Category: invest_gtmp

## FSM adv over ETF or individual stock trading

Posted on by tiger40490

The special (most valuable) benefit of FSM over ETF — no live trading no live prices

  1. no live price, so I’m less tempted to check my portfolio during office hours
  2. All orders are queued till end of day, so even if I can see live prices of underlying stocks, I’m less tempted to engage in trading during office hours

Other benefits of FSM:

  • specialty stocks otherwise inaccessible, like other regions in other currencies.
  • small minimum amount ($100 or $1000) with the standard upfront fee (5%) waived. Extremely important for testing the water.
  • $0 transaction cost thought trailer fee applies

##Did I invest too small amounts@@

Posted on by tiger40490

When I feel I have invested too small amounts, it’s always after hearing some lucrative investment gains by other people.

However, I also learned painful lessons of over-exposure and over-concentration:

  • BGC
  • Majestic Village
  • too many China holding in FSM
  • Unifund by UOB Asset Management. Forced to liquidate

energy12^other alt investments

Posted on by tiger40490

Tax — Assuming 100k invested. 49k distribution received over 7 years without paying any tax. $120k received as principal + payout. There’s a $69k total gain, taxed at around 15% after the payout.

Eenergy-12 Cambodia shops AsiaProp HighYield-bond
liquidity Least liquid. 5-7Y after “close[1]” or longer any time but long lead time 2Y
amount USD 5k USD 200k SGD 10k
dividend “guaranteed” 6% (7% pretax) 7% and 5.5% 14%->19% semi-annually
.. from? existing oil output rent unknown
upside 40% participation. Long-term strategic investment with  potential of windfall. zero
downside indefinite delay property devalue; hard to sell
underlying asset oil field shop equity holdings in start-up
backer deal maker developer tiny investment firm
diversify: correlation with properties+stocks excellent good good
… geographically 1-5 3 5 #excellent 0 #poor
risk: key personnel high low high

[1] could be May 2019 or earlier

According to Chip, typical amount is 50-100k per investor. I choose to believe him. I feel his investors are generally more optimistic and risk-taking than me.

Many David Lerner staff invested in the same program.

 

Vanguard brokerage acct #SG comp set-up

Posted on by tiger40490

Kyle said there’s no cost. You can leave it empty (or $1). I might need it when I’m in Singapore.

  • login from overseas — “unrecognized devices” would trigger SMS security code.
    • You can call Vanguard in advance
    • you can also make the overseas computer “recognized” in advance
    • you can also designate XR’s phone number for SMS
  • my account type (brokerage) can buy mutual funds, ETF … everything.
  • zero sales commission for mutual funds
    • “Never pay a commission when you buy and sell Vanguard mutual funds and ETFs in your Vanguard account. A few Vanguard mutual funds charge fees designed to help cover high transaction costs and discourage short-term trading.”
    • typically $3k commitment
    • vanguard mutual funds feature low expense ratio.
  • $7 commission for stocks .. actually depends on the account
  • hotline 8am – 10pm EST
  • You can keep the account “empty” forever and avoid $20 annual fee by opting for e-delivery. Confirmed with hotline staff and also MailPreferences page

mufu: y recover slower than ETF: illustrated #1.5% typical ExR

Posted on by tiger40490

Buffett said: “If returns are going to be 7 or 8 percent and you’re paying 1 percent for fees, that makes an enormous difference in how much money you’re going to have in retirement.”

Q: why statistically most mutual funds under-perform the benchmark?

1.5% is a typical management fee, similar to GSAM/PWM quarterly fees. Suppose I invest the same amount in two similar funds — an ETF vs a mutual fund.

  1. 12k -> $180 fee = 1.5%. Second year my ETF becomes
  2. 10k -> $150
  3. 8k -> $120
  4. 9k -> $135
  5. 8k -> $120
  6. 8800
  7. 10k -> $150
  8. 11k -> $165
  9. in this year ETF recovered to 12k, but mutual fund is about 10% (at least 1k) below break-even.

It took 8 years for ETF to recover, but it would take the mutual fund a few more years.

in https://www.newretirement.com/retirement/the-lockbox-strategy-and-10-other-retirement-income-tips-from-nobel-laureate-william-sharpe/, Sharpe pointed out the same annual fee eroding a retiree’s returns.

