Official Shiny Things thread—Part III

[makav31i]

One can surmise that it wouldn't deviate much. There are many bloggers and articles in Singapore that have covered the 3 funds portfolio and you can extrapolate the performances there if you are interested.

I think you are again missing the purpose of me sharing this article. It is to show that there are more than 1 type of porfolio out there(especially relevant for someone that is trying out such asset based portfolio like me). And that different portfolio with different characteristics when measured qualitatively over a long period shows interesting results.

Point being, there is no one portfolio that fits everyone. The charts shows different portfolio characteristics for different risk levels and different volatilities. Take it whatever way you want but I for one am evaluating the Golden Butterfly portfolio as a retriement portfolio when the time comes.

No one is disputing about 3-fund portfolio here...

That chart on the allocation of local stocks which can be understood in Singapore context is the STI ETF which can be in ES3 or G3B and for the international stocks in either VWRD or VWRA or IWDA + EIMI...

Now you compare that with the performance for someone in the USA which for their Domestic stocks purchase VTI or even S&P500 be it in SPY or VOO or IVV and VT for international stocks, do you think their performance is not much difference than someone in Singapore with the STI + VWRD/VWRA/IWDA+EIMI?

The point is the article allocation of domestic and international in the photo may or may not be applicable to a Singapore based person, and nothing on disputing the 3 Fund Portfolio...Why do you think some would ask you to allocate 80% to 100% in International which can be in the form of VWRD/VWRA/IWDA+EIMI and very small percentage in the STI ETF?

Of course so long as you know what you are doing and decide to go 50-50 on local and international stock allocation or even go heavier on SGX and lighter on International, it is your own choice so long as it fits your situation and only you can decide on the allocation...

 

[moolala]

No one is disputing about 3-fund portfolio here...

That chart on the allocation of local stocks which can be understood in Singapore context is the STI ETF which can be in ES3 or G3B and for the international stocks in either VWRD or VWRA or IWDA + EIMI...

Now you compare that with the performance for someone in the USA which for their Domestic stocks purchase VTI or even S&P500 be it in SPY or VOO or IVV and VT for international stocks, do you think their performance is not much difference than someone in Singapore with the STI + VWRD/VWRA/IWDA+EIMI?

The point is the article allocation of domestic and international in the photo may or may not be applicable to a Singapore based person, and nothing on disputing the 3 Fund Portfolio...Why do you think some would ask you to allocate 80% to 100% in International which can be in the form of VWRD/VWRA/IWDA+EIMI and very small percentage in the STI ETF?

Of course so long as you know what you are doing and decide to go 50-50 on local and international stock allocation or even go heavier on SGX and lighter on International, it is your own choice so long as it fits your situation and only you can decide on the allocation...

Actually I dont understand this point.

It seems to me International porfolio gives more returns than SG

Not to mention its much more liquid when you wanna sell

 

[BBCWatcher]

The point is the article allocation of domestic and international in the photo may or may not be applicable to a Singapore based person, and nothing on disputing the 3 Fund Portfolio...Why do you think some would ask you to allocate 80% to 100% in International which can be in the form of VWRD/VWRA/IWDA+EIMI and very small percentage in the STI ETF?

Of course so long as you know what you are doing and decide to go 50-50 on local and international stock allocation or even go heavier on SGX and lighter on International, it is your own choice so long as it fits your situation and only you can decide on the allocation...

It sure seems like too many people think we're still living in the 1970s (or thereabouts). Back then stock markets were a lot simpler. If you invested in stocks in Country X, then those stocks pretty closely tracked Country X's real economy. And if you managed a young, up-and-coming company based in Country X, producing/manufacturing/making 90+% of your products/services in Country X, and selling 90+% of your products/services in Country X, you'd also list in Country X to raise capital to grow your business, primarily from investors living in Country X. Sure, there were some exports and imports, but fundamentally that was a world with fewer and less significant global supply chains and global capital flows....

....Well, that's not our world today, and every decade our world is getting less national and more global. And this long-running, still running trend should spur some reconsideration about how to invest. As an example, we know with high confidence that the Singapore Stock Exchange is simply not the place where young, growing companies go to raise capital -- including young, growing companies founded, headquartered, and with substantial operations in Singapore. We know, with high confidence, that the SGX will continue to be an exchange of "heritage stocks." With global capital flows, the SGX simply cannot compete. It's like MySpace in a Facebook, Instagram, and Twitter world. It doesn't have the scale economies that, say, Wall Street has.

