Official Shiny Things thread—Part III

[JetStorm]

I generally agree (and whichever is easier get bonus points, of course).

But just to wrap things up on my end, I did a run through S&P 500 from 1 January 2000 to 1 December 2019 (making sure to hit the 2008 crash). On the same assumptions as previously, the average figure for a DCA person through this period would be ~1,571.77 whereas culepico's methodology results in ~1,577.79. That means ~105.55% returns for the former and ~104.77% for the latter. Difference is truly slight (but the DCA results, I think, lends support against the alleged efficacy of culepico's methodology).

thank you for taking the time to do this. with such small difference between the two steategies, it should really help calm the nerves of those who are reluctant on dcaing in this period.

so moral of the story is... stay the course!

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

 

[12retire]

IB - Nasdaq data chart

Trading Hours in the United States / Americas
The New York Stock Exchange (NYSE) is based in New York City. The NYSE is one of the largest stock exchanges in the world, and it is a public entity.1 As of 2019, the NYSE has normal trading hours from 9:30 a.m. to 4 p.m. local time, unless there's an early close due to a holiday.

The Nasdaq is an American stock exchange that serves as a global electronic marketplace for securities trading. Pre-market trading hours are from 4 a.m. to 9:30 a.m. local time, and after-hours trading extends from 4 p.m. to 8 p.m. The normal trading hours begin at 9:30 a.m. and end at 4 p.m.

When i look at TWS charts for some Nasdaq stocks, data for pre-market & after-hours trading are not shown.

Do you guys buy US stocks during the normal trading hours Only?

 

[sks888]

Hi Shiny and all the masters here, decided to send some queries as I'm in the midst of investing my warchest using shiny strategy. Cut the story short, pls take a look at below:
1)Am buying iwda using warchest in the next few MTHS. Should i sell my sgs bond to buy sti now since it's low now? When int start rising, buy back local etf bonds during rebalancing?
2)At present crisis, the movement on mbh seems to be fast n furious n Nikko abf seems holding better than mbh. Cant imagine when interest start to rise. First, will Nikko abf be a better candidate?
Second, will it better to put 50% on idtl n local bonds each for the sake of better portfolio performance n rebalancing in the accumulation phase at least n convert all idtl to local bonds before drawdown?
3)I'm doing 6mths mthly purchases now using my sgd. After Im done, I be having sti n sg bonds in SGD n iwda in USD.
So how do I calculate my % portfolio at the end of the purchases and also during rebalancing, since assets mixed are in usd n sgd?
4) Since is in USD and sgd, how do i calculate my portfolio performance yearly?
5)With USD rising record high, Wat measures can I take to prevent fx loses?

 

[culepico]

I generally agree (and whichever is easier get bonus points, of course).

But just to wrap things up on my end, I did a run through S&P 500 from 1 January 2000 to 1 December 2019 (making sure to hit the 2008 crash). On the same assumptions as previously, the average figure for a DCA person through this period would be ~1,571.77 whereas culepico's methodology results in ~1,577.79. That means ~105.55% returns for the former and ~104.77% for the latter. Difference is truly slight (but the DCA results, I think, lends support against the alleged efficacy of culepico's methodology).

I am piqued by both methods and had time to do further calculations (using S&P 500 historical chart).


First case, same scenario as you have calculated above. Monthly DCA at the opening price from 2000 to 2019.

Blind DCA: Average buy price = 1,571.77, total returns = 105.55%
DCA up: Average buy price = 1,577.79, total returns = 104.77%

Blind DCA has the edge.


Second case, to smooth out volatility. Weekly DCA at the opening price of every Monday from 2000 to 2019.

Blind DCA: Average buy price = 1574.88, total returns = 105.74%
DCA up: Average buy price = 1573.10, total returns = 105.97%

DCA up has the edge.


For dividend paying ETFs, assume $1.50 per month per $1000 invested. Also assume that there is a $1.50 brokerage fee per $1000 per trade. The dividend yield and brokerage fee cancel each other or are negligible, so there are no effects on the numbers for the above analysis. For non dividend paying ETFs, you have to take into account the brokerage fee per trade.

My assumption is that for less volatile trends (or more regular DCA), DCA up > DCA blindly. The reverse is true for a more volatile trend.

So I did an overly simplified simulation.


First case, more volatile trend over 20 time points. Prices as such: 1,2,3,4,5,6,5,6,7,8,9,8,7,6,7,6,5,6,7,8.

Blind DCA: Average buy price = 5.8, total returns = 37.93%
DCA up: Average buy price = 5.9, total returns = 35.59%

Blind DCA has the edge.


Second case, less volatile trend over 20 time points. Prices as such: 1,2,3,4,5,6,7,8,9,10,9,8,7,6,5,6,7,8,9,10.

