Wednesday, August 28, 2013

Should I Care If The Straits Times Index Goes Under 3,000?

What a difference two weeks can make, you may ask.

 Two weeks ago, I bought 1 lot of Nikko AM STI ETF at $3.30. Since then STI ETF has been in a downward spiral. What is the price today? $3.09!

Okay, this may seem counter-intuitive to you, but does it matter to me now that it has dropped $0.21 (Omg! A loss!) in two weeks? Not at all! In fact, I hope that it will FALL even more.

Let's imagine I'm going shopping for something basic like groceries at Cold Storage supermarket. Assume I'm a Coca-Cola addict and drink it on a daily basis. Okay, I know it is not healthy but that's not the point here.

Do I like it when the price of my favourite Coca-Cola goes up? Nope. I want it to fall! Since I'm a Coca-Cola addict, I'm going to buy Coca-Cola regardless of the price increases (or decreases). Obviously, I would want the price to drop so that I will pay less for my daily fix of Coca-Cola. Makes sense?

Now, let's apply the same logic to STI ETF. Assume I'm a very disciplined investor in STI ETF and make a purchase every month, regardless of the price. Logically, I would want the price to be as low as possible when I'm stocking up on STI ETF so that I can buy it at a "discount".

The price only matters to me when I'm selling STI ETF - simple as that.Once you get used to this concept, you will find that price fluctuations is nothing more than mere distractions.

Meanwhile, I can look forward to Nikko AM STI ETF bi-annual dividends in October. Assuming I have 1,200 units by the expiry date, I can potentially pocket S$42 based on last year's dividend of $0.035.

Cheers!

Tuesday, August 20, 2013

SGX Seeks to Reduce Standard Board Lot Size to 100 Units

Source : Channel NewsAsia (19-Aug-2013)

Highlights

  • SGX said it hopes to first reduce the board lot size to 100, and eventually to one unit.
  • SGX aims to introduce the board lot size of 100 by the first quarter of next year (2014), and it could be at least two years (2015) before the lot size will be reduced to one unit.
  • The proposed standard board lot size of 100 units will apply to ordinary shares, real estate investment trusts, business trusts, company warrants, structured warrants, extended settlement contracts and shares on GlobalQuote.
  • Board lot sizes for exchange traded funds - barring the SPDR STI ETF and ABF SG Bond Fund - American Deposit Receipts and fixed income instruments, including Singapore Government Securities and preference shares, will remain unchanged. 

So, what does this mean?

For small-time index investors like myself, rejoice! Singapore ETFs, specifically SPDR STI ETF (ES3) and ABF SG Bond Fund, are targeted to have board lot size reduced to 100. A common problem faced by small-time investors is that a single lot of SPDR STI ETF cost in excess of $3,000+ and ABF SG Bond Fund $1,000+. A smaller board lot size will definitely make index investing more accessible for the average guy on the street.

Note
Nikko AM STI ETF (G3B) board lot size is already at 100 currently.

Saturday, August 17, 2013

Nikko AM - Investing in MyHome

Part 5 of Nikko AM advertistment on Today newspaper on Nikko AM Funds.

As mentioned in an earlier post, you can rely on POSB - Regular Savings Plan to buy into the below funds if you wish to do so.






















Thursday, August 15, 2013

Nikko AM - Keeping Track of the STI

Part 4 of Nikko AM advertistment on Today newspaper on Dollar Cost Averaging (DCA).

Question

Answer
Dollar cost averaging (DCA) is an investment strategy that involves investing of equal monetary amounts regularly and periodically over specific time periods in a particular investment or portfolio. By doing so, more shares are purchased when prices are low and fewer shares are purchased when prices are high. The point of this is to lower the total average cost per share of the investment, giving the investor a lower overall cost for the shares purchased over time.




Wednesday, August 14, 2013

Nikko AM - Bonding With ETFs

Part 3 of Nikko AM advertistment on Today newspaper - ABF Singapore Bond Index Fund (A35).

Taken from Nikko AM -
The investment objective of the Fund is to provide investors with investment returns that correspond closely to the total return of the iBoxx ABF Singapore Bond Index before fees and expenses.The iBoxx ABF Singapore Bond Index is an indicator of investment returns of S$ denominated debt obligations issued or guaranteed by the Singapore government (or any other Asian government), a Singapore government (or any other Asian government) agency, quasi-Singapore government (or any other Asian government) entity, or supranational financial institutions.

Top Portfolio Holdings (as of 30-Jun-2013)
Cash
Housing & Development Brd
Land Transport Authority
PSA Corporation Ltd
Singapore Government
Sp PowerAssets Ltd
Temasek Financial I Ltd

Do take the article with a pinch of salt. Sure, it stated factually how well it did in "difficult market conditions". I guessed they have forgotten to state how well it did in comparison during good market conditions?

Also, consider the possibility that during difficult market conditions, we instead BUY into equities at depressed prices, how much would we have gained when the market rebounded?

Time is our best friend.

Personally, I'm not recommending that you buy, or do not buy in it. It is merely a matter of choice. With a small capital, I do not touch ABF ETF at all since 1 lot (1,000 shares) costs $1160 at current prices. I prefer to keep cash instead for the "bond" portion of my portfolio.

At the moment, I'm roughly keeping my portfolio at a 70% (STI ETF) vs 30% (Cash) ratio, which I intend to re-balance annually.