Official Shiny Things thread—Part III

[swan02]

I've created another "test" portfolio for possible assets under management for over a million dollars, retired, and Singapore domiciled. Risk preference: low to medium overall portfolio.

Require critique for this..

Equity: 35 percent. (can go up to maximum of 50 percent depending on situation).
35 percent IWDA
45 percent SXLP or a global version (might have utilities mixed)
20 percent EIMI

Fixed income component 65 percent
40 percent MBH
60 percent US dollars
? might riddle a bit on O9P, to improve on income return and take slightly more equity like risk, while also acts as a usd inflation hedge.

Rationale:
1. The high international shares component is to hedge against USD devaluation rather than using gold or foreign currencies or TIPs.
2. Mainly income oriented to put nerves at rest during sell offs.
3. Also gives the sense of "getting a cash return", even if it doesn't make sense, but old people only believe in what they feel or see or touch.
4. US dollars and not bonds, acts as a reliable buffer/ballast.
5. MBH gives some stability to the portfolio as well as income. Has decent buffer but not as good as USD dollar.
6. Low 35 percent asset allocation readily acceptable risk but yet return overall is ok to produce a SGD return of 3-4 percent over the next 10 years assuming asset prices remain elevated while also not having to worry of interest rate rise due to USD (cash), while also USD acting as dual formation as a buffer in sell offs.
7. EIMI will eventually be reduced to pure IWDA/consumer staples (this is the only market timing part of it in order to benefit from the eventual rise up of USD after a sustained dollar correction.
8. Requires 2-4 times rebalancing especially in volatile times such as now.

 

[cassowary18]

After thinking a bit, it appears that Ameritrade is the right account to open ?

hence purchasing QQQ etf instead and accumulate it till close to 100k usd before moving to IB.

Also being aware of tax differential being small given that QQQ smaller TER offsets the tax savings of EQQQ domiciled in Ireland.

And also being aware of the death tax of
USA domiciled funds.

so anyone wishes to rebut AMERITRADE as being the choice for the already mentioned scenario !

Why do you need to shift to IB once you hit USD 100,000? Just continue on with TD Ameritrade if that's what you prefer. Shifting incurs transfer costs.

You mentioned EQQQ earlier which is listed on LSE, that's why I suggested IBKR. Ameritrade only allows trading in US markets.

 

[swan02]

won’t cost much shifting. Just sell all and buy in IBKR after 100k usd is reached.

As mentioned 500 bucks a month purchase is too low to have IB viable even when batched.

Sticking to TD has issues with death tax and a slightly more expensive overall after considering the 30 percent dividend tax and TER of QQQ over EQQQ. It’s costly when tech a highly volatile product can potentially grow to a very large amount where a small expense diff can mean a lot over 20
Years.

Why do you need to shift to IB once you hit USD 100,000? Just continue on with TD Ameritrade if that's what you prefer. Shifting incurs transfer costs.

You mentioned EQQQ earlier which is listed on LSE, that's why I suggested IBKR. Ameritrade only allows trading in US markets.

 

[swan02]

Any coders ??

Python or Java or C++ to learn ?

to create apps etc and teach kids coding.

Apologise for asking this in a finance thread.

 

[newjersey]

BBC Watcher...

STI is the worst index to invest in, 60% weightage to the local banks.
the rest are split between GLC, gov-linked companies that are fronted by the gov's ruling party's yes-peeps.

anyone investing in SG's stocks are just hardliners who are overweight on the SG brand as opposed to the global dynamism of international leaders at SPY.

no?

 

[MangoTuna65]

One further question i have, and that is regarding the distributing/accumulating feature of ETFs. I think i understand their major difference superficially (please correct me if wrong!); the first one pays out the dividends from their underlying holdings, whereas the second one reinvests the dividends automatically.

Mechanisticly, the distributing one is easier to understand, the ETF does not keep the dividends, replicates the percentage holdings of their underlying assets according to their benchmarked index, which also do not keep dividends.

How does the accumulating ETF work though? The fund keeps the dividends which are reinvested. ETF investors do not get additional shares, so this ROI is reflected as an increase in NAV? Wouldn't this result in discrepancies between the ETF and the benchmarked index, since the index do not keep this dividend ROI?

Looking for enlightenment from the gurus! Thanks a lot.

Hi everyone,

I am just starting off ETF investing and have a few questions.

Background - I am 35yo, married with 2 kids. I have about 200k in SSBs currently in their 2nd year earning ~2.2% this year. This pot of money will serve as my family's emergency funds.

1) I am not looking for dividend income for now at least, so I am planning to delay putting money into STI ETFs and go full steam with S&P500 ETFs. Does this make sense or am I doing something stupid?