Blind DCA: Average buy price = 6.5, total returns = 53.85%
DCA up: Average buy price = 6.25, total returns = 60%

DCA up has the edge.


So it seems like for less volatile trends (or more regular DCA), DCA up > DCA blindly. For more volatile trends, DCA blindly > DCA up. And bear in mind in terms of commissions paid, DCA up is cheaper than DCA blindly because there are less trades involved for DCA up (DCA up commissions are about 30% cheaper than DCA blindly). Although the differences overall are too minute to care.

Conclusion
In a perfectly smooth market trend (that contains at least 1 downtrend), DCA up always win. DCA blindly will start to win when a certain market volatility is reached, and increases its lead as the market's volatility increases even more. So yes that explains why regular DCA is useful during volatile periods. And regular DCA is also the better option for most investors.

EDIT

Definitions:
DCA blindly = DCA at set regular time points religiously no matter the price.
DCA up = DCA at set regular time points when current price is higher than the previous, and hold if the current price is lower. Pump in that held cash in the next uptrend.

In both cases there are no market timing involved. Both methods are viable. Before you flame, I am just presenting facts and data.

 

[levanify]

Hello, hope everyone is doing well in the current market turmoil. I have a question that I want to ask the people here, IWDA clearly is a very good fund. However, does anyone feel that if you buy S&P500 ETFs or even Nasdaq ETFs, it would provide you with better growth in the long run? Even Warren Buffett recommended buying S&P 500 only. Talking about diversification, given the recent crash, don't think that the diversification of IWDA helps much from lowering the risk. Additionally, companies within S&P500 are mostly global company, when their US business is affected they are diversified in a sense that they have businesses overseas so there is geographical diversification built into S&P index as well. My question is: wouldn't investing in S&P provide a better growth opportunity compared to IWDA? What to seek people's opinion on this. Thank you!

 

[Investnewbie82]

Actually, if it’s not markedly different, it may be psychologically easier to execute “dip up” than regularly DCA.

If you study the maximum drawdown, It seems the dip up method should have a definite edge?

 

[d9_lives]

So... 'DCA UP' is market timing + DCA?

I'll stick to the old trusted DCA because I just can't trust myself to do 'DCA UP'.

 

[culepico]

So... 'DCA UP' is market timing + DCA?

I'll stick to the old trusted DCA because I just can't trust myself to do 'DCA UP'.

No market timing involved at all. It's essentially buy if the current price is higher than the previous, and hold if current price is lower. There's no timing how the market will move in the future.

And yes, DCA blind is less effortless to do.

 

[culepico]

Actually, if it’s not markedly different, it may be psychologically easier to execute “dip up” than regularly DCA.

If you study the maximum drawdown, It seems the dip up method should have a definite edge?

Well, if you wanna squeeze every penny's worth, certain strategy will get you slightly more returns. But for the layman, a strict DCA might be better overall just for the effortless sake .

 

[flowerpalms]

You do realise that you will miss out on continued compound growth if you just hold and waiting for higher price to buy right?

DCA the last word is called "Averaging" why because we dont time the market. Price go up, we buy. Go down we also. Keep is simple.

Dont panic sell and all the more dont unload warchest thinking that price is low low low. Look at what happen to those who buy in at $50 iwda. What they have to say now?

Keep to DCA once every month but instead of timing the market, increase your investment amount and buy accordingly at a few cents above market price. Stay on course.

No market timing involved at all. It's essentially buy if the current price is higher than the previous, and hold if current price is lower. There's no timing how the market will move in the future.

And yes, DCA blind is less effortless to do.

 

[culepico]

You do realise that you will miss out on continued compound growth if you just hold and waiting for higher price to buy right?

DCA the last word is called "Averaging" why because we dont time the market. Price go up, we buy. Go down we also. Keep is simple.

Dont panic sell and all the more dont unload warchest thinking that price is low low low. Look at what happen to those who buy in at $50 iwda. What they have to say now?

Keep to DCA once every month but instead of timing the market, increase your investment amount and buy accordingly at a few cents above market price. Stay on course.

You do realise that compounded growth is already included in the share price right? So it makes no difference.

And look, I'm not advocating timing the market or panic selling at all. Where do you see that in my presentations?

And I also admitted DCA religiously is a good thing to do didn't I?

If you are against my presentations why don't you present some facts and data to prove?

 

[moolala]

You do realise that compounded growth is already included in the share price right? So it makes no difference.

And look, I'm not advocating timing the market or panic selling at all. Where do you see that in my presentations?

And I also admitted DCA religiously is a good thing to do didn't I?

