Official Shiny Things thread—Part III

[jhyeo_]

My 2 cents:

1) The yield you see is based on trailing 12 months earnings/payout at current price. It does not mean that you will get the same yield in future. Earnings are expected to drop with the current pandemic situation, which means the actual yield could be lower than that. Recent historical STI’s dividend is around lower range of 3%.

2) Means you will receive the dividend into your bank and you have to redeploy it by buying back into the ETF in a way or another to get your money “working” again.

3) Edit this part cause i read wrongly:
I suppose you are talking about high interest savings bank account. It is a good way of preserving wealth but not increasing/creating wealth.
Also note that they have a cap limit and may not return as much if you have much more savings in future. And 2% may be just good enough to offset inflation.
Stock assets had proved to increase one’s wealth by higher average returns over long periods of time. Which comes with a higher risk as you have recognized. As advised by ST/BBCW and many others, the allocation (what and how much you buy) of stocks/cash or bonds is important which also depends on your age/investing timeframe so that market crashes like this will not impact your financials too much and have enough time to recover.

Hi all,
I have a few silly questions,
1) ...I receive every year as a percent of the money I have in it? e.g. a 1k investment in G3B with a yield of 3.92% will return me $30.92 a year?

2) ....What would this mean for the POSB IS since does not reinvest the dividends for us?

3) Why would it not be better to simply put the money in a bank account where the interest rate is sufficiently high at like 2%? I read posts of people losing a decade's worth of profits through ETFs during a crisis like the covid right now.

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[tangent314]

any idea where can find the breakdown of buying and selling volume? instead of the usual consolidated trading volume.

A trade involves someone selling X amount of something to someone who buys X amount of something. So trade volume = buy volume = sell volume.

 

[Shiny Things]

Sure, that's a great question - you're picking up on the fact that the bond's maturity is getting shorter. Shorter-dated bonds tend to have lower yields, so as the bond rolls down to maturity the returns get lower each year (though also, the volatility gets lower... see next answer

Does Thia mean the bonds need to be sold off before the 5 year mark(peak returns usually = 3 years)?

No, not usually.

Shorter-dated bonds are less volatile than longer-dated bonds, so there's a benefit to holding on to them; and selling bonds involves crossing a spread to sell them, which costs money.

Check out Howard Marks' latest memo (a follow-up from his recent one sent only to clients)

Always love reading his letters

Oh yeah. Howard Marks is no idiot, and reading through his letters it looks like he took quite a sensible approach—near the lows he was saying "look, you probably want to be buying down here".

Anyway maybe can put it as this way, for MBH the max drop is from price of 1.053 to 1.007 which is about 4.4% "only".. compare to stock market which is about 20 to 40% drop. Therefore already a "cushion"?
Understand the other consideration is how much return can be expected from MBH.

Exactly right. MBH has relatively small drawdowns compared to equities, so it has a relatively lower return than equities.

(Conversely, A35 - which owns government bonds - has even smaller drawdowns, but has lower returns, and over the long term, corporate bonds do better than government bonds. The only time government bonds do better than corporate bonds is in extremely sharp downturns.)

IWDA should be on par to S&P500TR (of course slightly worse, as taking consideration of ER, expense ratio)?
Is that correct?

Er, no. IWDA tracks the MSCI World index, not the S&P 500.

The two will be close, because the S&P 500 is a pretty big part of the MSCI World index, but not identical.

What's the best safe haven now? While waiting to dca for the rest of the year?

Weeelll… I’d say if you’re looking for a safe haven you’re about six weeks too late, and 30% too low. Now’s the time to be moving away from safe havens and taking risk.

I'm running out of ideas on where to invest.

Why do you need more ideas? Three funds is plenty.

Having more funds won’t increase your returns; it’ll just increase your transaction costs.

I say this a lot, but ETFs aren’t Pokemon; you don’t need to catch ‘em all.

Hi all. Based on ShiningThings book, can I ask if I can replace ES3 with a S&P ETF instead for my allocation but still leaving IWDA and A35 as they are? This is just because I prefer US to SG stocks.

I’m going to challenge the premise of your question: why do you prefer US to Singaporean stocks in the first place?

Are you saying that because US stocks have gone up more over the last few years—and if you are, how do you know that’s going to continue?

Thanks Joshua for your book, enjoyed reading through it. One big question I have is nowhere in the book do you ever talk about investing in individual stocks (in fact it sounds like you're somewhat discouraging it).

I’m absolutely discouraging it, yes.

Individual investors like you and me have basically no advantage when it comes to picking single stocks. If you make more money from investing in single-stocks than from ETFs, I’ll guarantee you that’s from pure luck.