2) I made an account with interactive brokers and read on this forum that there is the 'SG' version of IB? Are there differences between a SG and non SG account and how can I tell which account did i create?

3) The S&P500 ETF i am looking at is CSPX. On interactive brokers, it shows as CSSPX ISHARES CORE S&P 500 LSEETF. Is this the correct one? My understanding is that CSPX and CSSPX are just different names on the irish and london exchanges respectively, but they are referring to the same ETF right?

4) I am looking to park money for at least 15 years. My expenditures spreadsheet tells me that I can probably put in ~35k per year barring sudden spikes in spending. Would it matter alot to do DCA and put money in monthly or do a lump sum investment to save time buying shares every month?

5) Dumb question: to actually buy the shares, do I have to purchase them when the LSE market opens? and I should offer the asking price at that time of purchase ... right?

Thank you in advance for answering my questions and any advice is appreciated!!!

 

[BBCWatcher]

Is there a better platform ?

I don’t think you (somebody) should, but if you want a “technology” stock fund then get a technology stock fund. Examples include IUIT and WITS. IUIT has a total expense ratio of 0.15%, less than QQQ’s 0.20%.

I’ll ask again: currency conversion cost? TD Ameritrade offers only a bank rate.

STI is the worst index to invest in, 60% weightage to the local banks....

That figure is about 36.1% right now.

 

[BBCWatcher]

One further question i have, and that is regarding the distributing/accumulating feature of ETFs. I think i understand their major difference superficially (please correct me if wrong!); the first one pays out the dividends from their underlying holdings, whereas the second one reinvests the dividends automatically.

Mechanisticly, the distributing one is easier to understand, the ETF does not keep the dividends, replicates the percentage holdings of their underlying assets according to their benchmarked index, which also do not keep dividends.

How does the accumulating ETF work though? The fund keeps the dividends which are reinvested. ETF investors do not get additional shares, so this ROI is reflected as an increase in NAV? Wouldn't this result in discrepancies between the ETF and the benchmarked index, since the index do not keep this dividend ROI?

I don’t know why accumulation is more difficult to understand. It’s what you do, hopefully, so if anything it should be easier to understand.

Let’s suppose the underlying index consists of 4 stocks and that it’s a market capitalization weighted index, meaning the index components are weighted against each other according to their relative market values. Let’s assume at this instant that all 4 are trading at $20 per share with 1 billion shares each, so they’re each worth $20 billion. The index is baselined at 80. The fund manager creates Fab Four Fund D and Fab Four Fund A, but to attract more retail investors the fund manager sets the share price at $20 (one quarter of the initial index value). And that’s Lesson #1 here: the fund’s share price can be set to practically anything at the beginning. There’s no need to set it specifically to the index value.

OK, let’s assume for now the share prices of these funds are remarkably stable and that it’s a closed fund — no additional shares and shareholders. Stock #1 pays a net (after tax) $1 dividend, let’s suppose. For Fund D the manager sends $0.25 (one fourth) per Fund D share to each shareholder, because each share of Fund D includes one quarter of one share of Stock #1. For Fund A the manager takes the dividend and buys more stock. Since the ratio between the four stocks in the index is equal, the manager buys an equal number of shares of all four stocks. The price of Fund A rises to $20.25, because each fund share now owns $0.25 more of all four stocks.

And that’s it, really. Simple! Yes, of course the prices of the underlying stocks bounce around, and so the index ratios between those stocks bounce around. With both Fund D and Fund A, the fund manager simply tracks the index ratios between stocks. Each share of Fund A just owns more and more shares (fractional shares) of every stock in the index over time because the dividends are plowed right back into buying more shares, still tracking the index.

Also, in reality, most funds can sell additional shares. The fund managers can onboard new shareholders, buy even more stock in equal fractions to existing shareholders (the index ratios), and expand the size of the fund. That’s with both Fund D and Fund A types.

Anyway, it’s not complicated, actually. Just remember that accumulating funds use dividends to buy more stock shares for all fund shareholders, per the index ratios (if it’s an index fund). That’s it. The divisor changes (falls), so each accumulating fund share holds progressively more fractional stock shares.

Accumulation is what you should be doing for most or all of your working career. It’s easy and cost efficient. Some jurisdictions (like the U.S.) don’t allow accumulating funds at the fund level, but they allow brokers to provide automatic dividend reinvestment as an account feature. Either way, accumulating funds are terrific. And decades from now (I presume), when you want accumulated wealth to support a retirement lifestyle, no problem, just sell a few fund shares every quarter, for example.

