Official Shiny Things thread—Part III

[tchen003]

if want more exposure in US for higher gains,

wouldnt VUSD be better than IWDA+EIMI or VWRA combo?

TER is much much lower too

I saw the div is 1.49% TTM, using 15% withholding tax: 0.2235% is gone

Plus 0.07% of expense ratio, total near 0.3% which is higher than 0.2% and 0.18% of IWDA and EIMI.

But I might not fully understand TER, appreciate any correction

 

[tchen003]

If you go by free-float market-cap, about 88% IWDA to 12% EIMI.

Thanks for that, mind to share the reasoning? Thanks a lot!

 

[tchen003]

The world is changing. US is going down the drain.
IWDA consists of >65% US stocks, so I don't suppose you want to over-weight stocks of a sun-set economy?

That is true....

but right now US is still the big boy, perhaps we place more emphasis (more than 80%) on US exposure? As China grows we can shift more weights on EIMI.

Any thoughts?

 

[bobobob]

So, we should hold a mix of S$ and US$ bonds? I don’t think we can achieve a perfect currency risk match, though.

Maybe I'm being too pedantic?

At the end of the day you won't know which currency will be stronger at what time. But you can have a good idea of where you want to retire.

 

[cassowary18]

Thanks for that, mind to share the reasoning? Thanks a lot!

The MSCI Emerging Markets Index (which EIMI tracks) takes up 12% of the MSCI ACWI Index (which tracks the entire world). Hence, MSCI World (developed world index, which IWDA tracks) would take up 88%.

https://www.msci.com/our-solutions/index/emerging-markets

But if you don't want to worry about allocations then go for VWRA.

 

[Han Shot First]

The MSCI Emerging Markets Index (which EIMI tracks) takes up 12% of the MSCI ACWI Index (which tracks the entire world). Hence, MSCI World (developed world index, which IWDA tracks) would take up 88%.

https://www.msci.com/our-solutions/index/emerging-markets

But if you don't want to worry about allocations then go for VWRA.

OK but why do the asset allocation according to market-cap weights?

What is the evidence (or otherwise) that market-cap weighting provides the optimal rate of return for the investment portfolio?

 

[frugal living]

Hello,

May I know what is the latest recommended international bond etf?

I have seen a few options pop up; CORP LN, LQDA. What about VAGU by vanguard? Any thoughts?

Thank you all!

Hello,

I see that my question has been missed.

The reason I want to include international bonds is because I am undecided on where to retire, specifically Canada or Singapore. I could end up splitting time between Canada and Southeast Asia during retirement.

So the question is, during the accumulation phase, should I have international bonds? If yes, which ones? I know there are CRPA, LQDA, VPDA, all of which consist of investment grade corporate bonds. And then there are VAGU and AGGU, which consist of global government and investment grade corporate bonds. Expense ratio wise, VPDA is the cheapest at 0.09%, while VAGU, AGGU are at 0.1%. the rest coming in at 0.22%. all are denominated in USD and accumulating. Any thoughts about these funds? I'm quite confused between CRPA and LQDA. Anyone has a clue? Both seems to be corporate bond etf denominated in USD, but LQDA's bonds are only issued in USD. How does that impact my choice?

I had thoughts about splitting my bond portfolio between Canada and Singapore. But during the accumulating phase, and because I'm a tax resident in Singapore, I don't want to hold any Canadian bond etf as most are distributing and subject to withholding taxes for residents in Singapore. Plus, I'm not sure if holding Canadian securities now will complicate my tax returns in Canada in the future when I move back.

Please enlighten me. Thank you

 

[cassowary18]

OK but why do the asset allocation according to market-cap weights?

What is the evidence (or otherwise) that market-cap weighting provides the optimal rate of return for the investment portfolio?

Good question. My (incredibly unqualified) take on this is that as a passive investor, you're not trying to optimize returns but merely trying to earn market returns. Ergo, your portfolio should mirror as closely as possible the market. That's why a market cap weighted allocation.

 

[swan02]

When u invest in the mentioned international corporate bonds. Your aim is largely to profit from income returns rather than rebalancing as they entail equity risk along with quite a long duration aka interest rate risk.

There is indeed a big diff when u hold MBH vs any of the mentioned corporate bonds. MBH firstly is much shorter duration hence less interest rate risk, and from the experiences in the recent covid crash, does not suffer as much as many of the corporate bonds internationally. Hence its proved, at least to me, much superior than many....hence I simply just needed to adjust my equity allocation if I feel MBH exposes too much equity like risks for my liking.

Ask yourself what’s the purpose of your fixed income.

Personally I don’t really care whether I think I’m in canada one day or the other. I'm in a similar position, hence I simply create a portfolio that ignores my domicile but rather become mobile instead.

In other words, I equate my equity allocation and fixed income or currencies to the perceived equity/credit/interest risks of those mentioned investment grade bonds by allocating a perceive equivalent risk of SGD and MBH and equity.

While now u r Singapore tax resident, I would take advantage of that.

But CAD is an extreme end. Has much much more equity risk like features. Don't forget by investing in the countries bond, you are basically dabbling with foreign currencies along with its equity/credit/interest rate risks....

