Since we are at it, no harm veering off course to discuss whether you hypothetical example will work out as "planned" 40 years later.
1) Inflation is not factored in? Inflation is something we can't control... Just ask our Indonesian and Malaysian friends do they trust interest rate projections without factoring inflation ;)
2) Looking at my dad's and my personal experience, I would prefer to put that $1000 per month into property instead ;)
Readers can also refer to their personal experiences or ask their parents or grand parent - how much they paid for their property 40 years ago and whether that same money would be better off in fixed deposits?
Those with whole life insurance may also join in he fun by comparing the opportunity costs if they had invested the money in fixed deposits or property instead.
Did a backtest of investing in STI, $100 monthly, using POSB Invest-saver method (fees and all) from Jan 2005 to Dec 2014. With 1% sales charge: Portfolio value @ $17,388. With 0% sales charge: $17,600. Difference:$222. Most people fail to realise one time sales charge of 1% or 3% is quite negligible. Slap a 0.5% annual platform/wrap fees is totally another story.
Welcome to my watering hole! Thanks for your courage and willingness to put your convictions to the test!
1. Let's side step the "low cost" discussion since you are using the example of $100 per month for 10 years. If its $1000 per month and 30 years, its another story ;)
2. You do know that some practitioners of passive indexing are advocating Wilshire 5000 Total Market Index as they deem the S&P 500 Index is too narrow an index for diversification purposes as a risk management technique. What more there is to say about our STI index...
3. You are practicing Active Index Investing. Yet you are advocating Passive Index Investing to "others". Do as I say; not as I do?
4. Your DIY individual stock picks are outperforming the STI index. Any reason why you still want to engage in Index Investing? Reason I asked is that you shared you are moving away from the Permanent Portfolio strategy after 3 years because you have found another strategy you have backtested to be even better. You have more faith on backtesting over your actual investing track record?
5. Is there a possibility you'll move away from Index Investing 5 years later if you find another better strategy?
Don't get me wrong. I'm not putting you in a spot. This is what a sounding board should do. Challenge your thesis to uncover blindspots ;)
It's interesting to see what the father of Low Cost Passive Indexing has to say about ETFs:
As expected your questions are tough man..haha. My answer as follow
1) The overall portfolio will suffer about 1% loss due to the sales charge, not significant in my personal opinion.
2) So you are saying STI is not diversified enough?
3) I advocate index investing to 2 groups, those who don't invest at all, and those who underperform the index (unkowingly because they refuse to track their performance). For me, I know my temperament can't stick solely to boring index investing, hence trying active investing, but also making sure it is outperforming the index.
4) Why am I sticking to index investing despite my own outperformance? Because past results is not indicative of future performance. The fund allocated to the new (backtested) strategy I found made up of just ~5% of my overall portfolio, due to the same reason stated.
5) Quite unlikely. Currently the STI ETF is in my top 3 holdings despite me having found several new strategies over the past few years. So think it will stay with me well into the future.
LOL! You are probably closer to the "agar agar du hor" or estimate can already fuzzy logic grey grey shepherds ;)
No, those are not goals.
What started out as random activities have turned into habits, and they in turn have morphed into lifestyle choices ;)
Goals are like props, clutches, or training wheels.
It's not that people like us have no goals; it's just that once we have crossed the river, we don't see the point of carrying the sampan with us on our backs ;)
Instead of concrete SMART goals, we prefer to use non-quantifiable ideas like Principles, Values, Visions, etc.
You have faith he will provide; I let my ego go (work in progress).
Believer and pagan share something in common - we don't live life assuming we are the centre of the universe ;)
Hi Jared, good and honest question. Sure, as long as that financial goal is in line with the historic performance of the respective Indexes. Anything above would be wishful thinking. I currently have about 10% of my portfolio in ETFs. Mainly country index funds for countries where I have no clue like Myanmar and Vietnam who have good demographics or on technology indexes like Nanotechnology or Water or Renewables where I have no clues about the players.
I did have some goals which I did achieve...not all financially related though...as the years go by, out went the goals as there were some goals I wish I didn't work so hard for and missed out on spending time with far more valuable family members.
By blocking out our peripheral vision, we may miss out on more promising opportunities and/or fail to see things that may matter more to us...
Thus, goal setting's biggest strength is also its biggest weakness.
Most of us in our 40s will know or have seen the price we and others have paid for "success" - be it poor health or mental breakdowns, failed marriages, strained relationships with children, and so on.
There is no free lunch.
Likewise, those who value work/life balance and family may have to pay a price on their career progression or income.
can hear that i'm praying to thr market, oh please let me get out of it soonest possible, i still got a lot of work tomorrow when our local market open!
usually those trades if i enter without any fear or enxity it will probably work out well, so as this one. the feeling is like "i will kill myself if i don't put on the trade".
worst is i will break even for this trade. but what comes after that is totally different, i will try hard to forget about it and move on.
S&P bounced in the closing, and the futures this morning is still green ;)
I remember you did the same with Blumont.
I hear what you say. Must press the trigger when our setups appear. I still can't forgive myself for missing the biggest trade in 2015 - short WTI or Brent crude :(
My best trades are like what you do - NO MIND.
When I analyse or think too much, I'll miss the trade.
Funny how despite having completely different trading styles (I prefer to hop on the freight train), we are pretty much in alignment with CW's:
Passive indexing is to mimic market index performance http://www.finpipe.com/indexing-strategies/, so if a goal is set solely based on that then time horizon is hard to determine right? Cannot SMART. Why not the other way round - use passive indexing as one of the many strategies to achieve your financial goals?
I give you a big gold star for playing along! You good sport!
2 key points:
Passive - You don't do anything. Thinking not needed too! We set goals because we want to work towards it. What's the point of goal settings if its Passive?
Market Returns - Again if our boats rise and fall according to the ebb and flow of the tides, isn't setting goals a bit like drawing legs on snakes? Superfluous?
Maybe I live in well, but I can't find any local low cost Passive Index Funds in Singapore. At best feeder funds to those available in the US and Europe.
Isn't STI ETF a low cost Passive Index Fund?
Well, we have to ask why POSB Invest Saver never mentioned Passive Index Fund even once on their website?
And why the word "Savings" appear more than once ;)
No one cares about Narrow Country Focus risks until it bites us in the ass. STI minus 15% in 2015 is only better than Athens stock exchange. And that's not saying much!
Trading is the direct opposite of Passive Indexing.
Why do I spend time learning on my polar opposite?
不愧师傅级，一针见血。 So the poor folks who think that they are 'investors' only turned out to be 'savers' at the end of the day. Not say the bank didn't hint to them. lol
It is a Regular Savings Plan (“RSP”) that allows you to invest via a GIRO arrangement on a monthly basis. It is designed for those who:
may not have a huge capital want to potentially grow their long-term savings are looking to diversify their portfolio are seeking a relatively simple way to invest
From just S$100 a month, you can now invest affordably in either Singapore bonds or blue chip stocks, via two Exchange Traded Funds (“ETFs”) listed on the Singapore Exchange.
Since when it's a non risk arena ? Arena itself is aready a place where people pit against each other, showcasting their skills. Many things are on put on the table.
I don't mind to get poke ( maybe kana poked also don't know )
You guys get to wear a brown paper bag over your heads and still worried about risks?
Hello!
Jokes aside, it's much safer to pit and cross swords over here - the most is get a sugar-coated poke ;)
Look, if one's convictions cannot stand the fire of scrutiny from our fellow investing//trading PEERS, how is it "easier" if you meet them in the markets using real bullets and with friendly fire mode on?