What’s kind of weird to me is that there are so many people who trust Blackrock or whoever the fund manager is to track an index, but then they question whether the same fund manager struggles to reinvest dividends in an accumulating fund? That doesn’t make sense. Either way, it’s very mechanical. When you invest in an accumulating fund and hold X shares of the fund, every year — every day, usually — each fund share you hold owns slightly more stock per share. Dividends go straight back into buying more shares, for everyone. And when you’re accumulating more accumulating fund shares, you’re doubling up on the number of fractional shares of underlying stock that you own. Wonderful stuff, really.

 

[swan02]

So you reckon IB is still the way to go ?, even as one contributes just SGD 500 a month thus facing 10 USD (SGD 13.70) a month, which means approx. 2.74% + another 0.46% conversion fee due to the min USD 2. Total of 3.2%.

or one can batch it up to 6 monthly hence 3k SGD, incurring x6 x SGD 13.70(US 10) + SGD2.74 (currency conversion) total = SGD 85. 85/3000=2.8% transaction fee. Still is a lot

vs

TD: bank rate something like 2.5% spread ??? (FX conversion)

or

SCB, spread of 0.4% ? (FX conversion). Anyway, anyone knows the spread of FX conversion with SCB ?, and I assume also has 0.2% or 0.18% (with priority) transaction fee ?

or SAXO ?

1. 0.6 percent conversion spread ?
2. no monthly maintenance fee ?, hence batching works

...................

If TD conversion is really 2.5%. Perhaps SCB is a better platform ?..

My focus now is finding out what is the cheapest platform to purchase international shares for an amount that is small even as batched up.

Which ETF can be thought about later.

I don’t think you (somebody) should, but if you want a “technology” stock fund then get a technology stock fund. Examples include IUIT and WITS. IUIT has a total expense ratio of 0.15%, less than QQQ’s 0.20%.

I’ll ask again: currency conversion cost? TD Ameritrade offers only a bank rate.


That figure is about 36.1% right now.

 

[jaykill_92]

$10.70 per counter from CDP - I have asked an IBKR SG representative. However, transfer in of positions from another broker like FSMONe should be free if there are no changes to beneficial ownership.

 

[swan02]

Speaking about ETF. U rightly pointed out the concentration risk of tickers such as Apple. Hence IUIT is a Slight disadvantage even with cheaper fees.

Hence a preference for a broader classification is warranted.

Some other Tech ETF I’m thinking about are ones such as RYT and CQQQ and maybe even some WTAI to diversify the already concentrated and frothy Nasdaq 100.

I don’t think you (somebody) should, but if you want a “technology” stock fund then get a technology stock fund. Examples include IUIT and WITS. IUIT has a total expense ratio of 0.15%, less than QQQ’s 0.20%.

 

[MangoTuna65]

Thank you for the detailed explanation!!!
Yes, I am going for accumulation so what you said makes a lot of sense.

Perhaps why I thought accumulating ETFs are harder to understand because of the visibility of the ROI. For distributing ETFs, you get the dividends either in the form of cash, or cash reinvested for more shares (ie, there is a number that increases as a result of that ROI). For accumulating ETFs, the ROI manifests as a result of share price increases, but is convoluted with the share price movements of the underlying stocks.

I do understand that overall, the total theoretical results of a dist ETF and an accm ETF should be almost identical with commissions upon reinvestment in the dist ETF context eating into gains.

I don’t know why accumulation is more difficult to understand. It’s what you do, hopefully, so if anything it should be easier to understand.

Let’s suppose the underlying index consists of 4 stocks and that it’s a market capitalization weighted index, meaning the index components are weighted against each other according to their relative market values. Let’s assume at this instant that all 4 are trading at $20 per share with 1 billion shares each, so they’re each worth $20 billion. The index is baselined at 80. The fund manager creates Fab Four Fund D and Fab Four Fund A, but to attract more retail investors the fund manager sets the share price at $20 (one quarter of the initial index value). And that’s Lesson #1 here: the fund’s share price can be set to practically anything at the beginning. There’s no need to set it specifically to the index value.

OK, let’s assume for now the share prices of these funds are remarkably stable and that it’s a closed fund — no additional shares and shareholders. Stock #1 pays a net (after tax) $1 dividend, let’s suppose. For Fund D the manager sends $0.25 (one fourth) per Fund D share to each shareholder, because each share of Fund D includes one quarter of one share of Stock #1. For Fund A the manager takes the dividend and buys more stock. Since the ratio between the four stocks in the index is equal, the manager buys an equal number of shares of all four stocks. The price of Fund A rises to $20.25, because each fund share now owns $0.25 more of all four stocks.

And that’s it, really. Simple! Yes, of course the prices of the underlying stocks bounce around, and so the index ratios between those stocks bounce around. With both Fund D and Fund A, the fund manager simply tracks the index ratios between stocks. Each share of Fund A just owns more and more shares (fractional shares) of every stock in the index over time because the dividends are plowed right back into buying more shares, still tracking the index.

