(Post 74/week 55)Learning investing/trading together part 12: Boglehead investment philosophy

This post serves as a summary of the Boglehead investment philosophy, which I believe is a good and easy to understand investment strategy, that an amateur like you and me can follow

Please refer to this link to learn more about boglehead investment philosophy

What is a Boglehead investment philosophy?

• Boglehead investment philosophy simply follows a small number of simple investment principles that have been shown over time to produce risk-adjusted returns far greater than those achieved by the average investor.
• The basis of all of these principles is the idea that successful investing is not a complicated process, and can be accomplished by anyone with a small amount of effort.
• These ideas come from the investing philosophy of Vanguard-founder Jack Bogle, hence it is called the Boglehead investment philosophy

1.Develop a workable plan

• The Bogleheads approach to developing a workable financial plan is to establish a sound financial lifestyle.
• To summarise, live below your financial mean and avoid bad debt

2.Invest early and often

• Establish a regular saving pattern, minimum about 20% of your income should be enough
• Arrange automatic saving deduction for your bank account, if you are forgetful like me, like in my case with posb invest saver
• The graph below is a great example of why you should start saving early

3. Never bear too much or too little risk

• You need to be honest with yourself on how much risk you would like to take if the stock drop will you be able to sit through it without thinking about it all day? (I been through that and it wasn't a pleasant experience haha)
• In summary, you can either follow shinything advice on having 110-your age in stock(e.g my age is 22 this year, hence 110-22=88% in stock and 100-88%=12% in bonds) You can read more about shinything thread here
• Or, you can simply follow benjamin graham, father of value investing advice of simply either putting 25 % in bond or 75 % in stock or the other way around

4.Diversify

• Rather than picking individual stocks,Bogleheads buy funds that are widely diversified or even approximate the whole market.
• This guarantees they will receive the average return of all investors. Being average sounds bad, but it is actually a great thing. That's because most investors perform worse than average after taking into account the high fee that they can pay for actively managed funds.

5. Never try to time the market

• Simply put, don't try to time the market unless you are a trader and have a very good plan

6. Use index fund when possible

• The best and lowest cost way to buy the whole stock market is with index funds (either through traditional mutual funds or ETFs)
• One of such ETFs is our STI ETF (ES3 or G3B) OR Vanguard Total Stock Market Fund Which is the largest mutual fund in the world

7. Keep costs low

• Choose the index fund with the cheapest fees
• Refer to my post on how to choose a brokerage here

8.Minimize taxes

• There is no capital gain tax or dividend tax for Singapore stock(that's the only great part about buying stocks in Singapore)
• However, there is 30% dividend withholding tax for buying US stock if you're a Singaporean, for more information for dividend withholding tax please refer to my post on shiny thing thread here

9. Invest with simplicity

• The boglehead investment philosophy is simply following a 3 fund portfolio, a local stock market index fund ETF(Which in my case is the STI ETF: ES3 or G3B), a local stock market bond index fund ETF(Singapore bond index fund: A35) and an international bond index fund(Vanguard ETF)
• For more information about the STI ETF: ES3 or Singapore bond index fund: A35, please refer to this post here
• I do not own any international ETF as I do not have the capital yet(still working on it) 
• The picture below shows an example of a 3 fund portfolio

10. Stay on course

• Do not panic when the stocks prices drop
• Do not be distracted by other funds that are performing better, in short, only invest within your circle of  competence as Warren Buffett put it

11.Conclusion

• Simply put,boglehead should  (1) save a lot, (2) select an asset allocation containing both stock and bond asset classes, (3) buy low cost, widely diversified funds, (4) allocate funds tax-efficiently, and (5) stay the course.
• One of the wonderful things about Boglehead investing is that it generally only requires a part of a day to set up, and then about an hour a year of effort to rebalance. Beyond that, there is no need to watch the markets or follow financial news. Even better, it works. Although Bogleheads investing may seem strangely simple, it is based on decades of comprehensive research showing that buying and holding the whole market consistently outperforms many of the alternatives.
• To understand more about rebalance,do refer to this post on the shiny thing thread here

Remember to DYODD(Do your own due diligence!)