If you are against my presentations why don't you present some facts and data to prove?

just ignore this flowerpalm

flowerpalm is either a troll or those simple chill and relax investor, which is fine

when i ask for how much the portfolio drop in this crash, refuse to answer=DCA blindly is bad

 

[tesarise]

You do realise that compounded growth is already included in the share price right? So it makes no difference.

And look, I'm not advocating timing the market or panic selling at all. Where do you see that in my presentations?

And I also admitted DCA religiously is a good thing to do didn't I?

If you are against my presentations why don't you present some facts and data to prove?

Like I say before many times. Just ignore him and move on. To him the book = holy scripture. Don't expect an intellectual discussion

 

[ranchfarm]

Hello, hope everyone is doing well in the current market turmoil. I have a question that I want to ask the people here, IWDA clearly is a very good fund. However, does anyone feel that if you buy S&P500 ETFs or even Nasdaq ETFs, it would provide you with better growth in the long run? Even Warren Buffett recommended buying S&P 500 only. Talking about diversification, given the recent crash, don't think that the diversification of IWDA helps much from lowering the risk. Additionally, companies within S&P500 are mostly global company, when their US business is affected they are diversified in a sense that they have businesses overseas so there is geographical diversification built into S&P index as well. My question is: wouldn't investing in S&P provide a better growth opportunity compared to IWDA? What to seek people's opinion on this. Thank you!

I saw this video that explains better.

https://youtu.be/RR7e1Y-HJxQ

 

[flowerpalms]

https://youtu.be/jvgx5SjcfLI

I saw this video that explains better.

https://youtu.be/RR7e1Y-HJxQ

 

[BBCWatcher]

You do realise that compounded growth is already included in the share price right? So it makes no difference.

Culepico, since you used the S&P 500 Index directly you forgot at least one important factor: dividend distributions. The dividend distributions tend to favor what you're calling "blind DCA" in your comparison. That's because you don't get dividends on your capital unless and until that capital is invested.

For example, let's suppose that the S&P 500 Index generates a 2% gross dividend yield. It's actually 2.42% at this instant, as I write this, but let's go with 2%. That's a net 1.7%/year (after a 15% Irish treaty tax rate), let's suppose. And that's roughly 14 basis points per month. So if you delay US$1,000 by one month, that'll cost about US$1.40 in lost dividends, on average.

If you have enough data for an accumulating fund such as IWDA then you should be able to run your historical comparison. IWDA includes the net dividends.

 

[culepico]

Culepico, since you used the S&P 500 Index directly you forgot at least one important factor: dividend distributions. The dividend distributions tend to favor what you're calling "blind DCA" in your comparison. That's because you don't get dividends on your capital unless and until that capital is invested.

For example, let's suppose that the S&P 500 Index generates a 2% gross dividend yield. It's actually 2.42% at this instant, as I write this, but let's go with 2%. That's a net 1.7%/year (after a 15% Irish treaty tax rate), let's suppose. And that's roughly 14 basis points per month. So if you delay US$1,000 by one month, that'll cost about US$1.40 in lost dividends, on average.

If you have enough data for an accumulating fund such as IWDA then you should be able to run your historical comparison. IWDA includes the net dividends.

It is a very good point. For a more accurate analysis, I will have to include the dividend yield. It will make the calculations a lot more complicated, and I'm quite lazy to do .

Anyways, let's simplify things again. Assume we go with your numbers, if we delay US$1,000 by one month, that'll cost about US$1.40 in lost dividends on average. But remember that we also saved on commission by not placing a trade at that time. The commission amount varies between brokers and the amount invested, but again for simplicity sake, let's put it at US$1.40 per trade of US$1,000. The two then cancel out each other, and the analysis still holds.

Good idea to try IWDA, will do if I have time. But IWDA does not have a very long historical data at the moment (e.g. 20 years). Maybe I will come back in 10 years time to do

 

[Listopad]

Given the strong usd to sgd, would it make any diff to vest regularly into the GBP denominated one instead ?

 

[BBCWatcher]

Anyways, let's simplify things again. Assume we go with your numbers, if we delay US$1,000 by one month, that'll cost about US$1.40 in lost dividends on average. But remember that we also saved on commission by not placing a trade at that time. The commission amount varies between brokers and the amount invested, but again for simplicity sake, let's put it at US$1.40 per trade of US$1,000. The two then cancel out each other, and the analysis still holds.

Not really, because investors would typically be using Interactive Brokers for this path. And that usually ends up being a US$10/month fixed price.

 

[BBCWatcher]

Given the strong usd to sgd, would it make any diff to vest regularly into the GBP denominated one instead ?

You're talking about IWDA v. SWDA (for example)? No. It's the same fund, simply quoted in two different currencies (U.S. dollars and British pounds). If the USD-GBP exchange rate moves and nothing else changes, the prices of IWDA and SWDA immediately adjust in lockstep.