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AMA Christopher Tan

Held on 24th Jan 2019, Thursday

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AMA Christopher Tan

Retirement

Insurance

Investments

Should I stop subscribing to Share Builder Plan and invest on my own?
Dear anonymous, thanks for sharing about your investments and also for your question. Sorry for the late reply. Firstly, allow me to say that if you are not investment savvy, you should avoid owning individual stocks. In fact, even if you are investment savvy, holding on to just a few stocks might not be a good idea because you are taking on too much risks by concentrating your portfolio on just a few stocks. Personally, I do not own any individual stocks because I have no time to study and follow them and I also want to divesify my money across more stocks. I would suggest that you either invest in a portfolio of low cost ETFs (that tracks the index) or low cost funds such as Dimensional Funds. Low cost = less than 0.5% p.a. in terms of management fee. As a start, here are a list of equities ETF you can consider: 1. SPDR S&P500 ETF - US, a proxy to develop markets 2. SPDR Straits Times Index ETF - Singapore market 3. Db x-trackers MSCI Pacific Ex Japan UCITS ETF - A proxy to Asia By investing in then, you will be broadly diversified across different geographical regions. There are enough studies to show that it is very difficult to beat the market by trading and there is really no need to. The driver of returns for stocks is earnings or profitability. As long as world population continues to grow (and it is!) and people have needs and companies continue to exist to meet the needs, stock prices will (and have) gone up over the long run. Yes, some companies will fail but most will continue to be around. That is why you should invest in a broad diversified portfolio.So stay invested. Do not get in and out based on views or news. That will be gambling. Ok, hope this helps.
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ETF

STI ETF

Investments

AMA Christopher Tan

If you could turn back time. How would you have invested your first 10k. And what about now?
Hi anonymous, thank you so much for your question and so sorry for the late reply. I generally do not like to prerscribe a product before understanding the full context of your financial situation. It is like deciding what ingredients to buy before we know what we want to eat and the recipe. But I would generally say "yes" to your question. My firms' (Providend and MonwyOwl) investment philosopohy is that we do not believe in timing the market. There is no need to as well. We also believe in lowering the cost of investing. ETFs is one good way to access index investing and also it is low cost. However, as ETFs are listed on the stock markets and there are brokerage cost involved in buying them, please be mindful that you do not do many small transactions. And by the way, if I have only $10,000, my preference is to invest in a more broadly diversified ETF such as the SPDR S&P500 rather than STI. The Singapore market is just too small. Hope this helps.
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Savings

Investments

AMA Christopher Tan

I’ve just started working for about a year and a half and have saved up a decent pot of capital to start investing. How do I start?
Even though im not Christopher but ill put some of my thoughts as well. You should first learn more about investment because there are a lot of things you can invest in such as stocks, bonds, CPF, commodities, options, property, loans and more. Stocks itself have a lot of different styles like ETFs, value, growth, robo advisors and so on. You have to see which kind of investment suits your goal and risk appetite. You can simply start by going to Seedly blog to learn or google. Just take your time to learn first. Dont invest in things you dont understand because thats just gambling. Good luck!
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STI ETF

