Official Shiny Things thread—Part III

[assiak71]

I went to fsmone to see past returns of mbh and a35

It seems like during crisis, a35 is better?

Why do more people prefer mbh? Would like to understand better

 

[sydznnl]

Question for ST:

For example, my trading account in SCB is showing a totally different balance from the balance taken from average price X no. of shares and last price X no. of shares

Scenario:
Last price $1.00 x 50 shares = $50.00
Average price: $2.00 × 50 shares = $100
Fees: XXX
Trading account balance: not $50, not $100. I cant calculate how SCB derives this.

Hi. Im guessing you're referring to the "Securities Trading Account" reflected on SCB banking (not trading) portal?

I strongly believe that theres a data refresh lag. Notice how when you buy stocks on SCB trading portal, your FCY Settlement Balance remains high and only deducts after approx 2 working days.

If you log in into your SCB Trading (not banking) portal your market value actually reflects your last price x num of shares you have.

 

[pytha6ora$]

Recently started to invest during covid-19 crisis. Spent 50k sgd on es3 with a avg price of $2.70. Should I continue to dCA from here onwards every month?

Should I also start to invest in IWDA etf to diversify?

 

[3sniper]

Regarding Irish domiciled ETFs which are advocated as against US domiciled due to lower taxes, I would like to hear from those who have really bought/sold them in LSE with regards to spreads, volume, liquidity. Would there be a problem in fast moving markets like the recent deep dive?

 

[Shiny Things]

I strongly believe that theres a data refresh lag. Notice how when you buy stocks on SCB trading portal, your FCY Settlement Balance remains high and only deducts after approx 2 working days.

If you log in into your SCB Trading (not banking) portal your market value actually reflects your last price x num of shares you have.

That sounds like it might be the normal settlement lag. LSE trades settle T+2 (the cash and shares are exchanged two days after you make the trade), so it's probably just that your settlement account isn't being debited until the trade settles.

I went to fsmone to see past returns of mbh and a35

It seems like during crisis, a35 is better?

Why do more people prefer mbh? Would like to understand better

This is a genuinely good question. The reason I prefer MBH to A35 - and corporate bonds to government bonds in general - is that over the long term, investment-grade corporate bonds give the best tradeoff of yield and risk. (I put my money where my mouth is on this one; I use corps for my bond allocation.)

The counter-argument is that government bonds perform better in crises where equities drop, so when you add the two together, you end up with smaller drawdowns across your whole portfolio during a crisis. This is valid; "smaller drawdowns make investors more likely to stay invested" is behavioral finance 101. But I don't find it persuasive enough to recommend govvies instead—because the tradeoff for that better performance during crises is a much lower yield the rest of the time, on the order of 70-100bps lower.

And is that tradeoff worth it? I don't think it is. MBH is flat YTD; A35 is up about 5% YTD (excluding them both going ex-div at the end of the year, which skews the YTD performance numbers a bit). But if you have a "crash" once every decade or so, then the extra 7-10% in total return from MBH more than outweighs the short-term swing, if you can look through those short-term swings and remind yourself that you're investing for the long term.

If you took that position of "avoid drawdowns! drawdowns are bad!" to the extreme, you can reduce your drawdowns to zero... by withdrawing it all and hiding it under the bed. But that's ridiculous, because then you'll miss out on all the gains.

And most of the time, markets aren't crashing; I said this upthread, but any investment that outperforms for the two months of the decade when everything is puking will underperform for the remaining 118 months, and you'll spend all your time wondering "why did I buy this? It's terrible!". (My fave example of this, and by which I mean the most egregious example that nobody should ever invest in, is HSGFX, the Hussman Strategic Growth Fund. HSGFX is a notorious short-biased mutual fund that rallied 20% from February to end-March... but when you zoom out, HSGFX has destroyed over 50% of its investors' money between 2009 and today, even including the 20% rally. And it charges 1.25% for the privilege!)

My view is that the added yield from corporate bonds more than compensates investors for the differential performance during downturns. Don't forget: MBH is flat YTD (ex the dividend). Most investors would take that.

Thanks for the info! Currently I'm still in stashaway because I'm not sure where to get into funds like IWDA. I've heard a lot about the US domiciled tax stuff and also read fire path lion. Can you share about where I can get into IWDA? Thanks!

Sure! You can buy it through Standard Chartered; that's the cheapest and easiest way.

Well I dont think anyone for sure knows if MBH will do better than A35.

Sure, this is true—government bonds tend to do better in crises, IG corporate bonds do better the rest of the time, and nobody knows when the next crisis will be. But at the same time, there's no need to get all epistemological and say "there is no absolute truth, everything is relative, the Sophists were right, let's just give up and get drunk".

MBH performs well enough, better than govvy bonds, most of the time, and still redeems itself reasonably well in downturns. That's good enough for me, and for most people.

