Official Shiny Things thread Episode V, The Empire Strikes Back

[revhappy]

What price did you specify? Have you tried taking the asking price, subtracting a penny, and placing your order? (And what's the hurry, actually? Put an order in at the current Ask and let IB figure it out.)

Interactive Brokers has something called smart routing, and it can wait a little patiently during a trading day. That's "working as designed." I think you can shut that off if you really want, but you probably don't want.

I wont touch an ETF if there are no volumes and then I have to just take the market makers prices. I see the bid ask 5.322 and 5.327. Yesterday's close is 5.3. Zero volume as of now.

I will buy AGGG instead. 20k volume. It is distributing, but it is unhedged. AGGU is hedged and when I look at the performance, the hedging plays a big role in the performance, for example 2022, AGGU fell 16% vs AGGG's 11%.

 

[revhappy]

Okay, I just managed to buy CRPA at 5.33. So, I marked the 1st trade on this counter today, lol.
1700 QTY.

 

[BBCWatcher]

Okay, I just managed to buy CRPA at 5.33. So, I marked the 1st trade on this counter today, lol.
1700 QTY.

It's just that easy.

 

[Listopad]

I funded IBKR today to buy IWDA and CPRA and I am reminded why I had decided not to use IBKR.
1) The currency conversion step, USDSGD started shooting up for some reason and I kept chasing it and in the end I found I lost $29 compared to if I had just done a market price buy

2) IWDA opened more than 1% up, not sure why, anyways I bought it at 98.8 and immediately I look like a fool because I see MTM $25 loss.

3) I am still trying to buy CPRA. Market is open since last 1.5 hrs and not a single trade on this counter. So am I the only genius who has discovered this ETF and nobody else has heard about it?

You are overthinking

 

[revhappy]

You are overthinking

I am just sharing my experience of human psychology as part of the buying process. One of the key aspects of investing success is that you should somehow be able to automate the buying and be as less involved in the process as possible.

 

[highsulphur]

I am just sharing my experience of human psychology as part of the buying process. One of the key aspects of investing success is that you should somehow be able to automate the buying and be as less involved in the process as possible.

Recurrent investment with ibkr is your best friend

 

[iceblendedchoc]

I am just sharing my experience of human psychology as part of the buying process. One of the key aspects of investing success is that you should somehow be able to automate the buying and be as less involved in the process as possible.

dun need to think. I just place order on payday every month , walk away and play some cyberpunk instead.

 

[RuiQi_91]

I recently learnt about TBills and was wondering what the opinion is on how much worse (or comparable) they are relative to ETFs for long term investing. I am 32 years old and started investing in the ABF, STI, and IWDA ETFs about 4 years ago with plans to continue investing for around another 2 decades.

TBills recently has a yield of 3.8% for the 6 month tenor. My friends have commented on how it feels safer in that the capital will not fluctuate.

1) Are the gains from TBills "close enough" to ETFs or will I lose out a lot in the long run since I am giving the capital a chance to appreciate like in ETFs?

2) What about replacing the bond component (ABF) with TBills since bonds are supposed to be safer than stocks but with lower yield and growth compared to the STI and IWDA ETFs?

 

[celtosaxon]

I recently learnt about TBills and was wondering what the opinion is on how much worse (or comparable) they are relative to ETFs for long term investing. I am 32 years old and started investing in the ABF, STI, and IWDA ETFs about 4 years ago with plans to continue investing for around another 2 decades.

TBills recently has a yield of 3.8% for the 6 month tenor. My friends have commented on how it feels safer in that the capital will not fluctuate.

1) Are the gains from TBills "close enough" to ETFs or will I lose out a lot in the long run since I am giving the capital a chance to appreciate like in ETFs?

2) What about replacing the bond component (ABF) with TBills since bonds are supposed to be safer than stocks but with lower yield and growth compared to the STI and IWDA ETFs?

TBills are good when you need certainty about being able to liquidate without capital losses in the short-term.

Fundamentally, bond exposure is for capital preservation, not capital growth.

