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Brian

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Brian

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Brian

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Robo-Advisors

Investments

MoneyOwl

StashAway

AutoWealth

SeedlyTV S1E04

For robo-advisors, is a higher risk profile definitely going to do better than a profile with a lower risk?
Brian
Brian
Level 4. Prodigy
Answered on 15 Nov 2019
Hi Anon! The difference between a high-risk and a low-risk profile would be in terms of the risk appetite of the investor (in this case you). The risk profiles would generally be determined based on a questionnaire filled in prior to investing. Some platforms will recommend a few different risk profile options, ranging from low to higher risk profiles. In that sense, a high-risk profile would generally yield a higher possible return but at a higher cost in terms of risk. On robo-advisory platforms, the more attractive higher return numbers indicate the average highest returns possible but they do not indicate a guarantee return of the stated figure. The same happens for a lower-risk profile where the average highest return possble is not a full guarantee. The returns would be lower because less risk is being taken on in a lower-risk profile. Generally speaking in terms of portfolios, a higher-risk profile would be recommended portfolios that are comprised of a higher weight in equities than fixed income/bonds. Even within fixed income, a higher-risk profile might weight investment grade bonds lower than a lower-risk profile! Hence the general underlying idea is that higher possible returns come at a cost of higher risk. However, diversification is important when it comes to constructing your own portfolio to ensure that your investment risks are diversified away in times of uncertain market movements. Kristal.AI is a robo-advisor platform that allows you to gain access to global ETFs and provide you plenty of information within each ETF on the platform. All the best in your investment journey!
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Investments

P2P Lending

General

SeedlyTV S1E07

Is there a form of risk-adjusted return that investors can look at to compare between different P2P investments? (Something like Sharpe Ratio that kind)?
Brian
Brian
Level 4. Prodigy
Answered on 15 Nov 2019
Hi Issac, In my opinion, here are some statistics that you could use to compare across different borrowers: 1. Current Ratio Current Ratio measures how much Current Assets a company has relative to its Current Liabilities. It proxies as the liquidity position of a firm, and how much of its liabilities can be paid off if all current assets are liquidated. 2. Quick Ratio Quick Ratio is a more conservative ratio than Current as it does not include Inventories, assuming that a company that is failing cannot sell all of its remaining inventory to clear its debt. 3. Leverage Ratio Leverage Ratio (Debt-to-Capital) measures how much debt the company is taking on, relative to the equity available in the company. The higher the ratio, the more risky the borrower is. However, this ratio should be taken with a pinch of salt because different industries have different standards for how much is the typical levered position. This should come in handy because most reports provided by the P2P platforms do highlight roughly which industry the borrower is from. 4. % Fixed to Current Liabilities Not all platforms will provide this data but it is also important to differentiate fixed liabilities from current liabilities and see how the company is performing to match its current liabilities before they can even take on their fixed liabilities. Ideally, cashflows should be able to match current liabilities minimally. To get a better gauge, you can even calculate the Cash Conversion Cycle (= Days Inventory Outstanding + Days Receivable - Days Payable) to get a sense of how long the company takes to pay off their creditors. 5. Net Simple Interest Rate Lastly, to measure how profitable investments in these companies are, we should take the rate of return into account together with the risk measures above to be able to get a comprehensive measure in totality. While I am not an experienced investor or very much knowledgeable in the realm of finance, I think we can build onto the concept of Sharpe ratio and have a rough sense of the "volatility/risk" of the investment through the use of the above ratios and then consider the returns in the numerator as per usual. Hope this helps! https://solutions.kristal.ai/seedlypost
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Investments

Is it a bad time to invest in US index funds now (eg. S&P500)?
Brian
Brian
Level 4. Prodigy
Answered on 15 Nov 2019
Hi Anon! I think that time in market outweights timing the market because of the time horizon of the investment. If you are familiar with the Efficient Market Hypothesis (where all information about a trade will be reflected in the price of the stock), timing the market will be akin to assuming that the Efficient Market Hypothesis does not hold as you are waiting for that key moment to buy low and sell when it is high. The nature of these trades are that they are relatively short-termed as compared to "time in market" approaches and this could mean many years in the market. As you mentioned, in the "unfortunate" event that you started off investing now and a market "crash" happens, there is an alternative view of the stock market because a "crash" could also imply that you can buying into the market at a cheaper price. The spirit of DCA is in hopes that your average price of buying into the market is superior simply by averaging out the higher prices ("bad" purchases) and the lower prices ("good" purchases). I think it is also nice to note that lump sum investments do better than DCA if you expect the markets to be bullish! However, if you have a regular stream of small capital, DCA might be the way to go! If it were me, I would be equally skeptical of investing after a market "crash" simply because the sentiments after a crash would be equally negative. Because I cannot speak for you, I feel that it is a dilemma that I would be facing and therefore I would rather ensure a more disciplined and consistent approach to my investing. Perhaps admist all this discussion, the key idea of diversification is really important so that you will not be suffering a total meltdown in your portfolio should a market crash happen. https://solutions.kristal.ai/seedlypost
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Robo-Advisors

