Spending money is inevitable. Part of achieving robust returns is making your spending work for you. There are many different credit cards in the market today, and Grab has just launched the GrabPay Card (a Mastercard tie-up). With so many payment options, I share my intended strategy for different types of transactions in 2020.
1) Groceries from Fairprice
The preferred mode here is to pay by Fairprice gift card (securing 7.3% cashback - see item 2) or by Citi SMRT card (up to 5% cashback for transactions >= $50, or up to 3% cashback for transactions <$50. A reduction of 0.3% if monthly retail spend is less than $300, hence the "up to".. yes Singapore credit cards are ridiculously complicated like that.)
2) Gift Cards from Fairprice
By using the Citi SMRT card at Kallang Wave Fairprice Xtra only, I get 7.3% cashback, assuming I top up $300 into the gift card each time I go to Kallang Wave (which I do not frequent), or whatever amount to meet the $300 monthly spend requirement for this card. Otherwise, it's 7%, which is alright, but the point is to go to Kallang Wave Mall as infrequently as I can.
3) Public Transport
Quoting from Citi's website: "2% SMRT$ (i.e. cashback) is awarded for EZ-Reload transactions of more than $30. 1% SMRT$ is awarded for EZ-Reload transactions of $30 or less. For monthly statement retail purchases of less than $300, SMRT$ earn rate will be 0.3% less.Citi SMRT card." Grief. Long story short, set EZ-Reload to $50 and earn 2% cashback.
4) Online spend
This one is tricky. It can either go to the Citi Rewards Visa (4 mpd up to $1000 per statement) or to the DBS Woman's World Mastercard - which men can apply for (4 mpd). There's a slightly different rounding policy, because DBS WWMC rounds down to the nearest $5, so my preference here is the CRV, assuming I haven't already maxed it out for item 5 below...
5) Any other place which accepts Mastercard (contactless)
Sometimes, I may need to buy something from Cold Storage or Sheng Shiong. Or Watsons or Guardian. Or any other retail shop. The new GrabPay Card is the winner here. Because I can top-up my GrabPay wallet using the CRV (4mpd up to $1000 per statement - this mechanism might not last...), I can effectively unlock 4mpd by using the GrabPay card at these physical merchants. If they accept Samsung Pay, then better still cos I can triple-dip - I get 4mpd + GrabRewards + Samsung Pay points. The catch? This probably doesn't work for big-ticket items, unless you plan to keep a few thousand dollars in your GrabPay wallet... (see item 6)
6) Any other place which accepts FavePay/GrabPay
Okay, so no credit card accepted... cash or NETS only? Meh. Oh, you take FavePay/GrabPay. Great - here, take my money and let me earn my 4mpd + GrabRewards + Fave Cashback.
7) Big-ticket items
Since GrabPay might not be possible (e.g. transaction limit for contactless?), the best solution is to sign up for a new credit card a few weeks prior. The Amex Rewards card (the white one) is a decent option with a good sign-up bonus for $1500 spend and a very reasonable $53.50 annual fee.
So one big category which I omit is travel. I typically use my US credit card for that purpose (no foreign txn fees, which is proving to be useful in light of the slow but steady upward creep of the same fee for SG credit cards).
The GrabPay card slots itself usefully into a gap in an already-crowded market. There's supposed to be a physical card (numberless!) in the works and that could help to deal with situations where the transaction is higher than the contactless limit, or if the merchant lacks a contactless reader.
What do you think of this strategy? Feel free to share yours in the comments below!
Sunday 8 December 2019
Thursday 28 November 2019
Endowus - New option for investing CPF monies
I recently attended an outreach session by Endowus, a relatively new investing platform. It offers an interesting additional option for investing CPF monies (they also do cash portfolios, but this post will focus primarily on CPF) for Singaporeans, and I think it's worth considering.
If you are keen to sign up for an account with Endowus, do consider using my referral link which enables both of us to have $10,000 of funds advised free for 6 months (a $20 value, to be precise). I receive no compensation from Endowus or any other party in writing this post.
I shed some light on my revised views of the CPF in an earlier post, including my re-think of the CPF Ordinary Account (OA) as a quasi-cash "Housing Account" while the Special Account (SA) functions as the primary retirement vehicle. One of the questions I raised was whether 2.5% (the current OA interest rate) is a reasonable rate of return for the long term, and I briefly commented that I was not very keen on the CPF Investment Scheme (CPFIS). That may change with Endowus coming into the picture...
