Official Shiny Things thread—Part III

[Shiny Things]

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?

Ooh, I missed this but it’s a great question. There are two reasons why CFDs are worse than buying stocks on margin:

1) CFD brokers tend to charge much higher interest rates than stockbrokers who offer margin lending. This isn’t entirely fair, but IBKR is the benchmark for margin lending, and they charge roughly Fed Funds + 1.5%; CFD brokers (Saxo, IG, etc etc) charge fed-funds + 3% or more, whatever they can get away with.

2) When you open a CFD position, you’re effectively borrowing the entire notional of the trade, and paying interest on the entire trade notional. When you open a margin trade, you only pay interest on the amount you borrow, over and above your account’s cash balance.

So, let’s say you have $10k SGD in your account, and you want to take out a $15k SGD position in stocks. If you did it through a CFD, you’d pay interest on the whole $15k; if you did it through a margin loan, you’d only be borrowing $5k so you’d only pay interest on $5k.

—

Fun piece of trivia: there is no reason for CFDs to exist in Singapore. CFDs were invented in the UK, to allow retail punters to get exposure to stocks without getting charged the 0.5% stamp duty that the UK charges on stock trades. The dodge is that retail traders got charged stamp duty on stock trades, but not on derivatives; and market-making businesses like big banks didn’t get charged stamp duty on stocks. So if the retail trader buys a CFD, which is a derivative, not a stock; and the bank they trade with buys the stock as a hedge; then the customer has done the equivalent of buying the stock (with borrowed money), but they’ve dodged the stamp duty.

In Singapore, that loophole doesn’t exist—the stamp duty gets built into the brokerage fees on CFDs as well. So there’s no reason to trade CFDs, and no reason for them to exist... except that they trigger the same emotional reaction that online gambling does. Let’s be clear here: CFD brokers are legitimized online gambling. They are scum.

 

[auvignon]

Hi Shiny Things, all

Am committed to this three-fund portfolio (have a bunch of ES3 sitting with SCB from a few years ago (backslid on my DCA for a bit, unfortunately) and am also now beefing up my IWDA with IBKR). I note the recommendations regarding the FSMOne ETF RSP for local counters, but I was intending to use the monies in my SRS account to continue with my ES3/MBH investments and I understand from the website of FSMOne that they do not accept SRS funds (i.e., only cash investments). I checked with SCB for completeness as well and they confirmed the same.

I was wondering if you/anyone in this thread had any recommendations on low cost SRS-compatible brokers/methodologies to use for investing into ES3/MBH (beyond the usual DBSV, UOB KH, POEMS, etc.)? I did some research but the SRS threads aren't really focused on this three-fund portfolio and all I have really are the OCBC BCIP or POSB IS. Any thoughts would be very welcome!

Thank you!

 

[assiak71]

Hi Shiny Things, all

Am committed to this three-fund portfolio (have a bunch of ES3 sitting with SCB from a few years ago (backslid on my DCA for a bit, unfortunately) and am also now beefing up my IWDA with IBKR). I note the recommendations regarding the FSMOne ETF RSP for local counters, but I was intending to use the monies in my SRS account to continue with my ES3/MBH investments and I understand from the website of FSMOne that they do not accept SRS funds (i.e., only cash investments). I checked with SCB for completeness as well and they confirmed the same.

I was wondering if you/anyone in this thread had any recommendations on SRS-compatible brokers to use for investing into ES3/MBH? I did some research but the SRS threads aren't really focused on this three-fund portfolio and all I have really are the OCBC BCIP or POSB IS. Any thoughts would be very welcome!

Thank you!

Dbs vickers, ocbc securities, uob kay hian, maybank kim eng, poems etc all can do srs

Qn for you. How are you going to maintain your overall AA when using srs

 

[chrisloh65]

I believe CI rider is needed because there are critical illnesses where you need outpatient treatments and medication and these are not covered by your hospitalization insurance - Don't be misled!

Furthermore, you may become jobless because of inability to perform as normal due to critical illness (thus resulting in being laid off etc) and this will not be covered by DII (disability income insurance) - Don't be misled!

The insurance premiums of CI rider is not high anyway if you take it up when young and is a good insurance to have. At current medical costs, a rough rule of thumb for CI coverage of about $200k is sufficient. No harm getting more but I think $200k is enough for general people if you have a budget to meet.

i just realize there's an updated ST book. LOL.

Just wanted to clarify, in the book ST mention not needing CI rider. Just curious about the reason.

