Official Shiny Things thread—Part III

[Wishdom]

Keeping it simple has merits on its own. Having too many moving parts (eg. all weather portfolio) may actually be difficult to implement even given with a large AUM. Ultimately, and I believe many of us have this "timing" characteristics in all of us...DCA is timing. Even just DCA VWRD monthly and ignoring STI and Bonds etc....can actually be useful..cuz ultimately, we all need to stick to a plan, better to be invested than nothing at all.

I am one such person who dcas only into vwrd. I fully agree with you on the merits of simplicity. No need to rebalance, no need to execute multiple trades, no need to think at all.

My plan is simple and my goal is clear.

Posted from PCWX using Ilovennp

 

[chrisloh65]

To me, financial planning is the easiest part, only identifying multiple baggers is the difficult part. So there is no need for financial planner, I just need to get a good financial planning book to educate myself and carry it out.

Regarding managing emotions, that is easy part to me.

1. If only financial planning was that easy...then many of us would be rich.
2. How hard is it to establish an AA that is best suited to your risk appetite and expected returns ?.VERY HARD !
3. Because the client may not even know he or herself well enough !
4. Do clients know what they want ?, not until they decide either to choose the path of the investor who tries to time the market, or the path of Modern Portfolio Theory which simply suggests DO NOT time the market but instead increase the odds of success via risk management including yourself.
5. And after saying all these, this only forms a small component of what a good financial planner does
6. Tax is another area that is complicated and tricky. There are just as many dodgy tax accountants around, that who will you trust ?, if only you have a financial planner all packaged all in one, not having to earn their keep via a percentage of the funds they manage, but instead via how you pay a doctor.

But ALAS !, how many are brave to pay a financial planner such an amount ? after all, we seem to equate they to the insurance sellers, not to say there ain't many good ones....just ...I myself have not met one.
7. The quality of noobs ever present, can't even go beyond understanding the merits and mechanics of CPF. Not even able to have the motivation to self learn many easy concepts is baffling but rightly expected....as again, we all would have been rich.....thus a financial planner still fulfills a fundamental role, which is to begin the journey........There are enough evidence in real life, that ACTION usually begin after you pay the service for it. So much is lost via procrastination.




The bigger the AUM, the harder it is to manage. The more mistakes you will make, because your emotions will be your greatest archilles heel.

It is actually a damn good idea to start practicing with small amounts from young, thus building emotional resilience over time

but many have been burnt to never begin the journey. So are financial planners required ?..... Sure is, if you have a good one who knows more about you and your emotions, or perhaps roboinvesting might be a good alternative.......

even with passive investing, so many just could not stick to a plan.
i know...cuz I'm one such person and it has dire consequences. The beauty of passive investor is actually so that you DO NOT need to look at it closely. That is the central beauty of diversification. To let your winners run (takes approx a year), then exploit it via rebalancing (buy low, sell high). Less you look, the lesser the chances of fiddling with it.

And that's why I advocate for gold up to 10 percent generally speaking simply because of the large amount of USA international biased shares.

 

[chrisloh65]

If you expect USD to devalue continually, then there is no good way to hedge US stock portfolio. The best way is to get rid of holding USD and US stocks (just like I do).

If you refer to using USD to buy IWDA etc, then if USD depreciate, IWDA should go up if IWDA is holding stocks of other currencies and other economies that is growing faster than USD depreciation (but this is unlikely because IWDA contains almost 70% of US stocks where majority of their stock price is determined by US economy and correlates to USD).

What are some good ways to hedge a USD stock portfolio against USD devaluation?

 

[swan02]

I pulled figures off lazyportfolio and discovered some interesting facts.