Meaningful statistics on CPFIS are like hidden pieces of a treasure hunt on the CPF website, but some broad observations:
In a nutshell, it is a low(er) cost method of investing CPF monies in a diversified unit trust portfolio, with a stock-bond allocation of the investor's choosing. Endowus operates under an MAS Financial Advisers license (rather than a Capital Markets Services license), so never directly handles clients' money. All funds and holdings are parked with UOB Kay Hian in the client's name. For CPFIS-OA members who use Endowus, the following three fees apply:
If you are keen to sign up for an account with Endowus, do consider using my referral link which enables both of us to have $10,000 of funds advised free for 6 months (a $20 value, to be precise). I receive no compensation from Endowus or any other party in writing this post.
Investing CPF - why even?
I shed some light on my revised views of the CPF in an earlier post, including my re-think of the CPF Ordinary Account (OA) as a quasi-cash "Housing Account" while the Special Account (SA) functions as the primary retirement vehicle. One of the questions I raised was whether 2.5% (the current OA interest rate) is a reasonable rate of return for the long term, and I briefly commented that I was not very keen on the CPF Investment Scheme (CPFIS). That may change with Endowus coming into the picture...
Meaningful statistics on CPFIS are like hidden pieces of a treasure hunt on the CPF website, but some broad observations:
- 4.0 million CPF members as of September 2019
- 940,000 CPFIS-OA members as of Q3 2019 (and a further 297,000 CPFIS-SA members, which I won't be focusing on for the time being)
- "Total cost of current holdings in CPFIS-OA" has been steadily dropping from 2008 to 2016, and the drop seems to have slowed down, but the graph by CPF is actually very misleading because the x-axis is inconsistent (originally by year, then by quarter).
This means that less than 1 in 4 CPF members has opted in for the Investment Scheme for their OA, not even taking into consideration that some CPFIS-OA accounts may have been set up but were never used. Even assuming that all CPFIS-OA accounts are active, I find an average of $17,500 of "cost of current holdings" per account as of Q3 2019, which doesn't seem high and is significantly lower than ten years ago ($29,250 in 2009) or even five years ago ($22,000). In fact:
- Out of the $142b in CPF members' OAs, only $16.6b (less than 12%) is invested as of Q3 2019, as compared to a whopping 37% in 2009 ($26.15b invested out of $70.6b)
Clearly, popularity of the CPFIS-OA appears to be waning, and I think this can be attributed to three main reasons:
- Perception that 2.5% p.a. interest rate is "good enough". Relative to deposit account interest rates which have been nowhere close to even 1% for recent memory, 2.5% risk-free seems to be attractive, something which I do not deny.
- Hurdles in investing CPF monies. In addition to the hassle of setting up CPFIS itself, there are quite a number of fees involved, some of which are frankly absurd. For instance, DBS charges $2 per counter per quarter, subject to a minimum of $5. So that's instantly $20 of "service fees" per year even if you have just one counter, and it creeps up to $80 per year for someone attempting to diversify with 10 counters. I have no idea what "services" are actually offered.
- Fear. CPFIS may be subject to losses, and there is no guarantee of principal by CPF. Poor investment decisions could lead to significant losses, then panic, then withdrawal of funds (and realisation of those losses just as the market recovers...) For CPF members who continue to see both the OA and SA as their retirement vehicles, it is understandable to have a low degree of tolerance towards such losses, but if one adopts my suggested lens and sees the SA as the primary retirement vehicle, then sensible investing of CPF monies, in particular the OA, could yield positive returns while managing the impact of any volatility on retirement planning.
What does Endowus bring to the table?
In a nutshell, it is a low(er) cost method of investing CPF monies in a diversified unit trust portfolio, with a stock-bond allocation of the investor's choosing. Endowus operates under an MAS Financial Advisers license (rather than a Capital Markets Services license), so never directly handles clients' money. All funds and holdings are parked with UOB Kay Hian in the client's name. For CPFIS-OA members who use Endowus, the following three fees apply:
- Access fee: Endowus selects best-in-class unit trusts for the various portfolios (e.g. 60/40 or 80/20) and also handles portfolio creation and rebalancing. For their services, they charge an access fee of 0.40% for assets under advice (~AUM).
