How to invest in ETF and Indices

[accord]

Market timing is a dangerous game. Follow the market using DCA on ETF/Indices instead.

We have all heard of the Dollar cost averaging (DCA) strategy.
It takes the form of investing equal monetary amounts regularly and periodically for long-term investment.
By doing so, more shares are purchased when prices are low and fewer shares are purchased when prices are high. This will lower the total average cost per share.


How about this way?
To further improve the total average cost per share, we will only purchase the shares when MA200 is above share price. We eliminate buying the shares when prices are high.

Yr comments/sharing appreciated.

[candy_chia]

Kindly be informed that UOB SSE 50 ETF deals with Futures Trading as shared by Alvin.

http://www.masteryourfinance.com/forum/ ... =14&t=2713

http://www.masteryourfinance.com/forum/ ... =14&t=2489

Personally, I do not like this ETF because instead of buying real stocks, the ETF engages in FUTURES TRADING to replicate the Xinhua 25 Index. The ETF cannot buy the A shares because UOB did not have the agreement with the Chinese government to own them. Only Chinese residents can buy A shares and selected partners.

Hence, the tracking error of this ETF would be higher.

Understanding more about Synthetic Replication Exchange Traded Funds (ETFs)

Since 22 August 2011, all synthetic replication ETFs have been tagged with a ‘X’ symbol just before the ‘@’ symbol used to mark SIPs.

This makes all the synthetic replication ETFs more visible to investors on trading screens and the SGX live prices website.

[candy_chia]

An interesting article sharing about starting DCA (Dollar Cost Averaging) at the top of bear market. Kindly note that the writer's friend use Lim and Tan securities, instead of POEM Share Builders Plan

"The problem is that he invest in May 2007. Now when you hear that, your heart may jump out since that is at the very top of the Great Financial Crisis (GFC) that took nearly 60% off the STI index.

Now he uses Lim and Tan which gives him access to the unit share market. For the readers asking me how to dollar cost average with a smaller sum this may be the way.

My take is that Lim and Tan charges you the same commissions like you trade the full lot, compare to Philip Securities which charges $10.

By adding $1000 every month, he put it a total of $50,000 to date. His return for 5 years is 9.24% with 85% of returns made up by dividends. Annualized the return is 1.7%.

His average cost have gone down to $2.80, which was much lower than the $3.10 he estimated.

The majority of the returns had been from dividends, and without the dividends the returns would have been even more pathetic."

http://www.investmentmoats.com/stock-ma ... -market-2/

Yes, Candy. Graduates can consider investing in STI ETF through POEMS if
1) they have small capital and do not have enough money to invest in a few stocks (using all your money on one stock is very risky!)
2) they are not confident in picking stocks like Dennis. Invest in something stable and in the mean time, learn and improve stock picking skills.
3) Diversify the risk - in case the stocks you pick fail. Don laugh, it can happen.

[candy_chia]

Some points to consider before you invest in STI ETF via POEM Share Builders Plan as shared in the article.

SBP which stands for Share Builders Plan, is a Dollar Cost Averaging or DCA in short, plan offered by Philips Securities.

The whole idea behind the SBP is that you will contribute a fixed amount of funds every month and they will use that amount of funds that you have contributed to purchase shares on your behalf. Any remaining funds not used in the purchase of the shares will be carried over to the next month.

Currently, there are 19 counters which are available for purchase under this SBP and the STI ETF is included in it too along with the other blue chips.

The brochure is rather easy to understand thus I would like to point out some other issues which you should take note if you are interested in the SBP.

DISADVANTAGES:
1. Odd lot shares

Stocks in SGX are usually traded in board lot size. The board lot size is 1000 shares i.e. 1 lot = 1000 shares except for a few exceptions.

For these exceptions, there will usually be a number in the name of the counter. For example, the size of 1 lot of SBS Transit 500 is 500 shares and the size of 1 lot of SIA 200 is 200 shares.

There are two markets in SGX and they are the common market and the unit share market.

If you wish to buy WHOLE number of lots i.e. 1 lot, 2 lots, 3 lots, 4 lots etc, you can buy it on the common market and that is the market which most people will go to purchase stocks.

However, if you wish to buy anything other than whole number of lots such as 200 shares of 800 shares which are also known as ODD Lots, you will have to buy it on the unit share market. Do take note that the unit share market is a totally different market from the common market.