1. 22 year annualised return starting 1999, EIMI at 8 percent, Gold at 8.5, SPY 6.44.
2. (10 year annualised starting 1999), EIMI at 9.4, SPY -1.5, Gold 11.6.
3. (10 year annualised starting 2009), EIMI at 6.65, SPY 13, Gold 3.4
4. EIMI seems to do pretty well over time. Not too good last 10 years unless start 2009.
5. Bottom line hold all assets, and be well diversified and you can sleep well.
6. for the most risk averse investor... XLP aka consumer defensive is most appropriate. 22 year 6.2, 10 year 1999 4.4, 10 year 2009 10.8.
7. I wonder, with SPY annualised 22 year is still below the expected avg of 8 percent long term, is there still room for it to continue to go higher and higher ?
8. Gold looks like the most appropriate to replace safe bonds..no wonder I've read a about a person who advocates the 70/30 portfolio, 30 percent being in gold, arguing it is most appropriate to replace bonds when interest rates remains low..and he proved it mathematically which literally I can't understand.
9. Also...very dangerous to make big losses, if you get it wrong and concentrate incorrectly, ya gonna suffer as a 50 percent loss requires 100 percent to breakeven. I think personally a 25 percent loss which requires 33 percent to breakeven is a good cutoff.

If you expect USD to devalue continually, then there is no good way to hedge US stock portfolio. The best way is to get rid of holding USD and US stocks (just like I do).

If you refer to using USD to buy IWDA etc, then if USD depreciate, IWDA should go up if IWDA is holding stocks of other currencies and other economies that is growing faster than USD depreciation (but this is unlikely because IWDA contains almost 70% of US stocks where majority of their stock price is determined by US economy and correlates to USD).

 

[ftpofmpo]

This is my arbitrary take. I do agree with you to some extent. But it isn't that clear cut.
3 typical scenarios occurs.
1. Simply exchange differential and prices adjust accordingly like u suggest
2. USA companies especially those export oriented or have a lot of base in foreign countries will benefit over time hence improved biz and share value.
3. Lastly, competition for investing dollars

I think point 3 is most important for short term. USA investors seem to have appetite and culture for stock investing, meaning they will have huge impact on others. They know their US dollar will weaken, hence if overseas assets are cheap enough and if they think USA companies risk doing badly, will invest overseas and thus fully exacerbating the drop in USD value. This can be seen many times post year 2000, 2008.

So bottom line is...if you DO NOT wish to invest in eg CHINA or ex USA countries, thus the more gold you will need to hold because any of point 2 or 3 might surface.

Anyways this is my take and its something i've read some where (you know those free investment articles in their truck load) and remains stuck in me as to why we need to hedge, how to hedge without having to use derivatives.

Gold is one simple and popular means thus this the very reason for the popular all weather popular..catered to USA investors who hold the s&P 500. People seem to think they are hedging for inflation. In reality, its effect is similar, not necessarily for inflation but an alternative to holding onto USA assets. More people run from USA assets into others, USD devalues.

I really do not think you need to hedge for FX if you hold enough IWDA and EIMI and in fact, if you follow shinys rule, u will already be holding to a hefty amount of STI. That's already hedging for if USA does badly which is directly linked to the USD.

isn't gold too exposed to the opaque purchasing policies of central banks actions esp china, russia? if you're a russian oligarch who know what their central bank gonna do, can profit handsomely

 

[ValerieLah]

I really do not think you need to hedge for FX if you hold enough IWDA and EIMI and in fact, if you follow shinys rule, u will already be holding to a hefty amount of STI. That's already hedging for if USA does badly which is directly linked to the USD.

What is shiny's rule?

 

[swan02]

isn't gold too exposed to the opaque purchasing policies of central banks actions esp china, russia? if you're a russian oligarch who know what their central bank gonna do, can profit handsomely

Gold is just an example because of readily available data and history.

Some people go to the extreme keeping Gold, Silver, Bitcoins, EIMI, Euro dollars, AUD, GBP, Chinese Yuan all bundled into one as the "so called diversified inflation hedge"

What is shiny's rule?

I'm certain if you buy his book, ya know. It's just his recommended asset allocation which pretty much 50/50 between IWDA/STI. That's already sufficient not to have one bit of gold..and who knows, STI might make a killing this time.

 

[D-Aced]

wouldnt dividend investing be on par with growth investing in LSE etf?