Aren't there cases where it'd be prudent to invest into individual stocks, either for growth or dividends?

Can you think of any? Think of it this way: is there a case where you’d want to own a single name, instead of owning the index, that doesn’t amount to “I think it’s going up”?

If so, do you have any guidelines that you'd follow (e.g. how much you invest, when do you do it, etc.) Or would you genuinely recommend always sticking to ETFs 100% of the time?
Thanks for the book once again.

For most people—yeah, no, they should not trade single stocks.

The only reason I’d say “sure, that’s fine” is because some people just have the urge to punt around. If you’re going to do that, keep a separate pot of money from the rest of your retirement investments, and keep it to 5-10% of your portfolio to keep yourself under control.

And be very very honest with yourself about your performance. Look at your trading portfolio once or twice a year, and ask “am I doing better than I would have if I’d just left the money in my 110-minus-my-age portfolio?”. If the answer is no, maybe you shouldn’t trade single stocks.

The fed is buying junk bonds to prevent the collapse of fallen angels

I suppose buying a35 or mbh is way too conservative now, junk offers 5-8% yield and the fed is the buyer of last resort, full face value

Firstly, the Fed is buying junk bond ETFs, not junk bonds; and secondly they’re not buying “full face value”, they’re paying the same market price that you or I would. If you’re going to troll, try harder.

Secondly, Mr Morgan, tell your bank to call me back. I’ve been trying to refi my mortgage with them and they won’t pick up the damn phone.

 

[Shiny Things]

any idea where can find the breakdown of buying and selling volume? instead of the usual consolidated trading volume.

Every trade has a buyer and a seller, but that's a bit tautological; I think what you're asking about is "are people more aggressively buying, or more aggressively selling?".

You're probably gonna have to assemble this yourself and it's going to take work.

You'll need trade-and-quote data; then, I'm going to assume you define a "buy" as a trade that happens at or closer to the ask, and a "sell" as a trade that happens at or closer to the bid.

Once you've got that, then you can back into "what was the volume from aggressive buyers and what was the volume from aggressive sellers".

Hi all,

I have a few silly questions,

1) Does yield in percentage indicate the dividends I receive every year as a percent of the money I have in it?

Sort of, but not quite. It's usually "what were the trailing dividends over the last twelve months, as a percentage of the current price?". So the price can change, and the trailing dividends can change if the company raises or cuts its dividend.

2) What would this mean for the POSB IS since does not reinvest the dividends for us?

It means you have to reinvest the dividends yourself.

3) Why would it not be better to simply put the money in a bank account where the interest rate is sufficiently high at like 2%? I read posts of people losing a decade's worth of profits through ETFs during a crisis like the covid right now.

Your investment horizon is years or decades. Over a long period like decades, a bank account (which isn't paying 2% any more!) is going to get absolutely blown out of the water by stocks and bonds. The key is being able to hold on and be patient through downturns like the one we're seeing now.

 

[BBCWatcher]

For most people—yeah, no, they should not trade single stocks.

One typical exception: an Employee Stock Purchase Program with a decent or better discount, and provided you’re selling qualified shares regularly to avoid concentration risk.

Secondly, Mr Morgan, tell your bank to call me back. I’ve been trying to refi my mortgage with them and they won’t pick up the damn phone.

Just go find another bank, credit union, or mortgage lender. Shop around.

 

[kurtgoh]

Hello Shiny,

Is NYSE:FTEC and VT, worth investing at this current period.

 

[rotatingfan]

one assumes that when you say you prefer US to SG stocks, your preference is based on a belief that US will outperform SG stocks on a risk-adjusted basis.

if you believe US stocks will outperform SG stocks go right ahead, no need to ask permission

Definitely not asking for permission. You still stubbornly living in your own world and make the assumptions. Just shows what a shallow person you are. Definitely no respect to you, man. You need to reduce all these useless posts and try not to be goody-good shoes and sacarstic.

If I open up my textbook or attend a tutorial, there is nothing wrong to raise my hand and ask my tutor a question, for which I am certainly not asking for my tutor to validate my decision. You in your own world, interpret it as asking for permission.

 

[jhyeo_]

Thanks for the views. Currency risk is something that I had not considered that much but will do so now.

The reason of why S&P is simply because it has more upside than STI in my view. I'm no expert at all but STI never recovered to its peak while S&P had far exceeded it.

I have about the same thoughts as you being reserved on STI's performance.
But the main reason to have Domestic stocks is really to reduce volatility from Global exposure such as political, currency etc. We happen to live in Singapore hence the STI as a basic recommendation.

