Official Shiny Things thread—Part III

[ftpofmpo]

any idea what is the spread between the share price of a physically replicated equity etf and the underlying assets before the fund manager purchases or sells additional shares?

also, why would sgd rise after mas lowered the band?

 

[wadan1868]

Hi ST, nice to know you.

I am just starting to invest and have read your book from friend's recommendation. I have to say your book really opened my eyes. I have tried to use the rules and steps you taught, however, still a bit confused on how to start. It will be great if you can give me some suggestions.

I am 30 years old, so my portolio should be 40-40-20. However, under the current situation where the equity etfs' price are low, is it okay if I go with 50-50-0 instead? since I still have CPF which can serves as bonds purpose.

Also, I have a warchest of around 80k, should I put that all in for investment or keep some in cash? since we are not sure if recession is coming.

If I put all the amount in, should do it lump sum or on a monthly basis? if monthly basis, how much should I put in every month?

As for the trading platforms, it really confuses me as there are so many different fees. If after I put my warchest in and I do DCA of S$1000 monthly afterwards,which platform is best for IWDA and ES3 repectively?

Please pardon me if my questions are ridiculous to you.

 

[popol]

3-Fund Portfolio

Hi Josh
I hope this message finds you well and safe. I purchased your 'Rich by Retirement' book sometime back and have implemented a 3-Fund portfolio as advised in the book.

I am 40 years old and my portfolio is as follows: IWDA (35%), ES3 (35%), MBH (30%)

In this current Covid-19 situation, equities have taken a battering as expected. I was expecting that people will go to bonds to find refuge but I noticed that bonds (MBH) are also dropping. The overall effect is a drop in portfolio value.

In my case, I still have 20 years to go; so I can ride this volatility and purchase those counters at a discount. However I have the following doubt:

Imagine someone who is 60 years old today and has a portfolio like this : IWDA (25%), ES3 (25%), MBH (50%). Covid-19 will also cause his portolio value to drop (albeit less volatile than a 70% equities portfolio).

What can he potentially do next?

Thanks
S

 

[gazar1]

Hi, just checking if I want to put a lump sum of money for it to grow without any risk, what’s the best platform?

FD or ocbc 360 account?

Or is there any other method?

 

[tangent314]

Imagine someone who is 60 years old today and has a portfolio like this : IWDA (25%), ES3 (25%), MBH (50%). Covid-19 will also cause his portolio value to drop (albeit less volatile than a 70% equities portfolio).

What can he potentially do next?

Does not need to do anything special. If still working, continue to DCA as per normal. If retired and has already started drawing down, then continue to draw down like it's DCA in reverse. You're not withdrawing everything one shot in retirement so there's still a lot of time for most of the portfolio to recover while you slowly draw down a small bit monthly.

 

[yellownova]

Hi, just checking if I want to put a lump sum of money for it to grow without any risk, what’s the best platform?

FD or ocbc 360 account?

Or is there any other method?

There is always some risk in investments. But for the lowest possible, you may want to look into Singapore Savings Bonds (SSB). Unfortunately, due to the market nowadays, I don't think the next issuance will have high interest rates.

 

[Okenba]

Imagine someone who is 60 years old today and has a portfolio like this : IWDA (25%), ES3 (25%), MBH (50%). Covid-19 will also cause his portolio value to drop (albeit less volatile than a 70% equities portfolio).

What can he potentially do next?

Thanks
S

If not working and need money, draw from CPF first if you can.
If not, draw from MBH.
Try to tahan for 5 years until CPF life kicks in.

Frankly, I think we should already be planning for drawdown from about 50yo.
Cause 55 is when you start your RA and contributing to CPF life. So potentially you may want to draw some investments to put into your RA.

 

[cassowary18]

Hi, just checking if I want to put a lump sum of money for it to grow without any risk, what’s the best platform?

FD or ocbc 360 account?

Or is there any other method?

What's your timeframe?

FD and SSB are the safest, but the interest rates are abysmal these days.

OCBC 360 might look attractive now, but the interest rates are likely to be nerfed in the coming days (DBS and UOB already nerfed their high interest savings accounts already).