So simply adjust your equity allocation to LESS when u hold more equity like bonds like CORP or MORE when u hold more Singapore or usd bonds. Usd bonds sits in the opposite end to Canadian in regards to equity like risks.

However, do take note, we are speaking about Investment Grade bonds. If you decide to hold onto sovereign Canadian bonds, instead of corporate bonds, the risks severely changes and the canadian govt bonds maybe hell a lot safer (due to the nature of being a high quality bond) but it will still exudes CAD equity like risk.

Tax. Just sell them and buy them back for less headache. The assumption is you have capital gains. If not, do not sell, then go for tax harvest. I'm not an expert in Canadian tax, but generally the crux r quite similar in many jurisdication.

Anyways, my theory is not backed by mathematics. So take it as a grain of salt. So far it has worked for me.

One should figure out what asset allocation they want. 50% IWDA/50% MBH is definitely has higher standard deviation than 50%IWDA/50%Corp.

Which has a better risk adjusted return ?, which has better ending 20 year overall return with, or without rebalancing ?? who knows......I myself once opposed MBH, until this product proved to me is a fantastic alternative to A35....however, I think many people start to realise that and the YTM is going to be bad eventually and soon.........

I foresee, when bonds YTM returns do indeed become zero or negative. Currencies will play a greater role by focusing more on rebalancing strategy for return as oppose to coupon return. You can start ignore holding/management fee cost. Gold may start to be center stage as it is not manipulated by the policies and politics of a country, I won't be surprised many are already in this bandwagon of thought.

Do be careful how you structure your finance with regards to tax. You may spend all your life in Southeastasia and yet be still seen as a tax resident of Canada. Do either hire good help, or help yourself by learning as I did. I can correct my so called expat tax specialist and the work of his staff.....even solved an issue for him and yet having to pay him.....damn !

Hello,

I see that my question has been missed.

The reason I want to include international bonds is because I am undecided on where to retire, specifically Canada or Singapore. I could end up splitting time between Canada and Southeast Asia during retirement.

 

[swan02]

the consequences of getting wrong is severe. Can go both ways. Best to be in the middle.

Thus that is prolly why Listopad equity allocation is:

VWRD/IWDA: 71%
EIMI: 20%
ES3: 9%

looks like a good AA, although I myself in one of my portfolios based on this very similar principal has more Japan equities.

The world is changing. US is going down the drain.
IWDA consists of >65% US stocks, so I don't suppose you want to over-weight stocks of a sun-set economy?

 

[chrisloh65]

If you agree that US is sun-set economy, you still want to put 80% of your portfolio on US exposure just to see them grow at 1.0% p.a. (or in reality shrunk after factoring in inflation) while another 20% into something that grows at 6.5% p.a.? That doesn't make sense to me.

Furthermore, China's growth is not entirely captured in EIMI because of biases, particularly when US is trying to stop Stock Index companies from including Chinese stocks into the indices they compiled and trying to stop Americans and American funds from investing into Chinese stocks.

You may want to listen to what Billionaire professional investor Ray Dalio has to say:

https://www.scmp.com/business/china...weight-us-and-european-assets-should-increase

Investors ‘overweight’ in US and European assets and should increase Chinese holdings, Ray Dalio tells Hong Kong FinTech Week
Published: 10:30pm, 2 Nov, 2020

One thing I learnt early on in my investing journey is never trust the "advice" of amateurish investors like those in this forum (especially those who don't even have $10M of their money to manage), and some even write and publish books in order to try to increase their "credentials" to portray themselves as "experienced professional investor" (and can earn some extra pocket money as well) and then seek to earn more sideline money by soliciting consultancy fees for private consultation!

That is true....

but right now US is still the big boy, perhaps we place more emphasis (more than 80%) on US exposure? As China grows we can shift more weights on EIMI.

Any thoughts?

 

[chrisloh65]

A good AA to me is to re-balance based on where the returns / rewards is the highest (on reasonably diversified risk) in this global world. No point burying our head in the sand or keep looking at the rear mirror and keep dreaming of getting rich piling into US stocks that HAD made some people rich but will not be repeated in the future! (Unless you are Americans and have tremendous self-interest to encourage people to pile into US stocks and bonds)

So to me, it is clear that the consequences of your portfolio performing poorly if you have "VWRD/IWDA: 71%" is quite severe and you may end up that your current portfolio will not be enough to last your retirement draw-down until you kick the bucket!

the consequences of getting wrong is severe. Can go both ways. Best to be in the middle.

Thus that is prolly why Listopad equity allocation is:

VWRD/IWDA: 71%
EIMI: 20%
ES3: 9%

looks like a good AA, although I myself in one of my portfolios based on this very similar principal has more Japan equities.

 

[polyglob]

I like your writing style. Very straightforward.

If you agree that US is sun-set economy, you still want to put 80% of your portfolio on US exposure just to see them grow at 1.0% p.a. (or in reality shrunk after factoring in inflation) while another 20% into something that grows at 6.5% p.a.? That doesn't make sense to me.