Naturally we want to invest in things we think to have more upside, but as the saying goes history does not reflect the future. In the recent volatility caused by the pandemic, I have learnt not to overweight anything too much because we really have no idea what kind of things will happen in the future.

What I am trying to get across is diversifying is not a underrated term as advocated here. By replacing STI with S&P500, you are over-weighting into the US stock markets, along with IWDA.

 

[hindsight]

Firstly, the Fed is buying junk bond ETFs, not junk bonds; and secondly they’re not buying “full face value”, they’re paying the same market price that you or I would. If you’re going to troll, try harder.

No the Fed fully intends to buy individual junk bonds.

https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a2.pdf

I guess this is in anticipation of the large number of downgrades that will hit the market in the months ahead, roughly about 1T of investment grade debt is at risk of being downgraded to junk, that is worth nearly as much as the HY debt market, the HY debt market has no hope of absorbing such a big increase in supply without the fed coming in as the lender of last resort.

I don't agree with you on the "market price" bit either, many HY bonds (and some IG bonds) have had no bids on them since early March, what is a fair "market price" for these bonds under these circumstances?

 

[spvnnn]

2 questions

1. For foreign equities, why do people recommend going with SCB if you're investing less than $1000 a month and IBKR if you're investing more than $1000? When I look at the fees, SCB charges min 10USD per transaction and IBKR charges min $10USD per month, so if you DCA monthly it's the same? IBKR also has better forex spreads/comms, meaning that SCB will usually be more expensive anyway. So why even bother with SCB at lower amounts?

2. Is this $1000 a month benchmark referring to total investment amount per month? Or purely the overseas equities component of your portfolio?

 

[crystalnox]

2 questions

1. For foreign equities, why do people recommend going with SCB if you're investing less than $1000 a month and IBKR if you're investing more than $1000? When I look at the fees, SCB charges min 10USD per transaction and IBKR charges min $10USD per month, so if you DCA monthly it's the same? IBKR also has better forex spreads/comms, meaning that SCB will usually be more expensive anyway. So why even bother with SCB at lower amounts?

2. Is this $1000 a month benchmark referring to total investment amount per month? Or purely the overseas equities component of your portfolio?

1. Usually the recommendation for smaller amounts might mean alternating between ES3 and IWDA, so that's half of the US$10 cost a year. But you're right, IBKR is always better in the case of monthly DCA.

 

[applecore7]

Hi everyone,

I'm new to investing so I was hoping I can get some feedback on my current plan.

15% - SSB
10% - ES3
25% - IWDA

25% - C38U, MU7
25% - AAPL, GOOG/JNJ

The idea is that I can start opening positions in ES3 and IWDA while using 50% of my capital in individual stocks, 25% in SG for future dividends and 25% in 25% in US for capital gains.

Also, was planning to use Kristal.AI for buying ES3 and IWDA, from what i research there are 0 fees involved?
Using FSMone for the rest.
Does that sound reasonable?

 

[Zink00]

People tend to ignore the dividends paid out by sti.

 

[5408854088]

Every trade has a buyer and a seller, but that's a bit tautological; I think what you're asking about is "are people more aggressively buying, or more aggressively selling?".

You're probably gonna have to assemble this yourself and it's going to take work.

You'll need trade-and-quote data; then, I'm going to assume you define a "buy" as a trade that happens at or closer to the ask, and a "sell" as a trade that happens at or closer to the bid.

Once you've got that, then you can back into "what was the volume from aggressive buyers and what was the volume from aggressive sellers".

you are right about what i am asking, and i could have been clearer about it. i guess in the absence of those data, and from a technical analysis perspective, what would be some of the indicators that you would look at? A/D + MFI + RSI?

 

[chrisloh65]

Oh yes Howard Marks, I love reading his writings and comments!

In particular, I would bring to people's attention something he mentioned and collected here:
https://www.cfasociety.org/india/Newsletters/Howard Marks_The Truth about Investing.pdf

It’s important to practice “contrarian” behavior and do the opposite of what others do at the extremes. For example, the markets are riskiest when there’s a widespread belief that there’s no risk, since this makes investors feel it’s safe to do risky things. Thus we must sell when others are emboldened (and buy when they’re afraid).


This is also something I practice to great benefits and which I also wrote here previously about it. This is the opposite of buy, buy, buy, don't care what market keep buying!

Oh yeah. Howard Marks is no idiot, and reading through his letters it looks like he took quite a sensible approach—near the lows he was saying "look, you probably want to be buying down here".

