(Post 68/week 52)Learning investing/trading together part 10:Shiny things thread summary from hardwarezone

I know I have written about the summary just last week, but just this week I found a good summary of the shiny thread compilation and I think the summary does a very good job in keeping investment simple, hence I am adding this post so that I can refer to it easily and here I am promoting it, do give it a read from the original thread in hardware zone here

(Shiny things have also written a book btw, I hope I can publish a book someday too, haha)

Tip 1: Long-Only Investing for Retail Investors

• Invest in Stock & Bond ETFs.
• For Singapore Stock & Bond ETFs, that's ES3 & A35.
•  Use [ 110 - your age ] for the Stocks: Bond ETF ratio.
• Remember to rebalance once every year. (i seldom rebalance though)
• Buy & Sell to bring your stocks & bonds to that [ 110 - your age ] ratio.
• Consider exposure in other markets, e.g.. S&P500, China Large-Cap ETFs, etc., for diversification & growth
•  If an ETF shuts down, its assets get handed back to the shareholders.
•  A 100%-equities portfolio is also a bad idea.
•  STI's more tightly linked with economies like China and Malaysia and Indonesia than it is with the US and EU.
• In the long run, an investor's return is measured as earnings per share growth + dividends + changes in valuation(PE ratio).

 Tip 2. Lump-Sum Investing / Dollar-Cost-Average?

•  Consider dumping it all at once / in 3 portions.
•  To minimize buying high, split into 03 parts.
• Invest 1 part each month, until you are fully invested.
• That way, if the stock goes up, at least, you bought some.
• If the stock goes down, you have the cash to buy more at discounted prices.
• Avoid making many trading transactions per month, as that amounts to a high trading fee.
• In my case, I use posb invest saver for the dollar cost average, while when I am trading I am will use the lump sum method

Tip 3. Why is investing in Gold silly?

• Gold is an unproductive asset, it does not provide dividends yield.
•  It relies solely on capital gains.
• Physical Gold storage requires security expenditure & Paper Gold account requires a monthly expenditure.
• Investing in Gold = Shorting Interest Rates.
  Gold / Cash / Long Bonds are direct/indirect bets that interest rates are going down. (interest rates set by FED )
• Over the long term, Stocks provide better returns than Bonds & Gold.
• 2-5% of your portfolio in Gold is acceptable.

Tip 4: Investment Horizon

• If you need the money within 2 years or so, it should be in cash.
• If you need the money within 5 years, it should be in cash/bonds.
• If you don't need the money within 5 years, it can go into stocks, or ( even better ) the 110-minus-your-age stock/bonds mix.

Tip 5: About ETF Types.

• Invest in ETFs that actually holds the stocks/bonds that they claim, so that in events of distress, say, Great Financial Crisis, etc., the ETF would not vanish into thin air.
• there are many types of ETFs...Leveraged ETFs, Inverse ETFs ( Short ETFs ), Futures-Based ETFs... all have their own problems.
• Stick to Vanguard & iShares. Ignore everything else. Because they are ETFs that really hold the stocks that they target to be vested in.

Tip 6: Suggested Portfolio Mix.

• 110 minus your age in stocks; the rest in bonds; and 50-50 split between local and global stocks"
• Allocation to Singapore equities (including your ETFs, stocks, and REITs).
• Allocation to international equities (including DM and EM).
• Allocation to Singapore bonds.
• You can keep a 5% fun-money account around for that sort of punting.

Tip 7: When to rebalance your ETF?

• Doing it at the end of December is a bit silly because that's when liquidity is at it's absolute worst.
• "Markets are seasonal" sounds like witchcraft, but there does appear to be a bit of seasonality in the US markets.
• The old "Sell in May & Go Away" doesn't have much validity, but re-balancing in November, after the end of the May-October seasonal weak pretty, is a pretty good idea if you want to have a slightly better chance of capturing the turning points in the markets.
•  If you are re-balancing once a year, I would pick November.
• If you are doing it twice a year, May & November ( 6 months apart ) is a good idea.
• Rebalancing is done periodically regardless of economic situations and market conditions
  

 Tip 8: Which broker to use?

• for SG stocks, use Stanchart 
• All other local brokers(e.g DBS Vickers)They are expensive  & charge imaginary fees, i.e. custodian fees(Refer to my previous post a few weeks ago for DBS Vickers fee)
• for US & other markets, use Interactive Brokers (IB).
• for US only, with Sg office, use TD Ameritrade (TD).
•  Interactive Brokers is the absolute best.

Tip 9. BOOBY TRAP / made-in-USA IED.

• Using IB or TD, it is subjected to 30% US estate tax for accounts > US$65k.
• Buy a Term Insurance of 30% X [ US Portfolio Value - US$65k ], so that in the event you die... the term insurance offsets the 30% estate tax.
• If you are a Singaporean, consider taking up Aviva SAF term life, to defray the 30% US estate tax

Will continue at the next post!