(Post 73/week 55)Learning investing/trading together part 11:Shiny things thread summary from hardwarezone part 2

Continuing on from the last post here...

Tip 10:On Insurance

• Buy Term Insurance + Personal Accident Insurance.
• Buy Hospitalisation Insurance.
• Buy Mortgage Insurance, if you have any outstanding mortgage loans
•  Invest the rest.
• Do not buy Life Insurance.
• Do not buy ILP, Investment-Linked Products
• Mixing Protection ( essentially, Insurance ) & Investment in a product, e.g.. ILP, Life Insurance, Endowment Plan, is a terrible idea because these events are mutually exclusive & it should not cause liquidation.
• Cheapest Term Insurance in SG: Aviva SAF(The only good thing that NS has provided)
• This is the first insurance you should get if you don't have any for Death & TPD. ( Total Permanent Disability )

Tip 11: Growth-Centric / Dividends-Centric?

• If you are near retirement age, opt for dividends-centric stocks / Bonds ETF.
•  Generally, you buy stocks for growth gains, not dividends.
• One of the most dangerous things an investor can do to a portfolio is to seek bond-like returns from the stock market while taking de facto equity risk on the fixed income side. In English - to turn their bonds into stocks & their stocks into bonds.
• Buy high-yielding dividend stocks for their current income and pretending they are "bond-like" is a recipe for nasty surprises at some point down the line. But this is precisely what many in the industry have been doing - Financial advisors, ETF providers, money managers - everyone's playing. 

Tip 12. Diversify

• Hold diversified assets in different countries.

Tip 13. ETF

• ETF: Exchange traded fund, basically tracks / holds a bunch of something.
• ES3 is an ETF the tracks 30 sg-based companies, i.e. DBS, OCBC, SingTel, Keppel, etc.
• It's safer than buying 1 company and rises with the economy.
• During a crisis, you can be sure this ETF won't disappear, can't say the same about any single company.
• A35 is a bond ETF, it holds many bonds to maturity. One can treat it like a bond. It's stable and yields about 2%.
• ES3 and A35 are stock code.
• Their name is STI ETF and ABF SG BOND ETF. You can buy/sell them on the stock market.
• The Top 7 of STI are heavily weighted in Banks and a smaller spread on Telco's, Real Estate, Oil & Gas where they made up of 60% of STI.

Tip 14. on SG Reits (Aug 2015)

• If you buy a bunch of REITs, you're explicitly making a bet on real estate prices - they're nothing to do with the STI really.
• The STI is mostly banks, real estate companies (not REITs, the companies like CapitaLand that run the REITs) and SingTel.
• REITs are a tiny slice of the index, like 3.5% of it.

Tip 15. Avoid punting on FX if you are an unsophisticated Long-Only blue chips / ETFs investor.

• Compared to investing in equities, when the price goes below your FX position, you have to fund it. Meaning you have to pay to maintain the position OR cut loss and sell the position.
• Going Long-Only on blue chips, ETFs, REITs, won't make you rich, but it won't make you poor either. 
• From 1928 through 2014, the S&P 500's compound rate of return was 9.8%, enough to transform a $100 investment at the start of 1928 into $346,261 over 87 years.

Tip 16. Pro Tips About Trading.

• Don't trade after-hours OR in the pre-open. Spreads are WIDE & you don't know what the "real" price is.

Tip 17. SeekingAlpha.com for US-centric stocks / investment-related news.

Tip 18. the most basic books about investing.

• Millionaire teacher
• The coffeehouse investor

Talking about investment books, one of the next few posts will be about investment books that I have read, I would try to provide the eBook version if it is available, do look out for it!

(Post 72/week 54)TipforThought:10 financial tip,tricks and hacks

Saw some saving tip in an article in the magazine and would like to share here

Here are some tips that will help you manage your budget and add to savings...