- Fund-level fee, which will also apply when buying a unit trust through other platforms (e.g. Fundsupermart), except that Endowus rebates trailer fees. Basically, out of the $X that a unit trust fund manager collects, a proportion is paid to the typical platform as a trailer fee (sort of like a commission), and the remainder, which we'll call $Y, is kept by the UT fund manager. Since Endowus promises to rebate 100% of trailer fees, the client effectively only pays a fund-level fee of $Y, instead of $X.
- Agent bank charges, which apply to any sort of CPFIS arrangement. Basically, the "service fees" I mentioned earlier. One key advantage under Endowus is that because the client is holding one portfolio, the client only pays one quarterly service charge overall, even though he owns multiple unit trusts within that single portfolio. This is a clever workaround to reduce (although not totally eliminate) the somewhat frivolous fees charged by DBS, OCBC and UOB.
For purposes of illustration, we can use the funds which are part of Endowus's CPF portfolio as of writing (end-Nov 2019):
- Schroders Global Emerging Market Opportunities Fund
- Natixis Harris Associates Global Equity Fund
- Lion Global Infinity US 500 Stock Index
- First State Dividend Advantage
- Legg Mason Western Asset Global Bond Fund
- Eastspring Singapore Select Bond Fund
- United SGD Fund
Observation 1: Assuming that all 7 funds are available to retail investors, establishing a DIY 7-fund portfolio would incur 7x of the agent bank quarterly service fee, and any buying/selling of the funds (e.g. for rebalancing purposes) would incur agent bank transaction fees as well. Under Endowus, it will be counted as one portfolio, hence only incur a single quarterly service fee, and rebalancing-associated costs are not borne directly by the client but instead are covered by the separate 0.40% access fee.
Observation 2: Using the Schroders Global Emerging Market Opportunities Fund as an example - the annual expense ratio is around 1.66%-1.68%, which is what an investor would incur if owning the fund directly. But because Endowus rebates 100% of the trailer fees, this is brought down to 1.08% (source), and even after including the 0.40% access fee, the total of 1.48% is lower than the direct-purchase option.
Observation 3: Interestingly, observation 2 does not always apply - the Legg Mason Western Asset Global Bond Fund has an annual expense ratio of 0.87%, and through Endowus, the fund-level fee after trailer fee rebate is 0.57%. After including the access fee, the total of 0.97% is not as competitive as buying this fund directly. Endowus appears to have the comparative advantage in equity funds rather than bond funds, which is not surprising given that equity funds usually have higher fees to begin with (and hence can offer large trailer fees). Investors may wish to consider this when choosing their portfolio allocations.
Endowus is pretty upfront in acknowledging that the best way to preserve CPF capital is to stick to the risk-free 2.5% p.a. offered by the OA (assuming it never changes). Endowus is focusing on appealing to CPF investors looking for higher returns, by offering a fuss-free option supported by a non-intimidating user interface, and access to certain types of funds which may not be easily available to retail investors. Sure, the model does resemble that of a fund-of-funds setup, but I think the commitment to rebate 100% of trailer fees plus the very reasonable access fee of 0.40% make a very good value proposition.
I've initiated my account setup process and am waiting to explore the platform a bit more, but in the meantime a big question in my head is: what profile of CPF investor would Endowus be best-suited for?
My quick sensing is that young investors are unlikely to have much CPF OA monies available for investment, because a large majority of them may prefer to use CPF OA for housing needs, and still have to put up a $20,000 minimum balance before being able to invest the rest of their OA. Yet, these younger investors might be more receptive to what Endowus offers as an option to invest CPF monies. Older investors probably have larger CPF balances on average, yet may be a little harder to convince, because they might feel more reassured with "big bank" products, i.e. something offered by DBS, OCBC, or UOB, and may be willing to tolerate the higher fees as a trade-off for the reassurance they get investing through one of these better-known channels.
It'll be interesting to guess at what is Endowus's strategy here. While they also offer cash and SRS portfolios, their key comparative advantage at the moment is being able to offer a CPF portfolio, a feature which is currently unmatched by the competition. Is the investor base ready to come to the table with a new-found appetite for investing their CPF monies? How does one identify the "total addressable market" in this scenario? Will leveraging on the UOB Kay Hian tie-up help to reassure some would-be investors? Time will tell, but certainly I think this is a step in the right direction. Having more options is always better than having few or none, and based on what I've heard, read, and observed, Endowus provides a very compelling option for investing CPF monies.
