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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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Frankie Rappaport
Frankie Rappaport
Top Contributor

Top Contributor (Jul)

Level 9. God of Wisdom
Updated 16h ago

the simple things (updated on 05.08.2020)

shiny, shiny, some of my irrelevant ideas ...

(work in progress, can get updated)

DISCLAIMER (sorry): Complete losses possible with any strategy. This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this piece constitutes a solicitation, recommendation, endorsement, or offer by me.

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

If You needed only to read 2 single books on investing in Your lifetime, because of the authors honest, evidence based & balanced approach and clear words on how the mainstream finance industry still does damage to retail investors:

Burton G. Malkiel: A Random Walk Down Wall Street

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

... even better (You could use Google Translate):

Gerd Kommer: Souverän investieren mit Indexfonds und ETFs: Wie Privatanleger das Spiel gegen die Finanzbranche gewinnen

https://1lib.eu/book/2657535/1e35cb

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

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)

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

Unit Trusts (Mutual Funds), Whole Life insurance or endowment plans, single stocks (though most of us hold some), 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.

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

-when investing seriously the invested funds should be left untouched for at least 5-10 years

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

… not much remains:

-priority: passive (in the good sense!) stock index ETFs & REIT ETFs

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

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

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

https://www.youtube.com/watch?v=pPTHem2iu0A

-to donate

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, Charles Schwab, POEMS, FSMOne, Standard Chartered, Saxo). Generally trading commission fees head towards zero, as evidenced in the U.S., where 0.00 USD has been reached since 2019, on 03.08.2020 TD Ameritrade Singapore branch cut trading fees for U.S. securities (stocks, ETFs) to 0.00 USD. Prelude to Singapore SGX trading fee abandoning ...

note: U.S. based brokers subtract 30% withholding taxes from all dividends (but not from capital gains), of those only 1 x 15% can be avoided by filling in form W-8 BEN every 3 years, if Your country negotiated a tax treaty with the U.S., which Singapore currently has not! When the U.S. domiciled ETFs (given all on www.etf.com) seem to be more diverse, the better choice for Singapore investors of ETFs that are distributing a significant annual dividend would be (if annual fees being similar) to select an Ireland domiciled equivalent version of any given ETF (screen through on www.justetf.com with Germany or UK selected as the header drop down menu on the website)

-You do not need a formal savings plan or a robo advisor, because with some reading and experience You can manage Your portfolio all by Yourself. Savings plans and robo advisors only create more fees and worsen Your total performance.

-whenever a currency conversion is involved, never do let Your online broker or bank do this conversion. Almost all of the brokers & banks charge a hefty currency conversion fee that does not appear directly visible on Your trade confirmation ! Do use instead services like TransferWise (currently the top cheapest, safe & fast & reliable; alternative: competitor CurrencyFair) to convert/send currency into Your own account, even within Your country and within Your brokerage account. Example: with Your Singapore broker You buy ETFs directly on the U.S. stock exchanges. But take care that Your bank, from which You are transferring Your due amount to TransferWise does not charge a hefty fee for outgoing money transfers that could eliminate the advantage of TransferWise.

Here these transfer service companies can be compared: https://www.monito.com/

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://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 refer to Your total investing portfolio.

1-4%: realistic 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.

ETFs general selection criteria:

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

(For the stock market there is good evidence by studies, that active managers cannot beat the market robustly over longer periods.)

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 , easily retrievable 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 could 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%). See last chart on this webpage 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 to more re-investing hassle.

-the indexes should be ETF 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 widespread 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.

Chart: 10 year performance singaporean STI ETF (ES3) versus U.S. S&P 500 index

-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. 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 proper seem the better option when they have comparable TER fees

-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 absolutetely 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) is all O.K.