One potential problem that can arise is the LACK OF LIQUIDITY. A lack of liquidity will make it harder for you to buy and sell shares since there can be a lack of buyers and sellers for the shares. Furthermore, the difference in the buy price and the sell price can be rather significant and that can result in the purchase and sale of shares at an unfavourable price.

2. Custody of shares

Take note that the shares bought under the SBP is under the CUSTODY OF Philips Securities and NOT CDP.

If you check your CDP account, the shares which you have bought will not be reflected in there.

When you wish to sell your shares, you will have to inform your trading representative before you can sell your shares.

Do take note that if you inform your trading representative to sell your shares, you will be subjected to a minimum brokerage charges of $40 currently. If you wish to transfer your shares to CDP, you will have to pay $10.70 to CDP and $10.70 to Philips Securities for each counter that you wish to transfer.

3. Charges

The HANDLING FEE can be quite Expensive if the amount of funds that you wish to use each month to buy shares is rather Small.

For example, $500 is set aside every month to purchase 2 counters. The handling fee for the purchase of 2 counters is $6.42 thus the handling fee in terms of percentage will be $6.42 / $500 * 100% = 1.28% and this is rather high. The percentage will be even higher if the amount of funds being set aside every month to buy shares is smaller than $500.

There are also other charges under the SBP. Even though the charges are quite small, they are still rather significant if added together. There are some charges you can avoid such as the Hard Copy Statement charge by opting for an Electronic Statement instead and Insuffcient Funds charge by ensuring sufficient funds in the designated bank account.

Some charges are unavoidable such as the Dividend charge and Cash Offer, Rights Issue & Other Corporate Action charge.

4. Buying price of the shares

It is stated in the information sheet that the shares will be purchased on the 18th of every month on a non-discriminatory and non-preferential basis.

If the 18th of every month falls on a trading day, the shares will be purchased on the next available trading day. In my opinion, there is a loophole with this. How can one determine whether the shares are purchased on a non-discriminatory and non-preferential basis ? There is always a possibility that they can purchase the shares at a lower price than what is being reflected to you and thus they can profit from the difference between the prices.


Despite of all the issues that I have mentioned regarding the SBP, it is still a rather useful plan.

BENEFITS

1) SBP enables the investor to develop some form of discipline by investing in a fixed amount of money every month. Furthermore, it also helps an investor by
Eliminating the problem of TIMING the MARKET.

2) Some of the blue chips such as DBS and Keppel Corp are very expensive to purchase since buying just one lot of these counters can cost a lot thus the SBP is a rather feasible plan that enables investors to own these counters by accumulating the odd lot shares over a period of of time.

I hope this post can prove to be useful for those who are interested in the SBP. Do think about it seriously as with any investments if you wish to take part in the SBP.

http://www.moneytalk.sg/2008/12/philips-sbp.html

Yes, Candy. Graduates can consider investing in STI ETF through POEMS if
1) they have small capital and do not have enough money to invest in a few stocks (using all your money on one stock is very risky!)
2) they are not confident in picking stocks like Dennis. Invest in something stable and in the mean time, learn and improve stock picking skills.
3) Diversify the risk - in case the stocks you pick fail. Don laugh, it can happen.

[Albert]

I like to comment on the charges.

Comparing to the similar product i.e. unit trust
sales charges is cost 1% based on fundsupermart.com.
Management fund is approx 1.5%.
Expense ratio is 1.5%
Total cost is 4%

SBP is only $6.42 for premium less than $1k.
The handling cost can go as low as 0.642%.

Thus cost alone is very appealing.

[candy_chia]

VT is one of the recommended exchange-traded funds (ETF) that enables one to gain Global exposure across Asset Classes irrespective of geography in the link:


Vanguard Total World Stock ETF (VT)

For holdings across a variety of Sectors, Cap levels, and Nations, VT is a nearly unbeatable choice in the ETF world.

The fund tracks the FTSE Global All Cap Index and has average daily volume of about 175,000 shares while expenses are quite low at 22 basis points a year.

The portfolio consists of nearly 750 stocks in total and is quite spread out among industries.

In fact, six segments make up at least 10% of assets while there is also a good mix between growth and value as well (read The Comprehensive Guide to Total Market ETFs).

Large caps do dominate the fund, accounting for nearly 80% of assets, but the fund does a great job of spreading out capital across nations.