This arena is truly a cauldron of dragons and snakes (龙蛇混杂)!
How nice of you to give a gentle knock on my shell. I thought you would never come! Not a trick question? That's like saying 此地无银三百两. Nevertheless, pardon my sleep-deprived reply.
I hardly, if ever, use the word passive. For me, it is an active decision to engage in an index investing strategy, no?
I wonder how many investors can be truly be "passive", except perhaps regular savings/investment plans? Forced passivity. Is it always a good thing? Many people like to quote Warren Buffett : "put your money in index funds and move on". I'm pretty sure the intention is good and it should work out well in the long run, but it sounds suspiciously like a sales pitch to me and very few people actually touch on the nitty gritty details of you know, the "doing it" part. My idea of index investing revolves heavily around asset allocation and portfolio re-balancing, which again are active decisions.
Investing investing, by definition, lets the market dictates returns. How does one then set financial goals based on something that we cannot control? I think Twenty-two°C nailed it.
Coming back to your question, perhaps the real question to ask is quite the opposite - how does an index investing strategy fit into our financial goals when it inherently has an unpredictable time-frame? How long exactly is “long-run”?
You guys are the 正宗 Passive Indexing apostles. They are so much misinformation and superficial practitioners of Passive Indexing out there you don't point out their heresies.
Don't bother. Not suitable for you. Your testosterone way too high.
Passive Investing is more suitable for those who prefer, "Look ma, no brains needed!"
Or their lives are so happening that they rather spend time enjoying what they do currently outside of personal finance - not everyone wants to reek of "bronze smell" (铜臭)...
Then again, the true practitioners of this craft are likely to be more intellectually honest with themselves on their financial abilities.
Less delusional than most wannebe value or long term retail investors ;)
Usually mild and gentle people. With some flowers in their hair. If you're going to San Francisco..
don't say that, i also have some money park in out stock market, they are all under water as of now, better start learning more about investing before its too late.
i have check the internet but have not got a satisfying answer le!
i'm more worry of the eye no longer can see the screen clearly! 2 screen (use to be 3 now reduce to 2 haha) fill with nothing but numbers/prices and they are small.
actually i started (again) to invest in shares that i don't really understand early to mid last year, then after i bot they all heading south as though they just relised the fool had enter the market.
getting really piss with my investing skill already!
Thanks to turtle, i was directed here. this is interesting. I'm not sure if i got your question correctly but i'll tag along.
my ans: no, there are too many work and unforeseen circumstance lying around. First, expected returns are hard to forecast. second inflation would reduce future purchase power. These two alone will be almost impossible to estimate a figure i need for retirement. instead i use another rule of a thumb.
rule one: never use my CPF for unit trust investment or individual stocks. I shall let it roll to RA.
rule two: live below my means and invest the rest into low cost index portfolio.
rule three: never take too much risk or too little risk (change stock/bond allocation unnecessary.)
rule four: don't chase performance
rule five: stick to the conventional wisdom of age in bond allocation.
rule six: focus on my career, get a pay raise, invest 50% of the raise.
Haha ya, turtles are what they are known for. But I wanna credit Kevin for the referral. Lol.
after reading the rest of the comments above n below, I'm beginning to think I understand your question wrongly. Lol!
To respond to your poke, I actually would like to put into vanguard admiral funds. Problem is, as a non US citizen, we can't. The only way to match that is to own a low cost etf and don't trade them.
So I use standard chartered to buy those shares. E.g vanguard all world/ishare core world, sti etf and Nikko abf bond etf. So I think it becomes coke light?
Sometimes we have to settle for the next best available Plan B.
That's cool and you have said the magic words - "don't trade them".
World indices or at the very least Regional indices, but narrow Singapore concentration focus?
It's a bit like having a big chunk of our net worth vested in the very same company we are working at...
What can possibly go wrong? Enron, Nokia, Blackberry, Lehman, AIG employees may have a story to tell ;)
Talking about AIG, once upon a time in 2008, some Singaporean policy holders were queueing outside AIA building at Robinson road with fear and anxiety...
Eh? Maybe big daddy party machinery can surreptitiously encourage the common man on the SMRT train to "invest" in STI ETF and Nikko ABF bond ETF?
With narrow concentration risks hanging over their heads, that should encourage them to vote responsibly?
I get where you are coming from about concentrated risk. I got a significant home bias when it comes to global equity allocation and sti is not very boardly diversificated.
On one hand I think sti etf has its cost advantage since there is no withholding dividend tax and fx spread (since it's in SGD). On the other hand foreign explosure have their own advantage, (especially these few years). but it's kinda like the risk-reward relationship as far as our sti is concern. (less cost, more net market return, more concentrated risk)
Again I guess folks in Canada, UK and Australia who owns their home country index would have a similar problem as us Singaporean investor since there are also concentrated risk involved. At the moment, I rely on vanguard research paper that suggest we Asian investor should have an allocation of somewhere between 59% to 92% in foreign equity to maintain the tole of home bias. So I figured as long as I'm within this band, I'm not gonna change anything!
Speaking of 2008 crisis. I remember scb earlier announced that they are gonna shut down their corporate equity investment arm. Man, the retail investor were like jumping on hot frying pans. But if we have an option to put our shares into cdp account, then no sweat! what I am trying to point out is, although concentrated risk seems less so on broadly diversified world index, it is taken in a form of another kind of concentrated risk that's related to a custodian account. I suppose for a layman average investor like me, there is no escaping of such risk.
Side track abit, I read some of your post. it encourages folks to think and reflect. Some of your thoughts are interesting. How is your sabbatical leave? Oh and I wish you best of health, Good fortune and happy new year!!
Please don't Mr Seah me. Just call me Jared or SMOL ;)
If I want a bunch of followers, the last thing I want is for them to think for themselves - spoon feeding is the best way to dull a person's mind.
I do enjoy the company and intellectual discourse with PEERS like you and other commenters.
It's been 4 years now taking my sabbatical from full time work. Used to be retired from full time work, but after 1.5 years, I needed to work weekends to have my "days off".
Have been working weekend for 2.5 years now :)
Thanks for the well wishes and have a Merry New Year too!
"Do u set financial goals based on your passive index strategy?"
I rewrote the question just to understand better.
Answer: How can anything Passive achieve our goals? Unless it is not as passive as others may thought so or know or as it seems.
Bcos the SUCCESSFUL people who employ "passive" ways successfully either r definitely not so passive in other areas of their financial capability, or they have so much accumulated experiences until they discover "passive" is their best way of success! And they have that kind of right frame of mind.
If u do or learn nothing in life n expect passive strategy will work? Hmm.......
Side track abit...
I watched Ip man, he no longer kick or punch as well as before but this serial show his enlightenment of the true priorities in life.
I was with an "Wise old man" over the weekend who seen through life... This question of financial goal reminds me of what he preaches to me!
OVER focus in financial goal! we always put on lips on why money is not impt, life is!!! But the reality, is deep down it is always financial aspiration! Sometimes stop lying to urself as our actions shown! Better Wealth as a form of showing u r better or to escape from the things u hate doing. Maybe the focus should be finding the true purpose of life???
Compare setting a life-long goal with true purpose of life Versus Financial goal?
Which one do u we have today? Which one should come first? What makes a good life? Robert Waldinger’s Ted Talk/ 75 yrs of Harvard research of “What make a good life?” is so true but most of the time we neglect it!!!
Asked in first place why u invest?To escape from work to FIRE or to create an additional tap income? Hobby? Knowing the underlying right reason is impt.