Do you know the average duration of ABF? That would tell you how long you should expect to hold it, and when you can expect to liquidate it without the risk of capital losses.

Generally, someone who is 32 and genuinely seeking long-term investment exposure should lean heavily (if not wholly) into equity rather than bonds.

But, to be a successful long-term investor, you need to stop concerning yourself about capital fluctuations. You can do this by educating yourself on historical fluctuations, which always get resolved in the long-term. In fact, fluctuations can be your friend as you dollar cost average over time.

 

[highsulphur]

I recently learnt about TBills and was wondering what the opinion is on how much worse (or comparable) they are relative to ETFs for long term investing. I am 32 years old and started investing in the ABF, STI, and IWDA ETFs about 4 years ago with plans to continue investing for around another 2 decades.

TBills recently has a yield of 3.8% for the 6 month tenor. My friends have commented on how it feels safer in that the capital will not fluctuate.

1) Are the gains from TBills "close enough" to ETFs or will I lose out a lot in the long run since I am giving the capital a chance to appreciate like in ETFs?

2) What about replacing the bond component (ABF) with TBills since bonds are supposed to be safer than stocks but with lower yield and growth compared to the STI and IWDA ETFs?

6 month T bill yield will not stay above 3% forever. Before 2022, it was below 2%

Yes you can invest in t bill short term but you won't be able to lock in the higher interest long term

 

[RuiQi_91]

Do you know the average duration of ABF? That would tell you how long you should expect to hold it, and when you can expect to liquidate it without the risk of capital losses.

Sorry what do you mean by the statement "when you can expect to liquidate it without the risk of capital losses"? Do you mean to say that after X years, the likelihood I lose some of my capital if I liquidate would be much lower? Because that would be my understanding of bond and stock ETFs against fluctuations.

My knowledge is very basic. I know that ETFs long term appreciate in value, and that bond ETFs like the ABF are less risky than stock ETFs, in the short term. And I only follow Shiny's advice to put (110-age)% into stocks and the rest into bonds.

I don't plan to liquidate my holdings anytime soon except when rebalancing. That is the correct strategy that most of the users here follow right?

 

[BBCWatcher]

FWIW Shiny Things and I agree that the bond portion of your long-term investment portfolio should generally not be in sovereign bonds but rather in an investment grade corporate bond fund. That’s MBH for investors based in Singapore who plan to retire in Singapore* (who are not U.S. persons), not A35. We agree that long-term investors are better off collecting the yield/risk premium on (quality) corporate bonds versus sovereign bonds. Unless credit markets are fundamentally broken for years or decades — most unlikely! — that’s the smarter bond play. As it happens MBH isn’t perfect, but it’s currently the best vehicle of its type/category.

There are a couple “edge case” exceptions. For example, if there’s a reason to allocate a portion of your investment portfolio in real return (a.k.a. inflation indexed) bonds then you can’t really do that with corporate bonds. It’s only sovereigns that issue real return bonds (decent or better ones anyway), and only sovereigns outside Singapore. Oversimplifying only slightly, IGIL is a much better fund choice for investors who’d otherwise hold gold or other metals because they’re freaked out about inflation risks. I don’t think most investors should worry that much about inflation in that way — a low cost stock index fund does quite well combatting inflation — but IGIL is available.

If you want to defend against the slight risk that the Singapore dollar doesn’t work out then CRPA is available, a low cost, multi-currency, investment grade corporate bond index fund. I think ST prefers LQDA in this niche role since the U.S. dollar alone is an excellent alternative currency (LQDA holds only U.S. dollar denominated bonds), but I prefer the multi-currency bond portfolio in CRPA. I don’t rank these two options far apart, though. Either can work in that role.

All of these funds are long-term vehicles. They should work great with decades of dollar cost averaging to accumulate them followed by decades of drawdown. With annual or semiannual rebalancing along the way. T-bills are short-term vehicles, by design.

* Or based in Brunei and/or planning to retire in Brunei. The Singapore dollar is a two country currency.

