Advice required to invest with $100k cash?

[kimchi]

Hi guys,

Need your guidance and advices. I have $100k cash and $1000 per month for investing in stocks and shares for the next 5 years period. I feel now is the most appropriate time to do some investment. What stocks should I buy? How should my portfolio be?

Currently monitoring U.S. market closely, looking at putting some money on XOM (usd$57.07) and some gold ETF to leverage on any currency fluctuation. Also looking at citibank (usd$3.76). What do u guys think?

For gold ETF, which one should I go for?

What are the charges and taxes I should look out for when investing on U.S. Stocks in Singapore? Which brokerage firm offer the best deal for US market trading?

Advices needed. Thanks!

[Rommie2k6]

Just to set a few things straight:
- There is really no appropriate time to do investment. You invest whenever you have the money. I would like to clarify that this applies on the assumption that you are a relatively young person and not a retiree.
- Portfolio depends on your risk appetite, age, investment horizon. Nobody can give you a good reply unless you can provide some of these details.

To correct some conceptual errors in your post
- Don't invest in individual stocks, unless your $100k is your play money. Google the term "diversification" to understand more.
- Gold is kind of a wild card. I have read compelling arguments for and against gold as an investment. Some say that it acts as an alternative asset class, other say that (in the context of today), gold is a bubble waiting to burst. But in any case, limit your gold exposure to no more than 10% of the portfolio.

As for your other questions
- US stocks are subjected to 30% tax on dividends and no capital gains tax for foreigners.
- There is an estate tax of 50% on any sum over $55,000. What this means is that if you invest $100k and pass on tomorrow, the US govt will eat up: (100,000-55,000) x 50% = $22,500. Unless you are feeling charitable, I would strongly advice alternative markets like the UK.
- DBS Vickers in my opinion is the best local broker since they don't charge counter fees for US stocks.
- Saxo Capital in my opinion is the best locally available broker.

[kimchi]

Thank you Rommie2k6 for sharing with me your oppinions. Appreciate it.

Pardon my English level, I study no high. 'pass on tomorrow' does it mean death?

I am 38 this year and my risk appetite is medium to high as long as it's calculated risk, I am willing to give it a shot.

Reason for my investment in certain individual stocks is because I have been working in that industrial for some time and sort of gather or observe enough info from it's infrastucture investment to roughly forecast where the demand will be in about 5 yrs time. Coupled with the uncertainty of the US economy, Europe debts and our Smart govt's move to bring in the casino at this point of time, increasing our population, attracting talents to become citizens which I believe the ultimate aim is to draw investors Out from the develop countries to this small import/export hub call Singapore and promote the growth in emerging Asia countries during this 5-10yrs period rapidly. If demand in Asia increases, so will the supply to meet this demand that will come from more develop countries.  

I am trying now to 'design' this portfolio witH the investment period of 5 yrs to match this vision. After which I going to withdraw my investment and put it on properties and bonds. Which the govt is now implimenting the 'cooling' measures to control the property bubble but I predict the cooling measures will only take effect 4-5 yrs from now to be effective, whereby the buildings are ready and supply are more than demand. By then property prices will start drop and I will shift my funds there to park and wait for the next cycle to begin.

But because of my limited knowledge on stocks and shares, I do not know what should be the right stocks or shares to 
invest in except for companies (supplier) with the raw materials. 

You mention about investing in UK market, I find it very interesting as the euro currency is currently low.. Investing in UK might be a good idea. What stocks or funds do you suggest? Please share with me your picks and what make you choose them. 

Thank you for also pointing me to the right brokerage firms.

Cheers,
kimchi

[icy_cool]

Through out, you never mention about owning bonds in your overall investment portfolio?

Google the term "Efficient Frontier" to show why it is not advisable to hold 100% equity

[kimchi]

Bonds interests payout like very low now. How to invest? Or u mean is it better to add bonds to the portfolio to balance the investment?

[DPSK]

there is a saying that people usually invests with biaseness towards home companies. i think it is really true (at least for me) and appropriate especially if you are new into stocks. so forget about the US market when there are so many stocks available locally. furthermore you can feel the presence of local companies in here. so you can roughly know how these companies do

for a start, invest in singapore bluechip companies then slowly expand your portfolio to include mid cap then penny stocks. based on my experience with investing for the last 3 years, i prefer to deal with direct stocks as compared to unit trusts or ETF. stocks give you the flexibility to create your own portfolio and you feel great when your stocks return you >> 100%. of course on the hand, you may lose close to 100% of the stock value if you are unlucky. but if you can improve your stocks selection skills, in the long run you may select more winners than losers

As to bonds, personally i dont deal with them

[kimchi]

I think this is like chicken and egg. The reason why i choose to invest majority of my funds out of local market because i believe the US and Europe still controls the rest of the world economy. If the major players in states have a shaky platform, our local companies will never enjoy a steady journey so probably I will prefer my portfolio to be 70% in develop country and 30% on emerging countries. Slowly shifting my portfolio to 50%/50% eventually. What do u think? Please share your views on this.