Whichever it is, I was told to remember the most important goal in life, then financial goal which is also important but always pale in its true purpose.
And if this goal (not financial) is so important to u, then u shld naturally put it more time n effort to it, n even often say it out in ur mind or even lips or even write more about it than just financial goal or portfolio? Practice ur most impt goal not just ur financial goal.
You got your health "scare" to help you reset your compass to True North.
Sometimes those who are ever so eager to bring others to the water of financial literacy may not realise they are the ones who have holes in their hearts...
While others may be living happily in the here and now, the so called "financially literate" ones are always living in the future - if I achieve X, then I will enjoy Y.
Even if they have achieved X, they will just move the goal posts... There is never "enough". Must adjust for inflation mah you say? You win liao lor!
Some even don't realise why others avoid them despite their "wealth"... I wouldn't want to mix with people who open mouth talk about money, close mouth also talk money...
Now that's a fantastic name! Just add a middle name "Walker" and you are set! A warrior name ;)
Hey! Malaysians and Singaporeans like to mix our drinks - kopi and teh; dao huey and qing chao.
You fit right in!
The trouble with Passive Indexing is most people just can't be Passive! They change the rules as they move along... LOL!
And add in the confusion with low cost ETFs and low cost funds, plus ignorance of concentration risks, that's where the misinformation builds up like the communication game we used to play - you pass one message to the next person and he does the same until the last person's message received is totally different from the original message of the first person!
Everyone seems to be setting up their own Passive Investing denomination church that's different from John Bogle's Orthodox Church!?
50% of monthly bring home for short term - now that's goal setting that's entirely we can "control".
Of course we can't "control" whether we'll be retrenched and earning zero income; but we definitely still can set aside 50% of our zero income.
With percentages, we can do anything!
Use % in public; but in private, use $ - now that precision as in SMART ;)
Interesting thoughts. Passive Indexing is the vehicle we have chosen to attain our goals. Are they financial goals? Not really. It is more saving goals in fact. Not really chasing a certain amount of performance, being content with what the market has to offer (All World ETF). A simple strategy indeed.
The important thing is to keep pouring money into it, saving more, spending less, so that we can focus on the things that really matter, before the age of 60.
it happen all the time smol, that is also part of the game, correct and still lose money!
i had underestimate the oil market, been a while i had traded that counter, should not had walk in just like that, i'm more worry about expiration and the roll over trade, may be i'll just stick to 2 lots haha....
Even if you had longed S&P, while you were sleeping, you would be stopped out during the late afternoon dip, and then the market will do what it did to me - rub salt with a bounce during the close!
I guess the China stock market is reverting back to below 2000 once again. Now that's the kind of reversion to mean we don't want to see as an investors!
2 days ago I was right; but stopped out. Now Simsci has gone down without me. Boo hoo hoo. Lucky it was a pass time kopi trade. If it was a serious position trade, I would be banging my head against the wall now.
Idiot. I wasn't mentally prepared for this much volatility so near after the new year. Still in holiday mood. I thought this slam down would occur in March after the CNY...
Smol added a lot of my own criticism on passive indexing. I add a couple more here: indexing may not help with time horizon, indexing may not help with wrong geographical or sectoral selections, indexing may not help with long secular cycles of various asset classes.
You better think twice standing too close to me as I'm not exactly winning friends, followers, and e-mail subscribers... LOL!
But I do get to know some interesting peers and fellow journeymen :)
It's not a criticism per se.
We chose our own poison and it's OK.
For eg, if I chose STI ETF despite its narrow country risk because of my thesis that Singapore is the Switzerland of the East.
So if the surrounding emerging markets crash and burn, hot money has to flow somewhere. Park in our STI, Singapore properties, and/or triple A rated Singapore bonds?
Unfortunately, that thesis didn't pan out so well in 2015 :(
The $64,000 question is:
Is STI the canary in the coal mine?
Meaning we bear the pain first in 2015 while others catch up to us in 2016?
Or has STI become high beta? Others drop 10%; we drop 20% :(
If others drop 20%, we...
I'll be good. I don't mention any Japanese "investors" who started Passive Indexing in their home ground Nikkei 225 for the past 30 years are still under water - that's despite 30 years of averaging down :(
Sometimes knowing a bit can be more dangerous than not knowing at all...
The Nasdaq can be a big tease.
If one starts indexing the Nasdaq at the top in March 2000, after 15 years of averaging down, finally revisit the old top in April 2015.
Before you can shout horray! Now the Nasdaq is back below 5000 :(
Would have made a nice sum if one can cash out during April 2015. But then, with 15 years of training with one arm, I won't hold my breath betting one can become ambidextrous overnight ;)
i think I listed the nikkei example in one of bully the bear's posts on permanent portfolio which I believe is just a way out for lazy people. I believe when you get too lazy, you get punished.
Work hard to earn money, then close eyes and invest lazily mah.
Averaging down (passively or otherwise) on an index is like averaging down on any other stocks. And I have learnt my painful lesson within half a year.
Incredible. You did it again. 1 sentence post with >110 comments. clap clap*.
Seriously, I realised STI ETF is not good enough as an index for Singapore but this is the best we have and our market is too small. Imagine we have a Singapore 500 when we only have 700+ stocks in SGX.
Trading and investing (cherry picking or ETF), all are subject to uncertainty. Noble and NOL have proven any top 30 market cap can be weak once lose competitive advantages.
I hope i discover a more passive investing method for myself too than STI ETF.
The basket has 4 ostrich eggs, plus a mixture chicken eggs and quail eggs. We hope that the ostrich eggs continue to be resilient to knocks and cracks with its tough shell. Some of the other eggs don't look so good after a couple of hard knocks.
Cholesterol was once upon a time considered a health risk. Now US Dept of Health has changed its mind.
Nothing wrong with that - when the facts change, we change.
Just like when men finally accepted the its the Earth that goes round the Sun and not the other way round ;)
It would be interesting to review this discussion in 20 to 30 years' time to see if Passive Indexing using STI ETF works out better than a more diversified Word Index ETF or maybe if we are bias towards Asia, an Asia ex-Japan ETF?
Stay healthy and if we are still around in 30 years' time, we are all winners!!!
(Never mind if some of us has less money than we started)
Hi SMOL, Too many comments to read. To answer your post's qn, don't really get what you mean by "financial goals" but personally I feel no need to think so much and just allocate as much as you can to adding to your portfolio.
As for the last few comments I see on STI ETF, you seem to not like STI ETF a lot.
- Diversification. I agree that it is not diversified enough. I would love a FTSE ST All-share index ETF as I feel it is a good proxy to the Singapore market. What I am trying to say is, until there is a better product out there, STI ETF is still the best passive product for the singapore market.
- Passive. It is definitely more passive than managing individual stocks
- Performance. Many say that their individual stocks outperform STI. While that is not wrong, STI is often not the correct benchmark to compare against. The key, as I've learnt from Larry Swedroe, is risk-adjusted returns. Often, the "outperformance" are simply due to taking on more risk, and can be attributed to size and value premium. Sorry not an expert in this but just sharing form my layman POV. Again, why there is just a comparison with STI is because there are just no alternative products! Look at US, the most mature market, they have so many passive products! We will never reach there if we only have STI ETF...
1. Interesting. Financial goals as in how much passive income annually you get from REITs and non-REITs?
You mean to say you don't think too much as in setting goals and planning?
You just allocate as much as you can as in buy the dips and bargains when they present themselves?
Be nice now. Don't make me look too mainstream... Please say you do set financial goals!