Guns-and-canned-goods investors will still prefer government bonds, and that's fine. Swan02, specifically, is a very conservative investor; they've said upthread that their portfolio is currently 20/80 stocks-bonds. And that's fine for them, and for an investor who's that risk-averse: yes, govvy bonds are probably the better choice!

Regarding Irish domiciled ETFs which are advocated as against US domiciled due to lower taxes, I would like to hear from those who have really bought/sold them in LSE with regards to spreads, volume, liquidity. Would there be a problem in fast moving markets like the recent deep dive?

Sure. Firstly, I wouldn't worry too much about liquidity—you're not going to be trading sizes that are big enough to move the market.

IWDA is relatively liquid. In Friday's trade in London, it was 5-15 cents wide all day (call it 0.1%-0.3%): tighter in the middle of the day, and wider right at the open.

In fast-moving markets, the spreads will get wider. But also, that shouldn't stop you from buying; when markets were crashing, you might be paying a wider spread, but that means when it rebounds you'll have bought some. Worrying about crossing a wide spread on March 16th, when IWDA was $45, would have meant you'd missed out on the subsequent six-week rally to $54.

Recently started to invest during covid-19 crisis. Spent 50k sgd on es3 with a avg price of $2.70. Should I continue to dCA from here onwards every month?

Should I also start to invest in IWDA etf to diversify?

Yes to both. Those are both excellent ideas.

 

[ftpofmpo]

whats the difference between buying cfds vs buying stocks directly on margin?

not encouraging either but wanted to find out how they are different, is it just differences in margin used?
what's happening in the background that cfd have a higher margin?

 

[w1rbelw1nd]

Sure, this is true—government bonds tend to do better in crises, IG corporate bonds do better the rest of the time,

Can I ask, what is the basis of this statement? And whether it is right to assume that what works in US will work also well in Singapore? If i recall correctly you supported the switch to MBH shortly after it got listed, what gave you the confidence that it would do fairly well on a risk/reward basis relative to A35?

and nobody knows when the next crisis will be. But at the same time, there's no need to get all epistemological and say "there is no absolute truth, everything is relative, the Sophists were right, let's just give up and get drunk".

MBH performs well enough, better than govvy bonds, most of the time, and still redeems itself reasonably well in downturns. That's good enough for me, and for most people.

Sounds like hindsight bias to me, just stating my views. The reason why I dlslike Singapore market (yes STI, the bond etfs) so much is that the underlying securities these indexes are based on is so freaking small, its not decent diversification. And it is going to get worse, as our fewer companies choose to list here.

 

[MichealScott]

Thanks for the info! Currently I'm still in stashaway because I'm not sure where to get into funds like IWDA. I've heard a lot about the US domiciled tax stuff and also read fire path lion. Can you share about where I can get into IWDA? Thanks!

Just read Shiny Things book. It only cost less than $10 for the pdf version. It gives you guide on how to get into IWDA and then some.

Sent from Stamford Bridge using GAGT

 

[hwckhs]

Regarding Irish domiciled ETFs which are advocated as against US domiciled due to lower taxes, I would like to hear from those who have really bought/sold them in LSE with regards to spreads, volume, liquidity. Would there be a problem in fast moving markets like the recent deep dive?

I made a post regarding spread in Mar 2020, when market was volatile. You can check the screenshot there.

If you want low spread, stick to ETF with large AUM.

 

[churnmaster]

Hi Shiny,
I’m considering investing in LQD etf, especially after the backstop provided by Fed. With 3% pa dividend yield it looks attractive and also the options market provides an opportunity for deploying covered call strategy to improve the returns. What can potentially go wrong for this etf and should be considered before investing ? Currently, invested in ABF which I’m selling on rally.

 

[megdang]

Hi Shiny,
I’m considering investing in LQD etf, especially after the backstop provided by Fed. With 3% pa dividend yield it looks attractive and also the options market provides an opportunity for deploying covered call strategy to improve the returns. What can potentially go wrong for this etf and should be considered before investing ? Currently, invested in ABF which I’m selling on rally.

I assume you are referring to LQD iShares IBoxx $ Invest Grade Corp Bd Fd (NYSEARCA: LQD)
If yes, you will be taxed the 30% withholding tax because it's US listed, which is not recommended.

If you are looking a global bond etf, let consider LQDA listed on LSE.

 

[DamShiokla]

Hello everyone!

I have been Dca with POSB etf G3B for 2 years now, with $300 monthly. And i want to switch over to ES3. Do you think i should stop with posb and start new in stanchart? or i can reduce the amount to $100 in posb. As i think ES3 is much cheaper due to better dividend yield history.

Any advise? Thanks.

 

[makav31i]

Hello everyone!

