Official Shiny Things thread—Part III

[BBCWatcher]

What matters that I have to clarify is whether SIPC or SDIC applies to IB SG signups.

No. The SIPC only has U.S. brokers as members, not their non-U.S. affiliates. The SDIC doesn’t protect any brokerage accounts anywhere.

 

[swan02]

No. The SIPC only has U.S. brokers as members, not their non-U.S. affiliates. The SDIC doesn’t protect any brokerage accounts anywhere.

1 So ya saying the stocks u keep with IB SG is NOT protected (other than the ring fencing segregated trust accounts) in the event of collapse ? But the cash with IB SG in ABN Amro is still protected by SDIC ?

2. But the stocks kept with IB LLC is protected by SIPC. And I think cash 250k
cash too ?

3. Btw, why TD SG has SIPC and not IB SG?

 

[BBCWatcher]

1 So ya saying the stocks u keep with IB SG is NOT protected (other than the ring fencing segregated trust accounts) in the event of collapse ?

Correct, just like every broker in Singapore.

But the cash with IB SG in ABN Amro is still protected by SDIC ?

No, not really. The SDIC only protects up to S$75,000 per depositor in a SDIC bank, Singapore dollars only. Interactive Brokers Singapore Pte. Ltd. likely has S$75,000 worth of total SDIC protection on its deposits at ABN AMRO Singapore. (In other words, it's meaningless.) This is no different than every broker-bank arrangement in Singapore.

2. But the stocks kept with IB LLC is protected by SIPC. And I think cash 250k
cash too ?

Correct. It's US$500K worth of SIPC protection per account holder, of which there's a sublimit of US$250K for cash (in any currencies).

3. Btw, why TD SG has SIPC and not IB SG?

Because TD Ameritrade Singapore is only an operating company/conduit to TDA Clearing, a SIPC member. (Whereupon you are limited to U.S. listed securities.) Other U.S. brokers available to residents of Singapore (last I checked) that share these SIPC characteristics are Firstrade and Zacks Trade. So if you're opening a new account, you want to trade (or don't mind trading) only U.S. listed securities (despite some tax implications), and you want SIPC coverage, you have at least three U.S. brokers as choices. None of them are particularly good at facilitating Singapore dollar-U.S. dollar-Singapore dollar roundtripping, please note.

 

[888888888888]

uS is expected to add abt x million jobs in July in nfp and unemployment rate narrowing to 10.5% expected; with stronger seasonal hiring. remains to be seen whether ongoing improvement in labour market can trigger a positive reaction in USD and re-leg in shorts.

as the last US GDP contraction was extreme, Q3 gdp is likely to rebound ard 2X%.

only bouts of risk aversion shall support safe haven status and the global reserve currency. the Fed is fully committed to suppress rates and stimulate economic growth; in line with real yields collapse.

 

[limster]

that kinda suck is you can only choose IB SG when you are a new sign up. How reliable is this "ABN AMRO Singapore Branch"?

At first I thought I was reading a post by peipei

 

[CoolRock]

At first I thought I was reading a post by peipei

legit question okay, legit

 

[Kaypohji]

20% sgd u mean cash/fd?

Do u recommend wsml? Personally I feel small cap of other countries r not that worth pursuing... usually riskier just a personal feel

Frankly, why don't you turn your USD amount into a "TEST" all weather portfolio.40 percent IWDA, 20 percent IDTL, 20 percent GLDM or IGLN...and 20 percent SGD.

WSML if you are going after small caps global.

 

[swan02]

WSML or any small caps I think only persue when you r going for equities anything over 40 percent as u r limited to only another 20 percent for small caps to an overall 60 percent in equities while the rest r taken over by gold and long term bonds.

Higher Risk is fine if rewarded ie good risk adjusted returns.

Small caps r higher risk but higher potential returns. Whether that holds for the next decade is another story.