2. How can I don't like the STI ETF when I trade the Simsci futures - it's STI on steroids ;)
ETFs are one of the best financial innovations in recent years for traders and macro hedge funds. There's an ETF for any investment theme under the sun!!!
The question is more about whether STI ETF is suitable for a Passive Indexing strategy as espoused by John Bogle.
Your answer is like - No fish? Prawn also can!
Well, at least we are in agreement its not Coke Original ;)
3. I do agree with your take on using STI as a benchmark. That's why I appointed myself as a nano-hedge fund manager.
I focus on absolute returns; not relative returns.
I'm not going to psycho myself I've outperform when my portfolio is minus 10% and the STI is down minus 20%.
You and I count in dollars and cents ;)
You wear a brown paper bag over your head so you not afraid to share in $ - people can count backwards to deduce your portfolio size.
No, its not a trick question.
ReplyDeleteIt's a non risk arena where you test out your understanding of your chosen discipline - whether its skin deep or ocean deep ;)
Yes. Every month put $1,000 POSB Invest-Saver After 40 yrs, I can retire on passive income
ReplyDeleteCW,
DeleteThat's a savings strategy - not passive indexing.
You super slippery!
Since we are at it, no harm veering off course to discuss whether you hypothetical example will work out as "planned" 40 years later.
1) Inflation is not factored in? Inflation is something we can't control... Just ask our Indonesian and Malaysian friends do they trust interest rate projections without factoring inflation ;)
2) Looking at my dad's and my personal experience, I would prefer to put that $1000 per month into property instead ;)
Readers can also refer to their personal experiences or ask their parents or grand parent - how much they paid for their property 40 years ago and whether that same money would be better off in fixed deposits?
Those with whole life insurance may also join in he fun by comparing the opportunity costs if they had invested the money in fixed deposits or property instead.
Good to know how many young ones have started on POSB Invest-Saver.
DeleteCome and say your piece here.
CW,
DeleteIdiot. I so stupid! I let the cat out of the bag...
Oh well. Might as well play along...
Who here is of the opinion POSB Invest Saver is Passive Indexing?
*raise hand*
Deletebut 1% sales charge to the bank for each transaction for Nikko AM sounds "bo hua". Bleah...
That's why they didn't mention Low Cost Passive Indexing - not even once!
DeleteLow cost ETF and low cost Passive Index Fund are like Coke original and Coke Zero.
Look and taste the same; but not the same!
LOL!
Did a backtest of investing in STI, $100 monthly, using POSB Invest-saver method (fees and all) from Jan 2005 to Dec 2014. With 1% sales charge: Portfolio value @ $17,388. With 0% sales charge: $17,600. Difference:$222. Most people fail to realise one time sales charge of 1% or 3% is quite negligible. Slap a 0.5% annual platform/wrap fees is totally another story.
DeleteRK,
DeleteWelcome to my watering hole! Thanks for your courage and willingness to put your convictions to the test!
1. Let's side step the "low cost" discussion since you are using the example of $100 per month for 10 years. If its $1000 per month and 30 years, its another story ;)
2. You do know that some practitioners of passive indexing are advocating Wilshire 5000 Total Market Index as they deem the S&P 500 Index is too narrow an index for diversification purposes as a risk management technique. What more there is to say about our STI index...
3. You are practicing Active Index Investing. Yet you are advocating Passive Index Investing to "others". Do as I say; not as I do?
4. Your DIY individual stock picks are outperforming the STI index. Any reason why you still want to engage in Index Investing? Reason I asked is that you shared you are moving away from the Permanent Portfolio strategy after 3 years because you have found another strategy you have backtested to be even better. You have more faith on backtesting over your actual investing track record?
5. Is there a possibility you'll move away from Index Investing 5 years later if you find another better strategy?
Don't get me wrong. I'm not putting you in a spot. This is what a sounding board should do. Challenge your thesis to uncover blindspots ;)
It's interesting to see what the father of Low Cost Passive Indexing has to say about ETFs:
Bogle launches renewed attack on ETFs
As expected your questions are tough man..haha. My answer as follow
Delete1) The overall portfolio will suffer about 1% loss due to the sales charge, not significant in my personal opinion.
2) So you are saying STI is not diversified enough?
3) I advocate index investing to 2 groups, those who don't invest at all, and those who underperform the index (unkowingly because they refuse to track their performance). For me, I know my temperament can't stick solely to boring index investing, hence trying active investing, but also making sure it is outperforming the index.
4) Why am I sticking to index investing despite my own outperformance? Because past results is not indicative of future performance. The fund allocated to the new (backtested) strategy I found made up of just ~5% of my overall portfolio, due to the same reason stated.
5) Quite unlikely. Currently the STI ETF is in my top 3 holdings despite me having found several new strategies over the past few years. So think it will stay with me well into the future.
temperament,
ReplyDeleteLOL! You are probably closer to the "agar agar du hor" or estimate can already fuzzy logic grey grey shepherds ;)
No, those are not goals.
What started out as random activities have turned into habits, and they in turn have morphed into lifestyle choices ;)
Goals are like props, clutches, or training wheels.
It's not that people like us have no goals; it's just that once we have crossed the river, we don't see the point of carrying the sampan with us on our backs ;)
Instead of concrete SMART goals, we prefer to use non-quantifiable ideas like Principles, Values, Visions, etc.
You have faith he will provide; I let my ego go (work in progress).
Believer and pagan share something in common - we don't live life assuming we are the centre of the universe ;)
You need Kevin and Andy to answer this question.
ReplyDeleteFrugal Daddy,
DeleteYou can see we have already veered quite far off topic from my original question ;)
That's what you get when you invite Jazz musicians to a jamming session.
There's no musical scores to follow!
Everyone take turns for their solo rifts ;)
Feel free to join in!
Frugal Daddy, do you mean me, Andy from Tacomob?
DeleteHi Jared, good and honest question.
Sure, as long as that financial goal is in line with the historic performance of the respective Indexes. Anything above would be wishful thinking.
I currently have about 10% of my portfolio in ETFs. Mainly country index funds for countries where I have no clue like Myanmar and Vietnam who have good demographics or on technology indexes like Nanotechnology or Water or Renewables where I have no clues about the players.
Andy,
Delete;)
Hi SMOL,
ReplyDeleteI did have some goals which I did achieve...not all financially related though...as the years go by, out went the goals as there were some goals I wish I didn't work so hard for and missed out on spending time with far more valuable family members.
Joyce,
DeleteThe power of goals is their singular focus.
It's like putting blinkers on horses.
By blocking out our peripheral vision, we may miss out on more promising opportunities and/or fail to see things that may matter more to us...
Thus, goal setting's biggest strength is also its biggest weakness.
Most of us in our 40s will know or have seen the price we and others have paid for "success" - be it poor health or mental breakdowns, failed marriages, strained relationships with children, and so on.
There is no free lunch.
Likewise, those who value work/life balance and family may have to pay a price on their career progression or income.
bot 2 Emini at 1992 even!! wow i will hate myself if i don't buy them haha...
ReplyDeleteusually i don't don't trade or trace the US market no more but time like this i probably will stay awake all night lomg.
Deletecan hear that i'm praying to thr market, oh please let me get out of it soonest possible, i still got a lot of work tomorrow when our local market open!
Deletei will probably put a stop right at the low and go back to sleep......
Deleteoh just in case you are wondering, i use CFD for this trade, its equalavent to emini but tracking the cash market instead of future market.
Deletetake out one at 1998.50, let the other one swim in the market, i'm going to bed...