Endowus (and investing in general) is not about generating out-sized returns; leave that philosophy for a small, high-risk portfolio if you absolutely must, but don't let that active, risky portfolio form the backbone of your financial planning. Instead, build on what is often viewed as restriction - CPF monies are locked up and one cannot use them other than for housing (OA) and medical costs (MA) - and flip the perspective over to the positive, e.g. lock-in until age 55 means peace of mind, if done correctly from the start. In that context, Endowus potentially plays the role of a smartly-rebalanced investment/retirement platform suitable for CPF members, and is a first-mover in this untapped area.
[If you are keen to sign up for an account with Endowus, do consider using my referral link which enables both of us to have $10,000 of funds advised free for 6 months (a $20 value, to be precise). I receive no compensation from Endowus or any other party in writing this post.]
Post-edit: While there is a strong temptation to compare this to the DBS digiportfolio, I have consciously refrained from doing so since the latter is not a CPF-eligible product. I may touch on it in a separate post on cash-based investment options.
Endowus is pretty upfront in acknowledging that the best way to preserve CPF capital is to stick to the risk-free 2.5% p.a. offered by the OA (assuming it never changes). Endowus is focusing on appealing to CPF investors looking for higher returns, by offering a fuss-free option supported by a non-intimidating user interface, and access to certain types of funds which may not be easily available to retail investors. Sure, the model does resemble that of a fund-of-funds setup, but I think the commitment to rebate 100% of trailer fees plus the very reasonable access fee of 0.40% make a very good value proposition.
Who will Endowus be suitable for?
I've initiated my account setup process and am waiting to explore the platform a bit more, but in the meantime a big question in my head is: what profile of CPF investor would Endowus be best-suited for?
My quick sensing is that young investors are unlikely to have much CPF OA monies available for investment, because a large majority of them may prefer to use CPF OA for housing needs, and still have to put up a $20,000 minimum balance before being able to invest the rest of their OA. Yet, these younger investors might be more receptive to what Endowus offers as an option to invest CPF monies. Older investors probably have larger CPF balances on average, yet may be a little harder to convince, because they might feel more reassured with "big bank" products, i.e. something offered by DBS, OCBC, or UOB, and may be willing to tolerate the higher fees as a trade-off for the reassurance they get investing through one of these better-known channels.
It'll be interesting to guess at what is Endowus's strategy here. While they also offer cash and SRS portfolios, their key comparative advantage at the moment is being able to offer a CPF portfolio, a feature which is currently unmatched by the competition. Is the investor base ready to come to the table with a new-found appetite for investing their CPF monies? How does one identify the "total addressable market" in this scenario? Will leveraging on the UOB Kay Hian tie-up help to reassure some would-be investors? Time will tell, but certainly I think this is a step in the right direction. Having more options is always better than having few or none, and based on what I've heard, read, and observed, Endowus provides a very compelling option for investing CPF monies.
Endowus (and investing in general) is not about generating out-sized returns; leave that philosophy for a small, high-risk portfolio if you absolutely must, but don't let that active, risky portfolio form the backbone of your financial planning. Instead, build on what is often viewed as restriction - CPF monies are locked up and one cannot use them other than for housing (OA) and medical costs (MA) - and flip the perspective over to the positive, e.g. lock-in until age 55 means peace of mind, if done correctly from the start. In that context, Endowus potentially plays the role of a smartly-rebalanced investment/retirement platform suitable for CPF members, and is a first-mover in this untapped area.
[If you are keen to sign up for an account with Endowus, do consider using my referral link which enables both of us to have $10,000 of funds advised free for 6 months (a $20 value, to be precise). I receive no compensation from Endowus or any other party in writing this post.]
Post-edit: While there is a strong temptation to compare this to the DBS digiportfolio, I have consciously refrained from doing so since the latter is not a CPF-eligible product. I may touch on it in a separate post on cash-based investment options.
Friday 15 November 2019
Back to business
Okay, so things have been dormant for a bit as I've had to focus on a couple of different things through the year and this blog went on the backburner. As I find myself with a a bit of time as we approach year-end, I thought it would be best to go ahead and jot some reflections. Penning down some thoughts is generally good for holding oneself accountable, validating past hypotheses, and also sharing my perspective with readers. So here goes...
The final earnings season of most US stocks is pretty much out of the way, and I had a short-lived period of being happy by taking profits off an earlier trade, which evaporated the very next day due to some disastrous results associated with a different counter.
