What is YOUR general investing philosophy/strategy? - Seedly
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Frankie Rappaport

Asked on 06 Feb 2020

What is YOUR general investing philosophy/strategy?

What's the belief that underlies your investing strategy? Mine's in the answers below!

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    simple Zen investing things (update 16.02.2021)

    Be nice to people, eat well, get some exercise, and spend less than you make.

    Dan P. Egan: "Water, food, shelter, clothes and a bed. Those are all really important things. Without them, you’d be pretty miserable."

    DISCLAIMER (sorry): Complete losses possible with any strategy. You should not construe any information or material as legal, tax, investment, financial, or other advice. Nothing contained in this piece constitutes solicitation, recommendation, endorsement.

    https://m.youtube.com/watch?v=cpbbuaIA3Ds

    Singapore investing primer:

    https://sias.org.sg/wp-content/uploads/pdf/SIAS_3_Dimension_Guide_Book_To_Investing.pdf

    Did You read this excellent, classic book? The only one you need:

    Burton G. Malkiel: A Random Walk Down Wall Street

    https://1lib.eu/book/5565916/3dc865

    ...........................................................................................................................

    Burton Malkiel: created the concept of passive index investing to our advantage.

    ............................................................................................................................

    Baseline:

    -to be completely free of debt

    -to have emergency funds available anytime for several months (6-12 mo)

    -start early

    -to NEVER invest into the following (rationale: too risky and/or fees too high and/or too inefficient), take care:

    Unit Trusts (Mutual Funds), they are a (bad) thing of the past. Whole Life insurance, ILPs or endowment plans, single stocks (though most of us hold some), IPOs, options, bonds, structured products/derivatives, CFDs (contracts for difference), ETNs, commodities, currencies, cryptocurrencies, actively managed or „smart“ ETFs, leveraged/inverse ETFs, short selling stocks, margin trading.

    The next time your bank/finance advisor recommends mutual funds (unit trusts) to You, ask her/him whether there could be an 'elephant in the room'.

    https://m.youtube.com/watch?v=D7ETn56GWHQ

    -there is no use in short-term decisions

    -when investing seriously the invested funds should be left untouched for at least 10 - 15 years

    https://www.youtube.com/watch?v=UYE-kn5GR_0

    … not much remains:

    -priority: 'passive' stock & REIT index ETF investing

    -physical gold (5-10% of assets, current times substitute for bonds for stability, if any)

    -property (via REIT ETFs or even property of one's own)

    -to spend money for things one likes, though better live healthy and eco-/animal-friendly. The material world rarely gives longstanding deep satisfaction.

    -to support your relatives or donate ... maybe the best investment

    https://www.youtube.com/watch?v=mPGv8L3a_sY

    https://www.youtube.com/watch?v=xyqfHZjaRy8

    https://m.youtube.com/watch?v=PoPL7BExSQU

    https://m.youtube.com/watch?v=G9xKgtHKMMQ

    Platforms:

    -for ETFs: safe, cheap online broker (TD Ameritrade, Standard Chartered, POEMS, FSMOne).

    TD Ameritrade trading fees for U.S. equity came down to 0.00 USD. Prelude to Singapore.

    With U.S. equity the IRS forces brokers worldwide to withhold 30% tax on dividends (but not on capital gains). For ETFs distributing relevant dividends Ireland domiciled (UCITS type) ETFs are the better choice, withholding only 15% dividend tax.

    In Singapore there is no capital gains tax (nice !), also no dividends tax:

    https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/What-is-Taxable-What-is-Not/Dividends/

    -You do not need a formal savings plan / robo advisor, with some reading and experience can manage Your portfolio all by Yourself. These create more fees and worsen Your performance.

    -Your broker/bank charge high & invisible currency conversion fees, f.ex. when You trade U.S. equity. Let services like TransferWise (compare competitors on: www.monito.com ) do that conversion. Brokers prefer Your own name on incoming funds. Use the free USD 'account' TransferWise offers, with currently only 5000 SGD total value allowed across all currencies for Singapore residents.

    https://m.youtube.com/watch?v=l0zaebtU-CA

    -for physical gold: safe & cheap dealer (not a bank, they charge high fees up to 2%)

    ETF infos:

    https://www.etf.com/etfanalytics/etf-finder

    https://www.justetf.com/uk/find-etf.html

    https://www.poems.com.sg/etf-screener/

    https://secure.fundsupermart.com/fsm/etf/etf-selector

    https://www2.sgx.com/securities/etf-screener

    https://www.hkex.com.hk/Market-Data/Securities-Prices/Exchange-Traded-Products?sc_lang=en

    http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=vt&insttype=&time=8&freq=1

    https://dollarsandsense.sg/how-paying-1-in-investment-fees-could-mean-giving-up-to-13-of-your-wealth/

    What to expect with well diversified passive stock ETF investing ?