[Rommie2k6]

Thank you Rommie2k6 for sharing with me your oppinions. Appreciate it.

Pardon my English level, I study no high. 'pass on tomorrow' does it mean death?

Yeah I meant "death". I'll stick to simpler terms from now on.

I am 38 this year and my risk appetite is medium to high as long as it's calculated risk, I am willing to give it a shot.

Reason for my investment in certain individual stocks is because I have been working in that industrial for some time and sort of gather or observe enough info from it's infrastucture investment to roughly forecast where the demand will be in about 5 yrs time. Coupled with the uncertainty of the US economy, Europe debts and our Smart govt's move to bring in the casino at this point of time, increasing our population, attracting talents to become citizens which I believe the ultimate aim is to draw investors Out from the develop countries to this small import/export hub call Singapore and promote the growth in emerging Asia countries during this 5-10yrs period rapidly. If demand in Asia increases, so will the supply to meet this demand that will come from more develop countries.  

I am trying now to 'design' this portfolio witH the investment period of 5 yrs to match this vision. After which I going to withdraw my investment and put it on properties and bonds. Which the govt is now implimenting the 'cooling' measures to control the property bubble but I predict the cooling measures will only take effect 4-5 yrs from now to be effective, whereby the buildings are ready and supply are more than demand. By then property prices will start drop and I will shift my funds there to park and wait for the next cycle to begin.

Firstly, if you intend to take out your investments within 5 years in a lump size, I think it is not advisable to invest in too much stocks. What you describe seems to be timing the market, and if you are correct and whatever sector or country you invest in has a bull run for the next 5 years, you'll probably double your returns. But have you asked yourself what if you are wrong and the value of your stocks drop by 50% after 5 years? Then what?

You also mentioned that you want to buy bonds eventually. So why not start now?

Also, I don't understand the property part. Are you waiting for property prices to crash so that you can buy some private property, rent it out and earn some income and hope that the price appreciate when you reach retirement age?

But because of my limited knowledge on stocks and shares, I do not know what should be the right stocks or shares to invest in except for companies (supplier) with the raw materials.

If you have no idea what stocks to buy then the best bet is to buy a well diversified index fund or ETF. In simpler terms, invest in the whole country or the whole world. 

You mention about investing in UK market, I find it very interesting as the euro currency is currently low.. Investing in UK might be a good idea. What stocks or funds do you suggest? Please share with me your picks and what make you choose them. 

Actually I meant investing in the ETF available on the London Stock Exchange. iShares ETF invest in basically anything you can think of (and is not necessarily limited to UK). You can check out the iShares MSCI Emerging Market ETF that invests primarily in developing markets. There is also the iShares MSCI World ETF that invests primarily in developed markets. For most investors, these 2 ETFs would be good enough.

[kimchi]

Thanks once again rommie2k6 for sharing, the ishare msci world ETF and emerging ETF is Definitely what I am looking for to invest.

[newbie_george]

hi Threadstarter,

the way u invest, what u invest, how u invest, and when u invest will depend on your strengths, weakness, what u know, what u dunno, and your personal style n preference.

My way of investing may or may not suit u.

For the most simplest idiotproof investing, u can focus on broad market ETFs.

i suggest u read up more here first.

[kimchi]

Yes I understand everyone needs and risk appetite are different. Just want to hear more views and selection of shares from each individual if given $100k capital for investment and from there I will do my own comparision and create my own portfolio.

[icy_cool]

Invest in ETF is a very good idea.

limit your exposure to emerging market as well.

I am sure there are some bond ETF out there as well.

[makoshark]

The benefits of diversification is overhyped.
Whatever diversification one had would had diluted your returns before 2007 and not helped you in the super crash in 2008 as all correlation when to almost 1.
What you can do in investing is to determine what you are best at, eg. IT guy = technology field, logistics guy = shipping and logistics companies, property guy = real estate, etc.
That your speciality and use it to your advantage, i.e., you will know what to look out for in those companies to determine whether they are going to do well or not.
This way you will be doing your own risk management and limit your downside risks.
I know there are people who feel that you should NOT invest in the companies you are working in but this isn't true.
If you know how your industry is doing, you have a advantage from "outsiders" who can only guess what is happening to the industry and companies.
If you think it is going to be bad, then sell all of your holdings and move into money market instruments or bonds.
If you think it is going to be good, then do the opposite.

