Like “web2.0”, I often use the vague word “system” as a collective to include a diverse range of distinct or indistinguishable items:
k_ETF_assetClass
— The management fee encompasses all direct expenses incurred in “managing” the investments such as hiring the portfolio manager and investment team.
The cost of hiring managers is the largest component of management fees; it can be between 0.5 percent and 1 percent of the fund’s assets under management (AUM).
Passively managed funds (like index-tracking ETF) involves fewer decisions, less research, less skill, less manpower/expertise, so management fee is lower. Still the operating costs can be same as active management.
— expRatio: the total amount that an investment company charges investors to manage the fund. This include
Unlike the management fee, expRatio can fluctuate year to year
— typical expense ratios:
I got this question every year since my 30’s. Now I think I spend too much time tracking it.
Q: what is your percentage asset allocation (based on book value)?
Q: Is the eq portion too low by conventional standard?
A: I don’t care so much about conventional standard. I did experiment with higher eq allocation, using FSM as a laboratory…
I feel adventurous in many of my investment decisions. In contrast, out of 100 people in my age group, majority probably invest in standard products like 401k, REITs, ETF/mutual funds, CD, or stock markets.
Do these decisions make me a risk-seeking investor? I think so.
— I need excess liquidity; I don’t need every dollar working hard for me. (See https://tanbinvest.dreamhosters.com/24246/make-your-money-work-hard4u/) This makes me a risk-averse investor.
Q (recommended question): is my asset allocation comfortable and fulfilling[meeting my current pff goals]?
A: overall yes. I have always wanted a small allocation to eq until I feel comfortable, so I don’t really care about the eq/bond ratio.
Q: is my current asset allocation rational?
A: no clue
Q: is it positioned to capture the upside? people generally say the upside is in eq, esp US but not China
A: I would say I have a reasonable exposure that I can accept. I am not an eq believer… i see few trends long term. Only US shows me a trend but it’s expensive now.
See the post on non-performing investments — real experience.
Q: is it hedged against the black swan?
A: Not sure. Experience shows that our estimate of the downside is usually underestimate. I don’t want to be risk-averse either. Risk averse people would favor cash!
Q: within eq, is the geographic allocation comfortable?
A: I would say yes. I was confident about
* US
* Jap, Europe, Thai, Taiwan, Korea
* China
so I allocate according to my feeling
Q: Allocation/balancing across industries… comfortable?
A: I would say yes. I assume most of the sector funds are US-heavy. I feel US is expensive and I already have bigger allocation to US than elsewhere.
See [18]incremental buy-n-hold a hero stock4div
You can buy-n-hold mufu, but not exactly like a stock, due to the annual fees.
Interns can hit more profits, perhaps by trading cryptos or hot tech stocks…
pain (as opposed to risk and reward) also includes anger.
As I grow older, I am more aware of my pains in investment.
10% loss generates more pains in me than 10% gain can generate happiness.
No pain no gain. I still have 40Y+ to live, so I need to take on some risky assets such as SP500, or Sgp rEstate
k_investor_selfEval
See also
Too broad to be useful? Will focus on my idea of wise investor [mellowing up], which is mostly about 1) breakaway from convention wisdom, or wrong priorities [i] … and 2) risk profile self-discovery.
In addition, 3) Pain is also center stage of becoming “wise”, but behind the scene and less talked about. Various psychological pains [including stressors] are part and parcel of investing. Those pains need to be managed. Unexpected, unmanageable pain can be classified as One special risk.
[i]A wise investor understands that her own priorities [Risk/Pain/Return profile] are subtly unique and invariably different from the stereotypical investors. Therefore, a lot of “other investors’ priorities” are the wrong priorities for her. see also
— risk: over-commitment of personal time… A wise investor recognizes the risk of regrettable ROTI, even with the firewall intact
— risk: infatuated investors .. wise investors understand this tendency in herself
— risk: liquidity risk .. often requires large allocation to low-return assets. See make every dollar work hard4us @@
— other risks not specific to the “wise investor”:
— pain: stressors in eq-investing has a small section on “wise investor”. A wise investor would notice her internal stress sensitivities and work on stress prevention/reduction/protection.
Disambiguation : in this blogpost, “risk” refers mostly to financial risks; mental/health risk is classified as psychological pain.
— pain: firewall .. handles multiple risks and pains that I won’t list.
— pain: missing the boat on some high-growth assets
pain: FOLB by the cohort
— pain: setbacks .. (various types) A wise investor accepts them as facts of life in investing. She could choose to avoid certain assets forever [FXO, commodity futures..] Like R.Xia, she could decide to stand back and watch certain hot assets after losing money. No right or wrong.
— expected return .. if (a big if) and when all risks are understood and under effective monitoring, then the target return is a simpler question.
To reduce risks and pains, for some wise investors (or older investors), risk_capital could be a very small allocation. The smaller this allocation, the less pain/risk. My HY/PE is one example. Therefore, expected return is largely determined by the personal pain/risk profile.
Non-risk capital would go into low-return liquid assets including contingency_reserve. Some wise investors would find the low return painful.
jolt: It’s no shame to allocate 90% to low-return liquid assets.
