How about that election, huh? If anyone wants any color commentary on the election, hit me up, but be prepared for it to be snarky.
Let’s start with some election-related questions:
Let’s talk rebalancing:
Shiny Things advice is to rebalance in May and November, but should I put off my rebalancing until December or January in view of potential volatility from the US elections?
On the contrary: you should rebalance during volatile periods. When things are moving around a lot, you’re more likely to capture a low or a high in the markets.
can i ask why did he choose may and november?
is it cuz prices are usually low? what's the reasoning behind these 2 months?
Great question. I picked November first, because there’s a very slight seasonal effect in some equity markets (notably the USA) where they tend to perform fractionally better from November to April than they do from May to October. It’s not really big enough to be actively tradable, and not reliable enough to be tradable at all, but if you’re going to be rebalancing anyway you might as well take advantage of it.
And then May is just because it’s six months apart from November.
What would you recommend an investor who have a higher risk profile with a longer time horizon (late 20s) and wish to accumulate wealth more aggressively, within a shorter time frame?
I would assume concentration will be favoured over diversification (hotly debated train of thoughts). I'm fully aware of the risks.
With that said, will individual stock picking be better or a single aggressive ETF ( for example concentrating only on the Tech/Growth stocks sector)?
Ooooof. OK, I’ll be honest, this is not a good idea, and I would encourage you not to do this. “Accumulating wealth more aggressively, within a shorter time frame”, inherently means you have a higher risk of
losing money as well. Are you OK with that?
articles online r saying how it might be a lost decade for us stocks; stocks may not rise every year, such as after great depression or japan lost decades
Look, nobody says stocks are going to rise every year. But also, fearmongers have been writing the “oh it’s going to be a lost decade, hide out in gold or cash or paintings or whatever” article literally since 2009, and they’ve been wrong every single freakin’ time.
They write those articles because they get clicks. You can ignore them.
I thought spreads would only impact my P&L and not affect the share price we see on the exchange? I am trying to understand the impact of the TER on the NAV.
I get you, but I’m not sure why you’re digging into the NAV so deeply. The thing that matters is how much money ends up in your account, so spreads matter.
Two related questions:
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?
As our stock portfolio comprises local and global stocks denominated in local and foreign currency (US$), would it make sense to have a bond portfolio comprising safe bonds denominated in US$ as well?
The first question is why you’re looking at overseas bonds in the first place. Do you really want to take all the extra FX risk inherent in owning bonds, for basically zero extra yield? It’s not a great trade.
If you’re really insistent on owning overseas bonds, and you have a good reason for it (e.g. you’re going to retire in another country), then it makes sense to own bonds denominated in the currency of the country where you might retire. That might be USD if you like some purple mountain majesties and epic road trips; AUD if you like not getting the ‘rona and don’t mind deadly animals; NZD if you like not getting the ‘rona but don’t like deadly animals; or GBP if you hate yourself.
The upshot is that there’s no clear answer to “which international bond ETF should I buy?”; this one depends on individuals’ needs.
Wow.. Well done
Why not just come back and work on something that would make you happy?
Swan02, I was reading your back-and-forth about early retirement, and if I’m being honest, I got a similar vibe to highsulphur’s comment.
Unless you’ve committed yourself to being the one who raises the kids full-time (which, if you have, you can skip the rest of this paragraph, because raising kids is a full-time job!), I’d really recommend finding yourself a job. It doesn’t have to be a huge commitment, either! I have friends and colleagues who’ve pulled the ripcord from high-stress tech or finance jobs; they’ve ended up as yoga teachers, real estate agents, wine sellers, bookkeepers for their local school...
The key thing is that the job gives them two things:
A) Money coming in the door to keep the house’s finances ticking over without having to worry about their portfolio; and,
B) A sense of purpose; social interaction; a community; all of those things you get from a job over and above just pocketing the paycheck.