This is my understanding:

CI rider overlaps a lot with other insurance policies you should be prioritizing. Suppose you get diagnosed with a CI, here are some expenses you might be worried about:

Medical treatment: covered by emergency funds and hospitalization insurance.
Loss of earning potential from treatment: covered by emergency funds and DII.
Loss of earning potential from death (if you have dependents): covered by term life insurance

So CI coverage is less important.

 

[auvignon]

Dbs vickers, ocbc securities, uob kay hian, maybank kim eng, poems etc all can do srs

Qn for you. How are you going to maintain your overall AA when using srs

Thank you! Sorry - my original question below wasn't clear enough. I was looking for the lowest cost option to invest into ES3/MBH using SRS funds. The brokers you've listed work, but they are expensive and so I was considering the OCBC BCIP or POSB IS, but these two are still flawed and I was hoping someone on this thread has already brainstormed more about this.

Given that the SRS limit each year is only $15.3k, the SRS funds should form only a portion of my annual investment amount. I will also have to invest additional cash into ES3/MBH outside of the SRS framework together with cash into IWDA - my current proportions are a bit wonky because I haven't been DCAing religiously for a while (trying to fix that now) and I am, since February, still moving into the various positions. Will rebalance outside of the SRS framework (while taking into account the ES3/MBH within the SRS framework) - that should work yes?

 

[beefjerky]

Hi Shiny Things, all

Am committed to this three-fund portfolio (have a bunch of ES3 sitting with SCB from a few years ago (backslid on my DCA for a bit, unfortunately) and am also now beefing up my IWDA with IBKR). I note the recommendations regarding the FSMOne ETF RSP for local counters, but I was intending to use the monies in my SRS account to continue with my ES3/MBH investments and I understand from the website of FSMOne that they do not accept SRS funds (i.e., only cash investments). I checked with SCB for completeness as well and they confirmed the same.

I was wondering if you/anyone in this thread had any recommendations on SRS-compatible brokers to use for investing into ES3/MBH? I did some research but the SRS threads aren't really focused on this three-fund portfolio and all I have really are the OCBC BCIP or POSB IS. Any thoughts would be very welcome!

Thank you!

i used poems for srs. bought sti etf, mbh etf, and lion global world index (0.82% expense ratio) but the other fees are waived. so its as good as it gets.

 

[assiak71]

Thank you! Sorry - my original question below wasn't clear enough. I was looking for the lowest cost option to invest into ES3/MBH using SRS funds.

Given that the SRS limit each year is only $15.3k, the SRS funds should form only a portion of my annual investment amount. I will also have to invest additional cash into ES3/MBH outside of the SRS framework together with cash into IWDA - my current proportions are a bit wonky because I haven't been DCAing religiously for a while (trying to fix that now) and I am, since February, still moving into the various positions. Will rebalance outside of the SRS framework (while taking into account the ES3/MBH within the SRS framework) - that should work yes?

Their costs are all about the same. I dont know the exact cost but its around 0.275% to 0.28% with a min commission. So just pick anyone you like

Yes it only works if the srs amt is a fraction of your total investing amt. Else its not possible to maintain the AA neatly, especially ES3 if your SG allocation is not significant

 

[Torenoo]

Hi ST , tapping on your replies to the earlier qn from another forumer

QUOTE
isaacsayshi wrote:
Just wondering is it alright not to based any of my investment in SGD?

Allthough I'm now in my early thirties, I have no clue where I might want to retire in future. Seems like a better choice to put all my investment in a strong currency like USD, and many S.E.A countries readily exchange their currency for USD.

Do you think is a good idea to base all my investment in USD?


I wouldn’t recommend this for most people, but if you’re genuinely contemplating pulling the ripcord from the little red dot, then yes—in that circumstance, and only in that circumstance, it’d make sense to have just global stocks + global bonds, and no allocation to Singapore stocks/bonds. UNQUOTE




I have similar thoughts as well. Can i regard my cpf portion, as my sole SGD and bond exposure? I had hit FRS in SA @4% (via transferring) and intend to let it snowball all the way, which would be a lil sizeable by then

Having set aside the sgd and bond component , my plan now is to go full steam into IWDA only, for the USD and equities exposure.(not intending to go into STI etf)

Am I being too aggressive and concentrated on IWDA, wish to keep it simple and hence not too keen to go into STI ETF at all.

my rough estimates for the said equity/bond allocation at end of 20 years timeframe would be approx 66% equities 33% bonds , thereafter rebalance over to a much more conservative stance with more bonds


My plan is also not to retire in sg, mainly looking at SEA countries as well. But home is still home and would still come back frequently and incurr some cost every now and then, and eventually come back once im not so mobile to keep travelling.


would appreciate your advise please. TQ

 

[BBCWatcher]

I intend to split my equities into 50:50 sgd and usd.