 

[ValerieLah]

I'm certain if you buy his book, ya know. It's just his recommended asset allocation which pretty much 50/50 between IWDA/STI. That's already sufficient not to have one bit of gold..and who knows, STI might make a killing this time.

I'm new to money mind..i didn't buy his book or knew that he's an author

 

[deadaxe]

Hi folks, newbie here looking to start out and I'm trying to decide on the platform I should use. I apologise in advanced if this had been discussed at length; there's a little too much info to trawl through. So while I play catch up, may I ask:

If I'm looking to put in S$60k into ES3/IWDA/MBH over 3-4 months, and commit S$2k/mth DCA across the 3 portfolio after, should I choose to do:
(A) local in FSMOne and IWDA over SCB; or
(B) local in FSMOne and IWDA over IBKR; or
(C) IBKR for everything until I hit the requisite USD 100K, before switching to using FSMOne for local and IBKR for IWDA.

Intent here is to drive down cost where possible while having a sensible number of platforms I need to admin/manage.

I've seen cflee's spreadsheet and it seems like (A) is a more cost efficient choice. However, given that the USD100k requirement is not exactly that far away, and there seems to be no reliable way to transfer SCB holdings into IBKR, is (C) actually the best choice?

I just thought the min. $2.50 commission incurred for local counters on IBKR would count towards the monthly $10 USD charge anyway, so there's technically no cost in doing so. And in the process I shorten the runway to hitting the requisite 100k USD for no min. monthly activity charge.

Is this sound or did I miss out something?

 

[cassowary18]

Hi folks, newbie here looking to start out and I'm trying to decide on the platform I should use. I apologise in advanced if this had been discussed at length; there's a little too much info to trawl through. So while I play catch up, may I ask:

If I'm looking to put in S$60k into ES3/IWDA/MBH over 3-4 months, and commit S$2k/mth DCA across the 3 portfolio after, should I choose to do:
(A) local in FSMOne and IWDA over SCB; or
(B) local in FSMOne and IWDA over IBKR; or
(C) IBKR for everything until I hit the requisite USD 100K, before switching to using FSMOne for local and IBKR for IWDA.

Intent here is to drive down cost where possible while having a sensible number of platforms I need to admin/manage.

I've seen cflee's spreadsheet and it seems like (A) is a more cost efficient choice. However, given that the USD100k requirement is not exactly that far away, and there seems to be no reliable way to transfer SCB holdings into IBKR, is (C) actually the best choice?

I just thought the min. $2.50 commission incurred for local counters on IBKR would count towards the monthly $10 USD charge anyway, so there's technically no cost in doing so. And in the process I shorten the runway to hitting the requisite 100k USD for no min. monthly activity charge.

Is this sound or did I miss out something?

I think (C) is the best choice given that you minimise the number of platforms you have to manage. How often are you planning to buy - monthly? IBKR beats every other platform for monthly.

 

[deadaxe]

I think (C) is the best choice given that you minimise the number of platforms you have to manage. How often are you planning to buy - monthly? IBKR beats every other platform for monthly.

Probably monthly for local. I could do quarterly for SCB and I think it’s cheaper for me given present circumstances. I suppose the main qn is if I should do (C) because there’s longer term gains to more quickly hit 100k on ibkr by buying local ETFs in the platform also.

 

[crystalnox]

Probably monthly for local. I could do quarterly for SCB and I think it’s cheaper for me given present circumstances. I suppose the main qn is if I should do (C) because there’s longer term gains to more quickly hit 100k on ibkr by buying local ETFs in the platform also.

As long as you're doing monthly, IB will win out. Max US$10 no matter what combination of ES3/IWDA/MBH you feel like buying that month.

 

[BBCWatcher]

I pulled figures off lazyportfolio and discovered some interesting facts.

Where more precisely are you finding these figures? They look incorrect.

 

[swan02]

From lazyportfolio. They have annual returns for each asset class. I then self calculate their CAGR using excel.

Be aware that my rolling 10 years are starting from the year mentioned hence for the year starting 2009, it ends 2018 hence 2019 n 2020 not taken in.

