Official Shiny Things thread—Part III

[assiak71]

IAU or GLDM or some other gold etf for the long term?

 

[cassowary18]

IAU or GLDM or some other gold etf for the long term?

SGLN for Irish domiciled thus avoiding US estate tax

 

[BBCWatcher]

SGLN for Irish domiciled thus avoiding US estate tax

....But don't overweight gold, please. It's not a great idea. If you insist on inflation defense then you should check out IGIL, but that's probably/generally a bad idea, too. A bog standard low cost global stock index fund is more highly positively correlated to inflation than gold is, per Fidelity's study. If you insist on zombie or alien defense then go buy buckets of freeze dried food with a 30 year shelf life (restocked every 25 years or so) and other supplies, at least one hidden bunker, each with its own separate life support system (water, air, waste, etc.), a viable way to abscond to any of your hidden bunkers, a private army or rough equivalent, and maybe (if you still have any budget left) a bit of physical silver. These ingredients simply aren't available in Singapore, so you'll need to emigrate to make these particular plans even halfway viable.

 

[meltedsolid]

Not that I disagree with you, but for other forummers' consideration:

1. Do have a think if you really want to decrease equity exposure when you grow older. If you have a more sizable portfolio, and have other goals such as giving to charity when you pass on, or to leave something more behind for your loved ones, you can stick to a more risky portfolio. I intend to do 80:20 till death

2. Again, SGX, which is the exchange which STI chooses it 30 stocks from, is getting smaller its share of market capitalisation relative to global public equities market cap. We are looking at a sickly, deteriorating exchange and its corresponding index and there are no signs of reversal
. There is no need to pledge loyalty to such an exchange or an index - what if temsaek delist another 3-4 index components (SPH, Sembcorp, Keppel, SIA seems like prime targets) and the index components get even dicier? My recommendation is, keep your eyes wide open on any SGX exposure throughout your wealth accumulation phase.

Is Shiny's stand for local/international equities still 50%/50%? What's the rationale for that?

 

[loackerc]

Does anyone know why does DBS RSP - NIKKO AM SINGAPORE STI ETF differ so much from benchmark?

Screenshot taken from DBS internet-banking.

 

[crystalnox]

Does anyone know why does DBS RSP - NIKKO AM SINGAPORE STI ETF differ so much from benchmark?

Screenshot taken from DBS internet-banking.

Here's my guess, to get the same results as say the 1 Year performance, you've got to go back and lump sum invest 1 year ago and keep it till today to match their numbers. Whereas RSP programs DCA monthly for you, so if the fund has been rising in value over time, you end up buying it more expensive on average, affecting your returns vs benchmark.

I might be wrong though, maybe someone with more experience can comment.

 

[BBCWatcher]

POSB Invest-Saver also involves some commissions (0.82% last I checked), and commissions reduce net total returns versus a theoretical, cost free alternative.

The good news for dollar cost averagers right now is that the 30 Straits Times Index stocks are lower priced than they have been in a long time. Buyers should like lower prices. Prices can still fall, of course, but they are lower than they've been in quite a while.

 

[loackerc]

Here's my guess, to get the same results as say the 1 Year performance, you've got to go back and lump sum invest 1 year ago and keep it till today to match their numbers. Whereas RSP programs DCA monthly for you, so if the fund has been rising in value over time, you end up buying it more expensive on average, affecting your returns vs benchmark.

I might be wrong though, maybe someone with more experience can comment.

POSB Invest-Saver also involves some commissions (0.82% last I checked), and commissions reduce net total returns versus a theoretical, cost free alternative.

Hmm, good point. It just seems rather odd that on DBS RSP, the tracking error is much greater than what was shown on nikko am website. As a reference, here's what I found on nikkoam website:

So if what you said were right, then it means that their definition of return are in fact quite different (DBS considers monthly DCA and takes 0.82% platform commission into account; whereas tables we see on nikkoam or iShare does not). At first sight, the information provided by DBS kinda gives an impression that it isn't tracking effectively.