Do note that what you are "best" in might not be what you are working as.
So you could be a property agent but with interest in biotech stuff so you would focus on both real estate and biotech stuff.
Do ignore the believe that you need to beat a specific benchmark as outperforming a benchmark by 5% when the benchmark is down 15% still means you are down 10% while underperforming a benchmark by 5% that is up 15% is fine.
The main goal should be increase in your portfolio value.
So when you can't find anything to buy, just move to money market funds as this would ensure you won't go negative.

Just my 1.5 cents.

[Rommie2k6]

The benefits of diversification is overhyped.
Whatever diversification one had would had diluted your returns before 2007 and not helped you in the super crash in 2008 as all correlation when to almost 1.

Actually commodities or more specifically gold went the other way... so I do not think you have a valid point. Short to intermediate term investment-grade bonds did not lose excessive value as well. And for the proper investor such market crash would not bother him because he has a proper portfolio plan suited for his risk profile.

What you can do in investing is to determine what you are best at, eg. IT guy = technology field, logistics guy = shipping and logistics companies, property guy = real estate, etc.
That your speciality and use it to your advantage, i.e., you will know what to look out for in those companies to determine whether they are going to do well or not.
This way you will be doing your own risk management and limit your downside risks.
I know there are people who feel that you should NOT invest in the companies you are working in but this isn't true.
If you know how your industry is doing, you have a advantage from "outsiders" who can only guess what is happening to the industry and companies.
If you think it is going to be bad, then sell all of your holdings and move into money market instruments or bonds.
If you think it is going to be good, then do the opposite.

This is done at the risk of concentrating all your monies into a narrow sector. One of the key enemies of the investor is the investor himself. Greed. Pride. Overconfidence. That's how people lose money in stocks. You may be inside the industry and think that you have an advantage versus outsiders, but ask yourself are you in any form capable of analyzing a company? Do you know what to look for in a company when making an investment choice? From your earlier post, I don't think you are extremely well versed in this. So unless you have inside-information, I don't think it's worth the risk. Insider trading is illegal btw...

Do note that what you are "best" in might not be what you are working as.
So you could be a property agent but with interest in biotech stuff so you would focus on both real estate and biotech stuff.
Do ignore the believe that you need to beat a specific benchmark as outperforming a benchmark by 5% when the benchmark is down 15% still means you are down 10% while underperforming a benchmark by 5% that is up 15% is fine.
The main goal should be increase in your portfolio value.
So when you can't find anything to buy, just move to money market funds as this would ensure you won't go negative.

Just my 1.5 cents.

No, the objective of any active investor or trader is to beat the benchmark (index). If you can't beat the index over the many years, then you are better of having invested in that index.

[kimchi]

Hi rommie2k6,

Is there a website whereby I can find informations on all the ETF and what companies are inside that ETF?

Just tested out my friend DBSvickers account, it has U.S. market but does not have access to UK market. Does that mean I have to open a separate UK account? Which brokerage do you recommend for UK trading?

regards,
Kimchi

[Rommie2k6]

Hi rommie2k6,

Is there a website whereby I can find informations on all the ETF and what companies are inside that ETF?

Just tested out my friend DBSvickers account, it has U.S. market but does not have access to UK market. Does that mean I have to open a separate UK account? Which brokerage do you recommend for UK trading?

regards,
Kimchi

Unfortunately Vickers is not good for UK market. They charge 50 GBP commission and you can only order through phone. Saxo offer a pretty good platform of 15 GBP commission (http://www.saxobank.com/en/pages/default.aspx) but they have higher than average account opening requirement ($20k?), which I juz realized shldn't bother you that much since you have $100k.

You can go to iShares UK website (http://uk.ishares.com/en/rc/) and download the factsheet, annual report, etc... Admittedly I never go check what are the hundreds of companies the ETF invest in, but I'm sure it has to be in some document somewhere.

[makoshark]

Kimchi,
Just some advice.
Don't always believe everything you read online.

In 2008, equities, corporate bonds, commodities (ALL) fell the only exception were government bonds.
Gold by end of 2008 was lower than Jan 08, investment grade bonds that didn't mature by Dec 2008 also fell.

I don't know how anyone can believe that it is more important to beat benchmarks than generating positive returns, I think a person who beat the Nasdaq index by 1% every year since 2000 would be happy as he will still be underwater.

Bottomline is to review what you read with facts and use some sense to filter out nonsensical postings from the massive amount of postings online.

[kimchi]

Thanks for All the advices and feedback guys. Really appreciate it.

[Rommie2k6]

Kimchi,
Just some advice.
Don't always believe everything you read online.

In 2008, equities, corporate bonds, commodities (ALL) fell the only exception were government bonds.
Gold by end of 2008 was lower than Jan 08, investment grade bonds that didn't mature by Dec 2008 also fell.