— William Sharpe concluded that active fund managers underperform passive fund managers, not because of any flaw in their strategies, but because of the laws of arithmetic. In order for active fund managers to beat the market by just 1%, they would need to achieve an excess return of more than 2% just to account for the average 1.19%  management fee.

https://www.investopedia.com/terms/m/managementfee.asp

%%cohort r more keen@windfall !!income

Posted on by tiger40490

I’m clearly more proud of my high-income investments. My peers generally feel “6% a year passive income over 10 years … only 60% profit over 10 years… Too low too slow.”

I asked only a few peer investors. I can only assume that most of my friends in my cohort are not debt-free. I feel most of them are not only dreaming but aiming at a 200k->$500k-1M windfall, over 5-10Y. My wife might be one of them.

Q: So how much risk capital are they committing for that target windfall? 100k? 200k?

Q: is that level of return realistic? I guess only tech stocks and BTC can deliver 30%/Y compound return, usually low growth, low growth … short bursts of high growth.

I don’t want to overthink this question, since it affects only them, not me.

Q: Did I ever aim at that target and how did I decide to stop?
A: perhaps I was never so ambitious so hungry for windfall, after I become an investor.

disillusioned with stock/bond mufu

Posted on by tiger40490

I used to spend hundreds of hours on FSM, researching on stock/bond funds. I always found very few funds different from the norm.

  • 90% of mainstream equity funds have very high correlation with SP (short for SP500 and Dow Jones.)
  • Some non-US equity funds or commodity equity funds can have slightly lower correlation, but always under-performing SP
  • Virtually all bond funds show dismal long term growth
  • The “balanced” or “multi-asset” funds are invariably uninspiring combinations of the above.
  • No genuine commodity funds exist. Always a mining stock fund in disguise, always under-performing SP
  • Virtually all the high-dividend funds under-perform SP and often shows no long term growth

 

price fluctuation: x% down then x% up

Posted on by tiger40490

https://money.stackexchange.com/questions/12706/help-me-understand-the-oddity-of-percentage-gains-and-losses is a good discussion

If you have two percent change values for adjacent time intervals, they compound rather than adding up. So 50% loss then 50% gain is base amount times 0.5 times 1.5. Which is NOT base amount minus 50 plus 50

real example — The TRBCX fund actually experienced 43% loss in 2008 then 43% gain in 2009, resulting in a 20% loss over 2 years.

eq analysis: not interested #R.Xia#ValueInvest

Posted on by tiger40490

Historical data analysis for investment is a big and growing domain. Despite my academic study, I’m still an outsider. I do read such analysis when I consider some stock/bond investments. So I kind of recognize the value. I believe the debunker research more than the marketing propaganda research. Here are my reservations on the value of historical data analysis for personal investment purpose:

Reservation: sample size is small in terms of length. My investment horizon is measured in decades, but how many decades do we have data for? 4 decades? I feel any stock or bond market data more than 40 years ago are not relevant since the environment has changed too much since.

Reservation: Markets are way too correlated. There could be 300,000 stocks and 30 million traded securities (mostly derivatives), but 99.99% of them are not worth analyzing given their correlation to the major market indices.

Reservation: If I have 200k I would plan to invest in properties over a few years, so I dare not put them into stocks. If I only have 100k, I don’t want to spend too much time analyzing.

Reservation: (Evidence) the big mutual fund houses employ armies of highly educated and experienced researchers, but most of their funds can’t beat the U.S. stock indices. How valuable is the research?

Reservation: Picking Mutual fund requires very little data analysis. Based on personal experience investing in mutual funds, I find them easier than stocks.

  • Carefree — No need to watch bad news about individual stocks since the fund manager should do that for me. I can just buy and hold and basically forget about it.
  • Diversification — Some form of Diversification is in place, but this is a double-edge sword. The high return on individual stocks is often unachievable due to the diversification.
  • Lower commitment — I usually start with SGD 1000 and slowly build up. With many stocks I would have to take on exposure.
  • Compliance — No issue with Compliance department

In my cynical view, “professional” analysis on historical data for the purpose of picking stocks is a marketing or academic effort.

There’s so much financial data available, so we the laymen feel there must be some hidden values to be extracted. The analyses output do look impressive and valuable. However, due to various factors (include my 1st two reservations), the analyses are not producing better investment returns.

One of my respected investment firm is the Singapore GIC. https://tanbinvest.dreamhosters.com/2015/08/02/gic-2015-update/ is my blog about their performance. If the “market return” over a 20Y horizon is typically 6%, how much “excess return” could I aim to achieve? In other words, what kind of alpha can I get? I doubt my analysis can give me 7%. https://tanbinvest.dreamhosters.com/2017/02/21/6-realistic-long-term-return/ is a blog I wrote on “realistic return rate”