Frankly, my read is that the counter still has upside, but with trade uncertainties jumping from "nearly signed it!" to "nope, no deal!" every other week, I think it was good to take some money off the table for this consumer discretionary counter, since this sector is fairly exposed to economic sentiment (although this may depend on whether one views pizza as a normal good or an inferior good from a microeconomics point of view).
Basically, there were some headwinds in the sector, and the results fell short of expectations. There were also quite a number of franchise agreement terminations, which is bad for the business as RLH moves towards an asset-light model. The remaining owned hotels have also taken quite a while to be sold, something which Vindico Capital issued a pointed shareholder's letter about, but already known prior to the earnings release.
Based on an earlier property count (as of 30 June 2019, from Red Lion's IR Website), it appears that the terminations are largely from the select-service category, from America's Best Value Inn and Canada's Best Value Inn, as well as from Knights Inn (which RLH acquired from Wyndham in 2018). Franchise terminations are part and parcel of the franchise business, and from the earnings call it didn't sound like the terminated properties were gravitating towards a specific competitor. I think RLH has some work to do (possibly streamlining the line-up of brands under its portfolio) for better operational efficiencies.
While I wish I had reduced my exposure further before the earnings call, there's nothing I can do about it now. As it stands, the significantly-reduced market cap of RLH could make it an M&A prospect given its portfolio of over a thousand properties representing nearly 80,000 hotel rooms. I'll have to watch this closely in the next couple of months, and hopefully the search for a replacement CEO ends in an outcome that is well-received by the market.
I've pared down some holdings and am looking towards a couple of anchors to drive returns over the next couple of months:
I'm definitely overweight tech, but its the sector I'm most comfortable with. The long-drawn 787Max issue seems to be almost ignored by the market now, and it's interesting that airlines (even those which had large Max fleets like LUV) didn't get impacted too badly, but I'm sitting on the sidelines for now.
As a final point, and also to allude back to an oft-repeated mantra that investors should think long-term, I managed to cull this chart off my IB reports showing my historical performance (since I started using IB) versus the same four indexes mentioned above. Over here, I'm still ahead of the S&P (if only just, and largely due to pulling way ahead in 2018), so this is perhaps a #humblebrag. Nonetheless, I guess it was always better to have started earlier, and I'm glad I did!
The final earnings season of most US stocks is pretty much out of the way, and I had a short-lived period of being happy by taking profits off an earlier trade, which evaporated the very next day due to some disastrous results associated with a different counter.
PZZA - the oven gets warmer
The joy was provided by none other than Papa John's (PZZA), a pizza delivery chain fairly well-known in the US. I started a long position in May and was pleased to know that Starboard Value, an activist hedge fund, was looking to shake things up in the company (Starboard's claim to fame is its success turning around Olive Garden under Darden Restaurants - there is a rather dramatic deck of slides relating to this effort). Following some good results, my resting sell order cleared pre-market, and although the share price was to go up a little further over the course of the day, I was quite content with having locked in a 20+% return over a short period of around six months.Frankly, my read is that the counter still has upside, but with trade uncertainties jumping from "nearly signed it!" to "nope, no deal!" every other week, I think it was good to take some money off the table for this consumer discretionary counter, since this sector is fairly exposed to economic sentiment (although this may depend on whether one views pizza as a normal good or an inferior good from a microeconomics point of view).
RLH - disaster!
The very next day, Red Lion Hotels Corporation (RLH) announced results which can only be described as a disaster, unfortunately wiping out my gains on PZZA and then some (quite a bit actually). It is almost unheard of for a share price to collapse by 50% except in the biotech/pharma sectors, or where there is fraud/corruption, but that's the scale of RLH's drop. I had been tracking the share price closely over the past couple of months and had already reduced my exposure slightly, but I never anticipated that the market would react so negatively to the results (and the CEO's departure ). I listened to the earnings call recording in an attempt to decipher what was going on.Basically, there were some headwinds in the sector, and the results fell short of expectations. There were also quite a number of franchise agreement terminations, which is bad for the business as RLH moves towards an asset-light model. The remaining owned hotels have also taken quite a while to be sold, something which Vindico Capital issued a pointed shareholder's letter about, but already known prior to the earnings release.