Also, in reality, most funds can sell additional shares. The fund managers can onboard new shareholders, buy even more stock in equal fractions to existing shareholders (the index ratios), and expand the size of the fund. That’s with both Fund D and Fund A types.

Anyway, it’s not complicated, actually. Just remember that accumulating funds use dividends to buy more stock shares for all fund shareholders, per the index ratios (if it’s an index fund). That’s it. The divisor changes (falls), so each accumulating fund share holds progressively more fractional stock shares.

Accumulation is what you should be doing for most or all of your working career. It’s easy and cost efficient. Some jurisdictions (like the U.S.) don’t allow accumulating funds at the fund level, but they allow brokers to provide automatic dividend reinvestment as an account feature. Either way, accumulating funds are terrific. And decades from now (I presume), when you want accumulated wealth to support a retirement lifestyle, no problem, just sell a few fund shares every quarter, for example.

What’s kind of weird to me is that there are so many people who trust Blackrock or whoever the fund manager is to track an index, but then they question whether the same fund manager struggles to reinvest dividends in an accumulating fund? That doesn’t make sense. Either way, it’s very mechanical. When you invest in an accumulating fund and hold X shares of the fund, every year — every day, usually — each fund share you hold owns slightly more stock per share. Dividends go straight back into buying more shares, for everyone. And when you’re accumulating more accumulating fund shares, you’re doubling up on the number of fractional shares of underlying stock that you own. Wonderful stuff, really.

 

[moolala]

BBC Watcher...

STI is the worst index to invest in, 60% weightage to the local banks.
the rest are split between GLC, gov-linked companies that are fronted by the gov's ruling party's yes-peeps.

anyone investing in SG's stocks are just hardliners who are overweight on the SG brand as opposed to the global dynamism of international leaders at SPY.

no?

I don't trust BBC. he is American and I think not invested substantially in sti

he's just giving general advice to buy index fund in ur home country

dyodd

maybe he ish saying use cpf for sti

 

[Nyan]

i just set a 2 year time frame because i feel that's how long it will take for the market to recover. if we take a look at the 2008 financial crisis, it crash at the end of 2008 and recovered around late 2009. prolly around a year?

so im speculating a 2 year time frame to see whether will it be worth it for me to take the risk. but this timeframe can be extended if needed.

im also looking at unit trusts, but since unit trusts are actively managed. their prices seems abit high to enter now.

Of course you could lose money on a punt like this within 2 years. You could even lose a lot of money. Right now ES3's share price is down about 20% from its level 2 years ago. Adding dividends but subtracting the hefty costs, and you'd definitely be down, a lot, versus 2.5%/year interest. "Past performance is not indicative of future results," but it certainly could be, or worse, sure.


So a couple questions then:

1. If you're unhappy with 2.5%/year interest, why aren't you transferring at least some OA dollars to SA for 4.0%/year interest?

2. Why have you specified a 2 year time horizon for these dollars?

 

[highsulphur]

i just set a 2 year time frame because i feel that's how long it will take for the market to recover. if we take a look at the 2008 financial crisis, it crash at the end of 2008 and recovered around late 2009. prolly around a year?

so im speculating a 2 year time frame to see whether will it be worth it for me to take the risk. but this timeframe can be extended if needed.

im also looking at unit trusts, but since unit trusts are actively managed. their prices seems abit high to enter now.

No one knows for sure when market will recover. I'm deploying my reserve since Mar with a 10 year horizon ie till 2030

 

[highsulphur]

Latest top 10 holdings in iwda. Technology forms 16%. Are the top 10 holdings also the top 10 biggest companies in the world? How does iwda weigh its holdings?

 

[hwckhs]

How does iwda weigh its holdings?

By free-float market capitalization. https://www.msci.com/developed-markets

There's a long document explaining how the index is constructed: MSCI Global Investable Market Indexes Methodology (August 2020)

 

[newjersey]

I don't trust BBC. he is American and I think not invested substantially in sti

he's just giving general advice to buy index fund in ur home country

BBC watcher knows about investing more than most of the clueless here.

it's good to listen to him than your common village of friends.

 

[Nyan]

Totally agreed with you on that. No one can know. No one will also know if the market would crash at the end of your 10 year timeframe.

But I feel we’ve gotta at least try. The market is beaten down right now. And to outperform 2.5%. Is it really that hard? Is it really too much of a risk?

No one knows for sure when market will recover. I'm deploying my reserve since Mar with a 10 year horizon ie till 2030

 

[moolala]

BBC watcher knows about investing more than most of the clueless here.

it's good to listen to him than your common village of friends.

Never listen blindly ... he may be knowledgeable about certain stuff but at the end of your day, you are fully responsible for your own investing

And pls don’t insult my friends knowledge...what a sweeping statement