Official Shiny Things thread—Part III

[unknownplayer]

I think at this time it is best to build up the emergency cash.. Who knows how this whole thing will turn out but it looks like a whole bunch of pain globally. People might lose their jobs etc

 

[highsulphur]

I think at this time it is best to build up the emergency cash.. Who knows how this whole thing will turn out but it looks like a whole bunch of pain globally. People might lose their jobs etc

You should have an emergency cash reserve of at least 6 months of expenses BEFORE a crisis hits not after. Now is the time to invest after getting the reserve

 

[hwckhs]

When I transfer money from SGD to the USD account in StanChart, I get an indicative forex rate. Even if I trade immediately, the USD-SGD forex rate shown in the contract statement is different from when I did the transfer.

Where can I get a forex rate in StanChart to be used to track my portfolio (IWDA, ES3 and MBH) % allocation?

For portfolio/allocation calculation, I recommend using the rate from XE. They show mid-market rate, which I believe is the mid point between "buy" and "sell". It is a neutral rate, therefore ideal for value calculations.

The indicative rate will be slightly lower (~0.5%) than the mid-market rate due to SCB earning from the spread. Even if you use the indicative rate for calculation, it will not be a big deal as the difference is small. The rate may change by this much within days/weeks anyway. Any rate that you use is just a point in time, and quickly becomes obsolete. If you want to track the value of your portfolio in real-time, use Investing.com website/app or something similar.

 

[zoneguard]

For portfolio/allocation calculation, I recommend using the rate from XE. They show mid-market rate, which I believe is the mid point between "buy" and "sell". It is a neutral rate, therefore ideal for value calculations.

You can use GOOGLEFINANCE("USDSGD") in Google Sheets and it matches the value in XE as of 2020-03-15 11:18 UTC.

 

[crystalnox]

I see online.Most ppl can beat the index. Is it survival bias? Very demotivated as I continue to DCA.

Try it. Sometimes the best lessons in life comes from getting burnt yourself.

 

[revhappy]

People who are interesting to know about rebalancing techniques, this article will help:

https://humbledollar.com/2020/03/harder-than-it-looks/

I particularly like this formula:

What is that optimal point? Daryanani recommends taking action when your portfolio falls out of line with one of its allocation targets by more than 20%. For example, if your target allocation to stocks is 60%, you would set outer bounds equal to 20% of that 60%, or 12 percentage points. Then, if the market were rising, you would wait until your allocation to stocks reached 60 plus 12, or 72% of your total portfolio, before rebalancing.

Similarly, if the market were falling, you would wait until your allocation to stocks dropped to 60 minus 12, or 48% of your overall portfolio. Right now, that number isn’t too far away. The upshot: Hard as it may be to put new money into stocks amid the current turmoil, the research indicates that the odds will be in your favor if you do just that.

 

[highsulphur]

People who are interesting to know about rebalancing techniques, this article will help:

https://humbledollar.com/2020/03/harder-than-it-looks/

I particularly like this formula:

I admit I don't follow the ratio strictly.

If I deploy the war chest fully I suspect I will be close to my target allocation. So I'm actually behind the curve all along

 

[brfish]

In theory is possible but I don't think anyone has actually done that because the fund manager will charge an admin fee that doesn't offer much savings compare to just buying from the market and paying the commission

I have personally done this, before reading ST's book actually. In both buy and sell.

Yes you have to go through a broker and most of the time the person you speak to won't know what you are talking about. Insist for him or her to poke around and most likely they need to get in touch with the institutional investment department before they get the right forms. From that on it's a simple process as filling the forms and signing them etc.

And yes the brokers do charge a fee, higher than your normal commission if you just buy/sell on SGX. Why do I do it then? Liquidity. If you buy/sell a large amount at once, you are going to increase the spread, to a point there the additional fee actually is a better deal. The MBH might be trading at 1.04 but if you look at the market, there might be only 50000 asks at 1.04 when you want to buy, say, 300k. And to buy the full 300k you may need to go higher to say, 1.043, which is almost 0.3% higher while the fee is around 0.2% additional compared against SGX commision.

To that extent, I probably wouldn't do it for 50k. You are better off just trade on SGX. But as the number increase, you see the benefit of unit creation. BTW, A35 has better liquidity than MBH so the threshold should be higher for A35.