Deletecoconut,
DeleteYou are either crazy or have baxxs of steel!
Playing the bounce off the lows trade? In front of an incoming freight train?
I can understand where you are coming from ;)
Saw the USD/JPY broke below 119 but no follow through. Now has reversed back above 119.
Same for Gold. Touched 1083 and now reversed back.
Only problem is the US 10 year treasuries is not agreeing with the Gold and Forex markets.
I tired liao.
Need to sleep too.
Have fun!
i love catching falling knife, you can see all my scare on my body, its everywhere haha...
Deletei only do it very very selectively, don't worry, who cares haha...
usually those trades if i enter without any fear or enxity it will probably work out well, so as this one. the feeling is like "i will kill myself if i don't put on the trade".
Deleteworst is i will break even for this trade. but what comes after that is totally different, i will try hard to forget about it and move on.
coconut,
DeleteClap, clap.
S&P bounced in the closing, and the futures this morning is still green ;)
I remember you did the same with Blumont.
I hear what you say. Must press the trigger when our setups appear. I still can't forgive myself for missing the biggest trade in 2015 - short WTI or Brent crude :(
My best trades are like what you do - NO MIND.
When I analyse or think too much, I'll miss the trade.
Funny how despite having completely different trading styles (I prefer to hop on the freight train), we are pretty much in alignment with CW's:
Less analyzing; more investing :)
as expected, i got out with a limit at 2010 even, during my deep sleep.
Deletedoing this trade just to satisfy my gambling instinct, nothing special. glade my hunting instinct still intact.
Sharpening the sword, while waiting for the Big One to come along ;)
Deletebloumont was a much bigger trade, i took a very big risk but thats becos of some stupid SGX regulations last minute in place, i remember that one.
DeleteWell, well, well.
DeleteStill early days, but US futures green, FTSE China A50 green, Nikkei 225 futures green.
Tuesday is my movie watching day. If markets don't reverse at 10 am, I think I can go watch Star Wars ;)
don't watch star wars!!
DeleteI know how you feel about the new Star Wars.
DeleteI need to verify for myself mah.
You not me and I not you.
Maybe I'll like it?
I learn by doing ;)
Passive indexing is to mimic market index performance http://www.finpipe.com/indexing-strategies/, so if a goal is set solely based on that then time horizon is hard to determine right? Cannot SMART.
ReplyDeleteWhy not the other way round - use passive indexing as one of the many strategies to achieve your financial goals?
good night.
DeleteCai Hong Mei,
DeleteI give you a big gold star for playing along! You good sport!
2 key points:
Passive - You don't do anything. Thinking not needed too! We set goals because we want to work towards it. What's the point of goal settings if its Passive?
Market Returns - Again if our boats rise and fall according to the ebb and flow of the tides, isn't setting goals a bit like drawing legs on snakes? Superfluous?
Maybe I live in well, but I can't find any local low cost Passive Index Funds in Singapore. At best feeder funds to those available in the US and Europe.
Isn't STI ETF a low cost Passive Index Fund?
Well, we have to ask why POSB Invest Saver never mentioned Passive Index Fund even once on their website?
And why the word "Savings" appear more than once ;)
No one cares about Narrow Country Focus risks until it bites us in the ass. STI minus 15% in 2015 is only better than Athens stock exchange. And that's not saying much!
Trading is the direct opposite of Passive Indexing.
Why do I spend time learning on my polar opposite?
Understand myself; understand my counterparty.
不愧师傅级，一针见血。
DeleteSo the poor folks who think that they are 'investors' only turned out to be 'savers' at the end of the day. Not say the bank didn't hint to them. lol
That's why we need to take personal responsibility.
DeleteIf we are "bei kambing" and believe others will help us get "rich" - lucky the most lose some wool; unlucky we provide the lamb chops :(
The word "invest" appears four time. :-)
DeleteWhat is POSB Invest-Saver?
It is a Regular Savings Plan (“RSP”) that allows you to invest via a GIRO arrangement on a monthly basis. It is designed for those who:
may not have a huge capital
want to potentially grow their long-term savings
are looking to diversify their portfolio
are seeking a relatively simple way to invest
From just S$100 a month, you can now invest affordably in either Singapore bonds or blue chip stocks, via two Exchange Traded Funds (“ETFs”) listed on the Singapore Exchange.
CW,
DeleteNever say Passive Indexing hor?
That's marketing and pressing BOTH buttons to appeal to two sets of potential customers - the "investors" and "savers".
Selective perception will do the rest.
We see what we want to see ;)
Maciam Panadol. You got headache? Take this. You got fever? Take this.
Same pill :)
Does the targetboard of gaining enough monthly dividends to pay monthly expenses and for retirement considder a financial goal for passive investor?
ReplyDeleteBlack,
DeleteWhat Passive Income?
When we are climbing up the mountain to secure our Passive Income, goal setting works great!
Its just one of many tools to help us get from here to there.
Once we have ACTIVELY secured our PASSIVE Income (spot the irony?) and retiring down the mountain, well...
Some will discard the tool as they prefer to travel light. You know, free and easy.
Some who are competitive in nature will reuse the tool to see who can get down the mountain the fastest!
Typical kiasu Singaporean... Everything also want to be No. 1?
LOL!
Hi Smol
ReplyDeleteSince when it's a non risk arena ? Arena itself is aready a place where people pit against each other, showcasting their skills.
Many things are on put on the table.
I don't mind to get poke ( maybe kana poked also don't know )
Small Time Investor,
DeleteYou guys get to wear a brown paper bag over your heads and still worried about risks?
Hello!
Jokes aside, it's much safer to pit and cross swords over here - the most is get a sugar-coated poke ;)
Look, if one's convictions cannot stand the fire of scrutiny from our fellow investing//trading PEERS, how is it "easier" if you meet them in the markets using real bullets and with friendly fire mode on?
This arena is truly a cauldron of dragons and snakes
(龙蛇混杂)!
How nice of you to give a gentle knock on my shell. I thought you would never come! Not a trick question? That's like saying 此地无银三百两. Nevertheless, pardon my sleep-deprived reply.
ReplyDeleteI hardly, if ever, use the word passive. For me, it is an active decision to engage in an index investing strategy, no?
I wonder how many investors can be truly be "passive", except perhaps regular savings/investment plans? Forced passivity. Is it always a good thing? Many people like to quote Warren Buffett : "put your money in index funds and move on". I'm pretty sure the intention is good and it should work out well in the long run, but it sounds suspiciously like a sales pitch to me and very few people actually touch on the nitty gritty details of you know, the "doing it" part. My idea of index investing revolves heavily around asset allocation and portfolio re-balancing, which again are active decisions.
Investing investing, by definition, lets the market dictates returns. How does one then set financial goals based on something that we cannot control? I think Twenty-two°C nailed it.
Coming back to your question, perhaps the real question to ask is quite the opposite - how does an index investing strategy fit into our financial goals when it inherently has an unpredictable time-frame? How long exactly is “long-run”?
Answering a question with another question - ha!
Kevin,
DeleteI never poke you hor!
But I do want to give you a kick!
You guys are the 正宗 Passive Indexing apostles. They are so much misinformation and superficial practitioners of Passive Indexing out there you don't point out their heresies.
Wait for clowns like me to do the poking.
Yeah. Good cop you play; bad cop I do!
LOL!
whats passive indexing? before i from confuse to becomes headless.
Deletecoconut,
DeleteDon't bother. Not suitable for you. Your testosterone way too high.
Passive Investing is more suitable for those who prefer, "Look ma, no brains needed!"
