2019 Interactive Brokers Portfolio Performance

Usually by this time people will be publishing their portfolio returns in the forums, but this year seems to be quieter. 

I guess many investors are quiet because they failed to beat MSCI World or equivalent World index  - including myself (the graph above shows my IBKR performance in comparison to Vanguard Total World Stock Index - because IBKR doesn't have an MSCI World comparison). 

Because I am overweight UK, someone even asked me how much money I lost due to Brexit. So perhaps I should count myself lucky that I didn't lose money this year. 

My interactive brokers graph shows a sharp rise in December due to the UK election result that helped narrow the gap but it was not enough

My 2020 resolution will be to buy more ETF and less individual stocks in order to reduce volatility

Year-end Parking of some spare cash

SCB Fixed Deposit
As I have been adding to my war chest on and off through the course of this year, I found myself with more cash on hand than desirable. When I visited SCB at the I found out that their 9 month promotional FD rate had gone up from 1.85% at the start of Dec to 1.88%. Since I had the cash, I opened a $25k 9mth 1.88% FD with SCB. The term is short enough and more of a wait and see, earn a like $100+ extra interest in 9 months over my savings account.

As I have mentioned before, the promo is not found on the SCB website but the bank RM will be able to apprise you of the latest promo rate. It also stands to reason that day to day, rates may be changing faster than the website can be changed.

Refund to CPF
I also decided to try out the CPF website feature which allows you to refund money to the CPF that you had borrowed for housing. Previously you had to mail in a cheque I believe. But with Paynow integration of the CPF website, you can do an instant transfer and the refund will appear immediately on your online statement. I just refunded $5k to CPF just to see how it works. You have 2 choices Paynow or ENets. I actually tried both. Paynow is instant, by scanning a QR code, while ENets actually logs you into your banks i-banking site to make a payment but payment is only next working day. 

Investing your CPF-OA. Unit Trust or Singapore shares?

When it comes to CPF you are limited to investing in local share/STI ETF  and the only way to get foreign exposure is through unit trusts

I use my CPF to buy STI ETF and unit trusts. So far, it seems that my unit trusts have outperformed STI ETF even though they have higher management fee. I decided to diversify into unit trusts instead of spending all my CPF on Singapore shares. 

This is of course not a recommendation to only buy unit trusts, the point is that diversification is important. Simply going for the option with the lowest management cost (i.e. STI ETF) would have led to underperformance.


I guess sometimes you have to pay money to make money....


10-year annualised return

• STI ETF 4.59%
• First State Bridge unit trust: 6.61% (this is a fund containing 50% bonds and thus less volatile, yet it can beat STI ETF which is 100% equity)
• First State Regional China: 8.85%

Roboadvisors for CPF?

There is some discussion in the forums of a 'roboadvisor' Endowus that you can invest in using CPFIS. Basically, for CPFIS, it has managed to negotiate with some CPF approve unit trust managers for a rebate of about 0.5% to the management fee. On the other hand, they charge a 0.4% wrap fee. So all-in, I guess you save about 0.1% in expenses by using Endowus. Of course, you have no control over which CPF unit trusts they invest in which may be a good or bad thing, depending on your perspective.

0.1% cheaper expense ratio is not enough to make me want to switch, especially since I pick my unit trusts based on my assessment of the fund manager. But I could see myself recommending Endowus to a friend/relative who is not financially savvy and would prefer 'autopilot' investing. My current recommendation would have been LionGlobal All Seasons fund for autopilot investing, but the small fund size means the fund is at risk of closing. That consideration also applies to any startup Roboadvisor - if they do not grow their AUM, they may not become financially viable, and investors may pull out.

A commitment to lower costs is promising and I hope that it spurs FSMOne/ Poems to negotiate with fund managers for similar rebates.

Dividends: December 2019

Edit 2 Jan 2020 - AHT merger with ART - there was a nearly $2k capital refund at the last day of the year. Then FHT paid their dividends on 28 Dec (SCB slow?), so there was a 2.6k upward revision

Note: Vanguard/iShares dividends recorded in Jan/Apr/Jul/Oct. (Last year Vanguard paid in Jan, this year they are paying in Dec. For consistency I'll keep the months the same year on year)

I managed to double the dividends I collected in 3 years (i.e. my 2019 dividends is more than double my 2016 dividends) The above sum does not include CPF interest. I thought about including it but in the end I decided to exclude it from the graphs in order to maintain consistency with previous years. However, once it is paid out in January, I'll add it to the final figure of dividends collected for 2019.

