Tag: t_moetfSys11

blogposts about my “system”, beyond moetf^etf

beatIndex^ livelihoodBoost: choose your goals #R.xia

Posted on by tiger40490

 

See also

As I continue to invest more money + time, and write more blogposts evaluating my MOETF vis-a-vis other investments, there’s a real growing concern like

Q1: is my time and money well-invested in MOETF?  It is quite productive compared to my other investments, but perhaps an ETF/eqMufu would achieve higher total return and lower tcost?
%%A: even if you hold a SP500 ETF, there’s always [2] a legitimate need for an alternative equity portfolio with lower volatility, lower risk of a “down year”, higher cash payout, higher reassurance,,, Therefore, it’s my mistake to pit MOETF against SP500, when it’s not designed to compete with SP500.
A: tcost is addressed below

There’s a widespread perception that “mindless (therefore easy) investing in the U.S. [1] large-cap index will outperform most hand-picked MOETF in most years“. Buffet has struggled against the SP500 index for decades. I believe many value investors achieve lower return than the US large-cap indices. (Note SP500 is all-large-cap and all-US.) See Buffett no longer beating SP500. I do have some ETFs and mutual funds (T.R.Price) to capture the index appreciation. If after X years (to be decided) I still believe that MOETF consistently underperforms SP500, then I would allocate more to an SP500 ETF.

One portfolio in MOETF would become a fund comparable to a cash-cow retirement account; another portfolio an absolute-return fund without a benchmark. As such, MOETF is designed to meet those “other” needs.

Jolt: Similarly, most SP500 ETF investors also have assets in retirement accounts (401k), bonds (or money-market funds), gold, Reits, rental properties, dividend stocks etc, so it’s unfair to look down on those assets or MOETF.

[1] How about mindless investing in non-U.S. indices? Much weaker?
[2] many investors put aside that need .. unwise

— OPP .. It’s crucial to be clear what exactly we want out of stock trading. Many valid priorities of other investors are not important to us. In fact, these OPPs (other people’s priorities) may get in our way.

  • when you take on those OPP, your life becomes more complicated, when it can be simpler like mine. You may have to babysit your positions. Your firewall is strained.
  • when you take on those OPP, they could displace some of your true priorities. Analog: carry-on luggage (i.e. limited holder of true priorities) vs checked luggage i.e. holder of lower priorities
  • when you take on those OPP, you may inadvertently take on more risks.

Matching SP500 return … is a bad OPP. Investing 80% of my assets, and minimizing idle cash (make every dollar work hard) … is an OPP

Q2: how important is total return (including current income) vs beating some index?

These questions arise more often when I discuss with fellow investors. An unwise investor may have an implicit goal “match other people’s returns” even though he doesn’t know their pain/risk profiles or even their actual return rate. I try to avoid that unwise goal. I often justify MOETF using phrases like “absolute return”, firewall (sleep well), recreational (learning), DYOC(current income),,,

div stocks: widely seen as low-growth #valInv #laughing described the recurring scenario .. When I show my 5% current income to friends, they probably walk away laughing …

— Question 2 is similar to FOMO^livelihood  — am happy with the current income, the low-stress (firewall), the relatively low but positive return, but not so happy when I compare with some “high flyers”. Why the hell do I bother with other people when I’m happy with MOETF?

MOETF generates a few times more current income than any SP500 ETF or cryptos, if I (arbitrarily) exclude the low-yield stocks that I bought for growth.

— rental yield .. is a parallel. So far I’m satisfied with my SEA rental properties esp. the rental yield, perhaps more than my Beijing property. If I were to compare myself with those who achieved 10x returns in some Chinese-hot locations then I might feel diminished.

However my Q1 above is different. Compared to those hot property markets, SP500 is widely perceived as less risky and tracking ETFs are much more accessible (low entry requirement, very passive,,,)

— Learning and fun.. relatively vague ROI, but as a ROTI it is growing more important. See learning: fund^stock-pick

  • If you don’t need learning, then SP500 ETF beats almost all ETFs or eqMufu.
  • If you want learning, then growth stocks and cryptos threaten my firewall (babysitting, buy-n-forget)

— le2 XR… a summary on a familiar question. Q3: given that MOETF can’t outperform a SP500 ETF, why bother to hand-pick to construct MOETF?