Furthermore, China's growth is not entirely captured in EIMI because of biases, particularly when US is trying to stop Stock Index companies from including Chinese stocks into the indices they compiled and trying to stop Americans and American funds from investing into Chinese stocks.

You may want to listen to what Billionaire professional investor Ray Dalio has to say:

https://www.scmp.com/business/china...weight-us-and-european-assets-should-increase

Investors ‘overweight’ in US and European assets and should increase Chinese holdings, Ray Dalio tells Hong Kong FinTech Week
Published: 10:30pm, 2 Nov, 2020

One thing I learnt early on in my investing journey is never trust the "advice" of amateurish investors like those in this forum (especially those who don't even have $10M of their money to manage), and some even write and publish books in order to try to increase their "credentials" to portray themselves as "experienced professional investor" (and can earn some extra pocket money as well) and then seek to earn more sideline money by soliciting consultancy fees for private consultation!

 

[swan02]

It’s just what financial planning is at least that’s how I see it. Which is based on

1. managing risk
2. NOT believing u or anyone can time the market and continue to do well long term
3. Meet clients expected return given their risk appetite with given suite of products
4. Do it cheaply
5. Meet returns with the lowest risk possible
6. Tax
7. Etc etc..

I have never seen anyone claiming to be experts in investing or timing to be exact.

Its more like all of them claim they are crap at timing the market hence crap investors if that’s your definition and that I agree we all are &$@& crap and continue to believe so with all sincerity.

Thats why we are here and not on other market timing blogs which I call load of BS.

Again, its more financial planning and hopefully backed by statistical evidence.

I would pay for a good financial planner than one who claims he can beat the market or one who runs a hedge fund even if that person is Ray Dalio.. no thanks.

One thing I learnt early on in my investing journey is never trust the "advice" of amateurish investors like those in this forum (especially those who don't even have $10M of their money to manage), and some even write and publish books in order to try to increase their "credentials" to portray themselves as "experienced professional investor" (and can earn some extra pocket money as well) and then seek to earn more sideline money by soliciting consultancy fees for private consultation!

 

[tchen003]

A good AA to me is to re-balance based on where the returns / rewards is the highest (on reasonably diversified risk) in this global world. No point burying our head in the sand or keep looking at the rear mirror and keep dreaming of getting rich piling into US stocks that HAD made some people rich but will not be repeated in the future! (Unless you are Americans and have tremendous self-interest to encourage people to pile into US stocks and bonds)

So to me, it is clear that the consequences of your portfolio performing poorly if you have "VWRD/IWDA: 71%" is quite severe and you may end up that your current portfolio will not be enough to last your retirement draw-down until you kick the bucket!

Very informative!

But I don’t dare to bet all in China with hundreds of grand of cash.

Assume US going at 1% pa growth in future, the buy and hold SP500 strategy provided by Mr Buffet will no longer be working.

The world is changing for sure

 

[FrostWurm]

One thing I learnt early on in my investing journey is never trust the "advice" of amateurish investors like those in this forum (especially those who don't even have $10M of their money to manage), and some even write and publish books in order to try to increase their "credentials" to portray themselves as "experienced professional investor" (and can earn some extra pocket money as well) and then seek to earn more sideline money by soliciting consultancy fees for private consultation!

One thing I learnt early on in my investing journey is never to trust the "advice" of those who only make grand-sounding but unsubstantiated arguments, repeatedly boast about how much money they have, and resort to ad hominem arguments because they think making personal attacks on others automatically makes them correct.

 

[cassowary18]

One thing I learnt early on in my investing journey is never trust the "advice" of amateurish investors like those in this forum (especially those who don't even have $10M of their money to manage), and some even write and publish books in order to try to increase their "credentials" to portray themselves as "experienced professional investor" (and can earn some extra pocket money as well) and then seek to earn more sideline money by soliciting consultancy fees for private consultation!

Yet one person has 3 fanpage threads but the other barely has enough to fill one

 

[Kayeesha]

I wonder whether it would have helped that u perceive an ETF as a currency as much as I perceive gold as such ?

This way, u will ....

Currency values move in cycles.
If you can buy US$ at cheap rate (vs S$), then it is more advantageous to exchange at cheap rate and hold on to the US$ and buy US$ bonds instead of switching back to S$ and then back to US$ to buy stocks listed in US$. Every forex transactions will incur costs....

At the end of the day you won't know which currency will be stronger at what time. But you can have a good idea of where you want to retire.

Many thanks swan02, chrisloh65 and bobobob for your views.

I guess in a perfect world we will be hedging. But it does make managing the investment portfolio more complicated and instead of passive investing, it’s more like active passive investing.

On the other hand, maybe such hedging will be necessary when the portfolio grows larger and when the rebalancing amounts gets larger?

 

[chrisloh65]

Bernie Mandoff also has many stupid and naive fan-investors and fan-supporters

Yet one person has 3 fanpage threads but the other barely has enough to fill one

 

[moolala]

Bernie Mandoff also has many stupid and naive fans-investors and fan-supporters

are chiu option trader?