Official Shiny Things thread—Part III

[culepico]

Not really, because investors would typically be using Interactive Brokers for this path. And that usually ends up being a US$10/month fixed price.

Sure, if you set a boundary condition that investors use Interactive Brokers for this path, and assuming that they only do their weekly/monthly DCA and do not do other trades as well that exceeds the minimum US$10/month, then yes you can add the dividend yields on the months that the DCA up have not vested to the DCA blind's portfolio. But note that a boundary condition has been applied (that may well be applicable for most investors).

 

[BBCWatcher]

But note that a boundary condition has been applied (that may well be applicable for most investors).

Sure. So is a broker commission, by the way. U.S. persons like me routinely enjoy zero commissions in U.S. markets, so we don't save any commission under any circumstances if we skip a month.

 

[culepico]

Sure. So is a broker commission, by the way. U.S. persons like me routinely enjoy zero commissions in U.S. markets, so we don't save any commission under any circumstances if we skip a month.

Right. If dividend yield is tagged to S&P 500 and is not a boundary condition, then broker commission is tagged to every trade and should not be a boundary condition. On the other hand, if you enjoy zero commissions, shouldn't that be another boundary condition? Unless if the widely accepted default is zero commission for trades.

 

[BBCWatcher]

Right. If dividend yield is tagged to S&P 500 and is not a boundary condition, then broker commission is tagged to every trade and should not be a boundary condition.

The S&P 500 stocks pay dividends to all shareholders of record. Not every stock -- Amazon doesn't, for example -- but collectively they do. Dividends should properly be taken into account in any backtesting. And this is particularly important with other indices such as the Straits Times Index. The STI stocks have historically had a higher dividend yield, i.e. a greater share of the total returns depend on the dividends. Total returns are what matter, not merely the capital appreciation.

As far as broker commissions, you've got lots of realistic situations when the broker commissions don't vary. Broker commissions don't vary for me because I pay zero commissions whether I invest US$1 every day(*) or US$5,000 once a month, and that's now true of most U.S. investors and their real world experiences. POSB Invest-Saver is yet another such example here in Singapore. You have to be careful to make sure you're measuring what you think you're measuring. If broker commissions do matter (because they're "high enough"), then all that might mean is that you should blindly invest bimonthly instead of monthly per a backtested hypothesis.

(*) Yes, seriously. U.S. mutual funds have management fees that are just as low as ETFs, or lower, the minimums are as low as US$1, and there are no transaction charges for either mutual funds or ETFs. It's a wonderful world out there.

 

[culepico]

As far as broker commissions, you've got lots of realistic situations when the broker commissions don't vary. Broker commissions don't vary for me because I pay zero commissions whether I invest US$1 every day(*) or US$5,000 once a month, and that's now true of most U.S. investors and their real world experiences. POSB Invest-Saver is yet another such example here in Singapore. You have to be careful to make sure you're measuring what you think you're measuring. If broker commissions do matter (because they're "high enough"), then all that might mean is that you should blindly invest bimonthly instead of monthly per a backtested hypothesis.

(*) Yes, seriously. U.S. mutual funds have management fees that are just as low as ETFs, or lower, the minimums are as low as US$1, and there are no transaction charges for either mutual funds or ETFs. It's a wonderful world out there.

I assume your bimonthly means once every 2 months? In that case you missed out on the dividend for the month that you didn't invest in order to save the broker fee for that month. It is linked right? You have to be careful to make sure you're measuring what you think you're measuring.

And if you're saying a situation that applies to you then that is a boundary condition for yourself. We should discuss things in all neutrality don't you think?

And yes, if there are no transaction fees for everyone, it is a truly wonderful world .

 

[BBCWatcher]

According to:
https://www.investopedia.com/ask/answers/040915/does-sp-500-index-include-dividends.asp

The S&P 500 index calculates total returns and thus assumes dividends are reinvested, although the ETFs that track that index don't do that.

Wikipedia disagrees, and I think Wikipedia is correct. My understanding is that the S&P 500 Index that you see quoted is the price-based index -- the "headline" index. If you go digging fairly deep into S&P's publications you can find dividend inclusive variants that they calculate and track. One of those variants is called the "S&P 500 Total Return Index."

....Yes, I'm finding agreement on this point everywhere, really. Investopedia seems to be the outlier. The potential point of confusion is that special dividends are included in the base S&P 500 Index. Ordinary dividends are not included in what S&P calls the "Price Return" indices, which includes the common S&P 500 Index.

 

[koreanlover]

Should we be holding more USD compared to SGD in the short term?

Bloomberg says MAS might ease SGD?

https://www.bloomberg.com/news/articles/2020-03-20/singapore-dollar-s-slide-boosts-odds-of-mas-easing-before-review

 

[streetfighter]

Dow crashed another close to 5% again last night! If i had stayed the course & didn't sell all during initial rebound after first crash, i would have lost about 40% or >$400,000! Scary!
Since Stock prices went up so much since 2009 low, we should expect this recession to bring stock index down by a lot more before it is safe to buy isn't it?

thank you for taking the time to do this. with such small difference between the two steategies, it should really help calm the nerves of those who are reluctant on dcaing in this period.

so moral of the story is... stay the course!