1.Create your monthly budget

• You are most likely going to spend more then necessary if you do have a pre-planned monthly budget. Keep a clear record of your earning and spending habits, and plan a budget accordingly.
• In my case, I do not have a pre-planned budget but I have a fixed amount of cash in my wallet that I put at the start of the week allowing me to keep track of my expenses easily.
• There is no doubt that credit and debit offer you an easy way to make payment. 
• However, using cash will help prevent spending more as you will budget accordingly. You will also be protecting yourself from potential credit card theft and other fraudulent activities.

2. Get a piggy bank

• It may seem childish, but starting a piggy bank is a great habit that will enable you to add to your savings. 
• You can either fix an amount to put in your piggy bank daily or simply empty your pockets into it at the end of each day. 
• In my case, I empty my coins out into the piggy during the weekend.
• You can also opt for an auto transfer from your main bank account to your sub-account(money cannot be seen are money that cannot spend)

3. Try shopping at thrift stores

• Thrift stores are a great place to buy an inexpensive yet decent secondhand household item that people have donated. 
• Talking about second-hand item, do visit my carousell page for second hand books:carousell.com/eric996

4. Find the way to happiness and life, not to spend

• Rather than finding happiness in shopping which is temporary and a never-ending cycle,you should do healthy things that you love to do.
• This will allow you to enjoy your life better along with adding to your saving accounts.
• For me, I love doing side business such as blogging, investment,carousell whatnot's etc

5. Automate your bills

• Bill should be automated so that you do not forget to pay your bill and incurred late payment, besides it is easy to keep track of through your bank transaction

6. Stay away from the catalogs

• If you have subscribed to catalogs and emails for different brands to hear about their latest launched then unsubscribe, the engaging advertisement will tempt you to buy the item you have no true need for.

7.Borrow books from the library

• Hard copies of books are too expensive and many of these books are such that you would not read them once exams and classes are over. 
• So instead of spending money on these books, you can borrow them from the library. You can also try EBook. 
• It is quite common for a publisher to sell both the eBook and hardcover copy now. What's more, they can be downloaded for free online(Google is your best friend).
• If you are an avid reader, you should try reading eBooks as it is a convenient and economical way to learn. Also, EBook is very convenient as you can download many books and store them on your tablet.

8. Buy a product that comes with a warranty.

• There are plenty of products for which some companies offer a warranty.
• It will not only give you confidence in the quality but will also save you money on potential repair if they happen within the warranty period of time

9. Don't spend much on trendy clothes

• Trendy clothes may help you gain popularity but most of the time, they are a waste of money because you may not wear them since the trend fades out.
• So try to buy clothes that are timelessly trendy.

10. Exercise daily from home

• Exercise should be a not-to skip part of your daily routine as it keeps people healthy and saves on money that otherwise you would spend on medication and hospital bills.
• This does not mean you should join a gym. You can easily practice exercising at home and avoid  paying a monthly bill to the gym

None of the above mention tasks are difficult, you can easily become adapted to them by making a small effort. I am sure that these methods collectively will help you save a significant amount of money

(Post 71/week 53)Investment project updates(Peer to peer lending):Moolahsense(My eleventh campaign)

Moolahsense(My tenth campaign with Moolahsense)

Note*the company name will not be revealed just like the previous post as my money are still inside moolahsense, haha(this is not a sponsored post by the way)

Issuer summary
Date of listing:Mar 2018
Amount:S$100,000.00
Tenor: 12 months
Note type: Callable

Quoting from the SGYoungInvestment

• Callable: In a Callable note, an issuer has an option to early redeem the note on a quarterly basis. If the note is not early redeemed, the issuer pays a quarterly interest. The principal will be fully repaid on the quarter that the redemption is early called or at the maturity date.