STI ETF

Investments

I am currently in uni and have started investing in STI ETF and roboadvisors, what other areas should i invest in or should i just stick with these 2 forms of investments?
Brian
Brian
Level 4. Prodigy
Answered on 15 Nov 2019
Hi Anon, Adding onto the discussion of other Seedly users here, you could explore cheaper robo-advisor alternatives and also consider options that can give you a greater variety of investment options. One such alternative is https://solutions.kristal.ai/seedlypost where the management fees are much lower (0%) for smaller amounts of investments. Passive investment is a way you should definitely consider because the active approach is often time-consuming and usually does not align with DCA methods. Diversification would be your best ally as investing using an active portfolio typically adds unnecessary risk to your entire portfolio. However, if you have some time on your side, you might want to consider exploring specific asset classes such as REITs or REIT ETFs as they are often a good option but that said, you should definitely consider what your broad investment goals are (i.e. Capital Appreciation, Dividends, Preservation or it could even be Education). S-REITS are something new that has been introduced to the REITs environment so you might want to look that up as well! (There are 3 to begin with) The 3 investment vehicles I suggest you start with could be STI ETF RSP, Robo-advisors and the SSB. The underlying concepts of these investments are the same for any other instrument so understanding these 3 local ones would be good to start with! Other than investing, you might also want to look into how you can get the most returns out of your non-investing finances such as through saving accounts and spending cashback! Seedly has many wonderful articles on how to maximise your cash inflows ;) All the best in your investing journey! More FYI Information: Lion-Philips S-REIT ETF: - 26.2% Retail, 24.6% Industrial, 22.7% Office, 5.7% Hotels, 5.0% Healthcare - Semi-Annual Dividends, 0.50% Management Fee Philips SGX APAC Dividend Leaders REIT ETF: - 35.51% Retail, 31.61% Diversified, 18.08% Industrial, Office 13.70% - Semi-Annual Dividends, 0.30% Management Fee NikkoAM-StraitsTrading Asia Ex Japan REIT ETF: - 36.7% Retail, 26.4% Industrial, 15.7% Retail, 15.1% Diversified - Quarterly Dividends, 0.50% Management Fee
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Investments

Robo-Advisors

Since there are robo-advisors now, why do people still go with fund managers or brokers? Isn't the fee much lower for robo-advisors?
Brian
Brian
Level 4. Prodigy
Answered on 15 Nov 2019
Hi Anon, With the maturity of many robo-advisors today, it is true that low-costs has become one of the main winning reasons for choosing a robo-advisor over a financial advisor! However, robo-advisors are widely varied and have different methods of operating. From my experience, I think that many robo-advisors require you to fill in a risk-profiling questionnaire before they categorise you into a few risk profile categories. From there, you are able to choose from a (or a few, like 3) portfolios, with the risk and returns defined on the website interface. However, there are also an increasing availability of platforms that give you greater customisability and Kristal is one of them. In addition to a recommended portflio, you are able to access a variety of ETFs and stocks. For an account under $50,000, there is also no management fees imposed on the account. https://solutions.kristal.ai/seedlypost https://solutions.kristal.ai/seedlypost
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REITs

Stocks Discussion

Investments

Savings

How else can we determine if a REIT is a good buy, other than looking at Dividend Yield, Gearing Ratio and how a company is doing?
Brian
Brian
Level 4. Prodigy
Updated on 15 Nov 2019
Hi Anon! Listed below are some key factors to be considered when investing in REITs: Total Returns: REITs are total-return investments, and that’s why investors should consider companies that have done well historically at providing both dividend income and growth. Liquidity: REITS have relatively lower liquidity risk as compared to directly investing in real estate. Investors should look for REITs that are actively traded on an exchange. Industry Type: Not all REITs will have the same outcome. For instance, Singapore REITs have six broad categories: office, retail, residential, healthcare, hospitality, and industrial. Different properties with their specific characteristics affect the REIT’s growth, risk profile, and performance in different ways. Stability: Strong management can make a huge difference. Investors should consider companies with a long-term track record. Quality of the REIT: There are far too many factors to consider when making any investment. Quality is one that cannot be compromised. Investors should look for REITs with great properties and tenants that generate solid cash flow. Diversification through REIT ETFs: Instead of buying individual REIT stocks, investors should consider diversification through REIT ETFs like the Vanguard Real Estate ETF (VNQ). https://solutions.kristal.ai/seedlypost
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Investments