Or their lives are so happening that they rather spend time enjoying what they do currently outside of personal finance - not everyone wants to reek of "bronze smell" (铜臭)...
Then again, the true practitioners of this craft are likely to be more intellectually honest with themselves on their financial abilities.
Less delusional than most wannebe value or long term retail investors ;)
Usually mild and gentle people. With some flowers in their hair. If you're going to San Francisco..
Don't anyhow kick ah. Watch too much Ip Man? My shell very thick.
DeleteMaybe I am a mountain turtle in a well. Are there a lot of misinformation? Then again, I also not considered 'passive' leh.
A product like POSB-Invest-Saver probably serves a certain demographic. Market returns minus 1% is still good enough for some?
Kevin,
DeleteOK, I'll take 正宗 back.
You also creating your own denomination school of "Indexing" ;)
Which makes a lot of sense.
Why be a follower when we can be our own shepherd?
I never say POSB Invest Saver no good.
I just saying don't buy Coke Zero and thinking its Coke original ;)
Talking about turtle shell, I just watched Teenage Turtle Ninja on YouTube last week. Man, is Megan Fox hot!
don't say that, i also have some money park in out stock market, they are all under water as of now, better start learning more about investing before its too late.
Deletei have check the internet but have not got a satisfying answer le!
When traders need to rest their eyes, it is about time to invest for passive income. :-)
Deletei'm more worry of the eye no longer can see the screen clearly! 2 screen (use to be 3 now reduce to 2 haha) fill with nothing but numbers/prices and they are small.
DeleteCW, you conduct investment courses?
Deleteactually i started (again) to invest in shares that i don't really understand early to mid last year, then after i bot they all heading south as though they just relised the fool had enter the market.
Deletegetting really piss with my investing skill already!
coconut,
DeleteListen to yourself - you invest in shares you don't really understand and you're pissed with your investing skill!!!???
Bantering with you all these you I've made an observation. Buy me a drink if I make sense:
Have you noticed when you lost a lot of money trading that's the best time for you to invest?
Similarly, when you made money trading, that's the lousy time for you to invest?
Go check your records ;)
Hah! Return 正宗 to you.
ReplyDelete管它正宗不正宗，打的赢就是好功夫。
Megan Fox, I likey. In Transformers just as hot!
You no read the eBook on what SMOL said if you have $20K to invest?
ReplyDeletereading books can become champion i long time quit trading already.
Deletebut again if one don't know how to do it, best is to learn from someone who is good or don't do it.
oh man what am i saying? slapping my own face.
coconut,
DeleteYou go ask your remisier brother about Passive Indexing and Long Term Investing lah!
Family won't smoke you one ;)
Thanks to you, I am beginning to appreciate myself more for being a Jack of all trades!
It seems being a hybrid is not a given.
Hi SMOL,
ReplyDeleteThanks to turtle, i was directed here. this is interesting. I'm not sure if i got your question correctly but i'll tag along.
my ans: no, there are too many work and unforeseen circumstance lying around. First, expected returns are hard to forecast. second inflation would reduce future purchase power. These two alone will be almost impossible to estimate a figure i need for retirement. instead i use another rule of a thumb.
rule one: never use my CPF for unit trust investment or individual stocks. I shall let it roll to RA.
rule two: live below my means and invest the rest into low cost index portfolio.
rule three: never take too much risk or too little risk (change stock/bond allocation unnecessary.)
rule four: don't chase performance
rule five: stick to the conventional wisdom of age in bond allocation.
rule six: focus on my career, get a pay raise, invest 50% of the raise.
Maximillian,
DeleteFunny how when one mentions "turtles", most of us will associate it with trading legend Richard Dennis and his turtles fame.
I can't argue with your 6 pointers as evidently they are tailor made for you and you only ;)
I can only poke your rule no. 2 - what is a low cost index portfolio?
Is it Coke original as in those Vanguard low cost funds?
Or is it Coke Zero as in ETFs?
Now who said Passive Indexing does not need brains?
Shit! I think I just poked myself...
Thanks for joining in the fun! Free do drop by again ;)
Hi SMOL,
DeleteHaha ya, turtles are what they are known for. But I wanna credit Kevin for the referral. Lol.
after reading the rest of the comments above n below, I'm beginning to think I understand your question wrongly. Lol!
To respond to your poke, I actually would like to put into vanguard admiral funds. Problem is, as a non US citizen, we can't. The only way to match that is to own a low cost etf and don't trade them.
So I use standard chartered to buy those shares. E.g vanguard all world/ishare core world, sti etf and Nikko abf bond etf. So I think it becomes coke light?
Maximillian,
DeleteSometimes we have to settle for the next best available Plan B.
That's cool and you have said the magic words - "don't trade them".
World indices or at the very least Regional indices, but narrow Singapore concentration focus?
It's a bit like having a big chunk of our net worth vested in the very same company we are working at...
What can possibly go wrong? Enron, Nokia, Blackberry, Lehman, AIG employees may have a story to tell ;)
Talking about AIG, once upon a time in 2008, some Singaporean policy holders were queueing outside AIA building at Robinson road with fear and anxiety...
Eh? Maybe big daddy party machinery can surreptitiously encourage the common man on the SMRT train to "invest" in STI ETF and Nikko ABF bond ETF?
With narrow concentration risks hanging over their heads, that should encourage them to vote responsibly?
Hmm...
Hi SMOL, or should I call u Mr Seah?
DeleteI get where you are coming from about concentrated risk. I got a significant home bias when it comes to global equity allocation and sti is not very boardly diversificated.
On one hand I think sti etf has its cost advantage since there is no withholding dividend tax and fx spread (since it's in SGD). On the other hand foreign explosure have their own advantage, (especially these few years). but it's kinda like the risk-reward relationship as far as our sti is concern. (less cost, more net market return, more concentrated risk)
Again I guess folks in Canada, UK and Australia who owns their home country index would have a similar problem as us Singaporean investor since there are also concentrated risk involved. At the moment, I rely on vanguard research paper that suggest we Asian investor should have an allocation of somewhere between 59% to 92% in foreign equity to maintain the tole of home bias. So I figured as long as I'm within this band, I'm not gonna change anything!
Speaking of 2008 crisis. I remember scb earlier announced that they are gonna shut down their corporate equity investment arm. Man, the retail investor were like jumping on hot frying pans. But if we have an option to put our shares into cdp account, then no sweat! what I am trying to point out is, although concentrated risk seems less so on broadly diversified world index, it is taken in a form of another kind of concentrated risk that's related to a custodian account. I suppose for a layman average investor like me, there is no escaping of such risk.
Side track abit, I read some of your post. it encourages folks to think and reflect. Some of your thoughts are interesting. How is your sabbatical leave? Oh and I wish you best of health, Good fortune and happy new year!!
Maximillian,
DeletePlease don't Mr Seah me. Just call me Jared or SMOL ;)
If I want a bunch of followers, the last thing I want is for them to think for themselves - spoon feeding is the best way to dull a person's mind.
I do enjoy the company and intellectual discourse with PEERS like you and other commenters.
It's been 4 years now taking my sabbatical from full time work. Used to be retired from full time work, but after 1.5 years, I needed to work weekends to have my "days off".
Have been working weekend for 2.5 years now :)
Thanks for the well wishes and have a Merry New Year too!
Hi Jared
ReplyDelete"Do u set financial goals based on your passive index strategy?"
I rewrote the question just to understand better.
Answer: How can anything Passive achieve our goals? Unless it is not as passive as others may thought so or know or as it seems.