I don't have a perfect solution to this problem. Long-term investors have to deal with the available vehicles, and the Straits Times Index of 30 "heritage stocks" ("heirloom stocks"?) is still the best available representation of Singapore's real economy. But Singapore's real economy is way, way more interesting and dynamic than the STI. Just to pick a couple examples, Trafigura is headquartered in Singapore, has a decent percentage of its total employees in Singapore, and is a large trading company. It's privately held, though, so there's no practical way to invest in it, even indirectly, even if you want to. Flex (formerly Flextronics), the electronics manufacturer, is domiciled in Singapore, has a decent number of employees and some operations in Singapore (but also in about 40 other countries), and...its stock is listed on the NASDAQ (symbol: FLEX). Are these two companies "Singaporean" companies? Well, I'd say they're definitely more "Singaporean" (whatever that means in this context) than Thai Beverage, one of the 30 STI stocks.

Anyway, we've had this friendly debate before, but the bottom line is that I don't think it makes sense to overweight our small, open economy's "heirloom stocks" too heavily. This country, its moribund stock market, and its currency (managed as a loose peg to a trade-weighted basket of other currencies) are quite different than what the United States has, and so we properly ought to "mark to market" U.S. centric portfolio allocation advice.

 

[iceblendedchoc]

Same thoughts as I am unlikely to retire in Singapore. So my portfolio deviates from ST three funds for Singaporean except for IWDA

 

[Eternit]

Hey gurus what are your opinions on roboadvisors here in Singapore such as stashaway and syfe? The management fees seem reasonable for a diverse portfolio?

 

[makav31i]

It sure seems like too many people think we're still living in the 1970s (or thereabouts). Back then stock markets were a lot simpler. If you invested in stocks in Country X, then those stocks pretty closely tracked Country X's real economy. And if you managed a young, up-and-coming company based in Country X, producing/manufacturing/making 90+% of your products/services in Country X, and selling 90+% of your products/services in Country X, you'd also list in Country X to raise capital to grow your business, primarily from investors living in Country X. Sure, there were some exports and imports, but fundamentally that was a world with fewer and less significant global supply chains and global capital flows....

....Well, that's not our world today, and every decade our world is getting less national and more global. And this long-running, still running trend should spur some reconsideration about how to invest. As an example, we know with high confidence that the Singapore Stock Exchange is simply not the place where young, growing companies go to raise capital -- including young, growing companies founded, headquartered, and with substantial operations in Singapore. We know, with high confidence, that the SGX will continue to be an exchange of "heritage stocks." With global capital flows, the SGX simply cannot compete. It's like MySpace in a Facebook, Instagram, and Twitter world. It doesn't have the scale economies that, say, Wall Street has.

I don't have a perfect solution to this problem. Long-term investors have to deal with the available vehicles, and the Straits Times Index of 30 "heritage stocks" ("heirloom stocks"?) is still the best available representation of Singapore's real economy. But Singapore's real economy is way, way more interesting and dynamic than the STI. Just to pick a couple examples, Trafigura is headquartered in Singapore, has a decent percentage of its total employees in Singapore, and is a large trading company. It's privately held, though, so there's no practical way to invest in it, even indirectly, even if you want to. Flex (formerly Flextronics), the electronics manufacturer, is domiciled in Singapore, has a decent number of employees and some operations in Singapore (but also in about 40 other countries), and...its stock is listed on the NASDAQ (symbol: FLEX). Are these two companies "Singaporean" companies? Well, I'd say they're definitely more "Singaporean" (whatever that means in this context) than Thai Beverage, one of the 30 STI stocks.

Anyway, we've had this friendly debate before, but the bottom line is that I don't think it makes sense to overweight our small, open economy's "heirloom stocks" too heavily. This country, its moribund stock market, and its currency (managed as a loose peg to a trade-weighted basket of other currencies) are quite different than what the United States has, and so we properly ought to "mark to market" U.S. centric portfolio allocation advice.