  • A(mentioned in earlier mail): foreign stocks .. missing from SP500.
  • A(mentioned in the call): recreation and learning (see above)
  • A(mentioned in the call): dividend payout, esp. during a downturn.
  • A(mentioned in earlier mail): selective cash-out
  • A(mentioned in earlier mail): selective buy .. esp. if I know a company well. This feature could help me outperform SP500
  • A: consider retirees. They don’t focus on “return” only, so they allocate heavily towards bonds, annuities, dividend stocks outside SP500. One retiree I know invests heavily into a rental property for rental income. MyOwnETF doesn’t aim to outperform SP500 but aims to provide other benefits such as access to cash flow.
SP500 return is hard to beat, so I will probably maintain 50% allocation to SP500. As I age, we will need to reduce SP500 allocation.

(de)stressor in eq-investing #w1r4

Posted on by tiger40490

I guess for most equity investors, stress [like all-at-once stressor moments, distraction, sleep in peace,,,] is like an “occupational hazard”, a fact of life.

I practice mainly two forms of eq-investing AA) SP500_ETF, BB) recreational MOETF. All other forms of eq-investing are unfamiliar to me, and by default too risky in terms of “wildfire getting out of control”  .. such as those 3episodes@ non-recreational trading. It’s worthwhile reviewing stressful investing experiences.

Note the key benefits of AA and BB are unavailable in “my” other asset classes like FXO, leveraged FX, gold, bond mufu, Singapore ETF

== AA) mindless investing .. SP500_ETF (not other indices, not mufu) is one low-stress, buy-n-forget form of investing. What about $200k in it? Should be fine. Buy-n-forget SP500_ETF relies on the index committee as stock pickers. Other ETFs, like sector ETF or other countries’ ETF are usually less successful than SP500_ETF. (Note buy-n-forget a single stock doesn’t involve exit-timing. Can rarely beat SP500_ETF.)

How about “balanced” mufu? It is supposed to buy “stability” at the cost of return but in my experience it doesn’t reduce stress cf SP500_ETF. Actually I always maintain my own bond ptf + speculative ptf + …. I can rebalance them, something I can’t do with a balanced mutu. Also the expRatio is not worthwhile.

== BB) recreational MOETF .. a classic positive stress comparable to other analytical and active-learning pastimes, in tech, magazine-xx, healthy food preparation,,
However, as I commit more funds into MOETF, this recreation can get out of control. Therefore it requires a robust firewall.

The positive stress is felt in a few specific stressor contexts listed in Q9.

  • Heavy allocation to growth ptf .. leads to net_negative effect on my overall stress profile, net_negative after considering firewall, buffer build-up.
  • Overwhelming allocation to dividend stocks .. has a 50/50 chance to net positive or net_negative stress, depending on the context

— destressor: firewall .. is designed for 1) stress protection, 2) portfolio protection.
Q: what frequency of ptf review is the max before it would lead to net_negative stress? Give a single number please
A: [3->6] a quarter
— destressor: steady DYOC .. (from my income portfolio) supposed to /defray/ a lot of annual expenses, reducing cash flow stress, but I have low cashflow stress in the first place.

Substantial DYOC should reduce the impact of a down turn, to be verified ..

— destressor: price buffer build-up has limited efficacy in stress reduction.
— destressor: diversification … meaningful diversification is not easy. Any evidence of that within a stock portfolio? I have not seen any.
=====
— Q: your notion of a wise investor? Beware not all “experienced” investors are successful in stress-management.