BTW, the unit creation thing doesn't happen on any day. For A35 and MBH it's every other Friday if I am not mistaken. So better do it when market is not volatile as you don't know what will happen in 2 weeks time.

 

[hwckhs]

BTW, the unit creation thing doesn't happen on any day. For A35 and MBH it's every other Friday if I am not mistaken. So better do it when market is not volatile as you don't know what will happen in 2 weeks time.

Thanks for sharing your experience. I also encountered Phillip Securities staff who just asked me to buy from market and I gave up in the end. Was only inquiring and not really going to subscribe/redeem.

I'm wondering, if you are able to wait for up to 2 weeks for the subscription/redemption to happen, what's stopping you from splitting the $300k into multi-day trades? And, you smooth out the price in the process. For me, I would prefer to get an average price over a few days than to subject myself to the price on a single day.

 

[revhappy]

I admit I don't follow the ratio strictly.

If I deploy the war chest fully I suspect I will be close to my target allocation. So I'm actually behind the curve all along

What is your target allocation and where are you right now? My target allocation should be 60%, although I am not comfortable going above 50%, since I have never crossed that psychological barrier ever. Right now I am at 44%, I would prefer to hit 50% and then let equities rise + DCA new savings to make it 60% rather than sell fixed income to buy equities and take it to 60%.

 

[brfish]

Thanks for sharing your experience. I also encountered Phillip Securities staff who just asked me to buy from market and I gave up in the end. Was only inquiring and not really going to subscribe/redeem.

I'm wondering, if you are able to wait for up to 2 weeks for the subscription/redemption to happen, what's stopping you from splitting the $300k into multi-day trades? And, you smooth out the price in the process. For me, I would prefer to get an average price over a few days than to subject myself to the price on a single day.

I guess you could. It's just a lot of work... And you don't have to wait for 2 weeks. The funds do those on specific days which are 1 or 2 weeks apart. If you figure out which days those are you can theoretically do it in a day or two.

BTW, one can do the same with ES3 too. It just requires 5M instead of 50k.

 

[hwckhs]

I guess you could. It's just a lot of work... And you don't have to wait for 2 weeks. The funds do those on specific days which are 1 or 2 weeks apart. If you figure out which days those are you can theoretically do it in a day or two.

BTW, one can do the same with ES3 too. It just requires 5M instead of 50k.

I can understand, if it's a large sum and you want it quick.

One more question. After your subscription/redemption process, did you compare the price you got versus if you have bought from open market? Did you get a good price, and by how much (if you still keep a record)? I think in theory you should, because you eliminate the spread caused by the market makers and other participants, but I'm interested to hear from you.

 

[swan02]

Great info,

Can u do this if u r using a custodian trading account such as SCB ?

If not, this would be another knock down on SCB trading platform.

I have personally done this, before reading ST's book actually. In both buy and sell.

Yes you have to go through a broker and most of the time the person you speak to won't know what you are talking about. Insist for him or her to poke around and most likely they need to get in touch with the institutional investment department before they get the right forms. From that on it's a simple process as filling the forms and signing them etc.

And yes the brokers do charge a fee, higher than your normal commission if you just buy/sell on SGX. Why do I do it then? Liquidity. If you buy/sell a large amount at once, you are going to increase the spread, to a point there the additional fee actually is a better deal. The MBH might be trading at 1.04 but if you look at the market, there might be only 50000 asks at 1.04 when you want to buy, say, 300k. And to buy the full 300k you may need to go higher to say, 1.043, which is almost 0.3% higher while the fee is around 0.2% additional compared against SGX commision.

To that extent, I probably wouldn't do it for 50k. You are better off just trade on SGX. But as the number increase, you see the benefit of unit creation. BTW, A35 has better liquidity than MBH so the threshold should be higher for A35.

BTW, the unit creation thing doesn't happen on any day. For A35 and MBH it's every other Friday if I am not mistaken. So better do it when market is not volatile as you don't know what will happen in 2 weeks time.

 

[hwckhs]

I particularly like this formula:

What is that optimal point? Daryanani recommends taking action when your portfolio falls out of line with one of its allocation targets by more than 20%. For example, if your target allocation to stocks is 60%, you would set outer bounds equal to 20% of that 60%, or 12 percentage points. Then, if the market were rising, you would wait until your allocation to stocks reached 60 plus 12, or 72% of your total portfolio, before rebalancing.

