Category: invest_gtmp

[23]4 GRRs #defer

Posted on by tiger40490

— MIH as of 2023
$2180/3M: $169k * 6 ppa / 4, then deducting 14% tax

— ThePeak as of 2023
$893/3M = $71,440 x 5 ppa / 4

— TheBridge #02 as of 2023
$2115/3M = $105,730 x 8 ppa / 4
$705/M

— TheBridge #03
$1760/3M  = $87,900 x 8 ppa / 4

====

I received 2 Nov 2023 notice from ThePeak+theBridge about 12M deferment up to 30 Nov 2024. Until this notice, I didn’t notice any GRR payment failure.

— Important to remember the impermanence of everything above.

  • GRR is scheduled to stop after 10Y
  • swan events could affect the GRR
  • etc, etc

longevity=elusive, finHealth can be strengthened

Posted on by tiger40490

Longevity health is elusive but financial health, in contrast, can be strengthened. Key drivers are 1) higher nonwork income and 2) burn rate control 3) maintain salary (a topic for another blog).

(The list below is nothing new) Assets to acquire:
* safe high-div stocks like O:US
* risky high-div assets, like HY/PE
* risky low-div high-growth assets, like SIA

Jill’s products do not provide truly reliable current income. They are less reliable than many div stocks.

gold?

liquidity[def]: how I gauge ILLiquid products

Posted on by tiger40490

I define liquidity as the expected number (possibly zero) of waiting months to fully recover my capital [1]. If I must incur a financial cost to access my cash, I consider it inferior liquidity. It feels like mis-calculation and mis-planning.

As defined, liquidity is a top 3 consideration in my investment decision.  I often think of liquidity more than (the vague concept of) risk. Therefore, liquidity is a dominant feature of my risk appetite and risk profile.

[1] Here is a fake example to illustrate some fine points. Say you incrementally buy one share of BRK.A and wait for X months to get near BrE. Presently, you only need to access the earliest 22% of that amount, but you have to liquidate the whole share, at a 3% loss. Still a big loss. So at the current price, the investment is not yet “free”, not at ABE, i.e. not_yet_liquid. However, suppose I also bought one share same way as you. If I’m able to select which fractional lot to liquidate, and able to liquidate the first 22%, then I am at ABE, i.e. breakeven on that 22% of capital. In such a scenario, the investment is already-liquid. In this illustration, fractional sell improves liquidity.

  • term insurance? liquidity is moot. Not an investment.
  • annuity? liquidity is moot. Not an investment.
  • cash-like? most liquid and low-risk

— ABE = actionable breakeven = a situation where I can liquidate a given position to achieve breakeven. Whether this breakeven includes various costs (like commission, FX) is unspecified. I usually include all costs.

BrE = breakeven. Half the times, the BrE situation is theoretical not actionable.

— With risk capital investments (rEstate, equities, HY/PE, gold …) there’s a pdf bell curve. I might have to wait for 10 years to breakeven and be free to liquidate (partially) to access part of my initial capital, or the wait could be 2Y.

I am used to this type of risk-capital liquidity. I have learned to embraced this type of risk-capital investments.

Mufu …. is generally less liquid than holding equivalent stocks because the wait is lengthened by erosive expensive ratio + upfront fees

Note dividend payout often improves risk-capital liquidity. Some risk-capital investments have no dividend — gold; SIA;  growth stocks

— My common objection to endowment products is super-safe illiquidity. No matter how lucky things turn out to be, I am likely to wait a long time before I can break-even via policy surrender.

CPF-OA/SA features horrible super-safe illiquidity, so I only accept CPF involuntarily.

— How relevant are bid-ask spread, upfront fees, and depth@market? Relevant.
Large transaction costs hurt liquidity as I defined.

few adopt my2investment criteria: Tanko+JL.Lim

Posted on by tiger40490

I told Tanko about my 2 stringent criteria to pre-qualify an investment asset. I then asked Tanko ..
Q: why so few in our cohort follow similar principles?

— 1) A (Tanko’s immediate answer): many don’t have enough free cash like 500k (Tanko’s figure).  In The affluent often favor Funds over stocks@@, I discussed 200k as a criteria.