Another possible option is Tiq by Elastiq for short-term. https://www.tiq.com.sg/product/universal-life-insurance-elastiq/

If your timeframe is longer (3 years or more), then consider short term endowment plans like Singlife Endowment series https://singlife.com/grow/endowment/

 

[BBCWatcher]

If not working and need money, draw from CPF first if you can.
If not, draw from MBH.
Try to tahan for 5 years until CPF life kicks in.

I don't necessarily agree with this. CPF SA+OA earns a reliable blended interest rate somewhere between 2.5% and 4%, and the first withdrawal dollars come from the 4% interest earning pool (SA). I don't expect that MBH will beat 4%, even on a long-term basis. (~3.X% seems more realistic.) I certainly wouldn't touch CPF RA. Indeed, it could be quite smart to boost RA. (See below.)

<2.5% interest earning cash is the first place to look. I'd probably shift mortgage payments onto OA (if not already there), at standard pace or even less if you can get a good refinancing deal and/or COVID-19 payment holiday. And then I'd probably take a look at whether the portfolio allocation makes sense. If not, I'd pick the "too high" portion and spend that first.

Frankly, I think we should already be planning for drawdown from about 50yo.
Cause 55 is when you start your RA and contributing to CPF life. So potentially you may want to draw some investments to put into your RA.

I think I disagree with this too. Shouldn't you end up with a pile of OA dollars at age 55 that can be shoved into RA to push it up to the ERS? Or at least wouldn't this be realistic quite often?

 

[Okenba]

I don't necessarily agree with this. CPF SA+OA earns a reliable blended interest rate somewhere between 2.5% and 4%, and the first withdrawal dollars come from the 4% interest earning pool (SA). I don't expect that MBH will beat 4%, even on a long-term basis. (~3.X% seems more realistic.) I certainly wouldn't touch CPF RA. Indeed, it could be quite smart to boost RA. (See below.)

Clarify: I would touch CPF interest. Not RA. Perhaps SA if I had to.
But you may be right that it makes more sense to sell MBH first.

<2.5% interest earning cash is the first place to look. I'd probably shift mortgage payments onto OA (if not already there), at standard pace or even less if you can get a good refinancing deal and/or COVID-19 payment holiday. And then I'd probably take a look at whether the portfolio allocation makes sense. If not, I'd pick the "too high" portion and spend that first.

I'm not sure why the need to pick the "too high" allocation knowing that stocks are much lower. I would sell from MBH and do my best not to touch IWDA or ES3 at all, even if I have to sell all my MBH.

I think I disagree with this too. Shouldn't you end up with a pile of OA dollars at age 55 that can be shoved into RA to push it up to the ERS? Or at least wouldn't this be realistic quite often?

Hence the need to plan? If you already have it in OA, that's the plan. If you don't, presumably, you need a plan.

 

[BBCWatcher]

Clarify: I would touch CPF interest. Not RA. Perhaps SA if I had to.
But you may be right that it makes more sense to sell MBH first.

That's not necessarily what I suggested. (See below.)

If you're digging more than lightly into CPF at age 55+ then you're withdrawing from SA first, the 4% interest earning part. Conceivably you could avoid that past $40,000 by raising a Special Account "shield" (CPF Investment Scheme-SA), but that's a hassle.

I'm not sure why the need to pick the "too high" allocation knowing that stocks are much lower. I would sell from MBH and do my best not to touch IWDA or ES3 at all, even if I have to sell all my MBH.

Stocks are much lower, but you still want to rebalance your portfolio periodically (once or twice a year is enough) to keep your portfolio aligned with your desired target allocation. If you need to raise some funds for day to day living expenses, you can still apply that rebalancing principle and start with that first. And that'll work well precisely because stocks are probably "low," meaning that you'd probably favor a bond fund sale first since bonds have held up somewhat better. If/when stocks rise back up (and perhaps beyond) their prior level, the next rebalance will reduce the stocks.

If you're in perfect balance to your target allocation then you'd draw evenly from stock and bond funds.