It doesn’t need to be a full-time high-stress commitment. (If you
do find yourself looking for high-stress jobs, it might be time to have a chat to a therapist.) But even just a part-time job on a low-but-decent wage will still measurably improve your quality of life, even if you’re already independently wealthy.
Two more related questions:
So the plan is to invest my 25k to fund my HDB in 5-7 years.
@swan02 suggested to 20/80 AA. 20% VWRD, 80% MBH. Is there any reason to go into VWRD instead of IWDA and why MBH as well.
What’s your opinion on IWDA+EIMI? What could be the AA between the two?
VWRD vs IWDA is a personal-preference thing. I’ve always recommended IWDA, but VWRD is perfectly good too. For Tchen, if you actually want IWDA+EIMI, you can get the same exposure from VWRA and only pay one set of transaction costs instead of two.
MBH is a very good ETF that owns SGD-denominated corporate bonds from large, stable issuers. It gives you higher yields than SGD government bonds, and it’s more stable than owning stocks.
Another thing is how much potential returns will i be able to get after 5-7 years? How do i calculate it?
You can’t guarantee, but you can spitball it. Don’t forget, these numbers are just averages, so I’m going to include a standard-deviation measure - a measure of the fuzziness around the numbers.
(Whoooop, give me a sec, I’m going to have to come back to this one. I’m on my iPad, and running Eikon for market data at the same time as writing this mega post is crashing my browser.)
The MaybankKimEng MIP recommendation in the ST's guidebook seem to be a similar setup to the RSP, which auto deducts the acc every mth. I can only do 300 a mth so theoretically i can only buy different ETFs every mth.
Annoyingly enough, MBKE cancelled their excellent MIP plan about two months after the third edition of the book hit the streets. (I like to think I gave them so much new business that their systems collapsed under the load, but then again I also like to think that I have six-pack abs.)
Question 1: what is the difference between TER and expense ratio? Am cost aware and do want to get the lowest cost as possible.
Uh, there’s probably some technical difference, but they’re basically the same. I use “expense ratio” interchangeably with TER.
Question 2: even though am a ride-through-market investor, do you think if this is the time to purchase IWDA or Sp500 given the current bubble?
Yes I do think it’s a good time (though I don’t think you want to buy the SPX by itself; buy a global-stocks ETF instead, so you get exposure to other markets. Europe, Japan, Canada and Australia have plenty of interesting stocks that you’ll want to own.)
Question 3: is there any other index funds/ETF you can recommend with exposure to US/World?
Not really. The reason I dig so deeply into “OK, why IWDA, what are the benefits and drawbacks compared to other ETFs, what makes a good ETF” is so that I can confidently say “yes, IWDA is a solid recommendation, it will be the right pick for the vast majority of readers”.
Question 4: what do you think of factor investing (small value)? Besides Endowus, any product recommend to get such exposure with Low fees?
The size effect and the value effect haven’t worked for decades, and I flat-out think they won’t work any more. I banged on about this upthread somewhere, but in short: the value effect worked when it was harder to get information about companies, so it was easier to find companies that were “cheap” because they were under-analysed. Now every mug with a web browser can run a Finviz stock screen and find a zillion companies that pass a cheapness screen, any stock that still looks cheap is probably cheap for a reason.
That’s not to say that all factors are dead. I’ve had friendly arguments over beers with mates in the market about the performance of momentum and quality factors, and low-vol has periods of popularity. But honestly, for most people, it’s not worth the effort of trying to understand factors and model them to the point where you can make an educated decision about which factor tilt your portfolio needs. Just buy the index!
On a related note:
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?
This is an interesting question, but it’s also the wrong one to ask.
The debate between “equal weight is better!” and “cap weighting is better!” (and the occasional weirdo saying “no, this third weighting scheme is better!”) basically reduces to “do you think the size effect is real?”.
If the size effect is real, then equal-weighting will outperform cap-weighting; if the size effect doesn’t work, then cap-weighting will outperform equal-weighting. (I’m handwaving away a LOT of things here, I know.)