    There is no defined long-term annual performance % classification for 100% stock exposure for retail investors, can evolve, takes into account fees and real world investing mistakes (with gold and bonds added the % would even be lower). My averaged % per year numbers suggestions refer to Your total investing portfolio. Attention: do not forget to subtract annual inflation rates to imagine real world net returns !

    1-4%: realistic annual net return

    5-7%: good (something that professional pension systems achieved for their clients over the last 10 years)

    8-12%: excellent (something that the very best U.S. university endowment funds achieved over the last 10 years, like MITIMCo, Harvard's, Yale's). Disgression: MITIMCo staff are very smart and beautiful people, have even a book club installed. MITIMCo's reading list https://mitimco.org/read/

    above 12%: not sustainable longterm over more than 10 years, or very very unlikely, particularly for retail investors and their total investments.

    ETFs general selection criteria:

    -only passive stock indexing ETFs or REIT ETFs (no bond ETFs etc.)

    The odds that your active manager could outperform an index ETF are 100% against her & you.

    Check the annual SPIVA reports:

    https://www.spindices.com/spiva/#/reports/regions

    https://assetbuilder.com/knowledge-center/articles/why-it-keeps-looking-worse-for-actively-managed-funds

    https://en.wikipedia.org/wiki/BillMiller(investor)#Investment_philosophy

    https://www.youtube.com/watch?v=pHNbHn3i9S4

    ALWAYS READ THE ETF FACTSHEET: Within the 'fact sheet' pdf documents of Your ETF , available on the internet, You will find the following essential ETF data:

    -assets under management (AUM) should be high (more than 100 mio USD), otherwise the ETF can get closed by the parent company, because of non-profitability.

    -total expense ratio (TER = annual fees) should be lowest possible (ideally less than 0.30%, maximum 0.80%). See last chart on this entry below !

    -dividend handling modality: with 'distributing' ETFs all stock dividends are distributed as cash; with accumulating ETFs all dividends are automatically reinvested into the ETF. The latter modality seems more appropriate for ultra-longterm investing since re-investing of distributed cash would increase trading costs, or at least lead to more re-investing hassle.

    -the ETF indices should be replicated 'physically', not 'synthetically' (by SWAPs). Since SWAP replication is not legal with U.S. domiciled ETFs, this is a problem of Europe domiciled (UCITS) ones. Formally, according to the UCITS regulation, the counterparty risk is limited to a maximum of 10 percent of the fund’s assets. In practice, however, the risk is even more reduced by various security measures. The risk is thus minimized by daily swap reset, overcollateralization or the use multiple swap counterparties. I would still be cautious and buy only physically replicating ETFs.

    https://www.justetf.com/ch/academy/synthetic-replication-of-etfs.html

    -the ETF should ideally not lend stocks to other parties, even if this is common practice in the business.

    https://www.justetf.com/de/news/etf/security-lending-and-etfs.html

    -proven track record (excellent past longterm performance, ideally for already 5-10 years)

    Techniques:

    -to diversify (countries, asset classes, sectors) to mitigate risks (most ETFs are already well diversified), don't succumb to 'home bias'.

    10 year price chart Singapore STI ETF (ES3) versus U.S. S&P 500 index (dividends not included).

    -to not buy & sell, but buy & hold ultra-longterm instead.

    Non-doing: this is the most difficult part for the beginning investor, who thinks high performance could be achieved only by frequent trading (buy & sell style), when the opposite is true. Better be a 座禅 samurai, following your patient Zen way of investing. Advice: Plan to hold your bought ETFs for 20 years.

    -to see dividends coming in seems nice, but possibly during the major part of Your investing horizon instead of the 'distributing' ones the 'accumulating' ETFs that reinvest all dividends into the ETF seem the better option if TER fees comparable

    -believe it or not: with an ultra-long term Buy&Hold strategy it is completely irrelevant, when You are buying. Anyway to determine best entry/exit points is absolutely impossible. So better invest just periodically ('dollar cost averaging'), monthly or quarterly or semiannually or even only once per year to have an appropriate lump sum (and thus low relative trade commission fees), all O.K.