Based on an earlier property count (as of 30 June 2019, from Red Lion's IR Website), it appears that the terminations are largely from the select-service category, from America's Best Value Inn and Canada's Best Value Inn, as well as from Knights Inn (which RLH acquired from Wyndham in 2018). Franchise terminations are part and parcel of the franchise business, and from the earnings call it didn't sound like the terminated properties were gravitating towards a specific competitor. I think RLH has some work to do (possibly streamlining the line-up of brands under its portfolio) for better operational efficiencies.
While I wish I had reduced my exposure further before the earnings call, there's nothing I can do about it now. As it stands, the significantly-reduced market cap of RLH could make it an M&A prospect given its portfolio of over a thousand properties representing nearly 80,000 hotel rooms. I'll have to watch this closely in the next couple of months, and hopefully the search for a replacement CEO ends in an outcome that is well-received by the market.
So what now
My portfolio YTD returns (blue line) took a sharp dive, and it doesn't look like I can come anywhere close to the stellar performance of the S&P (red line, 25% YTD) or even the world index (green line, 20% YTD). If not for the freak incident for RLH, I was tracking the world index pretty well. I take some comfort in having outperformed the Singapore index (purple line), and frankly, finishing the year with around 15% returns is not too shabby.
I've pared down some holdings and am looking towards a couple of anchors to drive returns over the next couple of months:
- AMD, with close to 100% returns YTD, is poised to play a sort of David vs Goliath role against both Nvidia and Intel. Exciting times!
- MU, perennial favourite of mine, and previously mentioned on this blog.
- SQ, currently in the red but holding out for M&A potential - could Google or Apple swoop in?
As a final point, and also to allude back to an oft-repeated mantra that investors should think long-term, I managed to cull this chart off my IB reports showing my historical performance (since I started using IB) versus the same four indexes mentioned above. Over here, I'm still ahead of the S&P (if only just, and largely due to pulling way ahead in 2018), so this is perhaps a #humblebrag. Nonetheless, I guess it was always better to have started earlier, and I'm glad I did!
Wednesday 9 January 2019
Event: Stashaway Academy - Market Outlook 2019
A Wednesday evening talk at the newly-completed Frasers Tower on Cecil Street.
As I approached the ground floor lobby, the public announcement system played a pre-recorded message that the cause for a fire alarm (presumably triggered just a few moments before) was being investigated. For office workers at the end of their workday, there was no cause for panic, and an intermittent trickle exited the building, headed in various directions, no different from a typical workday routine.
Alas, a long line had formed at the security counter, with more than 20 people waiting to obtain a visitor pass. My guess was that most people were here for the same event. I joined the line. Progress was excruciatingly slow, but I still had full intention of attending this talk which I signed up for a while ago. My patience was worn gradually as ten minutes of waiting in line only yielded a few metres of forward movement in the human queue. One of the event organisers apologetically appealed to the participants for their patience, and his frustration was palpable from his comment to the effect that this was likely the first and last time they would use this space for any of their events.
Finally, there was some executive intervention - presumably some negotiations with building security that playing it by the book wasn't working out very well, and that something had to be done to remedy the unacceptable situation. We were allowed to enter the barrier gates leading to the lift landing area, where batches of us were then ushered into commodious high-ceiling elevators bound for The Executive Centre, a mixed-use space on the 17th floor of the building.
At risk of sounding slightly quixotic, it was perhaps an apt metaphor of an investment paradigm that would be pointedly relevant to the subsequent talk -- the fire alarm representing the constant barrage of media claiming to foretell the impending arrival of the next big recession and absolute financial apocalypse; the slow exodus of tired office workers being those who experience the misfortune and jadedness associated with selling low after buying high, figuratively coming back down to the ground (and literally as well, from their lofty offices high above).
The metaphor flows easily into the time spent waiting in line for security -- this represents the patience demanded of all who seek to be contrarian investors, the minority group who look to enter the building (investment opportunities) when everyone is being told by the fire alarm (the media) to leave. And when the time was right, the gates opened, the bulls came charging in (you got that), and all of us went up, up and up ... to level 17, where we were rewarded for our patience and willingness to stick to earlier convictions with a good sharing session in how to look at 2019 by Stashaway.