  • stress reduction .. keep the growth portfolio small (relative to…). This is my idea of a wise investor.
  • stress prevention
  • stress protection .. is hard to achieve, even for experienced investors
  • portfolio protection … defensive ptf? I don’t think this is a standard strategy among wise investors. Many wise investors don’t mind high volatility in a small ptf.
  • SP500_ETF .. (rather than mufu) is probably popular among those “wise” investors.

— Q9: (personal experience ) when I came under _certain_ types of stressors (but NOT other stressors), I would increase my recreational MOETF hour-allocation and dollar amount allocation. A paradox!

There are too many types of stressors even in a single person’s life. Let’s first focus on those stressors “friendly to” MOETF:

  • the stressor of plateauing growth: 江河日下,自强不息, midlife crisis #timetable@self-growth? Yes. MOETF represents a new frontier of self-growth[learning]. MOETF increases my sense of relative superiority. Recreational MOETF generates positive stress.
  • OC-effective? T_semiKai3mo2? FOLB? presumably effective : stress-reduction by recreational MOETF
  • BMI stagnation? workout frequency?
  • boy’s academic motivation?
  • spouse quarrels? probably a positive diversion

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.

over-rely@eq analyst ratings@@ #w1r4

Posted on by tiger40490

Opening example: https://www.fool.com/investing/2020/12/28/scoop-up-10-highest-yielding-dividend-stocks-2020/ is a survey of 10 stocks, featuring many analyst prognoses. I think a lot of obvious signs are easily missed by casual observers but not by analysts. Analysts are paid to write research. I have a few ex-classmates paid pretty good salaries doing this research. I assume they have some evidence for their recommendations.

Most of the recommendations/reviews have a focus on overvalued/undervalued, over the medium term (I won’t specify how many years). This is not exactly my horizon, as I tend to buy-n-hold longer.

Site1: https://www.moneycrashers.com/stock-market-analyst-rating-accuracy/

— Quality concern: stale … Target price is more useful (in MOETF) than the rating, to feature on my blogpost titles. If a 100% BUY is given at price $97, before a surge to $152, then obviously the BUY rating is invalidated immediately.

Time horizon — Site1 says “analysts only follow 12-month time frames”. I think target audience often act on the recommendation and keep a position for years. However, Overpriced/Undervalued ratings are always tied to a price level, and loses relevance as soon as the stock experiences a big move. That’s presumably why 30 days later there will be a bunch of new research published for the same stock.

— Quality concern: selfish agenda .. Many online commentators accuse equity analysts of selfish bias, written to brainwash the lay public, for their self-interest (including indirect assistance to their paid clients). I think it’s valid suspicion and accusation. Site1 explains that analysts are more likely to rate a stock a buy than a sell. However, I want to hold a balanced view. In defense of the analysts I would point out

  • The analysis is a detailed writing, not a one-sentence stock tip.  There’s a track record to each analyst. If the equity analysis is all commercial propaganda then its track record would have discredited itself. Maybe it has happened, but I see that the mainstream news still cover them
  • Analysts are paid a high compensation, so there’s probably some evidence beneath their writing.
  • If there’s only one analyst, then I would suspect her motive. 9 analysts all have self-interests and would unlikely to give identical ratings. However, analyts in general tend to give Buy.
  • Do you have the same suspicion over Buffett’s pick?
  • Site1 says A) analysts are more likely to rate a stock a buy than a sell, B) if the vast majority of analysts that cover a particular stock rate it a sell, that acts as a big red flag that something is wrong with the company.

— Concern: tcost .. reading the fine print is time-consuming and perhaps poor ROTI. Therefore, when I look at ratings I mostly look at the percentage “breakdown”. Fine prints can contain crucial details, esp. in fiancial statements, but not in analyst reports! The analysts write to attact attention, so they would not bury important details in fine prints !

In absolute terms, I spend very few hours on analyst ratings or online recommendations. Longest article I would on a stock is 100 words.  However, within my 3-min due diligence framework, media-research is a big component indeed.

Note: Unlike MOETF, Index investing requires very little media research.

— A final, big question .. Q: Let’s say we rank the various inputs (to our decision making), and let’s say 30% is a reasonable level of influence by media (analysts++), then am I too receptive/attentive?

