CPF: A good deal?

[earthfriendly]

All that into HSBC, what about diversification? I am not sure if Buffett likes the idea of Temasek swoopiing up a large chunk of his company ? He is there to serve the individual investors, not some institutions or a country called Singapore. Anyway it is a big chunk of money and I remember it making news brief on CNBC with it purchased (or soldl, can't remember which one) Bank of America stocks.

Not sure what national pride you are talking about. They had hired an American to oversea the investment and it made news. The guy later quit.

[JR8]

You asked:
-----------
'Please name one investment in the world generating this rate of return (post tax) and at this minimal risk level. When it comes to investment, the simpler it is, the better. Nothing exotic please'
-----------

HSBC was representative, and answered your question. However the strategy is to have c20 very low-risk diverse, and stable holdings. Mine yield a current 5.4% (currently up a touch from the previously mentioned 5.2% as a result of a rather discontented week on the markets).
You don't float a stock on the market and then get picky about who can and who can't buy it.
If Temasek wanted to start hoovering up BRK, there isn't much they could do, at least initially.
Buffet is not there to serve 'individual investors', he is there to serve the shareholders, 2/3rds of whom are institutional.*


If I was Chip Goodyear I'd have quit too. But in fact he never even commenced his role.
--------------
At that point, Temasek appeared to bow to public pressure by announcing that Ho Ching would step down this August and be replaced by Goodyear, who took over from Brian Gilbertson at BHP in 2003. He was born in the US and is a former investment banker.

But with just a few months to go until Goodyear was due to take the helm, it had become increasingly clear that Ho Ching had no plans to leave her post, and that her stance was supported by government.

The Singaporean establishment had never been happy that Temasek would be headed by an outsider, according to analysts.
http://www.theguardian.com/business/200 ... esignation
--------------

I'm losing touch with what any outstanding queries you have on this topic might be...



*http://finance.yahoo.com/q/mh?s=BRK-A+Major+Holders

[earthfriendly]

Transacted by institutions and ultimately owned by investors like you and me. I buy shares in Vanguard Fund. Vanguard is the institution that offers the fund for individual investors like me to purchase. That is what I meant by "individual investors". Of course there is no rule to prevent say a company like Apple to invest with them.

Anyway, I understand there are different investment philosophies. Some go after high yield. And for a fiduciary like the CPF, they need to balance the demand for high yield and account preservation. Nobody can consistently predict the market. Who knew the broad market would climb that high in 2013, approximately 25%, and without much of a breather. Straight up. I didn't or I would have put a lump sum investment at the very beginning of the year instead of dividing it out. I personally prefer a conservative rate of return for core investment, broadly diversified. Even Berkshire is not diversified enough for me. And if there is excess funds, I can use it as a "play" money in more high risk activities. Markets go thru fluctuations and not everybody can control their emotions, especially when it comes to $$$$$$$$$. How many will sell off when market drops 50 %??

I agree with this guy's philosophy. BTW, Vanguard's managers do not get excessive pay, more profit for shareholders, like myself. I choose to invest with them for they have a good understanding of who they are supposed to serve. Fiduciary duty. For these managers, they are willing to accept a lower industry pay for they are sustained by this fiduciary duty. Not all managers have this line of thinking. Some need to be sustained by other ways e.g. sky-high renumeration. In our lives, we all ask ourselves, what is it that sustains me?

"Mr. Auwaerter: I was once quoted in a financial magazine as saying, "I run the shareholders' money like it's my own, because it is." I think that's a good way to put it. Not only is my own money here, but also my parents' money, my brothers' and sisters' money, and my neighbors' money. And they all know where I live.

Fortunately, everybody here at Vanguard operates with that mindset. When we're trading, we never forget it's the shareholders' money—and that includes us. To me, that's the best mindset for a fiduciary to have. "

[JR8]

I buy shares in Vanguard Fund.

And what are their fees?

[earthfriendly]

Hello JR8, for your benefit, I will just point out what I edited on my above post below. So you don't have to wade thru whole post to find the changes. I am not nitpicking or anything. Just decompressing after a hard days work. I was working all day today. Please proceed directly to their dinosaur (they don't invest in technology ) website vanguard.com. To find out the expense ratio. Sorry to all posters, I usually make tons of changes to my posts to clean up my writing style and thoughts. I am not a very good writer, does not come naturally for me.


