Official Shiny Things thread—Part III
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crystalnox
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I don't think there's even any demand for an index etf like iwda.
As Kram and cassowary has mentioned, most robos buy US domiciled ETFs which have 30% dividend withholding tax (and estate taxes if you pass on). Digiportfolio, MoneyOwl and Endowus buy Irish domiciled funds that only have 15% withholding tax.
The total cost (management fund + fund expense ratio + dividend tax converted into ratio) typically lies between 1.10% and could go all the way up to 1.5%
On the other hand, a DIY Irish domiciled diversified etf could start from 0.12 expense ratio. Even after converting for dividend tax, that would be roughly 0.39 or so.
So getting a robo to help basically means a premium of at least 0.7% more. Which is honestly quite hard to justify IMO.
chrisloh65
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moolala
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Shiny Things
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OK, let’s talk markets, because wow things got exciting overnight and you’re probably going to hear a lot about it:
It’s bananas! B-A-N-A-N-A-S! Gwen Stefani should be doing banks’ market wraps today!
This is why I keep banging the drum for bonds, even though they aren’t glamorous like stocks. There has been an absolute wall of money into bonds over the last few weeks, from people selling stocks and buying bonds; my suspicion is that the rip higher in price (and lower in yields) overnight was driven by technical factors (convexity hedging of US mortgages, this stuff is weird, I can go deep on this if you want), but that doesn’t make it any less real.
This has flowed across into SGD bonds and corporate bonds as well. My old fave MBH is up 1.5% in the last month. When there’s a flight to safety, people buy bonds.
These are your dry powder; these are your war-chest.
I tend to think that these big moves in interest rates are a bit over-extended. If a corporate client came to me asking how they should take advantage of the moves in rates, I’d be telling them to lock in fixed-rate loans right now for as long as they possibly can. (If you have a mortgage, this is probably a good idea too! Fix your rate now!)
But for you and I, it just means that you’ll be able to buy stocks cheaper than before; and when it comes to your regular rebalancing, you’ll be able to take profit on bonds and buy some stocks with the proceeds.
Oh sure, high-yield accounts will still exist. Banks will still want to capture deposit volume (though I’m surprised Singaporean banks want to get more deposits, considering the big three are traditionally stuffed to the gills with deposits!). The rates will just be lower.
So here’s a thing. Interactive Brokers has expanded their Stock Yield Enhancement Program to cover Canadian, European (including the UK) and HK-listed stocks and ETFs. I need to check, but if this is correct, it means that you can pick up some extra yield on your IWDA/VWRA holdings.
Here’s how it works:
The yield from lending out IWDA or VWRA right now is about 0.25%, I think (it varies day-to-day). That said: that yield gets split 50-50 with Interactive Brokers (which is still better than nothing!), and more importantly, your shares will not get borrowed every day. It’s still literally money for nothing, though, so it’s worth signing up to stock yield enhancement if you’re eligible.
Great question. In short, the answer is “don’t bother”, but how you get to that answer is very interesting.
The “value” factor, and the “small-cap premium”, absolutely used to be a thing. Warren Buffett made his name as a value investor; and until recently, small-caps used to noticeably outperform large-cap stocks.
The hypothesis was that these stocks were under-appreciated and under-followed, so as stocks became bigger, more people would buy them just because of their bigness.
Problem is, both of these effects have fallen on their face over the last decades. The value factor has been crushed by momentum and growth factors for ten years (basically, buying “trendy” stocks instead of “unloved” stocks). Small-cap stocks no longer outperform, either.
I think this is because people discovered the small-cap and value effects, and the rise of ETFs and value-focused funds made it easier for everyone to invest in those themes.
It’s possible I might be wrong; the 10-year outperformance of growth stocks might end, and we might see value resurge over the next few years. But my instinct, as grim as it may seem, is that value doesn’t do much any more, and it’s not worth a dedicated allocation. Just buy the index instead.
After. The WHT is withheld and paid by the fund itself, before the divs get passed on to you.
I’ve added this to the FAQ.
Your point about liquidity isn’t really true, though. Singaporean stocks and bonds are liquid enough for average investors; unless you’re selling like nine figures at a time! How much are you planning to sell?
You’re looking in the wrong place. Account Management / Settings / Account Settings / Account Type, I think is where you can upgrade from Cash to Margin or Portfolio Margin.