On 5 Feb 2022, I met my HJC classmates. Joonling (JL.Lim) said that most in our cohort (Singaporean Chinese) don’t have a lot of spare cash risk_capital to invest in stocks. He singled out burn rate on car + mortgage. I guess many Singaporeans (Zeng?) in my cohort have over-sized property assets paying out very little (or negative) DYOC — i.e. non-productive assets. I see that as cashflow low_ground.

Put yourself in the shoes of a big(like 500k+) mortgage borrower .. some of you probably don’t want to invest too much into stocks. The heavy debt limits the risk appetite, risk tolerance and overall capacity to take risks. Analogy — gymnasts carrying weights?

— 2) A (Tanko): If they have 500k, many investors prefer to see their 500k staying safe in a bank account, rather than fluctuating in an investment account. I guess my wife is one, so is my dad.

Put another way, I set aside risk_capital, whereas these investors have plenty of free cash yet very little risk capital.

However, some risk takers in my cohort maintain mortgage so as to invest 200k loan money in equities. This amount would be higher-tier risk_capital.

— 3) A (I told Tanko): a fundamental reason is that dividend yield is widely seen as insignificant compared to windfall achievable with growth stocks or SP500 passive investing.

Their burn rate probably makes $1k nonwork income insignificant. See $1k nonwork income=more meaningful to ME than others. To make a difference, they probably need $4k/M or $50k/Y nonwork income. At 5% payout rate, that requires $1M invested. So many of them would not be interested in receiving 5% payout.

With a risk capital below $200k, I would say a 6% nonwork income (below $1k/M) is not exciting or life-changing given their burn rate. Therefore, they probably want to deploy it to big bets.

[22]Chn not rising as a financial superpower #CNY,stockMkt

Posted on by tiger40490

— review of https://www.channelnewsasia.com/commentary/china-yuan-renminbi-currency-flow-us-dollar-finance-2758231

“As of 2022, the yuan is not viewed as a safe haven, Chinese stocks languish and no Chinese city is more than a regional financial center.”

I think HK/Tokyo/SG qualify as more global (rather than regional) financial centers because their currencies do not scare foreign investors.

“About 90 per cent of foreign exchange transactions involve the US dollar, while only 5 per cent use yuan…. Some depict the yuan’s tiny 3% (2.88% as of 2022 https://data.imf.org/regular.aspx?key=41175) share of global central bank reserves as quick progress because it is up from 1% five years ago. But this share is similar to those of far smaller economies like Canada or Australia, and well behind what analysts have been projecting.”

“Foreigners own about 5 per cent of stocks in China (versus 25 to 30 per cent in other emerging markets), and about 3 per cent of bonds in China (compared to around 20 per cent in other developing nations).” I think HKEX is considered outside China.

3episodes@ non-recreational trading

Posted on by tiger40490

[d=non-positive DYOC while holding]
[c=commission, or bid-ask spread was high in terms of percentage of investment amount not notional]
[m=margin account requires daily check, like a crying baby…]
[q=profit too quick and possibly unreal or unsustainable]
[t=time is NOT on my side]

Q1: how many months/years could I possibly hold a position?

— #1) [cdmqt] 1997 commodities for a few months
A1: months
— #2) [cdmqt] Saxo FXO for more than a year
A1: months, up to a year
— [dt] Oanda for a few months since late 2014
More recreational than earlier episodes.

Securities: mostly USD/SGD, but also a bit of gold and oil futures.
A1: 1Y+ for gold, oil. For USD/SGD, perhaps months

— #3) [q] Robinhood
Thank god the pre-clearance helps keep it more recreational.

A1: 1Y+, hopefully longer, as bulk of my assets have positive DYOC, allowing me to buy-n-forget.

==== txCost, NRY: 2 underrated advantages .. provide a significant margin of safety. When other investors experience losses or liquidity issues, I am often spared. Most people underestimate these advantages. Instead they focus on the overrated DRIP.

With commission costs and zero-div stocks, the entry-price/timing decision is more risky, more error-prone, more intimidating, less fun. I often become paralyzed by the due diligence. The dividend payout is a huge psychological and economic cushion against NAV drop or regrettable entry-price.