"I choose to invest with them for they have a good understanding of who they are supposed to serve. Fiduciary duty. For these managers, they are willing to accept a lower industry pay for they are sustained by this fiduciary duty. Not all managers have this line of thinking. Some need to be sustained by other ways e.g. sky-high renumeration. In our lives, we all ask ourselves, what is it that sustains me? "

[earthfriendly]

Nobody can consistently predict the market, especially for this kind of single (too narrow) bet.

http://www.fool.com/investing/general/2 ... r-mon.aspx


"Buffett didn't think energy prices would plummet as they did, and as a result, while his position in ConocoPhillips cost $7 billion, it was worth just $4.3 billion. Buffett admitted, "the terrible timing of my purchase has cost Berkshire several billion dollars." "

[earthfriendly]

http://www.bloomberg.com/news/2014-06-0 ... cmpid=yhoo

[earthfriendly]

Vanguard was founded by John Bogle. Can't vouch for the later leadership, although they more or less echoed his maxim. He wanted to give ordinary investors a fair shake by offering them a low cost way to buy into diversified funds. The company is quite happy that its entry into UK had resulted in competitors lowering their cost. Mission accomplished!

[JR8]

JR8 previously wrote:
'I'm losing touch with what any outstanding queries you have on this topic might be... '

[earthfriendly]

It is a slow day here, at the burb .

[earthfriendly]

http://www.bloomberg.com/news/2014-06-0 ... cmpid=yhoo


"In a series of events in 60 cities around the world last month, the CFA Institute urged members to start “putting investors first.”

[Beeroclock]

[quote="JR8] I’ve discussed before how I decided upon my own strategy here http://forum.singaporeexpats.com/ftopic ... sc-15.html I don’t want to go on about it lest I be suspected of having some form of vested interest in it, which I certainly don’t. It’s just a large group of people like you and me who realise it comes down to DIYing a pension oneself, and who don’t wish to pay other’s fees, any fees. I’m sure there are other such websites in existence if you looked, but this one has done me well over the years (20?) so I’ve never had reason to look.

Thanks JR8 for the reminder to this link, I will seriously look into this. I'm very much anti-fee and agree completely this 1-2% management fee which is easily ignored by many, will make a huge difference over the long term.[/quote][/quote]

I'm finally getting around to doing this.... Exiting some long held managed funds with 1+% management fees, and shifting it into direct shares and vanguard index etf's, so am taking a JR8/EF hybrid approach here. Thanks both for the idea/inspiration.

For the direct shares I'm going to pick 10-15 blue chips, diversifying as much as possible and with good dividend yields, and stick these in the bottom drawer for long term, as per JR8 method. I consider these a core equities allocation.

For the index ETF, vanguard does indeed seem very low management cost at 0.15% for Australia and lower for US. This seems decent value for the diversification and convenience. Also my idea is these will be more flexible holdings, for when I want to swing between deposits and equities. Without getting into a debate on gambling/speculation, I do want to try and adjust my allocation to equities when I feel the cycle is near the boom and bust ends. I figure it's easier to buy/sell the index at these times rather than mess around with individual holdings.... Let's see how it goes !

[JR8]

Hey ho Beery! Smile

I think that’s what is so pernicious about most funds, i.e that if you’re earning say 4-5%, but handing over 1+% of that in fees, it’s a hell of a slab of your total return. Then take say 4-5%, deduct inflation, THEN take off 1+% in fees, to get your ‘real’ return and it doesn’t make good reading at all! Take off tax next... and one is approaching the why-even-bother stage, ho hum....

Sector diversification is good, as the market is usually giving it hard doggy-style (the technical term for it) to one particular sector on any given day. While another sector of an opposing flavour is being anointed with golden halos. So about 12 sectors is a basic diversification, 15 better, and about 20 is ideal for most. I think I started at about 15, went to 22, needed some short-term cash so dipped back to 16, and right this week am in the process of taking it back up to 22 (the mini-rout this week is a beauty of a time to be buying in). So theoretically I don't need to consider other shares, i.e. if I want to put money in, the spreadsheets will run their macros and tell me which of the existing 22 to top-up, and so on.