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

 

[moolala]

Dow crashed another close to 5% again last night! If i had stayed the course & didn't sell all during initial rebound after first crash, i would have lost about 40% or >$400,000! Scary!
Since Stock prices went up so much since 2009 low, we should expect this recession to bring stock index down by a lot more before it is safe to buy isn't it?

u would have to go back 3 years to reach these levels

i think its bottoming

 

[streetfighter]

I would take a bet of waiting for at least 6 months instead. Let's see whether you are right.

u would have to go back 3 years to reach these levels

i think its bottoming

 

[spvnnn]

I'm sorry that I'm asking another question about brokerages again but I've been reading posts on this forum for days but still can't figure out what's the best route to take. I'm a beginner.

I'm looking to invest some capital I have in equities (roughly 20-30k), maybe 50% local 50% overseas. Some of this will be for dividends, some will be long-term holdings. What brokerage should I use? For local I'm looking at SCB or FSMone. Overseas either SCB or IB. I cannot figure out what's the best option.

I will also start to DCA some ETFs (probably STI and IWDA). For DCAing the STI I'm looking at FSMone RSP since it's fees seem to be the best. For DCAing the IWDA/S&P (either monthly or every 3 months) will probably be whatever overseas broker I choose above (i.e. SCB or IB).

Hope someone can help me out. Getting confused by all the different fees. Anything else I should look out for regarding opening brokerage accounts? Thanks in advance.

 

[JetStorm]

I'm sorry that I'm asking another question about brokerages again but I've been reading posts on this forum for days but still can't figure out what's the best route to take. I'm a beginner.

I'm looking to invest some capital I have in equities (roughly 20-30k), maybe 50% local 50% overseas. Some of this will be for dividends, some will be long-term holdings. What brokerage should I use? For local I'm looking at SCB or FSMone. Overseas either SCB or IB. I cannot figure out what's the best option.

I will also start to DCA some ETFs (probably STI and IWDA). For DCAing the STI I'm looking at FSMone RSP since it's fees seem to be the best. For DCAing the IWDA/S&P (either monthly or every 3 months) will probably be whatever overseas broker I choose above (i.e. SCB or IB).

Hope someone can help me out. Getting confused by all the different fees. Anything else I should look out for regarding opening brokerage accounts? Thanks in advance.

rule of thumb is to not have so many brokerage accounts to keep track.

personally, i like scb as it is a all in one. it is not the cheapest compared to ib but it has reasonable low fees.

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

 

[spvnnn]

rule of thumb is to not have so many brokerage accounts to keep track.

personally, i like scb as it is a all in one. it is not the cheapest compared to ib but it has reasonable low fees.

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

for both local and overseas?

 

[celtosaxon]

I would take a bet of waiting for at least 6 months instead. Let's see whether you are right.

Typically the faster the fall, the faster the rebound. Are you willing to risk letting these discounted prices go? Would you still invest 6 months later if the market rebounds?

Right now the market is really frothy and volatile, so if you have some extra to put in beyond your regular DCA, you can use limit orders and just name your dream price.

Another way is to take 23% (12/52) of your monthly DCA and switch to weekly DCA just to ensure you get closer to the true average given the volatility.

 

[ftpofmpo]

Dow crashed another close to 5% again last night! If i had stayed the course & didn't sell all during initial rebound after first crash, i would have lost about 40% or >$400,000! Scary!
Since Stock prices went up so much since 2009 low, we should expect this recession to bring stock index down by a lot more before it is safe to buy isn't it?

still same compared to wednesday, just adjusted after dead cat bounce

 

[investo]

Given the strong usd to sgd, would it make any diff to vest regularly into the GBP denominated one instead ?

Ditto, I am also contemplating with this idea.

FX risk & exposure has been discussed many times on this thread but current situation is different. USD demand always surges during rough period. Should retail investors look at alternate options?

ST, BBCW what’s your view?

PS: I have been reading this thread for some time now. Loads of good info. Really appreciate your efforts & patiences.

 

[JetStorm]

for both local and overseas?

yes can buy from local and overseas.

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

 

[moolala]

rule of thumb is to not have so many brokerage accounts to keep track.

personally, i like scb as it is a all in one. it is not the cheapest compared to ib but it has reasonable low fees.

Sent from Xiaomi REDMI NOTE 8 PRO using GAGT

scb is still the website platform?

I tried it but its so clunky

 

[BBCWatcher]

Ditto, I am also contemplating with this idea.

FX risk & exposure has been discussed many times on this thread but current situation is different. USD demand always surges during rough period. Should retail investors look at alternate options?

ST, BBCW what’s your view?

My view is you need to read my reply to this question.

 

[kram62]

My view is you need to read my reply to this question.

Hint: his reply includes the fact that it is not possible to cheat the USD FX risk just by buying the same fund denominated in another currency, because the nominal price of the same fund in the other currency will have adjusted to price in the USD strengthening.

Think about it, if you say you don't want to buy a banana in USD because the USD currency has strengthened and instead buy it in GBP, if the GBP price didn't adjust to take that into account, then you could make profit by buying more GBP denominated bananas and selling them for USD. This is an arbitration opportunity. When arbitration opportunities arises, you can be sure there are players to use up the opportunity to their benefits. In this case this pushed the price of the GBP banana up (because there's more demand to buy) and the price of the USD banana down (because there's more offer to sell). At some point the GBP price and USD price of the banana will converge such that there is no benefit to have in the arbitration.

Hence, no you can't cheat by buying the same fund in another currency. (replace USD banana by IWDA and GBP banana by SWDA above)