Yeah. To be clear, when I came up with the original “$1k a month is the cross-over amount”, that was with the brokers and fee structures that were around in 2015. It’s still a useful rule-of-thumb, but the existence of cheaper brokers (especially FSMOne’s RSP!) means that the crossover is higher now. I’ll re-think it when I do the next version of the book.
That all said: you don’t need to think too hard about this. Trying to optimize every last dollar is too much, and it scares new investors away. Coming up with a rule that’s good enough for most situations is the most important thing.
Don’t forget the Singaporean ETFs - you want plenty of exposure to your local economy as well.
Use Stanchart cash-upfront to buy IWDA, though. edited to fix the list of brokers
No. Fees just for posting an order that never gets executed aren’t a thing (except in a few very niche markets).
You should cancel it, then. It’s going to give you low returns for 20 years; you could do better investing that money by yourself.
Use FSMOne RSP for your Singaporean ETFs.
I wouldn’t think too hard about it; just stick to Stanchart. You can solve the problem of moving your stocks once you get to $100k.
You think you’re joking, but…! https://sf.eater.com/2020/3/2/21161485/coronavirus-costco-supermarkets-trader-joes-detroit-pizza
Oh yeah, but look, if someone’s really hellbent on trading equity options or getting overweight Eritrea or something else that isn’t a standard portfolio, and they’re not a complete newbie so they know what they’re doing, I can still tell them the best way to get the exposure they want.
Speaking of:
No. You have absolutely no advantage over professional traders; most likely you’ll end up doing worse than you would have if you’d just bought and held.
Not when your biggest customers are staring into the abyss and your biggest new product launch has been kneecapped by the FAA, it’s not.
I’ll take the other side of that bet.
The thing here is that you don’t know what’s “enough”, and you won’t really be able to guess when it’s going to bottom.
If you haven’t already started, now is a great time to start trickling your war chest fund in. Things are already off 10-15% from their highs; if it bottoms out here, you’ll kick yourself for missing it.
(And 50% across the whole of the MSCI World index is a lot - that’s the sort of dip that happens once in a generation. Don’t bank on that happening.)
Do you want Greater China (including Taiwan and HK), or just actual-China? And if the latter, do you want A-shares (pro tip: you don’t) or H-shares?
It hasn’t changed. I had a few lump sums come in from my tax refund and a contracting project that I just finished, and I plowed those into my usual allocation (I was short of international stocks, so that was most of what I bought). I last rebalanced in November (sold some stocks, bought some corporate bonds) and I’ll look again in April.
It’s bananas! B-A-N-A-N-A-S! Gwen Stefani should be doing banks’ market wraps today!
This is why I keep banging the drum for bonds, even though they aren’t glamorous like stocks. There has been an absolute wall of money into bonds over the last few weeks, from people selling stocks and buying bonds; my suspicion is that the rip higher in price (and lower in yields) overnight was driven by technical factors (convexity hedging of US mortgages, this stuff is weird, I can go deep on this if you want), but that doesn’t make it any less real.
This has flowed across into SGD bonds and corporate bonds as well. My old fave MBH is up 1.5% in the last month. When there’s a flight to safety, people buy bonds.
These are your dry powder; these are your war-chest.
I tend to think that these big moves in interest rates are a bit over-extended. If a corporate client came to me asking how they should take advantage of the moves in rates, I’d be telling them to lock in fixed-rate loans right now for as long as they possibly can. (If you have a mortgage, this is probably a good idea too! Fix your rate now!)
But for you and I, it just means that you’ll be able to buy stocks cheaper than before; and when it comes to your regular rebalancing, you’ll be able to take profit on bonds and buy some stocks with the proceeds.
Oh sure, high-yield accounts will still exist. Banks will still want to capture deposit volume (though I’m surprised Singaporean banks want to get more deposits, considering the big three are traditionally stuffed to the gills with deposits!). The rates will just be lower.
So here’s a thing. Interactive Brokers has expanded their Stock Yield Enhancement Program to cover Canadian, European (including the UK) and HK-listed stocks and ETFs. I need to check, but if this is correct, it means that you can pick up some extra yield on your IWDA/VWRA holdings.
Here’s how it works:
- Sign up for Stock Yield Enhancement Program (in Account Management / Settings / Account Settings);
- IBKR will automatically try to lend out the shares in your account each day. If they find someone who wants to borrow your shares, they’ll lend the shares automatically and split the interest with you 50/50.