Hence the need to plan? If you already have it in OA, that's the plan. If you don't, presumably, you need a plan.

My point is that most CPF contributions are compulsory, and there are many people -- not all certainly, but many -- who have no particular problem piling up CPF dollars. It "just happens." In that rather common (but no, not universal) situation, you shouldn't have to worry about raising cash for an ERS top up at age 55. Of course this'll depend on how much and how quickly you're draining OA for mortgage payments, how much you're topping up your SA at a $7,000/year clip for tax relief, how much you've topped up MA for tax relief, how early and how much you're performing OA to SA transfers, whether your employer participates in the AMCS, your earning level (including variable pay), and several other factors. But it is rather common to be relatively flush with CPF dollars at age 55, flush enough to be able to push a RA up to the ERS.

 

[EmporioArmani]

One quick question.
How would my stocks be handled, if one day SCB collapse? I read somewhere that they are separate so my shares won't be affected? But don't quite get how it works.

Sent from Xiaomi MI NOTE 10 using GAGT

 

[Okenba]

That's not necessarily what I suggested. (See below.)

If you're digging more than lightly into CPF at age 55+ then you're withdrawing from SA first, the 4% interest earning part. Conceivably you could avoid that past $40,000 by raising a Special Account "shield" (CPF Investment Scheme-SA), but that's a hassle.

If the money is important, I don't think some minor hassle should stop it.

Stocks are much lower, but you still want to rebalance your portfolio periodically (once or twice a year is enough) to keep your portfolio aligned with your desired target allocation. If you need to raise some funds for day to day living expenses, you can still apply that rebalancing principle and start with that first. And that'll work well precisely because stocks are probably "low," meaning that you'd probably favor a bond fund sale first since bonds have held up somewhat better. If/when stocks rise back up (and perhaps beyond) their prior level, the next rebalance will reduce the stocks.

If you're in perfect balance to your target allocation then you'd draw evenly from stock and bond funds.

My preference is not to sell low. I'm okay to be out of balance if that is the case. I can balance later. Stocks that are sold low would probably need to be bought high later. I fail to see the value of balance in this situation.

My point is that most CPF contributions are compulsory, and there are many people -- not all certainly, but many -- who have no particular problem piling up CPF dollars. It "just happens." In that rather common (but no, not universal) situation, you shouldn't have to worry about raising cash for an ERS top up at age 55. Of course this'll depend on how much and how quickly you're draining OA for mortgage payments, how much you're topping up your SA at a $7,000/year clip for tax relief, how much you've topped up MA for tax relief, how early and how much you're performing OA to SA transfers, whether your employer participates in the AMCS, your earning level (including variable pay), and several other factors. But it is rather common to be relatively flush with CPF dollars at age 55, flush enough to be able to push a RA up to the ERS.

Even if "it just happens", we should know what is happening. And if you know, but don't do anything, then I suppose that's part of your plan. And if you know, and do something, that's part of the plan as well.

The problem is if you don't know and just "let it happen", only to find out later that it didn't quite happen the way that you needed it to.


To be clear, I'm not here to say that my view is the only solution or even the best solution. I'm only stating what I would do in the circumstances that were defined. And of course, my view would probably be coloured by my own personal situation as yours would be.

Instead of critiquing it, why not state what is *your* best solution for the circumstances listed?

 

[BBCWatcher]

My preference is not to sell low. I'm okay to be out of balance if that is the case. I can balance later. Stocks that are sold low would probably need to be bought high later. I fail to see the value of balance in this situation.

Uh, if your stocks are "low" then they're far less likely to exceed your target portfolio allocation for stocks. Thus you'd tend to hang onto the stocks and rebalance out of something else (bonds).

I don't really know what you're talking about with the last part of your reply. Most CPF contributions are compulsory, so there isn't a separate choice in that respect in terms of how much you'll end up with at age 55. If your compulsory contributions amount to $37,740 for 30 years (age 25 to 55), then you're going to have absolutely no problem fully funding your Retirement Account at age 55 to the Full Retirement Sum and having plenty of dollars left over in SA+OA to push the RA up to the Enhanced Retirement Sum. For example. If that's your situation, or something like it (this math still works at a much lower total compulsory contribution flow), then you don't have to worry about raising cash in the run up to age 55 to add funds to a Retirement Account. You simply won't have that problem! All you'd do is optimize your CPF-related "plays" per normal.