Initially, I thought it might be related to the way price is determined (which can be different from the traded price on market), as illustrated at their FAQ:

 

[razoreigns]

Can you advise what are the next best low cost alternatives to IB for holding IWDA? I am considering reducing some exposure to IB. I have been using it to buy IWDA.

Does anyone know of other low cost alternatives? Would like to diversify. Thanks

 

[BBCWatcher]

There are a couple other possible points of divergence:

1. Nikko AM assumes all dividends are immediately reinvested. DBS/POSB doesn't automatically reinvest dividends as far as I know. This is a shortcoming that all or nearly all Singapore Regular Savings Plans share, probably because for some bizarre reason people think "Dividends are AWESOME! Passive income, baby!" Ah, no. A Regular Savings Plan should at least offer the choice of having dividends automatically reinvested, and with favorable or free commissions. Another possibility is that the fund managers and RSPs could offer low cost accumulating funds.

2. Could POSB Invest-Saver be buying these ETFs on the open market, and thus could there be some slight "big whale" effects in their monthly purchases? Or is DBS/POSB buying directly from the fund manager at a closing price? I'd have to dig into the mechanics of how they operate, and I'm not curious enough, frankly.

 

[BBCWatcher]

Does anyone know of other low cost alternatives? Would like to diversify.

Diversify broker-custodians, I think you mean.

I don't think there are terrific second choices. Maybe Standard Chartered Singapore? However, I don't know whether it's possible to transfer shares of IWDA in kind from Interactive Brokers to another broker-custodian or how much it'd cost.

One possible approach is that you don't transfer at all, but instead, once you reach US$100K in total account value at Interactive Brokers, you make some IWDA purchases via Standard Chartered -- every third purchase (once per quarter), for example. Standard Chartered will likely be more expensive, but if you're dead set on adding another broker-custodian to the mix then maybe you're willing to pay the extra cost. Of course the other approach is "Don't worry about it" since any single broker (including IB) that you use for your global stock index fund investing will only ever hold a portion of your total household wealth. I don't worry much about this issue, but my personal "rule of thumb" is that I like to avoid keeping more than half of total household wealth with one custodian. It seems unlikely that you'd rise above even my conservative approach.

 

[confusedsuitguy]

Hi all,

Quick question, I know we're only supposed to buy one counter with IBKR every month, but what is the rule if you're making your first lump sum investment?

I've split my lump sum over 2 months, but say I want my portfolio to be 90% the stock ETF and 10% the bond ETF, does that mean I invest 90% of my lump sum in the first month to buy the stock ETF counter and 10% the next month? They are traded in different currencies and I was very silly and converted half my lump sum into one currency and half into another perhaps I should convert some back?

 

[limster]

Hi all,


I've split my lump sum over 2 months, but say I want my portfolio to be 90% the stock ETF and 10% the bond ETF, does that mean I invest 90% of my lump sum in the first month to buy the stock ETF counter and 10% the next month? They are traded in different currencies and I was very silly and converted half my lump sum into one currency and half into another perhaps I should convert some back?

if you are new to this, whats the harm of following Shiny's recommended ETFs? why are you doing ETFs denominated in different currencies?

After you gain more experience and want to deviate from Shiny's recommendation go straight ahead....

 

[confusedsuitguy]

if you are new to this, whats the harm of following Shiny's recommended ETFs? why are you doing ETFs denominated in different currencies?

After you gain more experience and want to deviate from Shiny's recommendation go straight ahead....

Thank you for your reply.

I've discussed my reason for not going with the recommended ETFs on this forum before, but in a nutshell it was because I was not comfortable investing in certain companies/governments. I've found suitable replacements for the two standard ETFs suggested by Shiny - they aren't as good but they will do just fine for my purposes.

Would you happen to have any advice regarding the lump sum division? I've checked and I wouldn't be losing very much at all to convert back to another currency just unsure now about whether to go 50-50 and then continue buying the shortfall for a few months or to start 90-10!

Thanks

 

[zonewarehard]

come in ssrr...