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

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

-to not panic when the markets are going down, the crashes will come, be patient then and don't sell, after few years the markets in the past recovered completely most of the time (see ultra-longterm chart of SP500 with big crashes visible ... but negligible for the longterm investor)

ETF Strategies:

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

Attention: If Your selected ETFs distribute relative high dividends (more than 0.5% per year, roughly), try to buy the Ireland-domiciled UCITS version of the ETF (when available) instead of the U.S. version, because You loose 30% taxes with the 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 their 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

MSCI World ACWI (SPYY, ACWI)

MSCI World (LCUW, IWDA, SPPW )

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, VUSD, VOO, IVV)

#3 ‘balanced‘ global ETF strategy

50% SP500 (VUSD, VOO, IVV)

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

#4 U.S. / China codominance ETF strategy

50% SP500 (VUSD, VOO, IVV)

50% MSCI China (MCHI)

#5 focused ‘leader countries‘ ETF strategy

40% SP500 (VUSD, VOO, IVV)

20% China (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 IWDA (or CSPX) plus 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 past good performance (sector funds must be classified as risky because of less diversification and high volatility)

U.S. Technology:

VGT

QQQ (not pure tech ETF)

Subsector Technology:

FDN

SOXX

SKYY

NXTG

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

Global Technology:

XDWT

China Technology:

CQQQ

KWEB

Hang Seng Tech Index (upcoming)

HK:3147 CSOP SZSE Chinext ETF (risky)

HK:3173 Premia CSI Caixin China New Economy ETF (risky)

HK:3181 Premia Asia Innovative Technology ETF (risky)

KSTR (upcoming, risky)

KFVG (upcoming, risky)

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 (caveat: risky & actively managed)

China Biotechnology:

KURE

U.S. Medtech:

IHI

Non-Singapore-REIT ETFs:

VNQ

IQQP/IPRP

IQQ4

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

Nordic Technology focus Unit Trust (no ETF, actively managed mutual fund, risky):

TIN Ny Teknik (Sweden)

(management team has a special approach to particular companies and historically a very good performance, however it still has the potential disadvantages of actively managed mutual funds including 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 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."

See here an empirical chart of the 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 SP500 investing:

What You lose in absolute terms over the years with only 1% or 1.5 % annual fees (as typical currently with unit trusts/mutual funds) You can see here. Think !:

​​​

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Frankie Rappaport
Frankie Rappaport

23 Jun 2020

Maybe interesting https://www.ftportfolios.com/Commentary/MarketCommentary/2017/5/2/the-tech-sector-has-been-the-gold-standard-for-15-years View from the Observation Deck 1. The S&P 500 Index is comprised of 11 major sectors. Today’s chart shows that only two of those sectors, Information Technology and Health Care, stood above the rest for the standardized time frames referenced in the chart. 2. Information Technology was the top-performing sector in five of the six periods ended 4/28/17. Nearly a clean sweep. 3. Brian Wesbury, Chief Economist at First Trust Advisors L.P., has been unwavering in his belief that economic growth stems from entrepreneurship and invention, not quantitative easing or government spending. Technology fits that bill better than any other sector, in our opinion. 4. What we find most interesting about the results is that the 15-year period (4/30/02-4/28/17) proceeded the popping of the tech/internet bubble in 2000 and the bear market in stocks that followed (bear ended in 2002). 5. The recovery in Information Technology took time. At the end of 2002, technology stocks represented 14.6% of the S&P 500 Index, according to Bespoke Investment Group. As of 4/28/17, that figure stood at 22.5%, by far the largest weighting of any sector, according to S&P Dow Jones Indices.
Frankie Rappaport
Frankie Rappaport