1) America makes up just less than 50% of assets, while
2) Europe accounts for about one-fourth of the total and
3) Asia makes up another 20%.

This ensures a pretty well diversified fund that goes across borders and still provides a decent—but admittedly small—holding in emerging market securities.

Excerpt from the article: Build a Complete Portfolio with These Three ETFs, Aug 21, 2012 10:21 AM EDT

http://finance.yahoo.com/news/build-com ... 13846.html


Product summary of Vanguard Total World Stock ETF (VT)with annual fee of 0.22%
https://personal.vanguard.com/us/funds/ ... IntExt=INT

Below is an article with detailed explanation of permanent portfolio by Alvin in his blog.

Implementing Permanent Portfolio in Singapore
by Alvin on June 30, 2012

The permanent portfolio consists of four components with equal weightage: Stocks, Bonds, Cash and Gold.


1) Stocks

Singaporeans can consider the STI ETF listed on SGX to form the stocks component in their portfolio. It is denominated in SGD but it is focused on Singapore and a few regional companies.

It does not have the diversification of international stocks like the Vanguard Total World Stock Index Fund (VT).

I would say that the stock market is pretty much correlated despite of geographical location. If you are comfortable focusing on Singapore, you can stick with STI ETF.

Alternatively, you can divide the stock component into STI ETF and VT, to take the advantages of both funds.


http://www.bigfatpurse.com/2012/06/impl ... singapore/

[/quote]

[candy_chia]

Ishares Silver Trust (SLV) is listed in NYSE and can be purchased via broker. Annual management fee is 0.5%.


Objective of iShares Silver Trust:
- for the value of the shares of the iShares Silver Trust to reflect, at any given time, the price of silver owned by the iShares Silver Trust at that time, less the iShares Silver Trust's expenses and liabilities.

An investments in physical silver being efficient only in amounts beyond the reach of many investors.

Although the fund is not the exact equivalent of an investment in silver, they provide investors with an alternative that allows a level of participation in the silver market through the securities market.



Overview of SLV:
http://us.ishares.com/product_info/fund ... ew/SLV.htm
http://quicken.intuit.com/investing/ETF ... lver-Trust

1) iShares Silver Trust (SLV - largest silver ETF) - listed in US and CFDs through CMC Markets (zero leverage)


Radio recording on 12 July 2012, where Dennis shared what is ETF:

7月12日2012 ETF 挂牌基金是什么？

http://www.youtube.com/watch?v=z27K6sKD ... e=youtu.be

[candy_chia]

Paulson & Soros GLD Blunder
By Paul Baiocchi | August 24, 2012

You'd think a couple of billionaires like Paulson and Soros could choose the right gold ETF.

It seems like every quarter when hedge fund 13F filings are released, we get stories about how John Paulson or George Soros upped their stake in GLD.

The question I wonder about is, Why?

I'm in no position to question the logic behind Paulson's, Soros' or even the Teacher Retirement System of Texas' investments in gold. These people have already forgotten more than I will ever know about the market.

That said, I feel qualified to question the choice of ETF they use to get that exposure.

After all, I have spent the past two years working on our ETF Analytics tool, which helps investors do just that: choose the best ETF for the exposure they are seeking.

Armed with the insights I've culled, it boggles my mind that such sophisticated investors with such massive positions would buy the SPDR Gold Shares (NYSEArca: GLD) when a cheaper, nearly as-liquid alternative exists in the iShares Gold Trust (NYSEArca: IAU).

In fact, the continued use of GLD instead of IAU is a great example of how individual investors may be too focused on a name brand.

The posted expense ratio for GLD is 40 basis points, while the holding cost for IAU is just 25 basis points.

This may seem like a trivial amount, but when you start to scale up to the asset tallies Paulson & Co. and Soros Fund Management are dealing with, you get a better picture of just how dramatic the savings can be.

It would seem that Paulson, and, to a lesser extent, Soros are flushing money down the drain in holding GLD as opposed to IAU. The two funds offer identical exposure, but one is 15 basis points cheaper.

On an annual basis, based on the most recent 13F filings with the Securities and Exchange Commission from the two, Paulson is forfeiting more than $5 million in annual holding costs and Soros nearly $200,000.

Of course, once you incorporate trading costs, the savings decline, but even with a spread of 6 basis points, using IAU would save Paulson nearly $2 million.