    -to not (!) rebalance, letting winners run, most of the time

    https://www.youtube.com/watch?v=tguu4m38U78

    -to not panic when markets drop, crashes will come, be patient then, don't sell, after few years markets in the past recovered completely most of the time (see ultra-longterm chart of SP500 with big crashes ... but: negligible for longterm investors). For Japan a 22 year period starting in 1989 was bitter, though. (but not the ultra-longterm 1970-2020 period, with the Nikkei 225 y appreciating decent 5% annually).

    ETF Strategies:

    https://m.youtube.com/watch?v=qWG2dsXV5HI

    Attention: If Your selected ETFs distribute high dividends (more than 0.5% per year, roughly), try the Ireland-domiciled UCITS version of the ETF (when available) instead of the U.S. version, because You loose 30% taxes with U.S. domiciled ones. Balance the tax advantage however with the fact that U.S. domciled ETFs often have slightly lower annual fees. Because of higher liquidity I feel that the London Stock Exchange and the German ones (XETRA) should then be selected for the trade.

    If You'd like to enjoy the tax advantage of Ireland-domiciled ETFs, You should look for a cheap online broker with european stock exchanges exposure, for SG residents the following are possible online brokers with exposure to european markets in ascending order as to fees (% trading fee & minimum fee) as of 27.06.2020:

    Interactive Brokers 0.05% 1.25 EUR

    SAXO Markets 0.10% 10 EUR

    Standard Chartered (SG based) 0.25% 10 EUR

    Maybank Kim Eng 0.30% UK 20 GBP

    KGI Securities 0.50% 70 EUR

    OCBC Securities 1.00% 60 EUR

    ...........................................................................................................................

    #1 single ETF strategy

    SPDR MSCI World ACWI (SPYY/ACWD/ACWI)

    Vanguard FTSE All-World UCITS ETF (VWRA/VWCE)

    MSCI World (SWRD)

    FTSE Global All Cap Index (VT)

    still tilted much towards U.S. companies

    honestly: maybe a single one of those mentioned above (or from #2) is all a retail investor needs as to very successful long-term stock investing.

    #2 single ETF strategy with more upside potential and possibly more risk

    SP500 (CSPX, VUAA, VOO, IVV)

    #3 ‘balanced‘ global ETF strategy

    50% SP500 (CSPX, VUAA, VOO, IVV)

    50% MSCI World ex-USA (VEU, VXUS, IXUS)

    #4 U.S. / China codominance ETF strategy

    50% SP500 (CSPX, VUAA, VOO, IVV)

    50% MSCI China (HK:2801, CNYA, XCS6, MCHI)

    #5 focused ‘leader countries‘ ETF strategy

    40% SP500 (CSPX, VUAA, VOO, IVV)

    20% China (HK:2801, CNYA, XCS6, MCHI, PGJ, GXC)

    10% S-REIT ETFs Singapore (Lion-Phillip S-REIT)

    10% Switzerland (DBXS, EWL)

    10% Sweden (OMXS, EWD, Avanza Zero, also: Investor AB, which is not an ETF but a stock, of a Sweden stocks holding company, gives high dividends too)

    5% Germany (OXDA/DBXD, EWG)

    5% Japan (EWJ, EUNN/IJPA/SJPA)

    Note: The approaches #1 to #5 are all possible for a beginning investor.

    But honestly: possibly a single ACWI plus much patience is all what is needed anyway as to stock investing.

    The #6 following, is nothing, a beginner should try, when #1 to #5 are already risky enough.

    ..

    #6 interesting ETFs with higher risk but mostly past good performance (sector funds must be classified as risky because of less diversification and high volatility)

    U.S. Technology

    QTEC (advantage: less concentrated)

    VGT

    QQQM (new, cheapest), QQQ, EQQQ

    Subsector Technology:

    FDN

    SOXX

    SKYY

    NXTG

    ARKW (somehow these actively managed ARK funds seem successful, don't know why ... maybe must wait longer to evaluate true longterm performance ...)

    Global Technology:

    XDWT

    FDNI

    China Technology:

    CQQQ

    KWEB

    HK:3067/9067 iShares Hang Seng TECH ETF

    KBSTAR China Hang Seng TECH ETF (371150 KS)

    HK:3191 (low AUM still)

    HK:2807 (low AUM still)

    HK:3147 CSOP SZSE Chinext ETF

    HK:3173 Premia CSI Caixin China New Economy ETF

    HK:3181 Premia Asia Innovative Technology ETF

    ASX:CNEW

    KSTR (upcoming)

    KFVG (upcoming)

    EWT (Taiwan, tech heavy)

    Germany Technology:

    EXS2

    Asia (ex-Japan) Technology:

    ASX:ASIA (BetaShares Asia Technology Tigers ETF)

    U.S. Biotechnology:

    XBI

    FBT

    IBB

    ARKG (actively managed)

    China Biotechnology:

    HK:2820

    KURE

    U.S. Medtech:

    IHI

    Non-Singapore-REIT ETFs:

    IQQ6

    VNQ

    IQQP/IPRP

    IQQ4

    ...............