Assume that you invested $10k in a campaign at a final note rate of 13.5% p.a. in a Callable note.(Below is a very useful illustration)

                               

Repayment frequency: Quarterly

• Repayment frequency: Every 3 months

Target interest rate:16%P.A

Quoting from Moolahsense website

• Target interest rate: The maximum rate the issuer is willing to provide the interest on the principal subscription amount which the issuer wished to obtain, as notified in writing by the issue to Moolahsese

Purpose: Working capital

Quote from valuepenguin:https://www.valuepenguin.sg/what-is-working-capital

• Working capital: It is a concept to describe a business ability to cover its short-term operating costs
• E.g For this campaign, I have funded $100 into it
• As the target interest rate is 16%, this means that at the end of the tenor, which is 12 month I will expect to receive $116
• 100%=$100
• 16%(Interest for 12 month/1 years)=$16.00
• 116%(The Principal + the interest)=$100+ $16.00=$116.00
• However, a callable note will only pay the interest and you can redeem (principal) anytime,or you can simply just wait until the end of the tenor to get back the (principal)
• Do note that interest is automatically credit to your moolahsense account holdings

Summary company profile

• The issue is a company incorporated in Singapore in 2007. 
• The Issuer is in the engineering and manufacturing industry and has around 20 employees.
• The Issuer specialises in the design, engineering and manufacturing of components and parts for the aerospace, semi-conductor, automobile and oil & gas industries.

Detail of purpose

• The Issuer seeks funds to provide working capital to perform new sales orders which it has received. The total loan amount sought by the Issuer is SGD 200,000. In addition to this campaign of SGD 100,000, the Issuer may be launching additional campaigns.

Financial statement

Will only reveal a part of the financial statement due to confidentiality. As I have mentioned a few weeks ago in my post, that I only mainly use this three ratio: current ratio, quick ratio and debt to equity ratio to decide in investing in a campaign, hence I will be showing its ratio below

The ratio is as follow(left side of the column is for the year 2017/right side of the column is for the year 2016)

Year 2017/Year 2016

(Current ratio 2017:4.93),(Current ratio 2016:3.14)

• A simple ratio of current asset divide by current liabilities
• Current liabilities are debt that needs to clear in the short term(in a year)
• If a company has a current ratio less then 1.0, do not invest in it
• If a company has a current ratio more then 2.0, May consider investing in it
• The higher the current ratio, the better
• For the current ratio of 2016:4.93, it is higher than the recommended range(>2.0)
• For the current ratio of 2017:3.14, it is higher than the recommended range(>2.0)

(Quick ratio 2017:4.93),(Quick ratio 2016:3.14)

• The quick ratio is almost similar to current ratio except that it is assumed that the company does not sell its inventories(e.g Toyota inventory is its car) or stock, it is still able to fulfill its debt
• If the company has a quick ratio of 0.75 and below, do not invest in it
• If the company has a quick ratio of 1.25 and above, May consider investing in it
• The higher the quick ratio the better
• For the quick ratio of 2016:4.93, it is higher than the recommended range(>1.25)
• For the quick ratio of 2017:3.14, it is higher than the recommended range(>1.25)


(Total liabilities/equity 2017:0.79),(Total liabilities/equity 2016:0.95)





• The debt ratio is calculated by total liabilities divided by the equity
• If the company has a debt ratio of 1.5 and above, do not invest in it
• The company should essentially have a debt ratio of 1.0, if the debt ratio is below 0.75, do consider investing in it
• The lower the debt to equity ratio the better
• For the Total liabilities/equity of 2016:0.95 it is out of the recommended range(<0.75)
• For the Total liabilities/equity of 2017:0.79, it is out of the recommended range(<0.75)

Why did I invest in this loan?

• The current ratio and quick ratio of 2016 and 2017 is higher than the recommended range, however, the total liabilities/equity of 2016 and 2017 are out of the recommended range/The total liabilities/equity are improving from 2016 to 2017, hence I believe it will continue to improve in 2018. And so, I have decided to invest in this campaign

• As the moment of writing, this loan is still ongoing and there is no late payment so far

Repayment schedule?

link on how too read the effective interest rate for moolahsense:http://letscrowdsmarter.com/understanding-interest-rates/

As this is a callable note, that is different from the usual equal installment, the company will pay out an interest every month and you can redraw your principal anytime, or you can simply just collect interest until the end of the campaign

Total net payment=$102.96+$3.96+$3.96+$3.96=$114.84

remember I stated at the top of the post that the amount to be returned to me is $116, well $114.84 seem pretty close as about $1.16 are used to pay the moolahsense servicing fee

For callable campaign, you get exactly the amount stated in the campaign interest(no funny trick unlike equal installment campaign)

that's all for this campaign, left a few more moolahsense campaign and we are done!