Similarly, rEstate investment without rental yield is more risky.

— small transaction costs (one-time or periodic) do add up .. Some investors (like Kun.H) seem to dismiss these costs esp. commissions, in their pursuit of 中长线 strategic trends. In contrast, My MOETF “system” and HFT systems rely heavily on the commission advantage. Some HFTs even earn a rebate from exchange for providing liquidity.

Upfront commission and expense ratio are the two best-known transaction costs. Other small transaction costs:

  • FX exchange costs
  • fund transfer costs between institutions.
  • taxes

div: mufu^stock^Reit^ETF #DPR #NAV-erosion

Posted on by tiger40490

 

A mutual fund eats away up to 2% of the dividend yield, in the form of expense ratio. ETF is around 0.5%.

I have never earned real dividend yield above 10% so I am keen to experience it.  The Allinz funds are so fake and manipulative .. /marketing-gimmicks/.

==== DPR (Dividend Payout Ratio) .. is the basis of dividend safety , sustainability and dependability,  the differentiator between stocks (below 60%), ETFs (100%) and mufu (often above 100%)

REITs are required to pay out at least 90% of their net earnings, paid out as dividends. A payout of 70–80% of FFO is the U.S. industry average, regardless of taxable income.

ETFs receive stock dividends and are required to pay them out either in cash or as additional shares to shareholders.

Good dividend stocks have payout ratio below 60%, otherwise flagged as a dividend-safety red flag. I don’t think mufu has these two concepts. High-dividend mufu often need to liquidate (and reduce) NAV to sustain high target dividend. Examples include 1) AllianzHY 2) OCBC Templeton monthly div (I see this fact every month in my OCBC statement!) 3) AGD below. The frequent liquidation requires active management, and might increased expense ratio.

In an unprofitable year, a blue-chip can reach into its deep pockets of cash reserve and decide whether to keep up dividend. The dividend_aristocrats have done exactly that in every down turn. Most mufu funds have no such reserve as far as I know. Therefore, I would not want to depend on a mufu to keep up dividend payout… not dependable.

  • — dividend stability:
  • a good blue-chip including some REITs can maintain dividend amount for decades, based on a healthy payout ratio on the back of robust cash flow
  • an ETF is a simple construct and unable to achieve it if any constituent stock ever cuts dividend.
  • mufu is a complex structure. Whenever a mufu shows stable high dividend, it’s invariably “cheating” with DPR > 100% , by eroding NAV.

— The Aberdeen AGD case study … https://secure.fundsupermart.com/fsm/article/view/rcms222722/invest-in-this-income-strategy-with-regular-paying-dividends-and-potential-capital-gains is another case study. The FSM article claims “As seen in Chart 3, the strategy has also been able to deliver rather consistent dividend yields over the past few years, which at most times hover above 6%.” It sounds like the constituent stocks were generating 6% dividend consistently !?

Highly suspicious when you look at the top holdings — all low CDY and not known for high-yield. So I suspect the 6% dividend payout of this fund is financed by NAV erosion [liquidating its assets, hitting a payout ratio above 100%]. Fund managers do such things really to attract AUM. If the manager doesn’t liquidate assets, then the fund NAV would have climbed faster.

So this fund is probably a growth fund masquerading as a slow-growth income fund.

how to capture true ECR

Posted on by tiger40490

Compound return fallacy is the bigger framework.

— Q: How can a small investor like me “capture” some genuine exponential compound return? This is my personal observation

Time deposit is easy, but the return is never more than 2% in my entire life. Consider CPF-SA/RA . I think CPF calculator shows how  $1 at age 55 grows at 4% compound to become $1.48. In contrast, without compounding, 4% growth over 10Y would become $1.40.

At 4% compound rate, 1.48 vs 1.4 over 10Y — CR is not that impressive. Yet 4% is the highest safe compound return I know — nothing higher than that.

This 4% compound return is earned at a cost — limited liquidity.

— Q: where exactly did I capture compound return?

  • mufu: safe funds .. I did capture about 2% compound return, but at that rate, the “miracle” of compound return was /swamped/ by NAV fluctuations.
  • rental property? impossible to capture
  • CPF: I did capture 4%-5% in SA 🙂