Ya I mean cash or short term bills or fd no more than one year or SSB cuz you need to rebalance yearly.

20% sgd u mean cash/fd?

Do u recommend wsml? Personally I feel small cap of other countries r not that worth pursuing... usually riskier just a personal feel

 

[Han Shot First]

gldm to the max 60k USD, or IGLN after. ETFs only. No paper gold from UOB or physical gold.

Why not just IGLN? i.e. completely IGLN and no GLDM. TER of IGLN is lower than TER of GLDM.

 

[swan02]

Igln must have reduced their TER and I did not keep up to date. I’m certain igln TER was higher than gldm in the past.

however some pple do not want to have everything under ishares hence gldm might suffice. I also suspect gldm has better liquidity but it’s been a while since I’ve bought gldm .

Why not just IGLN? i.e. completely IGLN and no GLDM. TER of IGLN is lower than TER of GLDM.

 

[Han Shot First]

With the increase in price of gold, the value of your GLDM must be more than max 60k USD. Do you ignore it going beyond the limit?

 

[Shiny Things]

Kindly advise whether to invest in IWDA or VWRA? Thank you.

Both are perfectly good. IWDA is my current default recommendation.

Is it ok to buy MBH or ES3 or some others?

Yes, it’s OK to buy both of those. (Not sure why you’re asking?) On a related note:

[…] if we are buying ES3 now, will it be possible to run into a scenario many years later that when we want to sell off our ES3, there could be no buyers

There are banks and trading desks whose entire business is to post bids and offers to buy and sell ETFs like ES3, based on the value of the stocks that the ETF holds. There’ll always be a buyer.

how do we protect our sing dollar savings? earlier gov took a monetary stance of not lettign it appreaciate against usd;

You don’t need to. Your cost-of-living expenses are in SGD, and your assets are in SGD. No matter which way SGD goes, the currency of your assets and your liabilities is matched, so you don’t need “protection”.

So Fama and French are wrong?

Fama and French wrote their Nobel-winning paper in 1993… which, hilariously, was exactly when the value-to-growth ratio peaked, and growthy dotcom stocks proceeded to rip higher for the next eight years.

Fama and French were right that value had worked very well in the past[/]… but, like most academic papers about market phenomena, it stopped working as soon as someone wrote about it.

So the ideal investment portfolio should tilt to growth and large-cap stocks?

This is a much more complicated question. Large-caps, momentum factor, (and quality factor, to a degree) are working much better than value (low P/BV), and have worked better for a decade now. But that can’t go on forever; eventually, people will start paying up for streams of cashflow again. The question is when that’s going to happen, and what the trigger’s going to be…?

So generally IB platform is recommended. But I’m fearful to have assets in IB exceeding the SIPC.

Look, the SIPC only comes into play if the broker collapses. If you’re seriously that worried about IB’s creditworthiness, choose a different broker and suck up the higher fees and worse execution.

Which matters more to you: the maximum possible creditworthiness, or paying more per transaction? You can use DBS, a double-A-minus-rated bank, as your broker, and never worry about them going bust… but you’ll pay eighteen bucks a trade for US equities.

That's a tradeoff that you have to make. I know you have a much lower risk appetite than other people, so for you it might make sense to pay the extra to have the reassurance of a larger institution custodying your assets. But for most people, lower costs and convenience are the most important thing.

that kinda suck is you can only choose IB SG when you are a new sign up. How reliable is this "ABN AMRO Singapore Branch"?

As a side note, the people who ask “oh I want insurance” or “oh I don’t trust the custodian bank” or “oh I want the US entity not the SG entity” are kind of missing the point.

You’re never going to find a broker that checks all your boxes. The broker that offers SIPC insurance, low trading costs, a AAA credit rating, UK and Singaporean stocks, a Singaporean office so you can go and yell at someone, custodies at a bank you like the name of… it doesn’t exist. Just accept that and move on.