    Nordic Technology focus Unit Trust (actively managed, very high risk):

    TIN Ny Teknik (Sweden)

    (management historically performed excellent. disadvantages of active management & much higher fees than ETFs)

    https://www.youtube.com/watch?v=1C7DyWdky_Y

    https://www.youtube.com/watch?v=115HvpEgLow

    .

    .

    Disclaimer: Think for Yourself.

    https://m.youtube.com/watch?v=vtx5NTxebJk

    All private opinions, total losses possible with any strategy.

    ... possible Superstar U.S. & China Quartet: VGT + CQQQ + XBI + KURE ... (?)

    Interesting auto-updating chart, reflect well on ETFs longterm performance after the severe economical threat of the Corona Crisis (maximum prices level before crisis was on 19.02.2020), give recovery yet a bit of time, however some ETFs already climbed to all-time highs soon after this crisis:

    There is no place for charisma in investing, only objective performance and integrity count.

    Do You believe You realistically could beat the average market performance, f.ex., SP500 index by diligently (and time-consumingly) 'picking stocks' and market-time?

    Then look here to evaluate the success over the last 10 trailing years of two of the most famous and 'successful' (???) living value stock pickers: Bill Miller Opportunity Fund (LGOAX) and Warren Buffet (BRK.A, Berkshire Hathaway series A stock). Both the fund and the stock interestingly do not distribute dividends, which the depicted cheap & large & successful Vanguard SP500 ETF (VOO) however does. These ETFs dividends are not included in the chart, so VOO is even more successful (and Bill Miller and W.B. even less so) than the chart could tell.

    (sidenote: Warren Buffet himself concludes that something like VOO is the right vehicle for most investors. Integrity.)

    Do you still feel, You can realistically be a successful 'stock picker' over long-term measured against an appropriate stock index when the mentioned 2 'role models' with all their professional research resources and staff fail to do, at least consistently, exactly that ?

    Walter Benjamin: "... The storm irresistibly propels him into the future to which his back is turned, while the pile of debris before him grows skyward. This storm is what we call progress."

    Empirical chart of performance of individual investors,

    who buy & sell often, try stock picking, try market timing, sell panically on stock exchange crises versus simple Buy & Hold ultra-longterm passive S&P500 investing:

    What You lose over years with only 1.0 - 1.5 % annual fees (as currently with unit trusts/mutual funds):

    I will be writing updates below ...​​​

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    65 more comments

    Frankie Rappaport

    Frankie Rappaport

    2w ago

    Bill Miller speaks: https://millervalue.com/bill-miller-4q-2020-market-letter/?utm_source=enews&utm_campaign=market
    Frankie Rappaport

    Frankie Rappaport

    3d ago

    With TER 0.14 % the cheapest so far Hang Seng TECH index ETF: KBSTAR China Hang Seng TECH ETF (371150 KS)
    Thank You!
    Can you clarify
    I wonder if
    This is so helpful 👍
    What about
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    Ow Jie Liang

    Ow Jie Liang

    Level 6. Master

    Answered on 14 Aug 2020

    I feel the need to comment on this wonderful post as I come back to refer to it once in a while and hoping for updates. Thank you very much for such a detailed and thoughtful analysis in investing for the retail investor and the layman.

    A good book to me, or in this case a good post, is where you find yourself coming back once in a while to refresh your knowledge, take time to reflect on yourself and gaining new insights from the whole process when I am done digesting. I have looked at this post approximately 3 or 4 times over the course of a few months and each time I have positive takeaways.

    Thank you very much Frankie! I hope we have an opportunity to have coffee someday.

    0

    Thank You!
    Can you clarify
    I wonder if
    This is so helpful 👍
    What about
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    Karan Malhotra

    Karan Malhotra

    Level 5. Genius

    Answered on 27 Feb 2020

    There are some great answers here, so I'll just link to this:

    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3415739

    Abstract:

    compound returns to nearly 62,000 global common stocks during the 1990 to 2018 period, documenting that the majority, 56% of US stocks and 61% of non-US stocks, under perform one-month US Treasury bills over the full sample. Focusing on aggregate shareholder wealth creation measured in US dollars, we find that the top-performing 1.3% of firms account for the $US 44.7 trillion in global stock market wealth creation from 1990 to 2018. Outside the US, less than one percent of firms account for the $US 16.0 trillion in net wealth creation.