I agree with you...The problem is most of the online materials if anyone were to research online only leads to US-centric portfolio allocation and very rarely will you find a Singapore-centric portfolio allocation...Most just take it wholeheartedly as the solution backed by numbers such as the performance of US centric allocation which is based on facts and numbers but when you apply it to the Singapore context, that is not the case...

 

[tangent314]

Hey gurus what are your opinions on roboadvisors here in Singapore such as stashaway and syfe? The management fees seem reasonable for a diverse portfolio?

No it's not reasonable IMO. I would stick with DIY.
Ok well, it's subjective, depending on how lazy you are.

 

[flowerpalms]

Its better to diy yourself with a simplier portfolio

Hey gurus what are your opinions on roboadvisors here in Singapore such as stashaway and syfe? The management fees seem reasonable for a diverse portfolio?

 

[pai000000]

Sorry if this has been asked before.
For iShares ETF with distribution such as WQDV, is the distribution listed on the website before or after the 15% withholding tax?

Emailed BlackRock to ask, but so far no replies after one day.

 

[Okenba]

Wasn't my intention to portray this as US centric.

The thrust of the article and my post is the efficacy of the 3 funds portfolio, why we shouldn't be buying unit trusts and individual stocks and the potential returns of different mix of the 3 funds portfolio. This is relevant no matter what market you are in.

The concept of the 3 funds portfolio was championed by Tarylor Larrimore. This is the basis of the 3 fund portfolio ST is also recommending. It helps to understand the rationale behind this portfolio. There's nothing much to it other than reading material.

Personally, I applaud your efforts. I think it is useful for me to learn more about why we do what we do.

Unfortunately, this forum has a wide range of posters ranging from those waiting for ST to tell them what to do, to those who would rather make their own decisions and disagree with ST's recommendations. So it's tough to position a post like yours so that it is meaningful to everyone.

But thanks for taking the time to provide us with more knowledge about investing.

 

[SpeedingBullet]

Wow the move in US 10 Yr treasuries today is interesting, it was like 0.9% this morning, now it briefly went below 0.7%.

The movement is so fierce, yet the flight to safety isnt reflected in USDJPY or USDCHF yet

 

[Okenba]

Hey gurus what are your opinions on roboadvisors here in Singapore such as stashaway and syfe? The management fees seem reasonable for a diverse portfolio?

The management fees range from 0.5%-1% or even higher. And since many of them are not tax efficient, this pushes the resultant cost up even more.

Essentially, I think you would be paying an average of 1% more than DIY.

 

[ranchfarm]

Hi ST, I've been reading about passive investment and one thing that came up is factor investing. What is your opinion of going for value and/or small-cap ETF to replace IWDA/VWRA? I see things like VDVA or WSML on the LSE.

 

[BBCWatcher]

Wow the move in US 10 Yr treasuries today is interesting, it was like 0.9% this morning, now it briefly went below 0.7%.

It's absolutely amazing. These rates on U.S. Treasuries are record lows for at least 150 years. Robert Shiller hasn't yet gone back to compute U.S. Treasury yields prior to 1871 (the work he's done already), so that's the only reason why we don't know just how low these Treasury yields are prior to 150 years ago.

And take a look at the U.S. Treasury Inflation Protected Securities (TIPS) yields. TIPS are real return bonds. As I write this, real U.S. Treasury returns are sharply negative across all maturities, including the 30 year TIPS (the longest maturity available), which is yielding -0.22%. What this means is that investors -- or maybe I should say "investors" -- are so desperate to buy U.S. Treasuries that they're willing to endure a negative 22 basis point real annual yield for 30 years. And that's pre-tax -- many of these investors pay income tax on the nominal interest. They're OK with lending U.S. dollars to the U.S. Treasury and getting 22 basis points less purchasing power every year, plus paying some income tax. It's absolute madness in places like Germany, Japan, and Switzerland, and it's madness in the United States, too. But here we are. I've run out of superlatives.

 

[hwckhs]

For iShares ETF with distribution such as WQDV, is the distribution listed on the website before or after the 15% withholding tax?

WQDV is domiciled in Ireland and traded in LSE. The fund manager pays for any taxes, and the distribution is net of (after) tax for Singapore residents.