Equities (stocks) are not currencies!

I wouldn’t recommend this for most people, but if you’re genuinely contemplating pulling the ripcord from the little red dot, then yes—in that circumstance, and only in that circumstance, it’d make sense to have just global stocks + global bonds, and no allocation to Singapore stocks/bonds.

I would add that your retirement plan must be realistic, which I would define as having an existing, firm legal right of abode in destination Country X. Otherwise, while you might have particular aspirations of retiring elsewhere, it's still reasonable to plan for retirement in your home country at least as a contingency.

"Country X" is a placeholder, of course. For example, if you're a citizen of Australia then you have a firm legal right to retire in either Australia or New Zealand. As another example, if you're legally married to a French citizen (same or opposite sex, and in a stable, committed relationship), then it's realistic to plan for retirement in Denmark if that's where you'd like to retire (for example). France and Denmark are both European Union countries, there's "Freedom of Movement" within the EU (and EEA and Switzerland), and the EU is rather good about respecting family unity without too much hassle. You still might want to hedge your bets a bit, but these examples seem like reasonable, realistic plans.

 

[psyfy]

That illustrations is misleading and not a real apple-to-apple spreadsheet calculation, despite the effort to make it looks like a fair comparison because:

(1) That guy assume your cash not invested do not earn any interest, while he computed the shares' values to be dividend accumulated in his spreadsheet calculation.

(2) Good market timers do not invest the way he illustrates.

So there you are, otherwise all those hedge funds, and funds managed by Howard Marks etc got to close shop!

(1) Actually he did and it'll come up to just over $180k. Relook at the spreadsheet again.

(2) Please share how you time the market and what your track record is?

Since you quote Howard Marks, what are your views on distressed securities and should the average investor get their hands dirty in one? If so how and what's your strategy around it?

 

[RedsYWNA]

I am just using my Yahoo Finance app. Yahoo Finance shows that for VOO, dividend yield is 2.24% while VUSD is 1.58% (almost exactly 70% of 2.24%).

I was thinking the numbers dont make sense, unless it's due to timing differences in dividend distribution... Thanks!

Just trying to bump my question again. Is the yahoo app information regarding dividend yield for VOO and VUSD wrong? But on my DBS vickers, I also get a similar percentage (but not as close as 70%).

 

[hwckhs]

Just trying to bump my question again. Is the yahoo app information regarding dividend yield for VOO and VUSD wrong? But on my DBS vickers, I also get a similar percentage (but not as close as 70%).

Bloomberg shows VOO 1.81%, VUSD 2.18%

• https://www.bloomberg.com/quote/VOO:US
• https://www.bloomberg.com/quote/VUSD:LN

Maybe you can find the dividend distributions for the past 1 year and calculate for yourself. In the process, you may figure out the reasons for the difference.

 

[Shiny Things]

Am I being too aggressive and concentrated on IWDA, wish to keep it simple and hence not too keen to go into STI ETF at all.

my rough estimates for the said equity/bond allocation at end of 20 years timeframe would be approx 66% equities 33% bonds , thereafter rebalance over to a much more conservative stance with more bonds

My plan is also not to retire in sg, mainly looking at SEA countries as well. But home is still home and would still come back frequently and incurr some cost every now and then, and eventually come back once im not so mobile to keep travelling.

I'll be honest—it sounds like your plan is to be mostly based in Singapore, but you're looking for an excuse to go all-in on IWDA. I'd keep your focus on Singapore; I know you don't want to buy the STI ETF, because it's underperformed in the past, but if your exposures are going to be to Singapore and maaaaybe SEA, you should stick to Singapore unless you really pull up stumps.

I was wondering if you/anyone in this thread had any recommendations on low cost SRS-compatible brokers/methodologies to use for investing into ES3/MBH (beyond the usual DBSV, UOB KH, POEMS, etc.)? I did some research but the SRS threads aren't really focused on this three-fund portfolio and all I have really are the OCBC BCIP or POSB IS. Any thoughts would be very welcome!

Thank you!

Unfortunately there aren't really any good, cheap, SRS brokers—the oligopoly that used to keep all brokerage rates at 28bps with a $28 minimum hasn't been broken in SRS yet. If you're going to invest your SRS, I think DBSV is the least worst but I haven't checked lately.

Just trying to bump my question again. Is the yahoo app information regarding dividend yield for VOO and VUSD wrong?

