Official Shiny Things thread Episode V, The Empire Strikes Back

[Shiny Things]

Hello, the current simple strategy for beginners is to allocate (110 - age) into stocks, with the remainder in bonds. For the stock portion, we are advised to split it 50/50 between STI and VWRA, with the reasoning being that it protects us against volatility.

Not quite. The reason I like splitting between local and global stocks is that you want to be overweight your home economy, because that's where you need to spend your money eventually.

However, since VWRA has historically provided higher returns and investing over a period of 2-3 decades makes us less vulnerable to short-term volatility, I’m wondering if it’s okay to invest everything in VWRA instead?

Where that gets tricky is if you get a sustained period of the Singapore economy outperforming the rest of the world, which was very much the vibe in the 90s and 2000s. Going balls-out long global equities (VWRA) has worked great for the last decade, but that isn't a guarantee that it'll continue to work.

Hi everyone, I have some VWRA for a number of years which I believed is of accumulating dividends in nature. While I have a slight understanding of what that means I suspect I may not be getting the full picture yet.

I'm wondering how and where can I check the actual dividends that are being allocated to me ? I've combed through the IBKR app and even looked up online instructions but the dividend report always turns up empty.

While accumulating dividends means those dividends are reinvested back into the stock,

I'll jump in here. One thing that might help you think about this: VWRA reinvests its dividends at the fund level, not at the level of individual shareholders. This means there aren't "dividends allocated to you" or "dividends reinvested back into the stock".

isn't there a way to track what amount those dividends are at all ? Thanks in advance.

Sort of. You can look at the dividend yield of VWRD, which is the same underlying fund as VWRA, but with dividends distributed instead of reinvested; and VWRD yields about 1.5%.

So what happens is that VWRA's share price grows faster than the equivalent dividend-distributing fund (which is VWRD), by about 1.5% per year (which is the money that would otherwise be paid out as dividends).

 

[BBCWatcher]

Not quite. The reason I like splitting between local and global stocks is that you want to be overweight your home economy, because that's where you need to spend your money eventually.

Where that gets tricky is if you get a sustained period of the Singapore economy outperforming the rest of the world, which was very much the vibe in the 90s and 2000s. Going balls-out long global equities (VWRA) has worked great for the last decade, but that isn't a guarantee that it'll continue to work.

OK, so here’s the counter narrative. Unfortunately stock markets aren’t real economies any more. Not in the GDP sense anyway. They’re supposed to converge to discounted expected future net profits of the constituent stocks. As it turns out, profits aren’t at all the same thing as real economies. China is a good counter example: huge GDP, low profits. Oversimplifying only slightly, China’s growth did a great job fueling Apple’s profits.

And it also turns out corporations aren’t listing where their primary business activities are. Sea Limited is an excellent recent example.

I think we can “blame” electronic trading and the demolition of most international capital restrictions, possibly the more interesting byproduct of myriad international trade agreements. If we lived in Hong Kong, the United Kingdom, or possibly even Japan maybe the “local” stock market would merit some outsized attention. But we don’t. We live in Singapore with the SGX. We’re not far away from struggling to compose a decent 30 stock index here. The STI is already pretty sketchy.

We also live in a small, open economy that has to import most goods and a lot of services that we’ll be consuming in retirement. With a currency managed as a trade-weighted loose peg to other currencies.

50% of stocks in the SGX is a huge bet. Too huge IMHO.

 

[Shiny Things]

OK, so here’s the counter narrative.
[...]

I think we can “blame” electronic trading and the demolition of most international capital restrictions, possibly the more interesting byproduct of myriad international trade agreements. If we lived in Hong Kong, the United Kingdom, or possibly even Japan maybe the “local” stock market would merit some outsized attention. But we don’t. We live in Singapore with the SGX. We’re not far away from struggling to compose a decent 30 stock index here. The STI is already pretty sketchy.

This is fair, and this is why I say reasonable people disagree. It's important to have some local exposure, but you certainly don't want to be, like, 100% in the big three banks.

 

[BBCWatcher]

This is fair, and this is why I say reasonable people disagree. It's important to have some local exposure, but you certainly don't want to be, like, 100% in the big three banks.

Yeah, if you're planning to retire in Singapore it's "OK" to overweight the STI stocks to some degree. But I don't think it matters at all 30+ years away from retirement (for example), except that it'll probably hurt.

Something like this when you're starting out, and until about 10 years away from retirement (until about age 55), seems reasonable to me:

65 to 80% VWRA or ISAC
0 to 15% ES3
(=80% stocks)
20% MBH

Then by the time you get to age 65 converge to this:

35% VWRA or ISAC
15% ES3
50% MBH

And if you want to get fancy you could add some CRPA and/or IGIL into the bond mix, I suppose.