 

[razoreigns]

Diversify broker-custodians, I think you mean.

I don't think there are terrific second choices. Maybe Standard Chartered Singapore? However, I don't know whether it's possible to transfer shares of IWDA in kind from Interactive Brokers to another broker-custodian or how much it'd cost.

One possible approach is that you don't transfer at all, but instead, once you reach US$100K in total account value at Interactive Brokers, you make some IWDA purchases via Standard Chartered -- every third purchase (once per quarter), for example. Standard Chartered will likely be more expensive, but if you're dead set on adding another broker-custodian to the mix then maybe you're willing to pay the extra cost. Of course the other approach is "Don't worry about it" since any single broker (including IB) that you use for your global stock index fund investing will only ever hold a portion of your total household wealth. I don't worry much about this issue, but my personal "rule of thumb" is that I like to avoid keeping more than half of total household wealth with one custodian. It seems unlikely that you'd rise above even my conservative approach.

Hi BBCW,

Thanks for your reply. I currently have about 22% of my net worth in IB but that amount is beyond what is insured by SIPC, hence am looking to reduce exposure to it. Ideally, I am trying to limit exposure to any custodian to under USD500k. Will opening joint accounts help to mitigate the risk? For example, individual account (A) - 500k protection, joint account (A+B) - 500k, joint account (A+C) - 500k. In total, 1.5m protection split into 3 accounts. Does this solution work?

 

[BBCWatcher]

I currently have about 22% of my net worth in IB but that amount is beyond what is insured by SIPC, hence am looking to reduce exposure to it.

I hate to be the one to surprise you, but here’s the surprise: there is little or zero government insurance for brokers elsewhere. The SIPC isn’t perfect, but it’s probably the best of its kind. It’ll go to bat for you if necessary even above the limit, and it has been quite successful in such cases.

If you have more than US$500K in assets at IB then it’s usually rather easy to multiply the SIPC limit. The SIPC itself tells you how to do this. For example, let’s suppose you have a spouse or partner. You could have three accounts at the same SIPC insured broker arranged like this:

Account #1: your individual account
Account #2: your spouse’s individual account
Account #3: a joint account

Each of these accounts gets its own US$500,000 worth of SIPC coverage.

So yes, what you describe is possible. However, please note that the death of either or any joint account holder is an estate taxable event, and with the joint account valuation counted at 100% (not split) when calculating the fair market value for U.S. estate tax.

 

[decibel.]

Why would you want to diversify brokers like IBKR?

Sent from HUAWEI VOG-L29 using GAGT

 

[BBCWatcher]

Why would you want to diversify brokers like IBKR?

I can understand in the abstract why some degree of custodial diversification makes sense, but at ~22% of household wealth and with SIPC coverage for some big chunk of that, I don’t think it makes sense to shift assets to another custodian that’s lacking any SIPC coverage or anything comparable. Account retitling makes a little sense to multiply SIPC coverage, but it isn’t super urgent.

 

[razoreigns]

I hate to be the one to surprise you, but here’s the surprise: there is little or zero government insurance for brokers elsewhere. The SIPC isn’t perfect, but it’s probably the best of its kind. It’ll go to bat for you if necessary even above the limit, and it has been quite successful in such cases.

If you have more than US$500K in assets at IB then it’s usually rather easy to multiply the SIPC limit. The SIPC itself tells you how to do this. For example, let’s suppose you have a spouse or partner. You could have three accounts at the same SIPC insured broker arranged like this:

Account #1: your individual account
Account #2: your spouse’s individual account
Account #3: a joint account

Each of these accounts gets its own US$500,000 worth of SIPC coverage.

So yes, what you describe is possible. However, please note that the death of either or any joint account holder is an estate taxable event, and with the joint account valuation counted at 100% (not split) when calculating the fair market value for U.S. estate tax.

Thanks BBCW. I only have iwda in the IB account so US estate tax shouldn’t be a concern? Can I have more than 1 joint account to multiply the SIPC coverage?
Account 1 - individual
Account 2 - joint with my spouse
Account 3 - joint with my child