As suggested read the previously mentioned FAQ @ TMF. The tools are there to guide you to which shares should be forming your core holdings. That all done and you’re set. Oh and make sure you have a brokerage account that has competitive trading fees as well, all these little things add up and compound over time like you wouldn’t imagine.

Index trackers can be attractive, and require almost no effort or homework to invest in. The downside is you’re buying everything equally, the good stocks and the not so good. But assuming this is a two-pronged longer term approach see how it goes. I’d be very interested to see a net-net comparison (after fees etc) over say 1-3-5 years. Best of luck with it!

[Beeroclock]

Hey ho Beery! Smile

I think that’s what is so pernicious about most funds, i.e that if you’re earning say 4-5%, but handing over 1+% of that in fees, it’s a hell of a slab of your total return. Then take say 4-5%, deduct inflation, THEN take off 1+% in fees, to get your ‘real’ return and it doesn’t make good reading at all! Take off tax next... and one is approaching the why-even-bother stage, ho hum....

Sector diversification is good, as the market is usually giving it hard doggy-style (the technical term for it) to one particular sector on any given day. While another sector of an opposing flavour is being anointed with golden halos. So about 12 sectors is a basic diversification, 15 better, and about 20 is ideal for most. I think I started at about 15, went to 22, needed some short-term cash so dipped back to 16, and right this week am in the process of taking it back up to 22 (the mini-rout this week is a beauty of a time to be buying in). So theoretically I don't need to consider other shares, i.e. if I want to put money in, the spreadsheets will run their macros and tell me which of the existing 22 to top-up, and so on.

As suggested read the previously mentioned FAQ @ TMF. The tools are there to guide you to which shares should be forming your core holdings. That all done and you’re set. Oh and make sure you have a brokerage account that has competitive trading fees as well, all these little things add up and compound over time like you wouldn’t imagine.

Index trackers can be attractive, and require almost no effort or homework to invest in. The downside is you’re buying everything equally, the good stocks and the not so good. But assuming this is a two-pronged longer term approach see how it goes. I’d be very interested to see a net-net comparison (after fees etc) over say 1-3-5 years. Best of luck with it!

Thanks JR8, yes I've been right through the TMF link you posted, which helped me plan what I'm doing.

I'm trying for sector diversification, and also a few different companies in the big sectors. e.g. In australia the 4 main banks make approx. 35% of the ASX index. I spent a while thinking should I try to pick one/two preferred banks, or just invest in all four and skew the weightings towards my view of relative strength. In the end I'm leaning towards the latter. Reason being nowadays even the big blue chips can get whacked, e.g. BP gulf of mexico spill, BNP $9 billion fine. And also I couldn't really find a clear ranking of these banks, they all have their pros and cons. So the more important decision is at the sector level, what percentage to put in banks, do I really want to have 35% as per the index, or would 20% be a better level.....

One issue in Australia the economy is small and limits your ability to invest in certain sectors, e.g. IT. Need to take some global shares directly or via an index fund as I will do, to get some exposure to the Google, Apple, etc

Brokerage, yes indeed, fortunately some of the big online brokers in Australia have a package at the moment with 20 free trades in the first few months. It's ideal for me to basically sell my managed funds and buy my initial portfolio of direct plus index ETF's without paying any brokerage.

[JR8]

... as I'm wondering around my various spreadsheets this a.m. I came upon this old note, re selecting a stock...

'Take top three highest yielding share in each sector, and sift via these following criteria:
prospective yield >= 4% [mine currently are on 3.7-6.5%, net 5.4%, these things naturally ebb and flow, but you want 4% as an 'entry criteria']
prospective P/E <10>= £500m
dividend cover >= 1.2+'

That's the core of it. You can add 'Rising dividends for at least 3+ years', net 'Broker outlook' better than neutral, and so on, but already the above/latter are going to trim an index right down!

Sift with those criteria and the stocks pretty much pick themselves...


p.s. Oh and I'd add, consider carefully candidates that appear just too good to be true. Look into 'Directors Deals', and the past 6 months headlines. I.e. if something reputable is promising anything over say 6% I'd really want to be persuaded why.

... all the above applies directly to the UK market. But the general principles will carry over elsewhere, just you'd need to define appropriate local 'hurdle criteria'...