It serves little purpose for me to regurgitate what Freddy Lim, Stashway's co-founder and Chief Investment Officer, had to say, given that I've already painted the picture of the paradigm with the preceding paragraphs (double score for alliteration), but I'll leave you with three quick thoughts:
Unlike what you might be led to believe if you follow the media closely, we're not in a recession. Not yet, at least. I'm intending to follow the Conference Board's Leading Economic Index closely through 2019, and for the latest update the trend points towards continued positive growth, albeit much-curtailed from the earlier half of 2018 as well as much of 2017. Key takeaway: (my own, and not something mentioned by Freddy) Reading news to get an idea of what is going on is NOT the right way to do it; instead, read news with a strict goal of formulating your own opinion of what is taking place.
Understand your risk and your needs. This is super difficult to determine, since each of us have individual goals and financial situations. It's tedious, bothersome, and often under-appreciated (somewhat like going for a regular health check-up), but it's something all of us should do on a regular basis. Unlike a health check-up, it's difficult to find resources (people as well as information) to help you formulate an assessment of your risk and needs. Too many purported financial advisories are marketing and sales people in disguise, and good-quality financial advice is often not available or practical to those of us who don't have multi-million dollar portfolios to manage. My advice: read widely, start practicing (you could set up a paper trading account if you feel that helps you understand how investment things work in general), and draw lessons. Being clear of your goals will help you be cognizant of your risk appetite, and should guide your investment decisions.
The future is, ultimately, unpredictable. This was a point that Freddy brought across - that this evening's session was not about forecasting or predictions. Instead, he guided the audience towards a way of thinking, which I feel is quite difficult to hone in an age where there is constant media attention on just about everything. Freddy did have one slide showing the federal funds rate curve, from today out to around late 2021 (if I recall correctly). While the slide was used to illustrate a different point, it did strike me that we have nary a clue if the federal funds rate in 2021 was really going to be anywhere close to projection A or B or C or D. Heck, as at 9 January 2019, we hardly know how many rate hikes there are going to be in 2019 itself - the last we heard was probably two hikes, and then now we hear that there may be scope for a pause (or not?) Even in late 2018, there was uncertainty over whether there would/wouldn't be a final hike for the year. Come 2021, will it still be Jerome Powell as Fed Chair, Donald Trump as US President? Okay, we can be sure of one thing: President Xi in China, but other than that, really everything is anyone's guess, and everyone can guess can anything.
So it's much more useful to spend one's finite mental energies developing a way of thinking, than developing fine-grained predictions. When I picture that federal funds rate curve, the only part of the curve that really matters to me is the next 12 months or so. Beginning from the second half of this subset (i.e. around 6 months out), the line widens out into a triangular-shaped area, representing a cone of possibilities. The future is likely to lie somewhere within this cone, but as we go further (two or three years from now), that cone funnels out wider and wider, covering an increasingly larger vertical span of the entire graph, such that by the end of three years, the cone is so wide that it's practically useless for any kind of point-precision projections (which is precisely the point - oh, some word play there), but it's intuitively useful to illustrate the instructive uncertainty surrounding any kind of longer time horizon projection.
And I'll leave you with these thoughts for now, cheers and out!
As I approached the ground floor lobby, the public announcement system played a pre-recorded message that the cause for a fire alarm (presumably triggered just a few moments before) was being investigated. For office workers at the end of their workday, there was no cause for panic, and an intermittent trickle exited the building, headed in various directions, no different from a typical workday routine.
Alas, a long line had formed at the security counter, with more than 20 people waiting to obtain a visitor pass. My guess was that most people were here for the same event. I joined the line. Progress was excruciatingly slow, but I still had full intention of attending this talk which I signed up for a while ago. My patience was worn gradually as ten minutes of waiting in line only yielded a few metres of forward movement in the human queue. One of the event organisers apologetically appealed to the participants for their patience, and his frustration was palpable from his comment to the effect that this was likely the first and last time they would use this space for any of their events.
Finally, there was some executive intervention - presumably some negotiations with building security that playing it by the book wasn't working out very well, and that something had to be done to remedy the unacceptable situation. We were allowed to enter the barrier gates leading to the lift landing area, where batches of us were then ushered into commodious high-ceiling elevators bound for The Executive Centre, a mixed-use space on the 17th floor of the building.
At risk of sounding slightly quixotic, it was perhaps an apt metaphor of an investment paradigm that would be pointedly relevant to the subsequent talk -- the fire alarm representing the constant barrage of media claiming to foretell the impending arrival of the next big recession and absolute financial apocalypse; the slow exodus of tired office workers being those who experience the misfortune and jadedness associated with selling low after buying high, figuratively coming back down to the ground (and literally as well, from their lofty offices high above).