- The process is absolutely transparent. You can sell the shares at any time (IBKR handles closing out the loan if you do); and the borrower hands over cold hard cash as collateral for the loan. Either you get your shares back, or you get cash equal to the value of the stock.
The yield from lending out IWDA or VWRA right now is about 0.25%, I think (it varies day-to-day). That said: that yield gets split 50-50 with Interactive Brokers (which is still better than nothing!), and more importantly, your shares will not get borrowed every day. It’s still literally money for nothing, though, so it’s worth signing up to stock yield enhancement if you’re eligible.
Great question. In short, the answer is “don’t bother”, but how you get to that answer is very interesting.
The “value” factor, and the “small-cap premium”, absolutely used to be a thing. Warren Buffett made his name as a value investor; and until recently, small-caps used to noticeably outperform large-cap stocks.
The hypothesis was that these stocks were under-appreciated and under-followed, so as stocks became bigger, more people would buy them just because of their bigness.
Problem is, both of these effects have fallen on their face over the last decades. The value factor has been crushed by momentum and growth factors for ten years (basically, buying “trendy” stocks instead of “unloved” stocks). Small-cap stocks no longer outperform, either.
I think this is because people discovered the small-cap and value effects, and the rise of ETFs and value-focused funds made it easier for everyone to invest in those themes.
It’s possible I might be wrong; the 10-year outperformance of growth stocks might end, and we might see value resurge over the next few years. But my instinct, as grim as it may seem, is that value doesn’t do much any more, and it’s not worth a dedicated allocation. Just buy the index instead.
After. The WHT is withheld and paid by the fund itself, before the divs get passed on to you.
I’ve added this to the FAQ.
Your point about liquidity isn’t really true, though. Singaporean stocks and bonds are liquid enough for average investors; unless you’re selling like nine figures at a time! How much are you planning to sell?
You’re looking in the wrong place. Account Management / Settings / Account Settings / Account Type, I think is where you can upgrade from Cash to Margin or Portfolio Margin.
Yeah. To be clear, when I came up with the original “$1k a month is the cross-over amount”, that was with the brokers and fee structures that were around in 2015. It’s still a useful rule-of-thumb, but the existence of cheaper brokers (especially FSMOne’s RSP!) means that the crossover is higher now. I’ll re-think it when I do the next version of the book.
That all said: you don’t need to think too hard about this. Trying to optimize every last dollar is too much, and it scares new investors away. Coming up with a rule that’s good enough for most situations is the most important thing.
Don’t forget the Singaporean ETFs - you want plenty of exposure to your local economy as well.
Use Stanchart cash-upfront to buy IWDA, though. edited to fix the list of brokers
No. Fees just for posting an order that never gets executed aren’t a thing (except in a few very niche markets).
You should cancel it, then. It’s going to give you low returns for 20 years; you could do better investing that money by yourself.
Alternate every month; that gives you the lowest transaction costs.
I do love FSM, but not for overseas ETFs. VT is not a good substitute, for Singaporean investors; it has worse dividend tax treatment, and it falls into assets that would be subject to US estate tax if you fall off the perch.
Use FSMOne RSP for your Singaporean ETFs.
As long as you’re not panicking and hiding the cash in the ol’ Khong Guan biscuit tin instead, it’s a fine time. (It’s actually a great time to sell bonds; bonds have ROARED higher over the last month.)
I wouldn’t think too hard about it; just stick to Stanchart. You can solve the problem of moving your stocks once you get to $100k.
You think you’re joking, but…! https://sf.eater.com/2020/3/2/21161485/coronavirus-costco-supermarkets-trader-joes-detroit-pizza
Oh yeah, but look, if someone’s really hellbent on trading equity options or getting overweight Eritrea or something else that isn’t a standard portfolio, and they’re not a complete newbie so they know what they’re doing, I can still tell them the best way to get the exposure they want.
Speaking of:
No. You have absolutely no advantage over professional traders; most likely you’ll end up doing worse than you would have if you’d just bought and held.
Not when your biggest customers are staring into the abyss and your biggest new product launch has been kneecapped by the FAA, it’s not.
I’ll take the other side of that bet.
The thing here is that you don’t know what’s “enough”, and you won’t really be able to guess when it’s going to bottom.
If you haven’t already started, now is a great time to start trickling your war chest fund in. Things are already off 10-15% from their highs; if it bottoms out here, you’ll kick yourself for missing it.
(And 50% across the whole of the MSCI World index is a lot - that’s the sort of dip that happens once in a generation. Don’t bank on that happening.)