Bcos the SUCCESSFUL people who employ "passive" ways successfully either r definitely not so passive in other areas of their financial capability, or they have so much accumulated experiences until they discover "passive" is their best way of success! And they have that kind of right frame of mind.
If u do or learn nothing in life n expect passive strategy will work? Hmm.......
Side track abit...
I watched Ip man, he no longer kick or punch as well as before but this serial show his enlightenment of the true priorities in life.
I was with an "Wise old man" over the weekend who seen through life... This question of financial goal reminds me of what he preaches to me!
OVER focus in financial goal! we always put on lips on why money is not impt, life is!!! But the reality, is deep down it is always financial aspiration! Sometimes stop lying to urself as our actions shown! Better Wealth as a form of showing u r better or to escape from the things u hate doing. Maybe the focus should be finding the true purpose of life???
Compare setting a life-long goal with true purpose of life Versus Financial goal?
Which one do u we have today? Which one should come first? What makes a good life? Robert Waldinger’s Ted Talk/ 75 yrs of Harvard research of “What make a good life?” is so true but most of the time we neglect it!!!
Asked in first place why u invest?To escape from work to FIRE or to create an additional tap income? Hobby? Knowing the underlying right reason is impt.
Whichever it is, I was told to remember the most important goal in life, then financial goal which is also important but always pale in its true purpose.
And if this goal (not financial) is so important to u, then u shld naturally put it more time n effort to it, n even often say it out in ur mind or even lips or even write more about it than just financial goal or portfolio? Practice ur most impt goal not just ur financial goal.
and yes, financial goal is definitely more trendy and sexy than all the simple n yet most impt goal in life!
ReplyDeleteRolf,
DeleteYou got your health "scare" to help you reset your compass to True North.
Sometimes those who are ever so eager to bring others to the water of financial literacy may not realise they are the ones who have holes in their hearts...
While others may be living happily in the here and now, the so called "financially literate" ones are always living in the future - if I achieve X, then I will enjoy Y.
Even if they have achieved X, they will just move the goal posts... There is never "enough". Must adjust for inflation mah you say? You win liao lor!
Some even don't realise why others avoid them despite their "wealth"... I wouldn't want to mix with people who open mouth talk about money, close mouth also talk money...
Would anyone?
Skye,
ReplyDeleteNow that's a fantastic name! Just add a middle name "Walker" and you are set! A warrior name ;)
Hey! Malaysians and Singaporeans like to mix our drinks - kopi and teh; dao huey and qing chao.
You fit right in!
The trouble with Passive Indexing is most people just can't be Passive! They change the rules as they move along... LOL!
And add in the confusion with low cost ETFs and low cost funds, plus ignorance of concentration risks, that's where the misinformation builds up like the communication game we used to play - you pass one message to the next person and he does the same until the last person's message received is totally different from the original message of the first person!
Everyone seems to be setting up their own Passive Investing denomination church that's different from John Bogle's Orthodox Church!?
50% of monthly bring home for short term - now that's goal setting that's entirely we can "control".
Of course we can't "control" whether we'll be retrenched and earning zero income; but we definitely still can set aside 50% of our zero income.
With percentages, we can do anything!
Use % in public; but in private, use $ - now that precision as in SMART ;)
Hope you gained something, young Jedi warrior ;)
temperament,
ReplyDeleteThe irony is:
People who claim they do Passive Indexing are not Passive enough!
People who say they do DIY stock pickings are not ACTIVE enough!
I think they should swap strategies!
LOL!
Interesting thoughts. Passive Indexing is the vehicle we have chosen to attain our goals. Are they financial goals? Not really. It is more saving goals in fact. Not really chasing a certain amount of performance, being content with what the market has to offer (All World ETF). A simple strategy indeed.
ReplyDeleteThe important thing is to keep pouring money into it, saving more, spending less, so that we can focus on the things that really matter, before the age of 60.
Norman,
DeleteI can't tell how young at heart you are... Please don't tell me if you're below 25!
Your comment is level headed that I am now pouting...
You got to throw me a bone next time. There's nothing to poke!
Wink.
a.. just long feb wti at 3480, 1 lot.
ReplyDeletedon't know why hand becomes very iche...
this will not be a fast trade, dispite the middle east tension, cruel is unable to rally, looks very bearish...
Deletejust add another at 3470...
Deletetarget 5 lots to carry...
DeleteBearish and you long?
DeleteThe most painful trade can be most profitable... But I rather wait at $30 ;)
stupid isn't it?!
Delete2 lots as of now, will add only when it rebound, otherwise, i will cut it off.
what $30 a barrel? you you you.....
Deletewait long long!
Deletei feel like buying into cash market if they allow me haha, where to store all these oil??
Deleteremember 2008, i think it was goldman sach traders who chartered tankers to store the oil they took delivery...
Deletecoconut,
DeleteI think the idea of digging a huge underground storage for oil in Singapore kind of make sense.
If we have our own strategic oil reserves, we can take advantage of our appreciating US dollar reserves and exchange it for cheap oil.
ya, they can provide oil storage for private entity and traders as well!
Deletei just saw a thousand dollars (profit) disappear in less than a second no kidding!!
Deletevery volatile!!
Yah, tell me about it.
DeleteMy Simsci short yesterday was stopped out early this morning.
Went out for breakfast and when I came back, I missed the ride down :(
Idiot. Lose money is part of the game; that I accept. But market has to rub it in by showing me how much I could have made...
Why last night US markets have to bounce?
I was "right" and lost money... LOL!
Oh well, back to waiting for the next setup.
it happen all the time smol, that is also part of the game, correct and still lose money!
Deletei had underestimate the oil market, been a while i had traded that counter, should not had walk in just like that, i'm more worry about expiration and the roll over trade, may be i'll just stick to 2 lots haha....
should had bot the s&p at the open instead, but i saw the crude was down more than 3%. i figyre they will move together, wrong!
Deletecoconut,
DeleteA bit like old girl friends right?
Long time no see no call. We just walk in assuming we can pick it up exactly where we left...
Wrong!
Never forget foreplay! We had to do the romancing thing all over again...
LOL!
chalat! where do i put the stop?? need to go to bed already, now its trading at the low since don't know when. got to tikam a number liao!
DeleteNot easy.
DeleteEven if you had longed S&P, while you were sleeping, you would be stopped out during the late afternoon dip, and then the market will do what it did to me - rub salt with a bounce during the close!
Oh well, at least you got a good night's sleep :)
don't be black heart mah, if s&p my stop will put at day low, did it got hit?
Deletei think i had a nightmare last night just thinking about those crude oil, where do i keep them...
Sell them to Rolf. He's the orang minyak!
Deletei got 2,000 barrel! dekivery in a months time there about! may be can start bunkering business liao...
DeleteAfter you got rid of the oil, can you give me the oil drums?
DeleteI think I can sell them to the town councils for 7th month paper money burning :)
Reduce, reuse, recycle mah!
sure
Deleteno need to worry about the drum already, i get ride of them already! actually the market did it for me haha KNN
Deleteare we heading for a prolong depression? i had a bad feeling we are heading into it!! the pain is slow but steady.
Deletecan you immagin if you are a chinese investor wanted to get out of the market but only realise, sorry market close! wait til tomorrow....
DeleteYa, saw the break of $33 in WTI.
DeleteIf kenna locked-out, how to sleep like that?
I guess the China stock market is reverting back to below 2000 once again. Now that's the kind of reversion to mean we don't want to see as an investors!
That's the life of a trader.