ETF

AMA Christopher Tan

Investments

Based on your opinion, will buying STI ETF using DCA method on long term basis (more than 10 years) yield 4 - 6% annual returns? Is it a good investment? Thank you. ?
Christopher Tan
Christopher Tan, CEO at Providend Ltd
Level 6. Master
Updated on 07 Jun 2019
Hi anonymous, thanks for your question. There are A few parts to your question and so I will break it down. 1. About buying STI ETF I am a great believer in buying the Index. This is because, there are enough studies to show that most active managers do not beat the index after cost. Even if they do, they do not beat it consistently. As such, it is very difficult to pick a manager that can do it consistently after cost. And the point is, why do you want to take the risk to find a manager that cannot beat the market consistently if the market gives you enough returns to meet your goal? There is no need to take such risk. ETF is one way to invest in the index. However, while investing in STI is not a bad idea as we are familiar with the local market, STI is a very small market. I would prefer to diversify my portfolio with STI but definitely to bigger markets such as the S&P500. Investing into just STI may also expose you to volatility risk that you cannot accept and as such you get out of the market way too soon and thus not capturing the returns. 1. Using DCA method The thing about DCA is this, in a up market, DCA does worse than investing with a lump sum. And if you look at history of markets, the stock market goes up most of the time. However, as most of us may not have enough lump sum to invest at one go, DCA is not a bad idea. However, the problem with doing DCA using ETF is cost of transaction. Buying ETFs incur brokerage fees and if your regular DCA amount is small, the cost of that trade becomes high and that eats into returns. If I want to do DCA, I will prefer that you invest into a low cost indexed fund or evidence-based fund as such Dimensional. 1. About long term (more than 10 years) Long term is good. Short term is not investing, it is speculation. Over the long term, it has been shown that stock markets always go up. I think anything more than 10 years is reasonable. 1. Will it yield 4-6% p.a. This is something I cannot predict. What the markets can give really depends on many factors such as the future economy, population growth etc. However, I would say that 4-6% p.a from STI over 10 years is a reasonable expectation. 5. Is it a good investment? I think so. However, as mention in (1) above, do not just restrict yourself to STI. Do diversify across other markets. Hope this is helpful!
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AMA Christopher Tan

Singtel

ETF

REITs

Investments

With 10k in seed money I would like to start a portfolio of dividend yielding stocks such as Singtel, REITs etc. Any advice for this investing strategy for a new investor and beginner?
Alex Chua
Alex Chua, Freshmore (Engineering System Design) at SUTD
Level 6. Master
Answered on 29 Feb 2020
One of the thing u may want to consider is cost when building your portfolio. The cheapest transaction (enter and exit) fee is $10. If u want to diversified, 10 stocks of $1000 will cost u $200. 5 stocks of $2000 each cost u $100. The former eats up 2% while the late eats up 1% U would want to get your portfolio diversified. So pick 2 - 3 stocks and put the rest into robo advisors. And do your research. Why singtel? Is it really a dividend play?
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Investments

SG Budget Babe

AMA Christopher Tan

Stocks Discussion

Value Investing

Dividends

What style of investing do you go for? And why?
It depends on a couple of factors, and here are some questions to help you: 1. What is your capital? 2. How will you want to invest your capital? E.g. lump sum or an amount on a regular basis 3. How long will you want to stay invested? E.g. 10 years 4. What is your risk appetite? E.g. How do you feel about short-term volatility? 5. What is your objective for investing? Personally, I believe in value investing and to invest over a longer horizon for money that I do not need today. No, you do not need high capital in order to start investing. Instead, you can adopt dollar cost averaging and start with what you can afford. Here is how it works: https://www.blog.pzl.sg/dollar-cost-averaging-singapore-does-it-really-work/ On the whole, you need to understand yourself - the five questions may help you. Then, devise a plan that works to help you reach your goal. Here is everything about me and what I do best.
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Investments