Yes, I think Yahoo's number for VOO is wrong. The SPX's trailing-12-month gross div yield is about 2.3% at current prices, not 1.5%.

 

[zoneguard]

Yep. The default assumption should be that relationships like that one (“corporate bonds deliver better returns than govvies even after defaults”) hold unless there’s some reason for them not to hold. It’d be a bit nihilistic to say “oh, this relationship holds in US markets, but I’m going to assume it doesn’t work in Singapore”; it’s safe to say “OK, this relationship holds in US markets, it probably works in Singapore unless there’s some structural reason why it doesn’t”.

The Portfolio Visualizer dataset shows the duration of US government bonds matters when comparing against corporate bonds.

This begs the question, is A35 closer to long term US govt bonds in behavior or intermediate US govt bonds? Because the investor is going to pick A35 over MBH if the earlier statement- long term US govt bonds is true.

 

[RedsYWNA]

Bloomberg shows VOO 1.81%, VUSD 2.18%

• https://www.bloomberg.com/quote/VOO:US
• https://www.bloomberg.com/quote/VUSD:LN

Maybe you can find the dividend distributions for the past 1 year and calculate for yourself. In the process, you may figure out the reasons for the difference.

Thanks. The numbers dont quite make sense. In theory, VOO net diviend returns (for Singaporeans) should be 70% of gross dividend, while VUSD should be 85% of gross dividend, with some minor expense ratio differences.

I can only guess the reason is due to timing differences in dividend distribution, and just needs to have faith that the market will recognise and auto-adjust the dividend differences over time.

 

[hellvolhardzelinsky]

Is it a good idea to withdraw 5000 from StashAway and reallocate them into the 3 funds?

My StashAway is currently investing US equities and Europe equities.
US:
15% IVV
15% IJR
9% XLC
3% XLE
15% XLK
15% XLV
15% XLY

Europe: 12% VGK

Considering to hold it but it means I will lack ASIA equities. (I have invested in STI on FSM)

 

[3sniper]

Any better Irish domiciled accumalating S&P 500 etfs than cspx.l to consider?

 

[ftpofmpo]

its difficult to foresee how in a future where us economy is more decoupled from china, a global etf can grow much

the current gen has alredy reaped all the low lying fruits, difficult to see what will lift the broader market

there's no more post war boom, fall of the iron curtain and china's adoption of free market, dropping of interest rates to across the board to rock bottom, tax decreases, diminishing returns of technological growth

stock buybacks are also under scrutiny

there will still be pockets of growth in various sectors or companies, but it's hard to see what's the next driver of growth across the board

sure, fission energy, batteries, virtual reality, autonomous robots, fake meat, universal flu vaccine, rna drugs etc. may drive the economy, but it's hard to imagine how they compare with the previous drivers of growth in the past half century

 

[cassowary18]

Any better Irish domiciled accumalating S&P 500 etfs than cspx.l to consider?

If you prefer Vanguard can consider VUAA. But I believe CSPX is more liquid hence has better bid/ask spread

 

[Shiny Things]

its difficult to foresee how in a future where us economy is more decoupled from china, a global etf can grow much

Hmm. Counterpoint, the US throwing up the walls to China means that there'll be more opportunities for European, Japanese, and APAC companies to sell into China. I do agree that more trade is generally better, but I don't think it's the end of the world.

Any better Irish domiciled accumalating S&P 500 etfs than cspx.l to consider?

No, there aren't. Honestly, what are you expecting to find? CSPX has a 7bps expense ratio and it gets the divvy tax dodge. That's already pretty great, as far as SPX index funds go (and you know my view on overweighting individual countries, you're just hopping on the speeding train of FAANG momentum and hoping it doesn't derail)

Is it a good idea to withdraw 5000 from StashAway and reallocate them into the 3 funds?

My StashAway is currently investing US equities and Europe equities.
US:
15% IVV
15% IJR
9% XLC
3% XLE
15% XLK
15% XLV
15% XLY

Europe: 12% VGK

Considering to hold it but it means I will lack ASIA equities. (I have invested in STI on FSM)

That is a wack-ass portfolio. Where's the bonds? Why does it have S&P 500 and sector ETFs? Why is it 15% in smallcaps which are only 1% of the market and have been absolutely toasted for the last half a decade? Where's the allocations to Japanese and Commonwealth equities; to Korea; to Hong Kong; to Mexico and Brazil and CE4... and why is it all in the most estate-tax-and-dividend-tax-a-riffic ETFs imaginable? Someone has spiked the watercooler at Stashaway.

Yes. Fire them. Pull that portfolio, it's nonsensical for a Singaporean investor.