But also, it’s not really a relevant question, because there’s no good way for retail investors to buy an equal-weighted MSCI World or Straits Times portfolio. (There are equal-weighted S&P 500 ETFs, but that’s placing an awful lot of faith in the US equity market.) Cap-weighted funds are what we have, and they work well enough.
if want more exposure in US for higher gains,
...you’re confusing past performance with future performance. The US equity market has done well in the past, but that doesn’t mean it’ll continue to outperform. Markets
can’t outperform forever and ever amen, in fact; eventually valuations get so stretched that they snap back to normal.
Have you heard about Vanguard planning to close its ETF business in Hong Kong? I had intended to include either their China (3169) or Asia ex Japan index ETFs (2805) to my DM portfolio. This has thrown a spanner in the works.
Can you advise how I should proceed if I still want some exposure to China market? I’m not keen on EM ETFs though.
Uh. You want China, but you don’t want EM ETFs? I hate to break it to you, but China is an EM...
Anyway. Do you want mainland-China only, or do you want China + HK + Taiwan?
For IB accounts, does net liquidation value include trades done but not settled yet?
Yeah, it does.
Two related questions about financial planning:
What do you expect the financial planner to be able to do for you that you can't do yourself?
It’s just what financial planning is at least that’s how I see it. Which is based on
[...]
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.
My philosophy about financial planners is pretty much this. You don’t hire a financial planner or an advisor because you think they can beat the market—if you do, you’re going to be sorely disappointed, because most of them can’t. You hire an advisor to hold your hand and stop you from making dumb mistakes with your money; if an advisor can stop you from, say, going to cash in the depths of the March plunge and missing the recovery, then they’re worth their weight in gold.
Now, to the thread about hedging. Look, in the markets we used to say “you want a hedge, go hang out in a garden”.
What are some good ways to hedge a USD stock portfolio against USD devaluation?
You don’t.
If you have a USD devaluation, that’ll generally be GOOD for your USD stock portfolio. A lot of US-listed stocks (especially the large-caps) have substantial revenue in foreign currencies, so a weaker USD will be good for the stock price, and it’ll effectively be self-hedging.
More broadly, though: if a currency depreciates, the stocks denominated in that currency will tend to go up. (Think of it like this: The assets of the company are still the same. But the currency those assets are denominated in is weaker. So the shares of the company will be worth more units of that weaker currency.)
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.
Nah. For regular investors, hedging your FX risk is completely unnecessary. It just runs up costs—and really, it becomes an excuse for punting FX and calling it “hedging”.
And the larger portfolio you have, the more closely you should watch it grow (instead of just investing into passive index ETFs) because nobody has more interest in growing your own portfolio than you yourself.
This is actually not true, and if anything it’s the opposite of what’s happening at the biggest real-money investors. My absolute favorite example is NVPERS, the Nevada Public Employee Retirement System, which manages somewhere around thirty billion dollars...
and it’s all run by one dude, who sticks it entirely in indexes.
The gargantuan CALPERS fund next door in California—which runs north of three hundred billion dollars—did the same thing at the start of this year: they pulled nearly all of their equity investments away from active managers and moved them to passive index-tracking strategies. (They do still have some allocation to private-equity and other more esoteric asset classes, but after the scandal around their recently-departed CIO, I wouldn’t be surprised if they cut their private-equity business substantially as well.)
So, Chris, look, I understand you have a very high opinion of your own trading ability, but extending your experience to other professional investors much larger than you just makes you look silly.
And if you can grow your large portfolio faster, why need to work for people?
This is a facetious point, but I’m going to give it a more sensible answer than it deserves: because running other people’s money gives you a larger base for your compensation.
For example, Chris, if you were actually as good a trader as you claim you are, you’d make a lot more money as a PM at a hedge fund than you would running your own portfolio. You’d be earning 1.5-and-15 (it’s not 2-and-20 any more) on a much larger pool of assets.
