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Posts Tagged ‘STI’

Annualised return of 8.4% using CPF*

In ETFs, Financial competency, Financial planning on 01/04/2014 at 4:34 am

(*Terms and conditions apply)

Only problem is that most of it is via capital appreciation i.e. must sell to get the income.

Straits Times Index EFTs getting an annualised 8.4% over the past 10 years.

While our CPF ordinary account is getting a miserly 2.5% that is getting beat by inflation.

Although we can invest amounts above $20,000 in the CPF ordinary account into approved stocks and unit trust, this rule puts a damper on everyone’s CPF accounts, especially those who are starting to work, or those whose pay is low and those who are not investment inclined.

More important is the fact that just the average dividends given by the STI ETF alone will have beat the 2.5% given by the CPF.

The reply by our government that the interest rate is low because our currency is strong is pure hogwash. If you are using the CPF funds to invest all over the world and boasting that you are getting investment returns that is on par or beat that of Warren Buffett’s Berkshire Hathaway, that explanation is laughable.

So why not just put all the CPF funds into STI ETFs, get dividends higher than 2.5%, have a more than even chance of getting capital returns with dividend as high as the 8.4% achieve over the last 10 years?

This is one example of the nanny state trying to be too clever.

http://www.financialfreedomsg.com/2014/03/why-dont-we-get-84-on-our-cpf.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+FinancialFreedomSg+%28Financial+Freedom+SG%29&utm_content=FaceBook

 

STI ETFs — Are there values there?

In ETFs on 06/04/2010 at 5:30 am

The Straits Times Index (STI) is traditionally taken as the barometer of the S’pore stock market and the two ETFs that track it are the most liquid of the ETFs.

But should the STI and the two ETFs be as popular as they should be?

The reason is the presence of the Jardine Matheson, Jardine Strategic and Hongkong Land in the STI, which do not reflect the S’pore economy although apologists point to the operations of Cycle & Carriage Cold Storage, Guardian and Giant embedded within JM. While not peanuts, they are tiny in the Jardines scheme of things.  And, to boot,  they are illiquid and tightly held via cross holdings.

In theory, this means that the STI can be manipulated by judicious buying or selling of these counters. I stress “in theory” because there is no evidence that the STI has been manipulated by the trading  of these three counters.

Sometime back, BT wrote,”The STI’s guardians last week defended Jardine’s inclusion using reasoning that went something like this: ‘we have a set of criteria for index inclusion that Jardine meets, so they’re included’.”

BT went on to to say, “Conveniently omitted is what those criteria are; more interesting is the question of why it is that Jardine Matheson, Jardine Strategic and Hongkong Land, which are in the STI, are not in the more widely-followed MSCI Singapore Free Index*?”. Add to that the FT S’pore Index.

*Widely followed by the pros but not the retail punters. The ETF based on this is illiquid, as it is expensive in dollar terms.

The Perils of Indexation (Revised and Updated)

In Investments on 01/01/2010 at 5:36 am

(Been thinking more about this since I blogged on this topic a few weeks ago. This is an expanded and revised version.)

This writer agrees with Warren Buffett that buying low-cost index funds  is the best way for most people to invest in equities.  http://www.fisca.sg/financial_education?mode=PostView&bmi=189571

But he is not blind to the problems with index investing.

Even over 10 years, things can go wrong

– The return of the Dow to 10,000 (10428 on NY’s eve) serves as a reminder that US stocks have gone virtually nowhere, on balance, for more than a decade. It was in March 1999 that the Dow first climbed above 10,000, before reaching a high of 14,164 two years ago and falling to a low of 6,547 in March 2009.

– In 10 years the FTSE is only 25% lower. A lot better than the Dow but it too has been very volatile.

And longer term : “For those seeking solace in the conventional wisdom that stocks rise in the long run, consider this: 20 years after Japan’s stock market peaked, share prices are still less than 25 percent of their top values, ” from NYT article in March 2009.

All the above means is that buying index funds is fine if you are a young person with an investment horizon of 30-40 years, and a plan to regularly rebalance your portfolio, so as to take $ (or add $) to yr equity index funds. (I hope to blog something on rebalancing in early 2010). In the meantime, an example of rebalancing http://www.fisca.sg/product_reviews?mode=PostView&bmi=210476

But not if you are a retiree or someone 60 going on 70, when your investment horizons are shorter (you may need to draw on yr capital). Especially if you have not invested in shares when younger: the volatility may weaken yr heart or demoralise you.

“It’s sadly ironic that the boom in tracker [index] funds at the end of the 1990s came at the most inappropriate moment possible,” says a BBC writer.

But the article implicitly points out that the alternative could have been a lot more worse. Read about the stocks that lost value and have little chance to recover.

At least an index fund can bounce back.  Look at STI: STI started 2000 at around 2000. Went to a high of just below 4000 and on 31 Dec was at 2897. Just in March 2009, it was at 1455.

The moral of this piece: index but rebalance periodically. As I said, I will blog on rebalancing soon.

Investment Strategy for 2010?

In Economy, Investments on 31/12/2009 at 10:59 am

Look for strong balance sheets and dividends that will compensate if brokers’ optimism turn to be wrong. If past form is any guide, the brokers will get it wrong again. If my fortune teller’s track record is as bad, he would have starved to death for lack of clients.

Remember in late 2008, they were pessimistic for 2009 (and they were nearly right: remember March 2009?). Now the brokers are bullish for 2010, predicting STI will break 3000. As this is only 3% away, this should be a no-brainer. But what then? I’ve not seen a negative outlok for the whole of 2010.

STI tracks the US market closely. The 10-year price-to-earnings ratio of the S.& P. 500, a measure of how expensive stocks are relative to profits, was more than 20.3 in late December, up from 13.3 in March. The average for the last 130 years is 16.4, according to calculations by Robert J. Shiller, the Yale economist. So there are reasons for being cautious again.

In mid-2009, the FT carried an intervieww with a strategist from CLSA  who said we are in the midst of a bear market rally. Nothing new here. But unlike other pundits, he said this rally could run for another two years before collapsing. He cited what happened after the dotcom bubble bust in 2000/ 2001.

He said, with hindsight, it was clear that the recovery from 2003 to 2007 was a bear market rally.

Bottom line: A bull run or bear market rally can only be predicted in hindsight. So a little caution is again called for.

As this NYT blogger wrote:

“Travel back in time to the dark days of last March, when the Dow was flirting with 6,500 and pundits were predicting the end of capitalism as we know it. As a result, stocks were dirt cheap — as they always are in a panic. Should you double up with your last cash reserves or slowly feed in more limited amounts of cash?

‘The conservative approach turned out to be wrong: although you did just fine, you could have made a bundle by going all in. But suppose the economy, and the markets with it, had indeed fallen off a cliff. Those who went all in would have been wiped out, while those who kept some dry powder would still at least be paying the bills. Which just might be how it turns out the next time.” Italics are mine.

Full posting

Whither Wall Street, STI Follows

In Economy, Investments on 19/12/2009 at 6:10 am

Poll of Wall Streeters.

Let’s hope their bullishness is correct though if we go by their views in Dec 2008 and 2009, and March  2009 …

Are they just extrapolating current trends?

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