Paulson in particular may want to heed my advice considering that Citi Private Bank decided to pull $410 million from his hedge fund, according to a Reuters article that noted the redemption was first reported by Bloomberg News.

What makes this even more perplexing is the fact that both Paulson and Soros are trading this in blocks of 25,000 shares or more.

Based on our proprietary measure of block liquidity that we developed with Knight Capital, both funds are cheap and easy to trade with the help of market makers or liquidity providers.

This may not be what most retail investors want to hear, but these guys are in a much better bargaining position than retail investors as well, considering the scale of their positions.

Heck, Paulson's position alone represents nearly 5 percent of GLD assets, and would constitute more than a third of IAU's current asset tally.


The fact that these guys may be able to negotiate favorable creation or redemption fees from the issuer may be the wizard behind the curtain and may explain why both funds have focused on GLD as opposed to the more cost-effective IAU.

As I said before, these guys are far too smart to not catch something like this.

Still, they illustrate just how easily investors can be distracted by a well-known name brand, which in this case is GLD.

We see it all the time here, whether it be the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) versus the Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) or with the SPDR S&P 500 ETF (NYSEArca: SPY) versus the Vanguard S&P 500 ETF (NYSEArca: VOO).

The bottom line is that it's hard enough to generate the performance needed to outpace inflation and secure retirement.

So, there's NO NEED to further handicap yourself by CHOOSING an unnecessarily EXPENSIVE ETF, no matter how familiar the name.

Maybe it just takes two billionaires making the same mistake to show how big this mistake can be.

http://www.indexuniverse.com/sections/b ... ml?start=1

[cwe]

Hi. This is my first posting. I am wondering anyone here heard of Blue Chip Investment plan by OCBC? I searched the board and found some posts about POEM share builders plan.
Both plans look similar. However, it seems like the blue chip investment plan charges are lower and we can use SRS money to invest in the blue chip investment plan. I am not sure whether there is any charges for dividend, because nothing was stated in the website about this. I came across POEM share builders plan a few years back, but preferred to invest directly for my cash portion. However, it interests me this time, because I can use my SRS money to invest and I already have plan for that.

[accord]

Hi cwe

OCBC Blue Chip Investment Plan - Cash vs SRS

cash and srs - ocbc.jpg (128.32 KiB) Viewed 40409 times

Important part of OCBC Blue Chip Investment Plan:
Buying/Selling of shares - 0.30% or S$5 per counter, whichever is higher.


Touted as an "affordable and hassle-free way to invest in blue chip shares", I guessed they forgot to tell us the humongous percentage of your hard earned money that would go towards paying of fees.


If you are going to invest only $100 monthly, your fees would be 5.0%.
If you are going to invest only $200 monthly, your fees would be 2.5%.
Even if you invest $500 monthly, your fees would still be pretty hard to swallow at 1.0%.


To be fair, they have stated that the launch promotion that is luring you in is only temporary.
For a limited time only, you only have to pay a fee of 0.30% when you buy or sell through BCIP.


Assume that the limited time promotion is over, and the Nikko AM STI ETF is priced at $3 now. You invest $100 monthly through BCIP. In 3 months, you spend $300, and pay $15 in fees. ($5 monthly)


Now, assume that someone buys Nikko AM STI ETF differently through Standard Chartered. Save up $100 monthly for 3 months, and buy 1 lot of 100 units for $300. Fees? 60 cents at 0.2%. (of course, you'll still need to pay SG Clearing Fee and GST in addition)


I suggest you can find out more about Standard Chartered Bank Trading Account.
http://www.masteryourfinance.com/forum/ ... f=5&t=2810

[Albert]

Concidentally, I have called the OCBC hotline on some queries and did some comparison with SBP

1. Any dividends, rights, warrants etc are not charged handling cost. Unlike poems which charge a handling cost.
2. There are no max window for suspension while the POEMS has a cap of three months(Any time more than that liable for acct closure)
3. Is to be sold online while POEMS has to be sold through broker
4. Based on average purchase price, the price is averaged among all buyers over the entire month. While POEMS is based on the price it procured based on the purchase date.

Average Purchase price:
Buyer 1 1-Jan-2013 100 units @ $1
Buyer 2 3-Jan-2013 100 units @1.2

Average purchase price is $1.1 for all buyers on the 22nd of the month.