 

[RuiQi_91]

Thank you. I bought A35 when I was investing via POSB. I made an IBKR SG account about a year ago due to the cheaper fees if investing above some amount and have been buying MBH. My question now is if I should sell the A35 or just keep it there.

An answer was posted here which was to sell away the A35 and buy MBH but that was in Oct 2019 and Im also not sure if it applies given the loss I currently have in A35. Its currently at $32427.19 (down $3372.97 or -9.42%).

Do I leave it or sell it all to buy into MBH? Since I don't need the funds in at least the next 2 decades, should I wait until they are not red before selling?

I've been rebalancing my portfolio of MBH+STI+IWDA via IBKR and have not touched my investments of A35+STI in POSB at all.

My small portfolio in POSB:
A35 $32427 (down 3372.97 or -9.42%)
STI $76488 (up 5135.75 or 7.2%)

Any advice?

 

[BBCWatcher]

Thank you. I bought A35 when I was investing via POSB. I made an IBKR SG account about a year ago due to the cheaper fees if investing above some amount and have been buying MBH. My question now is if I should sell the A35 or just keep it there.

In my view, yes.

An answer was posted here which was to sell away the A35 and buy MBH but that was in Oct 2019 and Im also not sure if it applies given the loss I currently have in A35. Its currently at $32427.19 (down $3372.97 or -9.42%).

That doesn't really matter. You'd be trading government bonds for corporate and agency bonds within the same overall bond market (at current bond prices). It's a lateral move but with better expected long-term investment performance.

Do I leave it or sell it all to buy into MBH? Since I don't need the funds in at least the next 2 decades, should I wait until they are not red before selling?

No. A world in which A35 increases in value is a world in which MBH increases even more (almost always).

I've been rebalancing my portfolio of MBH+STI+IWDA via IBKR and have not touched my investments of A35+STI in POSB at all.

OK, but your A35 holding should be accounted for when you rebalance. It counts as part of your bond allocation.

My small portfolio in POSB:
A35 $32427 (down 3372.97 or -9.42%)
STI $76488 (up 5135.75 or 7.2%)
Any advice?

Yes, stop looking at whether these funds are up or down. Their values in 2024 basically don't matter when you won't even touch them until 2044+.

I guess if you're trying to decide whether you're ready to retire (if you want to do that) then you can look at your total household wealth — tally it up. But it's completely unnecessary to look at absolute or percentage dollar gains. Your strategy looks fine, and presumably you're dollar cost averaging into these 3 funds to grow your wealth. Now go do something more fun/interesting/productive. Everyone knows bond interest rates have increased/bond prices have decreased over this relatively short-term interest rate cycle. That's not news. Don't worry about it.

 

[jinsatkilife]

https://www.businesstimes.com.sg/co...ackrock-launches-stock-etf-100-downside-hedge

Can I ask for this type of ETF, is it a replacement for fixed income?

Risk wise very safe, while upside is likely better than risk free rates?
Liquidity wise, can cash out. If u do this trade urself, suffer from illiquidity/wide spreads

what are the cons/catch here? sounds too good to be true

 

[BBCWatcher]

https://www.businesstimes.com.sg/co...ackrock-launches-stock-etf-100-downside-hedge

Can I ask for this type of ETF, is it a replacement for fixed income?

I'd vote no.

Risk wise very safe, while upside is likely better than risk free rates?

Well, there are some counterparty risks. The options markets work great until they don't.

what are the cons/catch here? sounds too good to be true

MAXJ is listed/traded on the New York Stock Exchange. The tax consequences for a resident of Singapore (who is not a U.S. person) are: (1) any dividends are taxed at the high 30% non-treaty rate; (2) it's a U.S. estate taxable fund.

MAXJ is guaranteed to underperform a comparable S&P 500 stock index fund over a long enough (or longer) time period for two basic reasons: (1) the downside hedging is not free and is paid for out of gains; (2) the expense ratio is much higher (0.50% compared to VOO which is at 0.03%). MAXJ can never beat VOO* if you merely hold on long enough, or longer. That's just basic math: some of the gains have to pay for the hedge, and the expense ratio is higher. So for long-term investors this is a nonstarter. Long-term investors (decades of accumulation, and decades of drawdown) are better off with traditional and lower cost index fund mixes.