2019 Total Dividends + CPF interest= $117k

UK Elections - Conservatives Win

UK Elections - Conservatives Win
Stocks rally

• Relief that its finally over.
• Belief that there will be a deal rather than no-deal. 
• Threat of nationalisation removed, National Grid, SSE, BT, Royal Mail rally.

Nice 1 day gain in my interactive brokers account. Probably one of my largest 1-day gains since the financial crisis.

Lloyds is probably one of the biggest beneficiaries, adding about +8% to its share price on the news. In my previous post I talked about accumulating Lloyds. The position is a decent size but because it is a pure UK play, I hesitated to add too much, preferring to diversify with SAN and ING

https://buyaftercrash.blogspot.com/2019/10/brexit-deal-announced-with-eu.html

Synthetic ETF - 0% withholding tax on US dividends.

"ETFs that synthetically replicate major US equity benchmarks have clear structural advantages over physical ETF models, which has delivered outperformance and helps explain the big difference in demand.

Foreign investors in US stocks are generally subject to a withholding tax on dividends of up to 30%, although many can reduce this to 15% through the application of tax treaties. However, under US tax law, namely the HIRE Act 871m, swaps written on indices with deep and liquid futures markets, e.g. the S&P 500, are not required to pay withholding taxes on dividends.

This means that while a European-domiciled physically replicating S&P 500 ETF will generally be able to achieve a maximum of 85% of the dividend yield, a synthetic fund can theoretically achieve up to 100% of the full gross dividend amount. With the S&P 500 yielding around 1.9% (2% on average over the past decade), this exemption means synthetic funds can potentially achieve up to 30 basis points of additional performance each year."

https://www.etfstrategy.com/why-investors-are-flocking-to-synthetic-sp-500-etfs-10339/

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The linked article indicates that investors are willing to take on the counterparty risk of synthetic ETFs in exchange for the advantage of 0% withholding taxes on dividends.

Personally I am agnostic since I am well diversified. If there is sufficient liquidity for the LSE-listed synthetic ETF that guarantees me a few basis points extra every year due to 0% withholding it might be worth a small position. However, avoid the near-zero trading volume SGX ones (which also charge dividend handling fee). 

Dividends November 2019

November is a quiet month. I got a one-off boost due to the Prudential demerger. PUK ADR holders also received M&G shares, but since there is no US listing, the ADR manager sold the M&G shares and ADR holders got the sales proceeds.

I had to correct my Oct 2019 dividends as I missed out the cash value of the OCBC Scrip dividends which were paid in Oct 2019.

Once I add the CPF interest for 2019, I should be crossing the passive income 100k mark for the first time.

Short term Fixed Deposits - you might get a better rate from RM.

SCB RM informed me that they could offer 9month S$ FD at 1.85%. That's 0.2% higher than the website rate. Actually its not surprising since the financial markets are shifting from day to day whereas the website rate may be several days, if not weeks old. Yet you don't want to be updating the website every day as that might confuse customers (and also the web team and the loans/investment team might be different people and there is also lag in doing these updates).

Previously, I was also offered an US$ FD by SCB RM that was not advertised on the website.

When you look at China Taiping, Singlife, and NTUC offering 3 year endowment plans below 2.5% (and miserable SSB rates), 1.85% for 9 months actually looks pretty good. I asked the RM whether SCB on maturity will  rollover the FD into some default (i.e. lousy) interest rate if customers forget to give an instruction to discontinue, the RM stated that the money will go back to the main account. (You can actually check this in internet banking - my current US$ FD states the current instruction on maturity - i.e. it will go back to my High Account). So a 9month FD with no catches, definitely worth putting some excess money over it (after hitting the 'cap' of $70k for the OCBC 360 account).

Interest rates (and perceptions on its direction) of course vary from day to day, so its not guaranteed that such an offer is available everyday. I also guess that the usual term and condition of "fresh funds" applies, but not an issue as my plan is to transfer excess cash from OCBC 360.