[cwe]

Thanks Albert and accord for the information.

[alvin]

No doubt the cost of such Blue Chip dollar cost averaging plan is high.
I want to give a practical aspect for this.

When I started working, I did not have much money to invest.
And I was a poor saver.
I have to start somewhere.
I want to have a discipline way of saving and yet, give me returns.
The younger I start investing, the more returns I have. And that was my thinking.
I have bought insurance products before and I realised it is not going to make me good money.
In fact, they hide a lot of costs in the policies.
It was not until I read Multiple Streams of Income that I learned about dollar cost averaging an index fund.
I went to look for such fund in Singapore and I found it in POEMS Share Builder Plan.

I started with $200 per month to buy STI ETF and that was the minimum amount.
A part of my salary was automatically GIRO-ed to POEMS every month. This was what Rich Dad meant by pay yourself first!
Yes, the cost is high even though the charges was $6++.
$6/$200 = 3%
3% is high cost, and this is sales charge, we have yet to add in the fund management cost.
But I went ahead and I can proudly say I made decent profits despite investing through the 2008 financial crisis.
Slowly as I get the habit of saving and I grew my capital after a few years.
Although I am no longer doing the Share Builder Plan, I would still recommend to people, especially those with trouble saving money or have little capital to begin with.

If you have enough capital, I would advise you not to do the Share Builder Plan.
You are better off investing in lump sums.

[ein55]

Agreed, index ETF (eg STI) is a safe investment, esp if one does not how to choose strong FA stock, STI ETF itself is a combination of 30 good stocks, one can earn passive income and capital gain if knowing the big picture of macro market trend: where is the max upside and downside, then can plan for entry and exit points.

For mega market cycle investing, entry should be before 50% optimism, latest by 60% optimism, else shorter mid-term market cycle strategy has to be applied. For value investing, any mid-term correction can be a good entry point but longer term return will be averaged out if investing above 60% optimism and holding till the next market cycle.

No doubt the cost of such Blue Chip dollar cost averaging plan is high.
I want to give a practical aspect for this.

When I started working, I did not have much money to invest.
And I was a poor saver.
I have to start somewhere.
I want to have a discipline way of saving and yet, give me returns.
The younger I start investing, the more returns I have. And that was my thinking.
I have bought insurance products before and I realised it is not going to make me good money.
In fact, they hide a lot of costs in the policies.
It was not until I read Multiple Streams of Income that I learned about dollar cost averaging an index fund.
I went to look for such fund in Singapore and I found it in POEMS Share Builder Plan.

I started with $200 per month to buy STI ETF and that was the minimum amount.
A part of my salary was automatically GIRO-ed to POEMS every month. This was what Rich Dad meant by pay yourself first!
Yes, the cost is high even though the charges was $6++.
$6/$200 = 3%
3% is high cost, and this is sales charge, we have yet to add in the fund management cost.
But I went ahead and I can proudly say I made decent profits despite investing through the 2008 financial crisis.
Slowly as I get the habit of saving and I grew my capital after a few years.
Although I am no longer doing the Share Builder Plan, I would still recommend to people, especially those with trouble saving money or have little capital to begin with.

If you have enough capital, I would advise you not to do the Share Builder Plan.
You are better off investing in lump sums.

[accord]

Invest in Singapore blue-chip stocks from just S$100 a month — with a fee from as low as S$1!


What is POSB Invest-Saver?
It is a Regular Savings Plan ("RSP") that allows you to invest via a GIRO arrangement on a monthly basis. No securities' trading account or CDP account^ is required. All you need is a savings or current account with us. Even better, you can start investing or manage your investment at any of our ATMs islandwide, 24/7!


What will you be investing in?
Through POSB Invest-Saver, you will be investing into the Nikko AM Singapore STI Exchange Traded Fund ("ETF"). When you buy units of this ETF#, you are investing into Singapore's top 30 companies (based on market capitalization) including Singapore Exchange, Singapore Airlines and Singapore Press Holdings (subject to half-yearly review). Collectively, they are known as Singapore's blue-chip companies and their performance is tracked by the Straits Times Index (STI+)


Fees and Charges
Low sales charge of 1% per transaction with a minimum investment sum of S$100
No fees for selling the units (this may be subjected to change)


More info:
http://www.posb.com.sg/sites/personal/i ... fault.page