    Almost all the gains come from about 1.3% of stocks, so be careful what strategy you choose!

    A

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    Frankie Rappaport

    Frankie Rappaport

    27 Feb 2020

    Ok, thanks for input, dear Karan, very interesting, so much dead weight... So the longterm 'successful' SP500 is biased of course, composing of the better companies. I calculate for that period an SP500 price performance of about 6-7%. So, at least in the past, an SP500 passive ETF was no bad choice, I hope then also for the future ... thank You!!!
    Thank You!
    Can you clarify
    I wonder if
    This is so helpful 👍
    What about
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    MT2020

    MT2020

    Level 7. Grand Master

    Answered on 25 Feb 2020

    Personally, my investment strategy will be to invest in Singapore blue chips companies who pays dividends consistently every year. I do not like to invest in ETFs as i do not have control over my portfolio. All the dividends gained will be reinvested in counters to compound over the years.

    1

    Frankie Rappaport

    Frankie Rappaport

    24 Apr 2020

    Thank You, I also own stocks, even buy some new from time to time. however the evidence (many studies) clearly shows that single stock picking does not work out long-term (or better: not work out as good as the chosen index). so passive stock investing via ETFs is the best thing investors can do.
    Thank You!
    Can you clarify
    I wonder if
    This is so helpful 👍
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    AD

    Awk D

    Level 3. Wonderkid

    Answered on 25 Feb 2020

    • Invest in yourself (can invest by doing better in your career, can invest on knowledge for investing asset.

    • use the cash to invest in something you believe (for non professional, investment is only a part of your life. Don't let it rule your life. ) Such as high yield and stable REIT. Blue chip stocks.

    • use other asset to invest, such as your CPF and house. I am comfortable to top up CPF for minimum 4% annual interest. For housing, invest with your limit, my belief is that housing is always for use first not really for speculation. But as house is quite a sizeable amount to spend / invest. So choose a house that is comfortable and mitigate the inflation of CPI.

    1

    Frankie Rappaport

    Frankie Rappaport

    25 Feb 2020

    Exactly, thank you!
    Thank You!
    Can you clarify
    I wonder if
    This is so helpful 👍
    What about
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    Aaron Leow

    Aaron Leow

    Level 8. Wizard

    Answered on 14 Feb 2020

    Step 1: Build Cashflow

    Step 2: Invest Cashflow into Cashflow Generating Assets

    Step 3: Protect and Insure Assets

    Step 4 : Repeat Step 1-3

    A tree is an asset, the root's of the tree will determine whether the tree will survive. And I see the tree's roots as cashflow, which is the fundamental basis for a strong financial philosphy.

    Click here to find out more about me!

    1

    Frankie Rappaport

    Frankie Rappaport

    20 Sep 2020

    Thank You Aaron, yes like a living organism and then the sun and the air also help the tree keep growing
    Thank You!
    Can you clarify
    I wonder if
    This is so helpful 👍
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    Dividend Stocks and Dividend growth stocks

    One for income and another for income and capital appreciation.

    I make videos about interesting stuff at youtube here​​​

    6

    4 more comments

    James

    James

    17 Nov 2020

    Hi Frankie, i have a long term portfolio similar to your #3 strategy but the allocation is 80% CSPX and 20% 2801. What do you think about this allocation for long term say 20-25 years? I always hear ppl say that US is a sunset economy so i am not sure if i should hold it this long.
    Frankie Rappaport

    Frankie Rappaport

    17 Nov 2020

    Hi, dear James, your selection seems fine. (I always think super longterm, even more than 20-25 years, if that is realistic. at least a sound premise). Difficult to say if we should tilt away a bit from hitherto super-successful U.S. and tilt more towards China. 20% China already is already quite something. Future then will tell, whether we should increase our China allocation. At least China is developing very fast, do not consider all the other EM markets. USA, China, Scandinavia, Switzerland, Singapore are the countries with future potential (I feel). Technology has it's promises. So small percentage allocation towards the following could be interesting -QQQ, QTEC -XBI -HK:3067, CQQQ, KWEB -HK:2820, KURE
    Thank You!
    Can you clarify
    I wonder if
    This is so helpful 👍
    What about
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