But, I want to ask, do you prefer:

• an ETF that pays higher dividend but lower growth, or
• an ETF that pays lower dividend but higher growth?

Maybe you want to look at total return instead. WQDV tracks MSCI World High Dividend Yield Index which is a subset of MSCI World. The index document says its return is lower than that of MSCI World in the last 3, 5, and 10 years, but higher since 1995. I don't know if you can say one is better than the other in the long run.

If you like collecting dividend, maybe you can consider VWRD. It has a lower TER (0.22% vs 0.38%), a higher AUM (4.7B vs 100M) - more stable & less likely to be delisted, and is more diversified (3000+ vs 300+ holdings). Dividend yield is lower but total return might be similar (ie. VWRD will increase more in price).

 

[Eternit]

The management fees range from 0.5%-1% or even higher. And since many of them are not tax efficient, this pushes the resultant cost up even more.

Essentially, I think you would be paying an average of 1% more than DIY.

Can you elaborate more on what you meant by not tax efficient? All I see is their management fees which is below 1% for stashaway and syfe now..

 

[kram62]

Can you elaborate more on what you meant by not tax efficient? All I see is their management fees which is below 1% for stashaway and syfe now..

Usually the robos invest in the US listed ETFs (30% WHT) instead of the Irish domiciled ETFs (15% WHT)

 

[cassowary18]

Usually the robos invest in the US listed ETFs (30% WHT) instead of the Irish domiciled ETFs (15% WHT)

A notable exception is DBS digiportfolio, if that's something you might be interested in.

 

[pai000000]

WQDV is domiciled in Ireland and traded in LSE. The fund manager pays for any taxes, and the distribution is net of (after) tax for Singapore residents.

But, I want to ask. Do you prefer:

• an ETF that pays higher dividend but lower growth, or
• an ETF that pays lower dividend but higher growth?

The answer is probably...neither. Look at total return instead. WQDV tracks MSCI World High Dividend Yield Index which is a subset of MSCI World. The index document says its return is lower than that of MSCI World in the last 3, 5, and 10 years, but higher since 1995. I don't know if you can say one is better than the other in the long run.

If you like collecting dividend, maybe you can consider VWRD. It has a lower TER (0.22% vs 0.38%), a higher AUM (4.7B vs 100M) - more stable & less likely to be delisted, and is more diversified (3000+ vs 300+ holdings). Dividend yield is lower but total return might be similar (ie. VWRD will increase more in price).

Thank you! That's very helpful.
My investing strategy has been evolving over time. I started out as REIT investor, then moved to general dividend investing, dabble in value investing, now going more into semi passive ETF investing.

Due to my background, I have a tendency to go for stocks with stable earnings with sustainable dividends, and WQDV seems to be a good fit for my general investing philosophy.

But this may change in future. I am not dogmatic when it comes to investing, and I think there are multiple ways to do it. Thanks for the suggestion about VWRD, will look into it. Hope everyone will do well in this time of volatility and opportunity.

 

[SpeedingBullet]

It's absolutely amazing. These rates on U.S. Treasuries are record lows for at least 150 years. Robert Shiller hasn't yet gone back to compute U.S. Treasury yields prior to 1871 (the work he's done already), so that's the only reason why we don't know just how low these Treasury yields are prior to 150 years ago.

And take a look at the U.S. Treasury Inflation Protected Securities (TIPS) yields. TIPS are real return bonds. As I write this, real U.S. Treasury returns are sharply negative across all maturities, including the 30 year TIPS (the longest maturity available), which is yielding -0.22%. What this means is that investors -- or maybe I should say "investors" -- are so desperate to buy U.S. Treasuries that they're willing to endure a negative 22 basis point real annual yield for 30 years. And that's pre-tax -- many of these investors pay income tax on the nominal interest. They're OK with lending U.S. dollars to the U.S. Treasury and getting 22 basis points less purchasing power every year, plus paying some income tax. It's absolute madness in places like Germany, Japan, and Switzerland, and it's madness in the United States, too. But here we are. I've run out of superlatives.

The magnitude and the velocity of how it got there also astonishes me. A sudden flight to safety but equities (as of writing) aren’t reacting as badly yet.