Don't worry about the stuff you don't have to worry about, basically.

On the other hand, if you're self-employed, have only contributed to MediSave, have zero or near zero CPF OA and SA balances, and you're approaching age 55.... Well, that's a very different scenario, isn't it? OK, then you can worry about raising cash for CPF RA funding.

 

[Okenba]

Uh, if your stocks are "low" then they're far less likely to exceed your target portfolio allocation for stocks. Thus you'd tend to hang onto the stocks and rebalance out of something else (bonds).

And there is no universe in which stocks are low, you already sold bonds and need more money and now need to choose between stocks and bonds? My point is that I would go bonds. Was that very hard to understand?

I don't really know what you're talking about with the last part of your reply.

Then perhaps you don't need to spend time trying to comment on what you don't know?

 

[BBCWatcher]

And there is no universe in which stocks are low, you already sold bonds and need more money and now need to choose between stocks and bonds? My point is that I would go bonds. Was that very hard to understand?

Yes.

You can certainly choose to step outside your target portfolio allocation, which just means you've changed your target portfolio allocation. There's nobody policing those percentages except yourself.

 

[gazar1]

What's your timeframe?

FD and SSB are the safest, but the interest rates are abysmal these days.

OCBC 360 might look attractive now, but the interest rates are likely to be nerfed in the coming days (DBS and UOB already nerfed their high interest savings accounts already).

Another possible option is Tiq by Elastiq for short-term. https://www.tiq.com.sg/product/universal-life-insurance-elastiq/

If your timeframe is longer (3 years or more), then consider short term endowment plans like Singlife Endowment series https://singlife.com/grow/endowment/

No time frame as I am not invesment savvy, just leave it there let it gain interest.

for SSB invesment what portal should I use to engage?

 

[sks888]

When you’re buying more or rebalancing, you can just check the USD/SGD FX rate on that day and convert everything back to a SGD amount. .

Hi Shiny,

Many thanks for answering my questions. I am so grateful of your help. Without this forum, i dont think I can start this purchase at this great opportunity. Like to clarify on my previous question to u.

YOU mentioned need to calculate back to sgd on my porfolio when doing rebalancing. Is this applicable only when i already hav my 100% warchest porfolio running and when doing rebalancing?
What if now I am investing my warchest for the next 6mth?
For illustration, take iwda as example and every 1st of the mth i invest 1000k for 6 mths.
Which is correct mtd 1 or mtd2 or both mtds are wrong?
mtd1:
For second month and every month onwards,
on the 1st of second mth, take the first mth lots and multiply the second mth iwda price and then convert to (A)sgd at that day fx price. Since first mth use 1k, the bal to use is 2k-(A)=(B). Then use (B) to change to usd at that fx price and buy iwda for second MTH. Continue to do this until finish dispatching the 6 mth of my warchest.

mtd 2:
For every 1st of the mth for 6 mths, I jus convert my 1000 to usd and use it to buy iwda regardless of the fx rate, iwda price and lot bought on the previous purchases?

Again thks for your generous sharing!

 

[Jirachi]

Guys, my G3B ETF is not updated from POSB RSP is not updated on my investment statement

however my ABF is updated, did anyone experience the same thing?

You have done RSP for more than 12 months and it does not count towards your Multiplier Account as an eligible transaction in the investment category.

 

[Jirachi]

Like to check, if you see this news, would you think that the dip would be over and it is actually a good time to buy now? Or should I wait a while more?

msn.com/en-sg/news/world/coronavirus-good-news-newborn-baby-beats-bug-vaccine-on-way-and-italy-cases-slow/ar-BB11mEjM

It really depends on how you see the news. Some news are just noise and the market will ignore while some will trigger a market direction. This comes with experience though.