway is launching this new SGD portfolio that’s a mix of 54% bonds (MBH, QL3, A35), 10% STI (G3B), 35% REITs (CLR, CFA). Any views?

 

[Trader11]

Slashaway 4% return is rubbish. 90% of SSI warrior will perform better than these people