Fun fact: Stocks trading on the Tehran Stock Exchange currently have a total market capitalization that's roughly double what the SGX has. Yeah, it's gotten that bad. (Singapore's GDP is about 25% larger than Iran's, so that's not it.) And here's the trend in the number of listed securities according to the SGX's own published data:

August, 2022: 659
August, 2023: 637
July, 2024 (most recent month published): 622

I dug into this a bit more because I was curious whether IPOs are down across Asian stock markets broadly, primarily in favor of Wall Street. Nope. Stock markets across Asia-Pacific have been consistently attracting the highest number of IPOs at least for a while now. The SGX is just not getting many new listings even within its broad geography, and it's steadily losing the listings it has. European and American stock markets are pretty similar in terms of the number of IPOs, but IPOs on Wall Street tend to be the big ones, raising the most capital. See this article for some recent data.

I think we need to take these basic facts and trends into reasonable account in deciding whether the "textbook" recommendation to overweight one's "home" stock market works for those planning to retire in Singapore specifically.

 

[chekseng80]

How to choose between CRPA and IGIL if this pot of money could be either retirement in nearby countries or kids' oversea education cost?

 

[RuiQi_91]

Hello, the screenshot below is my IBKR LLC account. Could anyone tell me what the "Other" fees are in IBKR's portfolio analyst? The only thing I might recall from a while ago was transferring the money from my LLC account to my SG account though the number does not look right.

 

[Shiny Things]

How to choose between CRPA and IGIL if this pot of money could be either retirement in nearby countries or kids' oversea education cost?

Pick CRPA.

Inflation-linked bonds are a bit of a weird niche, and IGIL owns a pile of linkers from all over the world (including Japan, which has a famously low inflation rate, so Japanese linkers are kinda trash). Don't bother thinking about IGIL.

 

[Shiny Things]

Hello, the screenshot below is my IBKR LLC account. Could anyone tell me what the "Other" fees are in IBKR's portfolio analyst? The only thing I might recall from a while ago was transferring the money from my LLC account to my SG account though the number does not look right.

That seems weird. Drop a note to IB customer support.

 

[BBCWatcher]

Pick CRPA.
Inflation-linked bonds are a bit of a weird niche, and IGIL owns a pile of linkers from all over the world (including Japan, which has a famously low inflation rate, so Japanese linkers are kinda trash). Don't bother thinking about IGIL.

…But please pick IGIL instead of gold if you’re specifically worried about inflation. That’s essentially the point I’m making when I mention IGIL. It’s (mostly) for the ultra conservative inflation hawk, the sort of person who’d otherwise buy gold. Although I don’t think either IGIL or gold replace freeze dried food buckets or bunkers in Idaho if that’s your thing.

As it turns out, stocks have a good track record defending against inflation (on a long-term basis, as always). So I don’t think you need IGIL. But it’s available if you want.

 

[revhappy]

Hello, the screenshot below is my IBKR LLC account. Could anyone tell me what the "Other" fees are in IBKR's portfolio analyst? The only thing I might recall from a while ago was transferring the money from my LLC account to my SG account though the number does not look right.

This report is probably a summary view. IBKR has many reports with detailed views of the same information. Find a more appropriate report which goes into the details, like the activity report or something.

 

[snorex]

Hey @Shiny Things I know that in relation to insurance, the advice has been to buy term and invest the rest (as opposed to getting whole life plans). However, it seems like whole life plans could be cheaper overall?

Example for what I have been quoted:
1) Term plan to 75 years of age
a) Total cash outlay 550 * 75 = $41,250
b) Surrender value = $0
c) Net cash outflow = $41,250

2) Whole life plan
a) Total cash outlay (for only 25 years) = 1,500 * 25 = $37,500
b) Surrender value (after 25 years): $8,000
c) Net cash outflow = $37,500 - $8,000 = $29,500

What am I missing in this analysis?

Thank you!

 

[Shiny Things]

Hey @Shiny Things I know that in relation to insurance, the advice has been to buy term and invest the rest (as opposed to getting whole life plans). However, it seems like whole life plans could be cheaper overall?

Example for what I have been quoted:
1) Term plan to 75 years of age
a) Total cash outlay 550 * 75 = $41,250
b) Surrender value = $0
c) Net cash outflow = $41,250

2) Whole life plan
a) Total cash outlay (for only 25 years) = 1,500 * 25 = $37,500
b) Surrender value (after 25 years): $8,000
c) Net cash outflow = $37,500 - $8,000 = $29,500

What am I missing in this analysis?

Thank you!

I'm a little confused - are these quotes for a newborn?

 

[BBCWatcher]

Hey @Shiny Things I know that in relation to insurance, the advice has been to buy term and invest the rest (as opposed to getting whole life plans). However, it seems like whole life plans could be cheaper overall?

What’s the death benefit amount (sum assured)?

I'm a little confused - are these quotes for a newborn?

It’s a well-known fact newborns usually have at least one dependent that they’re financially supporting for 75 years thanks to the newborns’ social media careers. Or something.

Snorex, I think the basic point is that you should compare two or more choices that make some logical sense. Newborns don’t have dependents, and virtually nobody in Singapore plans to work and to earn an income (the stuff that supports dependents) for 75 years. Comparing two insurance policies you shouldn’t buy is not a great starting place.