My boss at Commerzbank was Finnish, and he introduced me to the Finnish term for a pedant, someone who focuses too much on the little things—a “pilkunnussija”, or, literally, a “comma-f*cker”.

Don’t be a comma-f*cker.

Hi shinythings , bbc and all,

g3b 2020 dividend yield 4.93% compared to 4.67% in 2019,
[…]
Does this mean g3b more stable and better dividend, or what gives? Please enlighten me, someone.

I suspect the varying dividend yields just reflect how the yields are calculated (e.g. because dividends are yearly in one fund and half-yearly in another), or the price that was used to calculate them (the most recent closing day vs the close of the previous month, or whatever).

The underlying portfolios should be exactly the same, so there shouldn’t be much difference in the actual dividends you receive.

Hi Shiny Things!

Bought your book 3 years ago, and realised I've been buying IWDA from AMS via SC for years using EUR currency, instead of via LSE using USD.

I've recently realised from the forum threads that I'm supposed to be doing the latter. Should I be concerned and if so, what should I do?

Ehh, no real need for concern. You’ll want to switch to buying the LSE listing, because it’s a lot more liquid; and if you want, you can sell the Amsterdam ones and re-buy the London ones in one big lump. But it’s not the end of the world; it’s all the same lump of shares under the hood.

Can anyone advice me what should I buy for international bonds index funds?

Low-cost USD bond ETF with high quality and a short duration: SDIA.

I have to say, I’m not totally bought into the idea that target date funds are the best thing since sliced bread. To me, it’s bit like a car with an automatic transmission versus a manual. Yes, you gain convenience, but give up control. […] Target date funds seem to work best if you put everything in them so that your asset allocation can be fully managed by the fund.

Yeah—that’s exactly the idea. Most people are pretty close to one-size-fits-all. Most people don’t have a lot of time to think about their investments, and don’t want to think about their investments (or, if they were to think about their investments, they’d end up as a day-trading Robinhoodlum and lose all their money).

Target-date investments are the perfect way to invest for most people. People with specific needs… they call up people like me and get tailored investment plans. But most people don’t have particularly unique needs, and TDFs and their ilk let you get a very good investment plan at a very low cost.

I think I need to clarify my understanding of FX risk for the benefit of many of us including I.

Totally. First thing to keep in mind is that you are not a company. You aren’t a treasurer who’s paid to manage risk, you don’t have a particularly complicated liability-matching problem… it doesn’t need to be very complicated.

4. However, that is dependant on the skill and talent of the Treasurer of the company and they are never perfect to ensure full share holder value is retained especially short term for a non Yen investor as partly also investor and company's interest and motivation are different.

Is this FX risk ?

The company has FX risk, inasmuch as they do their accounting in yen, so they need to hedge against movements in the yen that would reduce the company’s NPAT. The company has FX risk, and they may or may not hedge that.

But the treasurer of our Japanese company doesn’t give a toss about non-yen investors. The treasurer isn’t going to manage their company for the benefit of, I dunno, the iShares MSCI Global Fund just because the fund accounts in dollars.

Overseas investors who want to hedge their FX exposure can do that independently, but for most investors like you and me, trying to hedge your FX risk is a) excessive, and b) more likely to screw you up.

If the improved sales of these struggling companies only benefits a USD investor but may not for a SGD investor as much, and if I insist to continue to invest in USA as I believe they have unique comparative advantage and wouldn't want that the declining USD/SGD to be the main factor for improved sales, thus I hedge.

Is that FX risk ?

Uhhhhhhhhhhhhhh… it’s, like, second- or third-order risk. The effect of FX on the company’s sales is filtered through the company’s balance sheet, so it’s difficult to predict the magnitude of it - and if you can’t predict the magnitude of it, there’s not much point hedging it.

After all, why does Vanguard hedge international portfolios to a degree unless too much FX fluctuations is actually bad ?