Check out Howard Marks' latest memo (a follow-up from his recent one sent only to clients)

Always love reading his letters

 

[cassowary18]

2 questions

1. For foreign equities, why do people recommend going with SCB if you're investing less than $1000 a month and IBKR if you're investing more than $1000? When I look at the fees, SCB charges min 10USD per transaction and IBKR charges min $10USD per month, so if you DCA monthly it's the same? IBKR also has better forex spreads/comms, meaning that SCB will usually be more expensive anyway. So why even bother with SCB at lower amounts?

2. Is this $1000 a month benchmark referring to total investment amount per month? Or purely the overseas equities component of your portfolio?

1. You won't be investing every month. You'll be "batching up" and making purchases every 3-4 months.

2. Total investment amount.

Note that this is just a broad rule of thumb and can be subject to change with new products that are launched (for example, since FSMOne launched their RSP, it's cheaper to use FSMOne rather than POSB Invest Saver and SCB for local counters; or if IB ends up offering SGX trades, it's cheaper to do everything there).

 

[cassowary18]

Hi everyone,

I'm new to investing so I was hoping I can get some feedback on my current plan.

15% - SSB
10% - ES3
25% - IWDA

25% - C38U, MU7
25% - AAPL, GOOG/JNJ

The idea is that I can start opening positions in ES3 and IWDA while using 50% of my capital in individual stocks, 25% in SG for future dividends and 25% in 25% in US for capital gains.

Also, was planning to use Kristal.AI for buying ES3 and IWDA, from what i research there are 0 fees involved?
Using FSMone for the rest.
Does that sound reasonable?

Welcome onboard, young padawan!

Here, we don't encourage individual stock-picking. You can read up the rationale a few posts up, but essentially, you can't pick winning stock consistently (and neither can the experts, frankly). So for the individual counters, I'd put them in ES3 and IWDA respectively. Don't forget that ES3 pays out dividends anyway, and IWDA will reinvest the dividends for capital gain.

Other than that, the rest of your portfolio seems good. SSB might have been a good investment a few years back, but interest rates have hit rock bottom now. If you bought the SSB last time, keep and hold on to it. If you want to buy now, make sure you're prepared to liquidate your position and purchase a tranche with higher interest rates when the interest rates bounce back up (which can take a while). Personally, I'd put my bond component in a bond ETF or CPF, but SSB isn't the worse place to put it if you got a tranche that pays out high interest rates.

 

[ftpofmpo]

Oh yes Howard Marks, I love reading his writings and comments!

In particular, I would bring to people's attention something he mentioned and collected here:
https://www.cfasociety.org/india/Newsletters/Howard Marks_The Truth about Investing.pdf

It’s important to practice “contrarian” behavior and do the opposite of what others do at the extremes. For example, the markets are riskiest when there’s a widespread belief that there’s no risk, since this makes investors feel it’s safe to do risky things. Thus we must sell when others are emboldened (and buy when they’re afraid).


This is also something I practice to great benefits and which I also wrote here previously about it. This is the opposite of buy, buy, buy, don't care what market keep buying!

y buffett u turn and sell delta now?

 

[applecore7]

Welcome onboard, young padawan!

Here, we don't encourage individual stock-picking. You can read up the rationale a few posts up, but essentially, you can't pick winning stock consistently (and neither can the experts, frankly). So for the individual counters, I'd put them in ES3 and IWDA respectively. Don't forget that ES3 pays out dividends anyway, and IWDA will reinvest the dividends for capital gain.

Other than that, the rest of your portfolio seems good. SSB might have been a good investment a few years back, but interest rates have hit rock bottom now. If you bought the SSB last time, keep and hold on to it. If you want to buy now, make sure you're prepared to liquidate your position and purchase a tranche with higher interest rates when the interest rates bounce back up (which can take a while). Personally, I'd put my bond component in a bond ETF or CPF, but SSB isn't the worse place to put it if you got a tranche that pays out high interest rates.

Thanks for the friendly welcome

I am in my 3rd year for SSB, so the returns are actually pretty decent and I'll keep it! Perhaps I was thinking of the individual stocks due to personal vanity of being able to say I own those, but I will reconsider.

Any advice whether my choice of brokers are appropriate?

 

[cassowary18]

Thanks for the friendly welcome

I am in my 3rd year for SSB, so the returns are actually pretty decent and I'll keep it! Perhaps I was thinking of the individual stocks due to personal vanity of being able to say I own those, but I will reconsider.

Any advice whether my choice of brokers are appropriate?

Brokerage choice seems fine, although I am getting tired of Kristal.AI and thinking of shifting my funds out soon.

My question to you is, what happens now if you want to top up your bond allocation? Since SSB returns are rock bottom right now.