Do you want Greater China (including Taiwan and HK), or just actual-China? And if the latter, do you want A-shares (pro tip: you don’t) or H-shares?
It hasn’t changed. I had a few lump sums come in from my tax refund and a contracting project that I just finished, and I plowed those into my usual allocation (I was short of international stocks, so that was most of what I bought). I last rebalanced in November (sold some stocks, bought some corporate bonds) and I’ll look again in April.
Last edited:
moolala
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Hey ST, this is a absolute n00b question but how do you invest in bonds?
Are there some tickers that track bonds? I'm guessing Ireland domiciled is better than US since WHT still applies?
I searched MBH and it's listed on both SGX (SGD?) and MBH (US?)
Special mention: TLT
Noticed this is trending higher on US markets. Any difference between this and the XYZ ETF that track bonds/treasuries?
In general, other than currency differences, what's the main considerations in terms of profit (to SG investor) to take into account for same stock on different exchange?
For eg. IWDA is listed in both AEB and LSE
Are there some tickers that track bonds? I'm guessing Ireland domiciled is better than US since WHT still applies?
I searched MBH and it's listed on both SGX (SGD?) and MBH (US?)
Special mention: TLT
Noticed this is trending higher on US markets. Any difference between this and the XYZ ETF that track bonds/treasuries?
In general, other than currency differences, what's the main considerations in terms of profit (to SG investor) to take into account for same stock on different exchange?
For eg. IWDA is listed in both AEB and LSE
highsulphur
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ST, just China A shares. What etf would you recommend?
cassowary18
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Have to disagree with you regarding DBSV here. DBSV is good for buying local counters (insofar as it deposits your purchased shares in your CDP vs custodian account for SCB). However, it's absolutely horrible for overseas counters. They charge a $2 per month custodian fee and the commissions are higher.
Just stick with SCB or IB for overseas counters.
hwckhs
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If you want US corporate bond, it is LQDE in the LSE.
US bonds are not subject dividend-withholding-tax when held directly by non-US persons. (BBCW explains this better than I do.) iShares in Ireland is a non-US entity and they don't pay tax for LQDE. I have checked their annual report before, but you can check again to be sure.
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China A-Shares = ISHARES A50 (2823.HK)
China H-Shares = Tracker Fund Of Hong Kong (2800.HK)
IMHO
moolala
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1) Hmm is there a similar one in ireland that tracks TLT instead?
2) Secondly, may I ask what is maintenance margin?
I switched to a margin account from cash in order to be able to play short.
However, I noticed a maintanance margin and did some googling.
Say I have 10k market value in equities.
Apparently, 25% of my stock is supposed to be stuck and not doing any work (i.e. can't trade) and supposed to be sitting in my account. If the value of my equity drop beyond 25% i.e. 20k, I have to top it up due to being hit with a margin call, even though I did not borrow (or does shorting count as borrowing)?
Is my understanding of this correct? Or does it seems to go only in effect if I do some shorting?
By definition, does shorting=borrowing on margin? Even though I made sure the shorting is within my cash position...of course there's the interest so I guess that's why there's the 25% rule?
still not very clear even though I read this: https://www.investopedia.com/terms/m/margincall.asp
Last edited:
hwckhs
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Start your shopping here:
- https://www.ishares.com/uk/individual/en/products/etf-investments
- https://www.vanguardinvestor.co.uk/what-we-offer/etf-products
I think I see one that's similar to TLT in the first link, but I don't want to make any recommendation as I have no experience with it. No experience with margin either.
moolala
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what defensive stocks to invest instead?
chrisloh65
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2823.HK - Is this still a synthetic ETF?
2800.HK - This is not "China H-Shares" ETF! This is HK shares ETF!
2828.HK is the China H-Shares ETF.
2800.HK - This is not "China H-Shares" ETF! This is HK shares ETF!
2828.HK is the China H-Shares ETF.
assuming there are 2 funds each in ireland and luxembourg, with the same aum and liquidity, should there be a preference for ireland domiciled funds?
MrHighlander
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I am looking to buy some oil ETF to make a punt on the low oil price.
Which one is good ?
Which one is good ?
sxle 10char
tesarise
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depends on how much your current AA differs from your target AA.
selling and buying to rebalance acts to "lock-in" your gains and buy something that is relatively cheap at the point of rebalance.
i think the people on bogleheads forum usually recommend a rebalancing band of 5%, but i didn't do the maths myself, so DYODD
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