Vanguard offers hedged international portfolios not because Vanguard thinks they’re a good idea, but because Vanguard’s customers demand it. Doesn’t mean it’s a good idea.

 

[swan02]

Yes I do ignore for now cuz rebalancing is end of year.

It’s too small amt when compared over a large portfolio

With the increase in price of gold, the value of your GLDM must be more than max 60k USD. Do you ignore it going beyond the limit?

 

[Converged]

Hi ST,

Currently I'm holding on to some LVGO shares. Since Teledoc is making a takeover offer and paying partial cash & Teledoc shares (1 lvgo = 0.592 tdoc), is the partial cash component subject to withholding tax? Even though its not dividends.

What about the partial shares if my broker dont allow partial shares transaction?

TIA!

Posted from PCWX using Nokia 3310

 

[cassowary18]

https://www.ft.com/content/c72c8b3e-c893-49f1-bdfa-7fce9c9e9189

What happens to our policies if Aviva gets bought over? I'm under a corporate Aviva medical insurance plan and the MINDEF group insurance plan.

 

[swan02]

Thanks for your insights,

Got questions that has been troubling me. Anyone can answer..

1. With FED mega printing money and yield controls and flushing the economy and the world with USD, can I say for certain that the financial crisis that rendered bonds useless/or lose money will never or VERY unlikely to occur at least in theory in the next few years ?

2. What are your opinions on approx 10 year duration Inflation linked bonds for diversification purposes ? My understanding of them have always been that they are sensitive to both nominal yields and inflation. i.e. it provides both deflationary and inflationary protection.

BUT the longer its duration such as one with Standard deviation of about 6-8% (10 year?), the more sensitive it is to nominal rates rather than inflation.

The shorter, the better at it for unexpected inflation but lacked deflationary benefits.

3. Why is it that inflation linked bonds perform much more terribly than quality bonds during a financial crisis ?

My intuition tells me because they are affected by both the nominal rates and inflation-which obviously in a financial crisis nominal rates increased and expected inflation decreases being whacked both sides.

4. Since assuming my assertions are right, that inflation linked bonds have dual benefits...wouldn't then it be said that thus moving forward with nominal bonds having very limited upside, that inflation bonds of both short and long duration combo actually provides a much smoother ride then having the standard equity/nominal bonds combo ?..........especially so if one is able to be certain a liquidity financial crisis does not recur the next 3 years as the govt is flushing the system with liquidity hence not be afraid of the big draw downs of inflation linked bonds.

5. Thinking of RMB sovereign bonds denominated in USD for diversification. What are good ETFs for such ?

6. Whether you see China govt bonds as being more Risk on like or Risk off like ?.....the idea is that I'm looking at other quality govt NOMINAL bonds other than the typical USD and Euro govt bonds.

 

[CoolRock]

@Shiny Things

I don't need Singapore stock trading or Singapore office, just needed the SIPC insurance and low trading costs so IB LLC fits the bill.

Duly noted on your point though, no point be-etching about it, just sack up or move on

 

[greatpacificpatch]

https://www.ft.com/content/c72c8b3e-c893-49f1-bdfa-7fce9c9e9189

What happens to our policies if Aviva gets bought over? I'm under a corporate Aviva medical insurance plan and the MINDEF group insurance plan.

Interested to know about this too. Many brothers in Singapore will be involved in this.

 

[makav31i]

Interested to know about this too. Many brothers in Singapore will be involved in this.

You must be very young if you don't know previously the Mindef Group Term Plan is by NTUC and when Aviva took over from NTUC, it did not affect anything...

 

[makav31i]

https://www.ft.com/content/c72c8b3e-c893-49f1-bdfa-7fce9c9e9189

What happens to our policies if Aviva gets bought over? I'm under a corporate Aviva medical insurance plan and the MINDEF group insurance plan.

For Mindef, previously was with NTUC before Aviva...For corporate insurance, it is up to your company to choose the next medical insurance plan...