I want to be an aggressive wise investor, with growing equity portfolio and rEstate portfolio.
jolt: equity portfolio doesn’t have to beat SP500. A wise investor won’t insist on that as a priority.
hot assets .. require a lot of wisdom and cool-headed detachment. Missing the boat is quite common and acceptable.
Q: Is zqbx [working towards higher returns] or passive acceptance of low returns a quality of some wise investors?
Jolt: A: yes to passive acceptance. Investing is not personal improvement, not a noble cause, so I don’t associate it with zqbx. However, I don’t like “lazy” investing. Some due diligence, some PP learning (separate section in this blogpost), some personal growth is part of being a wise investor. It requires effort, focus and dedication, but not zqbx.
— learning .. is a valuable bonus, not always necessary and not always possible.
Jolt: A wise investor may invest in 9 different “things” and learn nothing in depth from half or all of them. Note the different types of learning
— xpSelf has joys from learning and at moments of “short-term”[ii] profits like doses@delight. A wise investor recognizes that. By definition, a wise investor is 100% judged by the rmSelf.. These joys may not be significant to the evaluative rmSelf are are mostly forgotten.
[ii]In contrast, “long-term” profits by definition are very few, and much harder to achieve. For example, I had many joys with Jill’s HY/PE, and FXO, but mostly forgotten. The long-term result seems to be a negative return.
— what experts to trust .. lots of theories make sense but are not really practical. Some academic theories have limited validity — most eq investing theories use U.S. stocks only, with a few (to a few hundred) thousand data points only. They don’t even recognize regime change.
— small number of experiences.. I told Caroline of Propnex that most rEstate investors are not wise because we can’t try too many times, esp. compared to stock investors. After one or a few tries, we are experienced, but not necessarily wise.
Buffett said each person has a punchcard and 20 punches to make, and a few good punches would be enough!
==== some patterns of my bad bets. (I keep this section here as relevant.)
See also ## key variables in my bad/good bets
— eg sReit .. good transparency, highly regulated.
The blue-chip sReits have good bid/ask spread
— eg bccy .. bad bid/ask spread and fees; zero DYOC; poor regulation
— eg (neutral experience) US HY mufu .. real net DYOC was 1-3% considering fees and NAV erosion
Scenario: for years you have invested in some beloved _good_[1] asset classes. Now you hear some friends getting better Returns. Initially you didn’t get affected, but the more you dwell on those return numbers, the less satisfied you feel about your beloved old friends.
If this tendency becomes a problem, then it is good to keep a cool head 冷静 [critical thinking] about the asset classes. Whatever high return is usually unsustainable and become inferior to our beloved old friends over the long horizon. The high return is sometimes less legitimate and provides a breeding ground for gambling.
[1] Good generally means reliable [legitimate], and suitable for your financial needs. What becomes beloved depends on your nationality [availability], your personal experience and risk appetite. It can be bonds, Reit, local rEstate. My own top 5 (unranked) would include
— eg of hot /enhanced/ returns:
Some use high leverage. Some follow Reddit and invest in non-blue chip tech stocks like electric vehicles or blockchain tech.
I guess those assets are less secure than buying real assets on margin, such as gold, oil or rEstate.
I don’t use margin or leverage at all.
In the bccy domain, getting_in_early (FOMO being another side of the coin) is a key reason for some of the enhanced returns. But the risk of pump-n-dump is very real.
When it drops, perhaps we can buy more? Warning: Unifund did well for decades and won many awards, but I think it declined slowly but hopelessly and was closed in 2015. I think the underlying asset class (SGP/MYS stocks in that case) was weak.
https://secure.fundsupermart.com/main/fundinfo/viewFund.svdo?sedolnumber=FSDVAD
See also
I decided to create this blogpost as it is a recurring theme.
— case study: In Aug 2022, my wife and I had about 700k against 500k outstanding mortgage. I asked Valerie of DBS where I could deploy the cash instead of PRP. She heard all of my ideas and suggested high-yield SGX stocks, but this is “borrowing money to invest, at floating LIR” of MBR+spread of 0.6 or 1%.
— ## common j4keep`mtg outstanding
Case study — Genn said her pre-tax mtg rate is 8%. Since she can’t generate more than 8% pretax return, she decided to sink all her savings to pay down the mtg…. smart !
Many experts and laymen say a mtg lets you borrow cheap, but cheaper than what, and borrow for what purpose? Do they have a way to generate higher return than the LIR (2.5% or whatever)?
Q: If (like me) they have too much cash sitting idle in the bank, why is it smarter for them to borrow (like 600k at 4%) and pay monthly interest (like 2k/M)?
It’s easy to confuse XX) too much liquid cash in the bank, vs YY) after setting aside sufficient reserve, still too much idle cash
As I observed in Nov 2021, 12M reserve is insufficient. Once I have a really sufficient reserve (like 200k), then I may want to invest the surplus into U.S. stocks. Using this criteria,
Q: DBS mortgage banker Jeradine said when mtg rate is 1%, it is “really not too hard” to earn a basically riskless profit (arbitrage). Where to find low-risk, high liquidity assets to park borrowed dollars?
A: Some bank promotions pay depositors 1%+ but only for 50k
A: LionG_EL (https://secure.fundsupermart.com/fsm/chart-centre-fund/LCP129 ) could beat my mtg rate…