(But Why bother with this question? I think this question might come up during my discussions with other investors. Also, the degree of influence is a non-trivial factor esp. in eq investing. )

Buffett: “Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance.”

Independent research .. sounds cool, esp. to an idealistic investor. In reality, it is foolhardy to buy (or sell) against visible consensus among analysts.  When too many analysts say “Overpriced” then I’m very reluctant to buy. I guess this is prudent of me. Overpaying for a stock would hurt my DYOC for years. Therefore, harmony is needed.

It’s quite common to encounter one negative forecast for my “favorite of the month”. We can either A) ignore it, B) reduce our purchase, or C) cancel it. Which option is independent? (A). We have no time to do our independent research. So I never choose (A). Since the media does affect my decision-making, how do I manage its influence? I limit my research t$cost.
* tcost .. a big factor. See section above.
* $cost .. So far I don’t feel the need to pay for advice.

— which rating sites are convenient
https://www.tipranks.com/stocks/gain/forecast .. 96,000 financial experts, including Wall Street analysts, financial bloggers, hedge funds, and corporate insiders,

  • 🙂 has a “enter stock name” search box. Easily click into the box -> type “MSFT” and Enter.
  • 🙂 has a link to dividend data
  • 🙂 the sentiment dashboard (left menu -> StockAnalysis) … comparable to analyst rating.

https://money.cnn.com/quote/forecast/forecast.html?symb=gm ..

  • to change the trailing ticker string, you need to double-click exactly on the symbol string embedded in the URL, then type the new symbol, and Enter. Slightly harder than TipRanks.
  • 🙂 historical ratings .. nice presentation
  • 👎 small print, esp. on count of Buy/Sell

MOETF [def] #downturn

Posted on by tiger40490

MOETF == MyOwnETF i.e. my own portfolio of U.S. stocks

Due to tcost, I don’t bother to compute the percentage weight, biggest gainer/losers, sector weighting,,,

— ETF .. is the main benchmark and competitor to MOETF.
ETF seems to be popular among mt cohort. I guess up to 10% of my peers have an ETF-only (or ETF-mostly) portfolio. In my defense of stock-picking, here are my first j4:

  • convictions .. I have a view about hundreds of stocks or specific sectors. ETF doesn’t let me act on my views.
    • Similarly, commission charges also prevent me from acting on my views, so am lucky to have the commission-free platforms.
  • percentage .. I can, and often do, increase (buy) or decrease (sell, rare) the percentage weight of each name
  • stocks: learn fast, though the learning is possibly superficial. In index investing, there’s no active learning, no knowledge I can gain and share with my family and friends. When my hand-picked bets work well, I feel the “kick”. This is a kinda positive feedback
  • stock picking is classic recreational investing, where (unrealized) PnL is sometimes not the #1 ROTI
  • constituents .. I can see the constituent names more easily. With ETF it’s harder so I won’t bother to find the answer.
  • .. flipside: distraction. See buy-n-forget→ sleep]peace, focus@work

me: “Look at my portfolio return!”
them: “But my SPY has even better return”

I accept that. However, in defense of MOETF I will raise my finger and point at other financial advantages, beyond that return:

  • MOETF has better dividend yield than most indices. I can handpick stocks with high CDY (above 9%). No such CDY in any ETF.
  • xjl crunch in a downturn … if and when I need to liquidate some, I could choose which stock to liquidate, as some are more profitable, or more distressed, or with more potential. Impossible with ETF.  In contrast, between 5 ETFs, I’m less likely to find one “above water”. See also my blogpost on bluechips are more dependable.

— drawbacks… tcost is the key drawback and part of most items below. However, as recreational investing, roti is measured by an unconventional yardstick.

