Ok. This will be my last post for maybe 1 month. Sorry for hijacking your thread Shiny. I can't seem to stop.
Lol no worries, as long as you don't mind me nitpicking when you're wrong
1. People need to understand what "risk adjusted returns is". Basically its avg return divided by its standard deviation (risk). Hence the aim of all investment is firstly get the best risk adjusted return combination
I'd actually disagree with this. When it comes to personal financial planning, the question is not maximising risk-adjusted returns (or Sharpe, or whatever your preferred ratio is); the question is "what do you want to achieve? and what's the lowest-risk way to get that?".
4. A bond that has little equity risk is like MBH. That's why I've said it will have fantastic risk adjusted returns and I don't think anything can beat it for a conservative bond.
This is absolutely true. Over the long term, the best returns in the bond market have come from single-A and triple-B corporate bonds. Better than govvies, better than junk bonds, better than AAAs...
@Shiny. shorting is an excellent idea. Will look into it.
@anyone.
Likely to go and live in Aus to live for 5 years N then return , two years from now. Also will buy a property in Aus.
Pertaining to needing currency AUD in a few years and many more years due to refreshing my PR. Would u in a space of a month
1. buy aussie bonds since buying bonds is also a bet on its currency
Right, it took me a bit of parsing your previous posts, but as I understand it you're saying you have the amount to buy the property, but you're holding SGD and you need AUD to buy the property, so you want to hedge against AUDSGD rising.
You've got plenty of bad options, and two good ones:
1) Start buying some AUD bonds now. You're right about the FX effect here; normally it's not a good idea for people on here to buy bonds denominated in any currency other than SGD, but in your case, buying AUD bonds is exactly what you want! You can scale into this over a period of time, and just buy VAF on the ASX (or VGB if you want to be conservative and just hate yield).
2) Call up your friendly local FX options dealer and buy some AUDSGD call options. I'd normally point you to Saxo, but I don't think they quote beyond six months.
Just eyeballing it, a strip of four six-monthly parity-party calls should cost you about 3% of the AUD notional (i.e. a 6mth 1.00 call, a 1yr 1.00 call, an 18mth 1.00 call, and a 2yr 1.00 call, in AUD 250k notional each date, will cost about AUD 30,000 in total, give or take movements in spot and vol and the dealer's margin.)
Things you do not want to do: FX futures (they exist but liquidity is zero); FX forwards (just buy the Aussie bonds); selling puts, buying collars/reversals, or any options strategy more complex than just buying calls.
Their point:
Post-covid, governments worldwide lose the ability to raise interest rate as a lever to control inflation (as governments and companies load up on debt right now to ride out COVID). This might lead to governments turning to bonds purchases as a mechanism to reduce money supply to control inflation.
The report sees the risk of:
1) Bonds and equity to positively corelate. (I don't fully understand why though, can anyone enlighten)
2) Devaluation of currencies, as there is a flight from currencies to bonds.
So the question is : IF this plays out, what is the impact on this on Singapore government bonds, or the ABF bond fund?
This doesn't make ANY sense to me. They're worried about not being able to
raise interest rates if inflation kicks off? We're at the zero lower bound basically all around the world, the problem is being able to
cut rates, not raise them.
This is a very confusing monetarist point of view, which confuses the size of the money supply with actual inflation; for anyone who takes this point of view, have a look at what's happening with US inflation right now. The Fed is in full-bore BRRRR mode but market-implied inflation forecasts are at historic lows.
I like GIC, they're smart cookies over there, but I'm struggling to see their point here.
any thoughts on iShares Barclays USD Asia High Yield Bond Index ETF (OP9)?
an alternative to A35 or MBH? it is trading in USD in Singapore exchange.
NOPE.
In bond-land, "high yield" is a euphemism for what the rest of the world calls "junk" bonds. These have higher yields because they're risky. These come from companies that are at greater risk of not repaying their debt.
This one is particularly gross because a) the bonds are denominated in USD, so you have FX risk; and b) because the issuers of these bonds are mostly emerging-market companies, not borrowing in their local currency, so you have an extra exciting slug of FX risk: if the companies' local currency does a 1997-style swan dive, the companies will have trouble repaying the bonds.
A very small allocation to high-yield bonds is OK if you have a large portfolio, but most people don't need it, and this is not the right way to get it.
Hi guys, decided to switch to ibkr from scb. Setup my account and wanted to test it out with 500sgd, but faced this error when trying to convert to usd. Is there a min I need inside the account? Or did I set up the account wrongly? Thanks!
*posted in ibkr thread too
Crossposting the response from the IBKR thread: you want to buy, not sell.
In FX-land, the "buy" or "sell" action refers to what you're doing to the first currency. You want to sell SGD and buy USD; so you need to enter a "buy USDSGD" order.
@anyone.
What do u suggest to protect portfolio from interest rate risk ?
To be clear, are you looking to protect yourself from the risk of interest rates going up (bond prices going down)?
1. Cash and short term bonds ?
This. If you want to reduce the interest-rate risk in your portfolio, you shorten the duration of the portfolio—which means moving to shorter-term bonds and cash.
There are gnarlier options (short bond futures, or buying bond/STIR puts, is the obvious one), but those are way over-engineered for regular retail investors.
@anyone.
Has anyone found a solution to include into your portfolio to manage a financial crisis event that disabled our quality bonds which was meant to buffer our equity drop during a crisis ?
The standard way to do this is to buy govvy bonds instead of IG corps, but the problem with that is that you trade off performance during the good times.
Look at what happened in March. If you owned MBH (which owns corporate bonds), you were down for about a month but you're already above your all-time highs. If you were correctly buying-and-holding-and-rebalancing, you wouldn't even have noticed.
If you were long A35 (which owns govvy bonds), you're doing better than if you owned MBH, but you now hold a portfolio that yields sub-one-percent and has gargantuan risk if interest rates start to go up again.
Corporate bonds make more money in good times, and they don't do badly during gnarly times.
