Hi Shiny, many thanks for taking the time to reply to my posts.
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.
Apologies but I was focussing on outperformance and had overlooked the objective of these ETFs – to track and not to outperform the benchmark. So, I really shouldn’t be looking at the performance of the NAVs but how closely they track the benchmark.
Nonetheless, as the spread cost only occurs when you buy and sell, whilst the TER occurs yearly, if not daily, I thought, intuitively, you will select the fund with the lower TER which in this case is SWRD/LCWD/VHVE over IWRA.
Moreover, can you assume that the spreads of the smaller and younger ETFs will narrow as the fund size and daily volume continue to grow due to investors shifting funds over for the lower expense ratio?
The first question is why you’re looking at overseas bonds in the first place.
Apologies but I had assumed that overseas bonds and overseas stocks will be more negatively correlated compared to local bonds and overseas stocks. Also, as these bond ETFs will be denominated in US$, there is no FX risk when it comes to rebalancing in the overseas portion of the portfolio.
Do you really want to take all the extra FX risk inherent in owning bonds, for basically zero extra yield? It’s not a great trade.
Correct me if I am wrong but the FX risk occurs when you drawdown to pay for your S$ living expenses but not when you use it rebalance your portfolio i.e. buy more overseas stocks?
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.
No, I’m not being insistent, just not understanding. I thought just like we will be holding both local and overseas stocks, we will also be holding local and overseas bonds during the accumulation phase.
However, during the distribution phase, to cover our living expenses in S$, our bond portfolio will be 100% local to not take on the extra FX risk. So, I thought there should then be a progressive shift in allocation from overseas to local in the bond portion. Of course, this does make the managing the investment portfolio more complicated and likely increase overall costs.
The upshot is that there’s no clear answer to “which international bond ETF should I buy?”; this one depends on individuals’ needs.
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”.
I’d take your advice. It’s already too complicated for me to manage this 3 (4 if I were to throw in a China ETF) fund portfolio.
Uh. You want China, but you don’t want EM ETFs? I hate to break it to you, but China is an EM...
Yes, China is an EM but an EM ETF like EIMI has other countries in their 10 top like Brazil, Russia and South Africa which according to OECD have country risk ratings of 4 and 5. China’s country risk rating is 2 and Hong Kong is a DM but has a country risk rating of 3.
Anyway. Do you want mainland-China only, or do you want China + HK + Taiwan?
Off the top of my head, I’d like China and Taiwan.
Btw, with Vanguard closing their HK ETF business which included their US$210m 9140 HK S&P 500 index tracking ETF, it would seem that the large ETF with AUM above US$100m criteria is no longer fool proof. Neither is the name “Vanguard, iShares or SPDR”?
Having said that, is it safe to assume that SWRD, LCWD and VHVE will not suffer the same fate as Vanguard’s HK ETFs?
Apologies but here are some additional questions that I have:
1. I believe I am supposed to reinvest all dividends from ES3 and MBH. So, how should I reinvest them bearing in mind that I have no income, so will not be doing monthly or periodic DCA-ing and minimising the number of transactions would be my preference? Still immediate reinvestment due to opportunity costs, or can I batch them up and reinvest when I come to do the rebalancing?
2. Would you recommend Tiger Brokers as they have the same 0.08% trading fees as IBKR SG but they have no minimum trading fee? Btw, I have an IBKR LLC account.
Once again, very many thanks Shiny and everyone.