P2P Lending

PFF Panel 2

Seedly PFF 2019

For investing in P2P like Funding Societies, and looking at the fact sheet, for a beginner, what are the good indicators for me to decide which company I'm going to invest in?
Brian
Brian
Level 4. Prodigy
Updated on 15 Nov 2019
In my opinion for starters, I would consider the following non-exhaustive list of factors: 1. Debt-to-Equity Ratio This tells you how much Debt the company is holding relative to equity and a higher gearing ratio would mean that the company is taking on a larger proportion of debt to run its company. 2. Cash Conversion Cycle This takes into account the company's Account Receivables, Account Payables and Inventory Turnover ratio (given by Average AR Colletible Days +Average Inv Cycle -Average Accounts Payable Outstanding). A negative cash conversion cycle means that the company is able to obtain a "interest-free" way of financing its business because it is able to obtain cash before having to pay the company's suppleirs. However, the CCC should be used in comparison to industry peers because some industries generall have negative CCC while others have positive CCC. Negative CCCs are rarer but definitely do occur (i.e. Dairy Farm International) 3. TIE (if available) Times Interested Earned ratio tells investors the ability for the company to pay its debt payments using the income generated (EBIT/Interest Expenses) 4. Macro views Understanding which industry the company sits in would also paint a clearer picture and give you better confidence in the type of business it is running. Overall, ratio should not be used in isolation and taking into account a few indicators at once can tell you a better story of the loan.
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REITs

Investments

What is the difference between REITs and business trust?
Brian
Brian
Level 4. Prodigy
Answered on 15 Nov 2019
Hi Anon, A REIT is different from a Business Trust as it can only own and operate real-estate assets whereas for Business Trusts, there is no such restriction on the type of assets. One such example would be the Arcadia Golf Trust. Furthermore, I think that the management differences are different. For a REIT, the management of the asset and the ownership of the asset can be different while the entity must be the same in both cases under a Business Trust. This results in difference in the governance structure between the 2 as the trustee-manager of a Business Trust it more difficult to be replaced. I think that there are also differences in the board of directors where Business Trusts must have independent board of directors while only a third of the board must be independent in REITs. One key different is also the gearing ratio as REITs are limited to 35% (or 45%/60%) gearing while there is no limit for Business Trusts. You can consult this article as well! https://sg.finance.yahoo.com/news/difference-between-business-trust-reit-010000838.html
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Investments

Unit Trust

ETF

What is the difference between Unit trust and ETF?
Brian
Brian
Level 4. Prodigy
Answered on 15 Nov 2019
Hi Anon, Both Unit Trusts and ETFs function the same way, by pooling money from interested investors. However, the main differences lies in that Unit Trusts are a pooled investment in which the portfolio manager of the Unit Trust would have set forth his investment objectives. From there, the Unit Trust fund manager will select his portfolio (active or passive as Hariz has mentioned) and use the pooled funds to invest. An ETF on the other hand has the purpose of tracking a specific index that is listed on the exchange (think S&P 500 and STI). I would say that ETF could be a subset of Unit Trust/Mutual Fund as an ETF has a more specific and pre-determined objective while Unit Trusts depends on the portfolio manager.
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Investments

ETF

STI ETF

Robo-Advisors

Regular Shares Savings Plans (RSS)

SeedlyTV S1E04

For ETFs, what is the difference between RSS and Robo-advisors?
Brian
Brian
Level 4. Prodigy
Answered on 15 Nov 2019
Hi Anon, Let me clarify how RSS and Robo-advisors are different concepts! First of all, the Regular Shares Savings (RSS) Plan is more of a method of investing while Robo-advisors are more of a platform for investing instead. RSS Plan uses Savings as an avenue to motivate/automate people's monthly cashflows and direct them towards an investment-oriented outcome. It makes use of the Dollar Cost Averaging concept and Time-in-market concept to encourage investors that a longer investment horizon will be more beneficial in the long run. The most basic form of RSS would be to place a monthly investment into the STI ETF. Perhaps the confusion comes when RSS methods are allowed on Robo-advisor platforms. Robo-advisors main purpose is to recommend a (or a few in some cases) portfolio that is tailored to your risk profile according to the questionnaire that you would have answered while registering for an account. In that sense, an investment strategy is recommended to you by a robo-advisory system while RSS is a conscious method of investing. In terms of which method/platform you might want to decide on, Robo-advisor's biggest advantage would be the cost of investing and also the access to global portfolio that may add diversification benefits to your current portfolio. In terms of starting with high or low risk, that would be a difficult question to answer and would be best addressed by a professional financial advisor (human or robo-based). It would depend on a variety of indicators: (Non-exhaustive) 1. Investment Horizon 2. Investment Objectives 3. Availability of Capital 4. Risk appetite 5. Risk ability
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