AMA Christopher Tan

How do I invest in index funds (NOT ETFs), tracking indexes like the S&P500 or the MSCI World index in Singapore?
Hi Anonymous, thank you for your question. It all depends on whether you are an accredited investor or a retail investor. If you are an AI, you are able to buy into the Vanguard series of index funds. An AI is is one that has a $2 mil networth or a preceding year income of $300,000. If you are a retail investor, unfortunately, there is no index funds in Singapore that is worth you investing into. I will explain what I mean "worth" in a moment. Since 2004, I have been talking to every CEO of Vanguard Singapore to bring in their Vanguard funds for the retail investors. Specifically, there were 4 CEOs I spoke to over the course of the past 15 years. Three of the CEOs could not do it because there was simply not enough demand. In their words, very few financial advisers/banks would want to sell index funds as the management fees are low and financial advisers and other financial institutions do not get a commission or trailer fees from it. When the 4th CEO came to Singapore, we made progress. I spent significant amount of time working with the management team in Singapore as well as their worldwide leadership to try to bring the retail tranche to Singapore. The funds were even registered and we were already to launch. But unfortunately, there was a change in leadership direction at Vanguard and Vanguard at the very last minute decided to pull out of Singapore and set up their Asia Pac office in Hong Kong instead. The 2 UTs that were mentioned below - Fidelity America A Fund and Threadneedle Global Equity Income Fund are unfortunately not index funds. These funds are benchmarked to the mentioned indexes, but they are not index funds. They do not track the index, they are active funds trying to beat the index by picking stocks. Benchmarked to the index means that they compare their performance to the index, but they do not follow the index. The funds also have 1.5% management fee which is far higher than the typical index fund of say 0.2%-0.4% p.a. Having said that, there are a few index funds in Singapore that are not "worth" investing into. They are the LionGlobal infinity fund series. They have the MSCI world and S&P 500 index fund but they are not worth investing into because the total expense ratio (TER) is simply to high for an index fund. The TER is at 0.81% and 0.72% respectively.
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Financial Planners

Investments

Retirement

AMA Christopher Tan

Is it relevant to start thinking about retirement planning at 27? And if yes, what should I be focusing on/ how do I get started?
If you have started working for a few years only and still closer to a starting income level, I suggest postponing the thought of "retirement planning". Focus on growth, focus on learning. You are just starting out on your working journey. Retirement planning talks are easy once you are the right level of income and at the right stage in life. The conventional wisdom on the "power of compounding returns" is true but that should not be a reason to bring retirement into focus right now. That is mere discussion using math. I don't know where you are at right now. But from experience, there will likely be a lot of life changes for you in the next 10years. Wedding? First house? Kids birth? Kids cost? Home upgrade? Parental demise? Inheritance? Career change?.... Retirement planning needs assumptions and it's just easier at a slightly later stage. That's where I found a sweet spot with many. But I'm not saying you don't save and invest. It is a right habit to cultivate early on. Saving up gives you the room to do things. Pursue what you like and can hopefully develop a long term skill at that pays you well. Investing early on gives you room to learn how to be more savvy. Not many here have experienced the losses from 2008 financial crisis. But without the pain of losses, all talks of compounding returns are hypothetical. Putting some money aside to experiement with things early on is very useful. I started an ice cream business naively at the age of 26 and it flopped. It flopped hard and I burnt a hole in not just my pocket but my wife's pocket. But there were great learning points fromt this failure. It may yet be the best investment. All this can be done with saving and investing without ANY expectation of retirement. Again, retirement planning needs assumptions and it's just easier at a slightly later stage. Hope this sharing works.
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AMA Christopher Tan

Investments

Stocks Discussion

ETF listed on SGX?
What spread levels are you seeing that is raising concern? The SG market is way off other big financial centres in terms of liquidity/activity and so big-ask spreads can grow at times; but for a individual investor view - this is a one off cost. So picking the right index would be much more important than a few percentage points "lost" crossing the spread.
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Investments

AMA Christopher Tan

What is a Dimensional Fund and how can retail investors get access to it?
Hi anonymous, thank you for your question. If you can wait till March when MoneyOwl launch our investment service, you will be able to gain access to Dimensional funds. If you can't and must invest now, you can invest via Endowus. The difference between Endowus and MoneyOwl is this: Endowus uses PIMCO for the bonds allocation of their portfolios. PIMCO is an active bond manager. Also, Endowus is a roboadviser. For MoneyOwl, for both the equities and bonds portion of our portfolios, we only use Dimensional, which is an evidenced-based fund manager who does not time the market. In addition, MoneyOwl is a bionic adviser -meaning you can use our roboadviser to get advice but at the same time, you have access to our salaried-based adviser to get a second opinion overlayed with human wisdom. Do check out www.moneyowl.com.sg when we roll out our investment service.
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