I have been Dca with POSB etf G3B for 2 years now, with $300 monthly. And i want to switch over to ES3. Do you think i should stop with posb and start new in stanchart? or i can reduce the amount to $100 in posb. As i think ES3 is much cheaper due to better dividend yield history.

Any advise? Thanks.

Stop POSB Invest Saver but you don't need to sell it away as there is zero fees when it comes to selling...

If it was me, I would buy ES3 using FSM RSP which charges 0.08% or minimum $1...

Can see the list of ETF offered here...ES3, G3B, A35 and MBH are available...

https://secure.fundsupermart.com/fsm/regular-savings-plan

However, if you have Priority Banking with SCB, 0.18% fees with no minimum would be better for the amount $300...

 

[cassowary18]

Hello everyone!

I have been Dca with POSB etf G3B for 2 years now, with $300 monthly. And i want to switch over to ES3. Do you think i should stop with posb and start new in stanchart? or i can reduce the amount to $100 in posb. As i think ES3 is much cheaper due to better dividend yield history.

Any advise? Thanks.

Stop POSB unless you're doing it for Multiplier bonus interest. FSMOne RSP is cheaper.

 

[DamShiokla]

Thank you to makav31i and cassowary18 for the helpful advice.

I have plans to switch over to ES3 with SCB as i have an account in SCB.
Imagine if you were me. What should you do?
Total cash to invest i have currently is $10k. Should i invest in 1 lump sump in ES3 for every 3 or so and continue to buy in with 1 lump sump? or should i DCA every month, investing $200 - $300 per month?


Any advise helps. Thanks.

 

[cassowary18]

Thank you to makav31i and cassowary18 for the helpful advice.

I have plans to switch over to ES3 with SCB as i have an account in SCB.
Imagine if you were me. What should you do?
Total cash to invest i have currently is $10k. Should i invest in 1 lump sump in ES3 for every 3 or so and continue to buy in with 1 lump sump? or should i DCA every month, investing $200 - $300 per month?


Any advise helps. Thanks.

Can you handle it if the market drops the next few months? If yes, lump sum. If no, DCA.

 

[zoneguard]

This is a genuinely good question. The reason I prefer MBH to A35 - and corporate bonds to government bonds in general - is that over the long term, investment-grade corporate bonds give the best tradeoff of yield and risk. (I put my money where my mouth is on this one; I use corps for my bond allocation.)

The counter-argument is that government bonds perform better in crises where equities drop, so when you add the two together, you end up with smaller drawdowns across your whole portfolio during a crisis. This is valid; "smaller drawdowns make investors more likely to stay invested" is behavioral finance 101. But I don't find it persuasive enough to recommend govvies instead—because the tradeoff for that better performance during crises is a much lower yield the rest of the time, on the order of 70-100bps lower.

And is that tradeoff worth it? I don't think it is. MBH is flat YTD; A35 is up about 5% YTD (excluding them both going ex-div at the end of the year, which skews the YTD performance numbers a bit). But if you have a "crash" once every decade or so, then the extra 7-10% in total return from MBH more than outweighs the short-term swing, if you can look through those short-term swings and remind yourself that you're investing for the long term.

To answer the question, investors will need to understand the role of bonds in their portfolios. A commonly accepted objective is to benefit from diversification. Assets with negative correlation in the portfolio will bring about better CAGR compared to assets with positive correlation.

If you look at this set of results from Portfolio Visualizer, this effect (achieved with long term Treasuries) is demonstrated.

Investors will need to do their own due diligence, as after all, it is their money they are investing.

 

[assiak71]

Can I ask, what is the basis of this statement? And whether it is right to assume that what works in US will work also well in Singapore? If i recall correctly you supported the switch to MBH shortly after it got listed, what gave you the confidence that it would do fairly well on a risk/reward basis relative to A35?




Sounds like hindsight bias to me, just stating my views. The reason why I dlslike Singapore market (yes STI, the bond etfs) so much is that the underlying securities these indexes are based on is so freaking small, its not decent diversification. And it is going to get worse, as our fewer companies choose to list here.

For bond, what are the alternatives for singaporeans? Considering all the options, a35 and mbh should rank pretty high up? If so why so much dislike

 

[sylves]

can i ask why no one share about DBS cash upfront account which provide a lower fees from SCB now?

In what context SCB is still consider a better choice? just wondering if anyone had done the comparison against these 2?

 

[kram62]

can i ask why no one share about DBS cash upfront account which provide a lower fees from SCB now?

In what context SCB is still consider a better choice? just wondering if anyone had done the comparison against these 2?

DBS cash upfront only OK compared to SCB for *local* stocks (and with DBS the stocks go to CDP account which is good, SCB is custody)

But for *overseas* stocks DBS charges SGD2 per month per counter as far as I know. That's why its not recommended for overseas stocks at all.