Delete2 days ago a hero; today kenna sia :(
2 days ago I was right; but stopped out. Now Simsci has gone down without me. Boo hoo hoo. Lucky it was a pass time kopi trade. If it was a serious position trade, I would be banging my head against the wall now.
Idiot. I wasn't mentally prepared for this much volatility so near after the new year. Still in holiday mood. I thought this slam down would occur in March after the CNY...
What's new?
I wrong again!
i now looking for empty barrel, the one we use to burn things....
Deletei'll put it beside my desk for suvinier and memberance...
if you found one let me know, with oil stande or smell inside better!
My HDB at Tanglin Halt have 1 barrel for several blocks.
DeleteIf missing I report police!
I tell them I know one suspect!
Smol added a lot of my own criticism on passive indexing. I add a couple more here: indexing may not help with time horizon, indexing may not help with wrong geographical or sectoral selections, indexing may not help with long secular cycles of various asset classes.
ReplyDeleteSMK,
DeleteWah, you brave!
You better think twice standing too close to me as I'm not exactly winning friends, followers, and e-mail subscribers... LOL!
But I do get to know some interesting peers and fellow journeymen :)
It's not a criticism per se.
We chose our own poison and it's OK.
For eg, if I chose STI ETF despite its narrow country risk because of my thesis that Singapore is the Switzerland of the East.
So if the surrounding emerging markets crash and burn, hot money has to flow somewhere. Park in our STI, Singapore properties, and/or triple A rated Singapore bonds?
Unfortunately, that thesis didn't pan out so well in 2015 :(
The $64,000 question is:
Is STI the canary in the coal mine?
Meaning we bear the pain first in 2015 while others catch up to us in 2016?
Or has STI become high beta? Others drop 10%; we drop 20% :(
If others drop 20%, we...
I'll be good. I don't mention any Japanese "investors" who started Passive Indexing in their home ground Nikkei 225 for the past 30 years are still under water - that's despite 30 years of averaging down :(
Reversion to mean, where are thou?
If only more people understood what SMK said before enthusiastically embarking on their indexing journey.
DeleteJared, I brought you some sparring partners to hone your skills, lol. Nikkei is good example, but I love Nasdaq dot-com bubble too.
Imagine Index Investing Chapter 1.. Show these 2 charts.. Wonder how many people would be scared off!
Kevin,
DeleteYour readers good sport!
Sometimes knowing a bit can be more dangerous than not knowing at all...
The Nasdaq can be a big tease.
If one starts indexing the Nasdaq at the top in March 2000, after 15 years of averaging down, finally revisit the old top in April 2015.
Before you can shout horray! Now the Nasdaq is back below 5000 :(
Would have made a nice sum if one can cash out during April 2015. But then, with 15 years of training with one arm, I won't hold my breath betting one can become ambidextrous overnight ;)
i think I listed the nikkei example in one of bully the bear's posts on permanent portfolio which I believe is just a way out for lazy people. I believe when you get too lazy, you get punished.
DeleteSMK,
DeleteSome people can be quite weird.
On one hand exhort others to study hard, work hard.
But when it comes to financial freedom, be passive is all we need?
Go figure!
Work hard to earn money, then close eyes and invest lazily mah.
DeleteAveraging down (passively or otherwise) on an index is like averaging down on any other stocks. And I have learnt my painful lesson within half a year.
Rainbow girl,
DeleteI not smart; I learned the hard way too.
Can't remember when I had that epiphany, but I do remember thinking how stupid I was to be "hoping" for a bull market just to breakeven!?
Once I got denial out of the way, that's when my real learning starts ;)
Hi Mr Seah
ReplyDeleteIncredible. You did it again. 1 sentence post with >110 comments. clap clap*.
Seriously, I realised STI ETF is not good enough as an index for Singapore but this is the best we have and our market is too small. Imagine we have a Singapore 500 when we only have 700+ stocks in SGX.
Trading and investing (cherry picking or ETF), all are subject to uncertainty. Noble and NOL have proven any top 30 market cap can be weak once lose competitive advantages.
I hope i discover a more passive investing method for myself too than STI ETF.
Frugal Daddy,
DeleteDon't get me wrong. I never say STI ETF is no good - just highlighting the narrow country focus risks, that's all ;)
It's great if you are bullish on our banking sector (3 banks only) and Sing Tel's future.
The movement of these 4 stocks will move STI in turn due to their weightage in the index.
So there you go, all your eggs are into these 4 stocks ;)
Passive? That depends on your entries.
Well diversified? You decide ;)
The basket has 4 ostrich eggs, plus a mixture chicken eggs and quail eggs. We hope that the ostrich eggs continue to be resilient to knocks and cracks with its tough shell. Some of the other eggs don't look so good after a couple of hard knocks.
DeleteMade feel like eating eggs after writing this!
Kevin,
DeleteCholesterol was once upon a time considered a health risk. Now US Dept of Health has changed its mind.
Nothing wrong with that - when the facts change, we change.
Just like when men finally accepted the its the Earth that goes round the Sun and not the other way round ;)
It would be interesting to review this discussion in 20 to 30 years' time to see if Passive Indexing using STI ETF works out better than a more diversified Word Index ETF or maybe if we are bias towards Asia, an Asia ex-Japan ETF?
Stay healthy and if we are still around in 30 years' time, we are all winners!!!
(Never mind if some of us has less money than we started)
Now that's grasshopper's optimism for you!
Hi SMOL,
ReplyDeleteToo many comments to read.
To answer your post's qn, don't really get what you mean by "financial goals" but personally I feel no need to think so much and just allocate as much as you can to adding to your portfolio.
As for the last few comments I see on STI ETF, you seem to not like STI ETF a lot.
- Diversification. I agree that it is not diversified enough. I would love a FTSE ST All-share index ETF as I feel it is a good proxy to the Singapore market. What I am trying to say is, until there is a better product out there, STI ETF is still the best passive product for the singapore market.
- Passive. It is definitely more passive than managing individual stocks
- Performance. Many say that their individual stocks outperform STI. While that is not wrong, STI is often not the correct benchmark to compare against. The key, as I've learnt from Larry Swedroe, is risk-adjusted returns. Often, the "outperformance" are simply due to taking on more risk, and can be attributed to size and value premium. Sorry not an expert in this but just sharing form my layman POV. Again, why there is just a comparison with STI is because there are just no alternative products! Look at US, the most mature market, they have so many passive products! We will never reach there if we only have STI ETF...
AK,
ReplyDelete1. Interesting. Financial goals as in how much passive income annually you get from REITs and non-REITs?
You mean to say you don't think too much as in setting goals and planning?
You just allocate as much as you can as in buy the dips and bargains when they present themselves?
Be nice now. Don't make me look too mainstream... Please say you do set financial goals!
2. How can I don't like the STI ETF when I trade the Simsci futures - it's STI on steroids ;)
ETFs are one of the best financial innovations in recent years for traders and macro hedge funds. There's an ETF for any investment theme under the sun!!!
The question is more about whether STI ETF is suitable for a Passive Indexing strategy as espoused by John Bogle.
Your answer is like - No fish? Prawn also can!
Well, at least we are in agreement its not Coke Original ;)
3. I do agree with your take on using STI as a benchmark. That's why I appointed myself as a nano-hedge fund manager.
I focus on absolute returns; not relative returns.
I'm not going to psycho myself I've outperform when my portfolio is minus 10% and the STI is down minus 20%.
You and I count in dollars and cents ;)
You wear a brown paper bag over your head so you not afraid to share in $ - people can count backwards to deduce your portfolio size.
I show my face so must hide behind % ;)
LOL!