1d ago

Here is a very good one from Barry Ritholz on self-reflection: https://ritholtz.com/2020/07/what-did-you-get-right-and-wrong-this-year/ What Did You Get Right – and Wrong – This Year? July 24, 2020 9:00am by Barry Ritholtz Five Midyear Questions for Disappointed Investors It’s been easy to get things wrong in markets in 2020, but self-examination can help to get things right. Bloomberg, July 20, 2020 With the second quarter behind us, investors are evaluating how well their holdings have performed. The midpoint of the year is as good time as any to evaluate what you did right or wrong in a very challenging year. Given how much panic selling we saw at the end of March, there surely are quite a few people who are disappointed with their results. If you are one of those folks, now is the time to determine where you went off track. Rather than tell you what you did wrong, ask yourself these questions. Your answers will help send you in the right direction: No. 1. What is my investing philosophy?: It may be a basic question, but it is one some people skip: Am I an active investor, hunting for alpha (market-beating returns), or am I a passive indexer, content with beta (market-matching returns)? For those trying to beat the market, are you succeeding? If you are, then congratulations! You’re one of the few. But ask yourself this: Is your process repeatable and reliable, or did you just get lucky? This question remains one of the most challenging in all of active management. If the active approach isn’t paying off, another question awaits: Would you be better off in the long run embracing a low-cost, passive indexing strategy? No. 2. Where did I go wrong, and how am I tracking it?: Be like Ray Dalio: Don’t hide your errors, but embrace them as a way to become a better investor. Managing this is a two-step process: First, figure out why you might have gone astray. Were you trading too much, incurring fees along the way? Did you hold onto stocks that you should have sold? Are you part of the Robinhood contingent buying bankrupt companies such as Hertz or JC Penney, which are never likely to pay off? Were you late to investing in Tesla or Netflix when most of the big gains were in the past? About 40% of active fund managers manage to beat their benchmark in any given year, but net of costs and fees, almost none does so consistently over 10-year periods. Once you find your weaknesses, the next challenge is to identify them sooner. What objective measures are you using to tell you an investment isn’t working out? How are you distinguishing temporary setbacks and permanent impairment of capital? You need to develop an objective way to determine if an investment was in error so it can be adjusted. It is acceptable to be wrong; it happens to everyone. But it is inexcusable to stay wrong. No. 3. How strong are my convictions? This question can confuse some investors. It is not a measure of enthusiasm or belief strength, but rather, how warranted is the confidence you place in your philosophy. Does your strategy have a firm, analytical basis in reality? Not merely a feeling or instinct, but something more specific: Do you have a well-researched plan that delineates how you are expressing your beliefs in the markets? Those investors lacking a high degree of conviction often become more easily influenced by outside forces. They develop self-doubt, bounce from one fad to the next, slavishly following financial Twitter, cable TV and punditry. Low-conviction strategies are not the path to success. No. 4. What changes am I willing to make? Long-term change in behavior is one of the toughest challenges you will ever face as a trader or investor. Once you figure out what is not working — which is hard enough — what are you able to do to change it? How much of what you believe has been proven false and must be discarded? What are you watching/reading/listening to that is counterproductive? What events or developments are hurting your investments now and must be addressed immediately? What are you willing to do to make repairs? Change is never easy; it is especially difficult when money and ego are at stake. But when a situation hasn’t been working, repeating the same thing over and over will not improve your results. No. 5. How can I stay on track in the future? The above questions are all about being brutally honest with yourself. Your beliefs, mistakes, performance and ego must all be addressed head on if you want to improve. This final question isn’t about the past, but the future. What will you do to stay disciplined? How are you going to evaluate your performance, especially in light of changes in investing strategy? Even if you don’t have all of the answers, having good questions can point you in the right direction. They go a long way toward helping you get the answers you — and your investments — need.
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

1 comment

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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!!!
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.

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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.
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.

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Frankie Rappaport
Frankie Rappaport

25 Feb 2020

Exactly, thank you!

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!

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Frankie Rappaport
Frankie Rappaport

14 Feb 2020

Thank You Aaron, yes a like a living organism and then the sun and the air also help the tree keep growing

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​​​

2 comments

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Frankie Rappaport
Frankie Rappaport

11 Feb 2020

Hi, dear Ernest, yes if you keep uptodate with company news and reports and are very educated surely a viable option. i also hold still tech stocks like INTC, ORCL, AKAM since the nineties, they are quite successful but I feel Tech dominant ETFs (f.ex. VGT, QQQ) are more successful as also more diversified and something like fire-and-forget for longterm investment ( I could be wrong though ...)
Frankie Rappaport
Frankie Rappaport

11 Feb 2020

Thank You! for the interesting link