The metaphor flows easily into the time spent waiting in line for security -- this represents the patience demanded of all who seek to be contrarian investors, the minority group who look to enter the building (investment opportunities) when everyone is being told by the fire alarm (the media) to leave. And when the time was right, the gates opened, the bulls came charging in (you got that), and all of us went up, up and up ... to level 17, where we were rewarded for our patience and willingness to stick to earlier convictions with a good sharing session in how to look at 2019 by Stashaway.
It serves little purpose for me to regurgitate what Freddy Lim, Stashway's co-founder and Chief Investment Officer, had to say, given that I've already painted the picture of the paradigm with the preceding paragraphs (double score for alliteration), but I'll leave you with three quick thoughts:
Unlike what you might be led to believe if you follow the media closely, we're not in a recession. Not yet, at least. I'm intending to follow the Conference Board's Leading Economic Index closely through 2019, and for the latest update the trend points towards continued positive growth, albeit much-curtailed from the earlier half of 2018 as well as much of 2017. Key takeaway: (my own, and not something mentioned by Freddy) Reading news to get an idea of what is going on is NOT the right way to do it; instead, read news with a strict goal of formulating your own opinion of what is taking place.
Understand your risk and your needs. This is super difficult to determine, since each of us have individual goals and financial situations. It's tedious, bothersome, and often under-appreciated (somewhat like going for a regular health check-up), but it's something all of us should do on a regular basis. Unlike a health check-up, it's difficult to find resources (people as well as information) to help you formulate an assessment of your risk and needs. Too many purported financial advisories are marketing and sales people in disguise, and good-quality financial advice is often not available or practical to those of us who don't have multi-million dollar portfolios to manage. My advice: read widely, start practicing (you could set up a paper trading account if you feel that helps you understand how investment things work in general), and draw lessons. Being clear of your goals will help you be cognizant of your risk appetite, and should guide your investment decisions.
The future is, ultimately, unpredictable. This was a point that Freddy brought across - that this evening's session was not about forecasting or predictions. Instead, he guided the audience towards a way of thinking, which I feel is quite difficult to hone in an age where there is constant media attention on just about everything. Freddy did have one slide showing the federal funds rate curve, from today out to around late 2021 (if I recall correctly). While the slide was used to illustrate a different point, it did strike me that we have nary a clue if the federal funds rate in 2021 was really going to be anywhere close to projection A or B or C or D. Heck, as at 9 January 2019, we hardly know how many rate hikes there are going to be in 2019 itself - the last we heard was probably two hikes, and then now we hear that there may be scope for a pause (or not?) Even in late 2018, there was uncertainty over whether there would/wouldn't be a final hike for the year. Come 2021, will it still be Jerome Powell as Fed Chair, Donald Trump as US President? Okay, we can be sure of one thing: President Xi in China, but other than that, really everything is anyone's guess, and everyone can guess can anything.
So it's much more useful to spend one's finite mental energies developing a way of thinking, than developing fine-grained predictions. When I picture that federal funds rate curve, the only part of the curve that really matters to me is the next 12 months or so. Beginning from the second half of this subset (i.e. around 6 months out), the line widens out into a triangular-shaped area, representing a cone of possibilities. The future is likely to lie somewhere within this cone, but as we go further (two or three years from now), that cone funnels out wider and wider, covering an increasingly larger vertical span of the entire graph, such that by the end of three years, the cone is so wide that it's practically useless for any kind of point-precision projections (which is precisely the point - oh, some word play there), but it's intuitively useful to illustrate the instructive uncertainty surrounding any kind of longer time horizon projection.
And I'll leave you with these thoughts for now, cheers and out!
Tuesday 1 January 2019
Right to the end
You know how they say, the game ain't over till the fat lady sings?
The previous post on 20 December 2018 could be a good example of that.
Portfolio sank into the red (!) almost right after the post, and was almost 6% down for the year, until a brief recovery in the last moments - literally between Christmas and New Year's Eve, pushed it back up into the green.
Whew!
The previous post on 20 December 2018 could be a good example of that.
Portfolio sank into the red (!) almost right after the post, and was almost 6% down for the year, until a brief recovery in the last moments - literally between Christmas and New Year's Eve, pushed it back up into the green.
Whew!
Subscribe to:
Posts (Atom)