  • dividend monitoring is too complicated
  • some names have a very high unit price, so I must use fractional share.. market order only
  • pre-clearance exempted for real ETF

Employer may say “Are you too busy trading on the sideline”? My defense:

  1. my trading activity is mostly during U.S. hours
  2. small trades, quick due diligence
  3. many decisions and analyses (even the money) were from family members. However, my browsing history in office is recorded, possibly not investigated. Better search at home.
  4. Some pre-clearances didn’t lead to actual transactions

— Matt of OC was the first to suggest the strategy to buy entire stock market. According to him, over a longer horizon (like 10Y?) the overall market always go up. I think it’s true in U.S. market, not true in the China or Japan or European stock markets. When I asked further, I think he said at least buy the entire U.S. stock market.

radical simplicity: recreational MOETF #Ewen.Chia

Posted on by tiger40490

Context: At end of the Affiliate Marketing Essentials course, after listening to Ewen Chia’s 20-minute elegant presentation I was struck by its radical simplicity. I realized there’s a similar radical simplicity in my recreational MOETF investing. I stumbled on this system after decades of investing in FSM.

Similar to Ewen Chia — we strip away lots of mainstream complexities
Similar to Ewen Chia — the system works, for whatever reasons.

This blogpost is about MOETF. So (now in Oct 2021) I will summarize the key features into a phrasebook, half-ranked by importance

[r=radical simplicity]
[v=vague but important guideline]

  • [v] steadfast focus on firewall
  • .. stay away from volatile hot assets like bccy
  • [v] steadfast focus on recreational [joy, learning]
  • [r] buy-n-forget .. vs babysitting
  • [r] .. Don’t care about exit timing. 3Y holding plan, and my definition of liquidity
  • focus first on DYOC .. vs NAV growth, which is harder to assess.
  • [r] .. refuse to benchmark against SP500
  • [r] incremental buy with fractional orders
  • [r] 3m due diligence .. buy without fear. No steep learning curve
  • 200-stock diversified MOETF .. vs ETF

t_moetf ^ t_G**eqRules

Posted on by tiger40490

Some overlap is likely.

  • t_moetf — is more my own system as a unique system from other investors’ systems, such as ETF or deep analysis. More abstract, more conceptual.
  • t_G***eqRule — is less about my system, more about individual buy/sell rules of thumb.
  • .. After thin->thick->thin, among the dozens of “principles” of stock investing, these are my top N. I want to maintain very few rules. More rules can get overcomplicated.

div ] MOETF^DIVA #learning

Posted on by tiger40490

In 2021 I had a brief “debate” with a DBS consultant after a Takashimaya seminar. He is conversant with stocks.

DIVA shows 10%+ compound return (assuming DRIP) over a decade+. Impressive, but most of it probably is capital gain, rather than dividend income from constituent stocks. The presentation by DBS/OCBC etc is probably misrepresentation of DIVA dividend dependability.

Q: if an equity mufu like DIVA can pay 4% dividend, then what’s the advantage of MOETF hitting DYOC 4% after tax?
A: This blogpost on DPR is the big picture. I doubt a mufu can generate 4% DYOC consistently without eroding NAV. I have yet to see an example.
A: An big point of confusion — when I say 4% DYOC I’m referring to my entire portfolio, where 80% of t could be earning 5% and the other 20% earning close to 0%. For a mufu investor, DIVA would be part of her portfolio, so her portfolio DYOC is unlikely to be same as DIVA.
A: an equivalent ETF will probably beat the mufu in terms of expense ratio. However, mufu manager can trade better than the ETF robot. Over the decades, countless papers have demonstrated that virtually all eq mufu’s under-perform the index in the long run.
A: MOETF will beat ETF on a few fronts. One financial reason — MOETF gives me the option to liquidate individual constituent stocks.

However, I do agree that dividend tax is a disadvantage of MOETF. Luckily, as U.S. tax payer, my annual income would be so low that my marginal tax rate would be far below 20%.

Tcost is another disadvantage but as an recreational investor I treat it as recreation and learning. Anti-aging.

By the way, the DBS consultant made another misrepresentation implying “10% return every year.” I challenged him “Are you sure there’s not an annual return below 10%”? I believe 2011 and 2018 are negative.