Tag: t_mufuEtf

overstated: risk@100%loss ] stock pick`

Posted on by tiger40490

I guess this is one justification for equity mufu over single stocks, but MOETF is “comparable” to mufu.

For any stock to receive $500 of my money, it has to be rather solid, reputable, with a convincing trec. If such a stock pick still goes bankrupt, then I will accept the result and accept personal responsibility. The initial amount is risk capital anyway.

Any example? Nortel? RIM?

I think the probability for hitting a bankruptcy or delisting among my non-trivial stocks, within 10Y, is 10% [1]. My loss would be … 5% of my portfolio. But Expense Ratio of a mufu easily adds up to 20% of my asset value in one mufu.

[1] The probability estimate depends on my count of non-trivial stocks. Am assuming 100+

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.

the affluent often favor Funds over stocks@@

Posted on by tiger40490

In this blogpost “the affluent” refers to anyone qualifying as clients of SG wealth mgmt,  having SGD 200k account balance.

Rebecca of UOB suggested that many of his affluent clients prefer (mutual or ETF) funds rather than stock trading.

— reason: professional mgmt (with the mgmt fee) .. highly questionable value-add in reality
“Peaceful sleep” is a major selling point of professionally managed funds.

Active fund managers analyze individual stocks and hand-pick them. I criticized it in bluechips=slightly more dependable than mufu
— reason: professional assistance from financial advisor .. probably a key factor.
In contrast, these advisors will not help them trade stocks because there’s no fee to be earned !
— reason: no interest no time no expertise .. I think more than half of these affluent clients lack enthusiasm (risk appetite), free time or expertise to pick stocks by hand.

Q: in terms of Funds vs stocks, how do I compare to the affluent? I only have some very vague presumptions about the age, nationality distributions of “the affluent”.
A: I guess many of them favor ETF or mutual funds, rather than stocks. The Vanguard 2020 report is an analysis of investor preferences.

Q: how relevant is it to understand fellow investors?
A: I think the relevance may grow.

FSM(+Trading): y ROTI so low@@

Posted on by tiger40490

 

In terms of personal ROTI efficiency, AA) trading (+FSM) is inferior to BB) property (+HY/PE) investment process. BB is more suitable for me:

  • I only need one big due diligence. Then buy-n-forget.
  • No monitoring required. No distraction to work. Often no price updates available anyway. Unable to transact on-my-own
  • Profit/Effort ratio is 10 times higher

Let’s compare Chip’s no-load fund to trading+FSM. The latter’s ROTI is lower because

  1. daily distraction
  2. too many research sessions compared to just once for the no-load

— guideline with FSM periodic checks,

  • reduce holdings to reduce the need for periodic checks
  • aim at one check per 48 hours

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

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

 

[14]eqMufu: long-term +ve trend: U.S.only

Posted on by tiger40490

Even though worst trough is much better in SP500 than other regional markets, and the long-term strength is more evident in the U.S, I would still say that other eq markets have long-term positive trends.

Warning — longTermStrength is widely used but ambiguous, compared to other concepts like worstTrough, durability@appreciation, marketReturn etc. As such it is an inferior focus for my blog.

Q: in my FSM portfolio, should I increase my US eq exposure ?

My past mufu investments were largely equity-centric. I never held a mufu beyond 7 years. The following personal experiences (despite the books I read) completely reshaped my view —
* any security I invest in, tends to show zero uptrend zero downtrend.
** Even if there’s some trend, it’s always dwarfed by the noise.
* equity market is heavily manipulated by big players, so I sometimes feel there can’t be any uptrend.
* bonds do show a bit of (rather low) uptrend but has non-trivial volatility

I also learned to dismiss the “advice” of various poorly trained Singapore financial advisors that “over 3 to 5 years this unit trust should make money”. Therefore the only safe “investment” is bank deposit.

About 1/4 to 1/2 of my mufu investments remain underwater after many years, and I often lose hope and liquidate. Now I think that’s all based on an incorrect view. Now I feel over a longer horizon like 10, 15, 20 years (retirement planning), US equity market do show an uptrend, as shown in historical performance.

Q: what if there’s a crisis like 2008. There are indeed big corrections every 5 years or so in equities — indisputable.
A: now I feel still the 15Y return is positive! Even if the drop in the final year is 30%, the previous years’ gains should exceed that — only on the US market.
** Japan, Europe … seem to be much worse — all gains could be wiped out in the last year.

Q: how about outside the US?
A: I feel the uptrend is evident in historical data from US market only. Japan, Europe and EM are not so clear.