(Post 70/week 53)Zero dollar project updates:carousell,Bitcoin Faucets,Short Link,Online survey and Adsense update

Updates for last week week of zero dollar project
1.Carousell
2.Bitcoin faucets
3.Short link
4.Online survey
5.Adsense update

1.Carousell

My carousell:carousell.com/eric996

Been doing some heavy marketing everywhere, gumtree, facebook, you name it...

Will be writing a post about some of my tip for carousell soon...

Total earnings for carousell from last update:$6 + $1=$7


2.Bitcoin faucets

Current coinpot holding

Bitcoin core: 6217 Satoshi
Bitcoin cash: 12188 bch
Dogecoin: 64.18 doge
Litecoin:  0.00218175 ltc
Dashcoin: 0.00072989 dash

3.Short link

Last x week

Currently

Total earning for short link last update:$3.8361-$2.9437=$0.89

For more information on how's I use both short link on my blog and YouTube, read here

4.Online survey

Current online survey on my list...(Bold mean that these survey websites have been verified for payout)

4.1 Toluna
4.2.surveyon
4.3 YouGov
4.4 mobrog
4.5 ipanelonline
4.6 viewfruit
4.7 mysurvey
4.8 millleu(App on google play store)

Survey that payout surveyon,mobrog,toluna

The total payout from last project update:$2.00+$20.00+$6.25+$2.00=$30.25

5.Adsense

Last week earning for Adsense:$5.85

Total earnings for last week zero dollar project:$7 + $30.25+ +$0.89+$5.85 =$43.99

That's all for the updates this week for my zero dollar project! stay tuned to my investment project updates for this week!

(Post 69/week 52)Investment project update part 2:Posb invest saver DEC 2018 summary

Posb invest saver update(Dec 2018)

My POSB invest saver update for the month of May, read here
My POSB invest saver update for the month of June, read here
My POSB invest saver update for the month of July, read here
My POSB invest saver update for the month of Aug, read here
My POSB invest saver update for the month of Sept, read here
My POSB invest saver update for the month of Oct, read here
My POSB invest saver update for the month of Nov, read here

Regular saving plan updates for ABF Singapore Bond Index Fund(A35)

Breakdown of my regular saving plan(A35) this month(Dec 2018)
Total amount(regular saving plan)A35:$100
Price per share:$1.149300
Gross sales charge:0.5%
Net sales charge amount:0.5% of 100=$0.50
Net amount invested: Total amount-net sales charge amount=$100-$0.50=$99.50
Units issued: Net amount invested/price per share=$99.50/$1.149300=86 units

Summary: As of 23 Nov, the share price of A35 was at 1.157, has went up from last month, but still quite at the middle with its maximum at 1.25(2011) and its lowest 1.00(2008). Will be watching it for any further movement, once below 1.100 will make a bulk purchase.No change in sentiment from last month.The increase is probably due to the STI ETF(ES3) dropping these few day(when stock drop,bond increase)

Regular saving plan updates for Nikko AM Singapore STI ETF(G3B)

Breakdown of my regular saving plan(G3B) for this month(DEC 2018)

Total amount(regular saving plan)A35:$100
Price per share:$3.235700
Gross sales charge:0.82%
Net sales charge amount:0.82% of $100=$0.82
Net amount invested: Total amount-Net sales charge amount=$100-$0.82=99.18
Units issued: Net amount invested/price per share=$99.18/$3.235700=30 units

Summary: As of 23 DEC 2018, the share price of G3B is at 3.18 and ES3 is at 3.10. Both ES3 and G3B has been on a downtrend, will ES3 drop below 3.00?. I think there is still a possibility.  Will continue to be watching it along with A35.Great time to purchase in bulk!

(Current regular saving plan portfolio)

(When you trade long term through dollar cost averaging, no need to worry about the red:D)

Don't forget to DYODD(Do your own due diligence!)

(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!