Similarly, if the market were falling, you would wait until your allocation to stocks dropped to 60 minus 12, or 48% of your overall portfolio. Right now, that number isn’t too far away. The upshot: Hard as it may be to put new money into stocks amid the current turmoil, the research indicates that the odds will be in your favor if you do just that.

Periodic rebalancing already brings additional return. Threshold-based rebalancing is only marginally better.

You can check the research report (page 57) cited in the article. For convenience, I reproduced the data below:

Return benefits of rebalancing once a year (250 market days): 0.15%
Return benefits of using 20% band: 0.16-0.20%
Advantage over annual rebalancing: 0.01-0.05%

I think opportunistic rebalancing is not very attractive for DCA-investors. There is added complexity for the small gains.

This method is definitely more suitable for non-DCA, opportunistic/speculative portfolios. These investors like to time the market, and this method works well for them as it provides a mechanical way to do so.

 

[revhappy]

Periodic rebalancing already brings additional return. Threshold-based rebalancing is only marginally better.

You can check the research report (page 57) cited in the article. For convenience, I reproduced the data below:

Return benefits of rebalancing once a year (250 market days): 0.15%
Return benefits of using 20% band: 0.16-0.20%
Advantage over annual rebalancing: 0.01-0.05%

I think opportunistic rebalancing is not very attractive for DCA-investors. There is added complexity for the small gains.

This method is definitely more suitable for non-DCA, opportunistic/speculative portfolios. These investors like to time the market, and this method works well for them as it provides a mechanical way to do so.

Thanks! Appreciate it.

 

[Purplestars]

I have personally done this, before reading ST's book actually. In both buy and sell.

Yes you have to go through a broker and most of the time the person you speak to won't know what you are talking about. Insist for him or her to poke around and most likely they need to get in touch with the institutional investment department before they get the right forms. From that on it's a simple process as filling the forms and signing them etc.

And yes the brokers do charge a fee, higher than your normal commission if you just buy/sell on SGX. Why do I do it then? Liquidity. If you buy/sell a large amount at once, you are going to increase the spread, to a point there the additional fee actually is a better deal. The MBH might be trading at 1.04 but if you look at the market, there might be only 50000 asks at 1.04 when you want to buy, say, 300k. And to buy the full 300k you may need to go higher to say, 1.043, which is almost 0.3% higher while the fee is around 0.2% additional compared against SGX commision.

To that extent, I probably wouldn't do it for 50k. You are better off just trade on SGX. But as the number increase, you see the benefit of unit creation. BTW, A35 has better liquidity than MBH so the threshold should be higher for A35.

BTW, the unit creation thing doesn't happen on any day. For A35 and MBH it's every other Friday if I am not mistaken. So better do it when market is not volatile as you don't know what will happen in 2 weeks time.

Great info, another argument against A35/MBH.

Shiny will gloss over this and ignore it though

 

[highsulphur]

Great info, another argument against A35/MBH.

Shiny will gloss over this and ignore it though

I dont understand why this is against a35 and mbh

 

[swan02]

Great info, another argument against A35/MBH.

Shiny will gloss over this and ignore it though

On the contrary, it now lends more support to a35 and mbh.

my foreign bonds won’t need to make up half of my bond portfolio anymore.

Now I’ll just want to know which days of the month they are on to do such transactions.

More so I wish to know when market makers show their faces. Sometimes I can tell
Base on volume, sometimes they just go missing most of the time ! This is inconsistent with other inert etfs I’ve transact in Australia.

 

[highsulphur]

What is your target allocation and where are you right now? My target allocation should be 60%, although I am not comfortable going above 50%, since I have never crossed that psychological barrier ever. Right now I am at 44%, I would prefer to hit 50% and then let equities rise + DCA new savings to make it 60% rather than sell fixed income to buy equities and take it to 60%.

around 65:35 equity vs bonds. To break it further i guess would be 35:30:35 for ES3:IWDA:Bond.

to be honest, i haven't been paying too much attention to the ratio as my bigger priority is my cash drag. I had about 35% cash end 2019. So the priority now is to deploy those cash till year end...

PS I classify my CPF under bonds so if you include CPF as cash, my cash holding would be much higher...

 

[Purplestars]

I dont understand why this is against a35 and mbh

1) the value of your bonds will drop in a crisis due to lack of liquidity.

2) going to the market maker will incur extra costs and take a longer time to execute the trade.

How does this lend support to own a35/mbh?