If for some reason you want to make a short-term bet that's very safe (assured upside) then you could buy a T-bill, Certificate of Deposit (fixed deposit), or savings bond, as examples. MAXJ really only seems to work if you want to make a short-term bet on the S&P 500 Index — if you think that particular index is going to rise over the short-term at least, but you're not entirely convinced of that. And you can tolerate the tax issues. That's a very strange bet, and I think if you're going to make that bet you're better off learning how to place the same bet in the S&P 500 Index options/futures markets. Which is a very active market since a lot of speculators seem interested in making those bets.

* VOO is not the best fund if you're a resident of Singapore and not a U.S. person. It's used here as a fair comparison, but CSPX is a popular alternative that has better tax characteristics.

 

[cassowary18]

No. A world in which A35 increases in value is a world in which MBH increases even more (almost always).

Well, in March 2020, MBH went down while A35 went up. Black swan event though.

 

[BBCWatcher]

Well, in March 2020, MBH went down while A35 went up. Black swan event though.

Yes, that's the "almost always" part.

 

[Shiny Things]

Can I ask for this type of ETF, is it a replacement for fixed income?

It’s too good to be true - your instinct was right. And it’s absolutely not a replacement for fixed income. It’s a collared bet on the S&P 500, where you give up a lot of the upside in return for some protection on the downside.

Basically, the fund gives investors the same exposure as buying IVV (an S&P 500 ETF), between about $547 and $608 (it’s currently trading at $554). Be careful: that’s not the same as saying “it gives you 100% downside protection”, because the market has moved since the fund put its hedge on: the hedge now doesn’t kick in until about 1.5% below where the market currently is. So you can lose money if you buy this fund.

Each year in the future, the fund will reset that protection - so the cap might be lower in the future (in fact, it probably will be lower).

Compare that to two things:
* Compare it to a 1-year US treasury bill that yields 5.05% with no market risk (if you hold it to maturity); if you’re worried stocks will go down, just buy the treasury bill instead; or
* Compare it to just buying the S&P 500: the average return of the S&P 500 over the last thirty years has been about 10%. If you think stocks will go up, then just buy the stocks instead.

So you’ll do worse than the S&P 500 about half the time, and you’ll only do better than the S&P about one-quarter of the time.

Risk wise very safe, while upside is likely better than risk free rates?
Liquidity wise, can cash out. If u do this trade urself, suffer from illiquidity/wide spreads

So this isn’t quite true: if you wanted to do this trade yourself, you could do it in five seconds through any broker with US equity options access (like IBKR), and the market for S&P 500 options is one of the most liquid and competitive in the world.

what are the cons/catch here? sounds too good to be true

The catch is that like a lot of structured products, this product sounds great in marketing, but if you think about it for a second it’s really not a particularly great trade.

Want to bet on the S&P going up? Just buy an S&P ETF!
Worried that stocks will go down? Just buy a bond instead!
Want a fixed-income product? Just buy a bond instead!
Want to bet on the S&P going up, but you don’t want to take as much risk? Just… buy less of the S&P! Buy half of what you’d normally buy.

 

[Shiny Things]

Well, there are some counterparty risks. The options markets work great until they don't.

I’m gonna be that guy: these particular options will actually work fine under all circumstances short of an asteroid flattening NYC. The fund hedges using flex-options, which are cleared through the OCC the same as exchange-traded US equity options, and the OCC is about as bulletproof as it gets.

This doesn’t apply to structured notes, which absolutely do have counterparty risk and all sorts of other wacky risks (remember the DBS High Notes 5 fiasco back in ‘08?)

MAXJ is listed/traded on the New York Stock Exchange. The tax consequences for a resident of Singapore (who is not a U.S. person) are: (1) any dividends are taxed at the high 30% non-treaty rate; (2) it's a U.S. estate taxable fund.

Also this, yep. The fund holds IVV under the hood, so I’m pretty sure it’d pay dividends just like IVV would.