However the 22 year one took all figures from 1999 till today.

unless my calculation is incorrect... but I’ve checked the annualised for one of them emerging market for past 10 years and it tallies with lazyporfolio hence since I use copy paste would assume the rest is accurate.

So basically I use the excel RRI function. It only requires the number of years, the end value and beginning value.

So obviously from lazyportflio, I have converted the return percentages per year into decimals and then plus 1. e.g. 20 percent return year 2000, would be 1.2 and -10 percent would be 0.9. Then you can take a hypothetical number such as 10 or 100 or just 1 to multiply the figure of every year starting from the year you invested. e.g. 1 x 1.2 x 0.9, of cuz if you are using 1, you do not need to use it...then you get your final figure, then you apply the RRI function with e.g. (2 years, PV is 1 dollar is FV is 1.08).

so Emerging market for e.g. last 10 years would have an annualised return of just 1.36%. But if you have not missed the bull market in 2009, the annualised return severely improves due to the math where the initial years matter most than the later.

I myself only thought Emerging markets does not look right. But after staring through the years compared to other asset class, it makes a lot of sense. It appears that EM looks like it has a greater propensity to do well in the next few years as it's been a long time since it last had a bull market.

I was also surprised of the stability of EM returns through the years, x2 10 years rolling, and x1 22 year even given its much high standard deviation and sitting far away from the efficient frontier. EM is likely given bad light due to its very poor performance for the last 10 years.

Which figure does not look right ??

Where more precisely are you finding these figures? They look incorrect.

 

[hwckhs]

Recently, I picked up a book titled Planning Your Will, Trust, LPA & More from Popular. Popular sells it for $26.75; you can get it from other online bookstores for a lower price or the library for free.

This book is written in local context and appears to cover a lot of ground. I have only read the first 2 chapters so far, but I feel that this might be of interest to some of you as the topic comes up from time to time.

 

[BBCWatcher]

However the 22 year one took all figures from 1999 till today.

Why did you pick 22 years? That’s a weird number.

 

[swan02]

Because many could only go as far as 1999. I was comparing defensive sectors how they performed during crashes n overtime.

Why did you pick 22 years? That’s a weird number.

 

[BBCWatcher]

Because many could only go as far as 1999. I was comparing defensive sectors how they performed during crashes n overtime.

OK, but that’s not a good reason to report only one arbitrary interval. Decent U.S. stock market data goes back about 150 years, and gold price data goes back even farther. (No, the S&P 500 index doesn’t go back to 1870, but decent proxies do.) It just so happens that 1999 was about the top of one of history’s greatest U.S. bull market runs in stocks, a gold price multi-year low, and a relatively challenging time for emerging market stocks (primarily Asian Financial Crisis effects). Which happened, of course, but it’s an arbitrary selection. For those familiar with this history it’s damn impressive that the S&P 500 looks so good even when you happen to pick a historically big bull market top as your baseline.

The typical way to look at historical performance is to report standard, round intervals (plural), not just one interval where you happen to get one data cutoff. So in this case you’d report 1, 3, 5, 10, and 20 year intervals if that’s as far back as you can go. (Maybe toss in 15 if you want.) But for at least some of these you can go back farther, even much farther. Then you have the challenging problem of factoring in fund expenses, taxes, dividend reinvestment, and (ideally) dollar cost averaging effects.

Of course past performance is not necessarily indicative of future results.

 

[BBCWatcher]

Following up on my earlier post, what you’ll find if you look across the century plus of available data is that corporate bonds and gold had similar yields over the long-term, but gold was much more volatile than bonds.(*) Stocks easily, utterly trounced both. Past performance is not necessarily indicative of future results, however. Nonetheless, I don’t think much of gold because I don’t like the combination of bond-like historic returns with stock-like volatility. That’s an undesirable combination, and if the future is like the past I’ll skip it. Moreover, if/when inflation is a concern, there are better choices available, notably real return/inflation indexed sovereign bonds, a late 20th century innovation.

(*) After the full decoupling of fiat currencies from gold, which is the current situation (for about a half century) and extremely unlikely to revert.