But OK… Are you familiar with the time value of money? In your example the premium is nearly 3X per year for whole life insurance. It’s front loaded! And that $950/year for 25 years doesn’t disappear. You’re supposed to invest the rest, not forget the rest exists. If you take that $950/year and invest it into something that grows 3%/year average (an extremely low assumption especially for a newborn) then after 25 years you have $35,675. Then 3% of that is $1,070 — more than double the amount of the Year 26 premium ($500). So that $35,675 at the end of Year 25 continues to grow because you’re not even withdrawing the 3%/year gains from Year 26 onward.

 

[snorex]

I'm a little confused - are these quotes for a newborn?

Yes, that's correct. Thanks.

What’s the death benefit amount (sum assured)?

Around $300k

Snorex, I think the basic point is that you should compare two or more choices that make some logical sense. Newborns don’t have dependents, and virtually nobody in Singapore plans to work and to earn an income (the stuff that supports dependents) for 75 years. Comparing two insurance policies you shouldn’t buy is not a great starting place.

Thanks BBCWatcher. Our thinking wasn't so much about the death benefit but rather the early CI benefit. In the event (touch wood) that we need it because of CI, then this term plan may help defray the costs that arise. And we were thinking since the newborn has no pre-existing medical conditions, underwriting would be much faster. Doubt if we invested our premiums (instead of buying an insurance plan - term of whole life) that we would be able to cover the early CI payout especially in earlier years.

But OK… Are you familiar with the time value of money? In your example the premium is nearly 3X per year for whole life insurance. It’s front loaded! And that $950/year for 25 years doesn’t disappear. You’re supposed to invest the rest, not forget the rest exists. If you take that $950/year and invest it into something that grows 3%/year average (an extremely low assumption especially for a newborn) then after 25 years you have $35,675. Then 3% of that is $1,070 — more than double the amount of the Year 26 premium ($500). So that $35,675 at the end of Year 25 continues to grow because you’re not even withdrawing the 3%/year gains from Year 26 onward.

Thanks for pointing this out! Yes, have ran the math and what you said makes sense

 

[highsulphur]

Yes, that's correct. Thanks.


Around $300k


Thanks BBCWatcher. Our thinking wasn't so much about the death benefit but rather the early CI benefit. In the event (touch wood) that we need it because of CI, then this term plan may help defray the costs that arise. And we were thinking since the newborn has no pre-existing medical conditions, underwriting would be much faster. Doubt if we invested our premiums (instead of buying an insurance plan - term of whole life) that we would be able to cover the early CI payout especially in earlier years.

Thanks for pointing this out! Yes, have ran the math and what you said makes sense

Why would a term pay out on early CI?

 

[BBCWatcher]

Around $300k
Thanks BBCWatcher. Our thinking wasn't so much about the death benefit but rather the early CI benefit. In the event (touch wood) that we need it because of CI, then this term plan may help defray the costs that arise.

Well, a public hospital Integrated Shield plan (with lowest cost rider) is your first port of call in that respect. Typically the rider includes some decent cancer coverage, for example. But let me take a quick look at ECI....

Did you get a premium quotation for China Taiping's i-Care (Plan 3 for $300K/$325K sum assured, term to age 75)? That's a standalone ECI policy that's optionally convertible to life insurance, but it's not as well known as some other policies/carriers. i-Care might be a good fit for this mission if the premium is reasonable. The basic idea here is that Integrated Shield coverage should do the heavy lifting for the medical care in such events, but if you feel the ECI coverage is essential to allow a member of the family to quit work due to childcare needs, then you might buy it. I'm oversimplifying, but I think that's about right.

Congratulations on the new member of the family!

 

[BBCWatcher]

Why would a term pay out on early CI?

It would with an ECI rider, but that's not the only way to buy ECI coverage for a newborn (if that's what you want).

 

[ExEngineer]

If the idea is to get CI coverage (or even death coverage) for a young child, why would you look at policies covering up to age 75?

I think you might find that the term Life+CI premium would be even more affordable if you quoted it to end at say age 25.

 

[BBCWatcher]

If the idea is to get CI coverage (or even death coverage) for a young child, why would you look at policies covering up to age 75?

I think you might find that the term Life+CI premium would be even more affordable if you quoted it to end at say age 25.

A couple points:

1. Snorex mentioned early Critical Illness, not CI.

2. The insurance industry in Singapore doesn't seem to offer ECI policies (either standalone or attached as riders to life insurance) with terms that end at age 25. Or at least I haven't found any such ECI policies yet. That i-Care policy, for example, has a minimum term to age 75.

 

[snorex]

Well, a public hospital Integrated Shield plan (with lowest cost rider) is your first port of call in that respect. Typically the rider includes some decent cancer coverage, for example. But let me take a quick look at ECI....

Thanks BBCWatcher, that's a great point that I hadn't considered.

Did you get a premium quotation for China Taiping's i-Care (Plan 3 for $300K/$325K sum assured, term to age 75)?

Nope, I hadn't gotten the quote but can try to ask for it. Just a little concerned that I haven't actually heard of these guys. Not sure if I am overthinking it.

Congratulations on the new member of the family!

Thank you