I don't know how anyone can believe that it is more important to beat benchmarks than generating positive returns, I think a person who beat the Nasdaq index by 1% every year since 2000 would be happy as he will still be underwater.

Bottomline is to review what you read with facts and use some sense to filter out nonsensical postings from the massive amount of postings online.

mako, we appreciate alternative opinions, but at least try not to misrepresent your stand.

You quoted the Nasdaq index... and how is this appropriate for the investor? Nasdaq is a tech index, why would a prudent investor have more than 10% exposure to a single country, single sector index that has such high risk? Moreover, Nasdaq bubble popped in 2000 and it has been only 10 years. Over an intermediate period like 10 years it is unlikely but not impossible that indexes return zero or even negative returns. However, the longer the investor holds and stays invested the lower the probability that he will get zero or negative returns. Research has shown that within any 20 year rolling period, such a possibility is near zero, and the studies even included the Great Depression era. It's not important to generate positive returns because a diversified portfolio of index funds will return positive eventually. The only cases where indexes are still underwater after 20+ years is like Japan, but even for that case it's a problem of insufficient diversification. If a Japanese investor had bought some foreign index, he would be out of the water by now.

And where did you get your data on recent correlation? Here's the price index data (dividends not reinvested) from Yahoo:
Blue VBMFX - US Total Bond Market (contains govt bonds and corp bonds)
Red VGTSX - Total International Stock Index
Green VTSMX - Total US Stock Index
Orange DJP - Commodity Futures (very oil/energy heavy)
Brown GLD - Gold

During the great recession we have seen correlation between US stock, International Stock and Commodity Futures that are overweighted in oil/energy. The total bond market was hardly affected. Ok... so there was a miniscule drop in Oct 2008 which was gone by Jan 2009. If you had invested on a quarterly basis, an investor would probably have not noticed it at all! Gold also went the opposite direction during the steep dive on Oct 2008.

And finally the concern with paper loss shouldn't be a big issue. If a person has heavy exposure to stocks that means he has a long time horizon to ride it out. Why should market movements tomorrow matter? The goal is decades away.

[makoshark]

You bought the academic nonsense about "we should only focus on the long term so forget about what happens in the short term".
Short tem losses can overwhelm the long term returns.
And please see the original requirement

Hi guys,

Need your guidance and advices. I have $100k cash and $1000 per month for investing in stocks and shares for the next 5 years period.

Is 5 years long???

Thanks for supporting my view that there are a lot of crap online and people should filter them away.

Kimchi,
Lots of people like to use historical data over long term (eg. 20 yrs!) to show that things will work out fine but what makes them so sure history would repeat themselves?
30 years ago, the Us interest rates were 18% but now it is almost 0% which means bonds would have done great over the last 30 years BUT do you think it will repeat its performance again?
Obviously not, so what makes you think those academic "research" are correct?
Maybe over 60 years it might repeat the cycle but can you handle such a long period?
When interest rates are so low what do you think the probability of it going up vs going down?
We can't be sure when it will increase but we all know it will.
Given that inflation is going to spike in the near term, go for assets that will do well when it comes.
Also when the govts and central banks withdraw the massive amount of liquidity they have injected to the their countries, what do you think would happen? Ans: lower economy growth (or even contraction), rise in interest rates and everything bad for bonds and most equities.
This time it IS going to be different.

[kimchi]

Guys,

Can share with me where i can get the 20,30,50 week moving average for all the indexs?

Thanks,
kimchi

[kimchi]

Just done my S$80,000 portfolio for the start of my investment mainly on US ETF. This is a short term investment, all dividends will be reinvested. target 20% profit returns by year 2015.

Balance $20,000 wanted to put it on bonds. Please give me your recommendation?

Additionally I will also invest S$2000 per month on local stocks and china / india ETF.

XOM - 50% (US$58.50 x 488 shares)
SPDR GLD - 10% (US$118.36 x 48 shares)
IWRD - 10% (US$18.40 x 312 shares)
EEM - 10% (US$39.98 x 144 shares)
FXI - 10% (US$40.64 x 140 shares)
STI ETF - 10% (S$2.91 x 2500 shares)

[Rommie2k6]

Just done my S$80,000 portfolio for the start of my investment mainly on US ETF. This is a short term investment, all dividends will be reinvested. target 20% profit returns by year 2015.

Balance $20,000 wanted to put it on bonds. Please give me your recommendation?

Additionally I will also invest S$2000 per month on local stocks and china / india ETF.

XOM - 50% (US$58.50 x 488 shares)
SPDR GLD - 10% (US$118.36 x 48 shares)
IWRD - 10% (US$18.40 x 312 shares)
EEM - 10% (US$39.98 x 144 shares)
FXI - 10% (US$40.64 x 140 shares)
STI ETF - 10% (S$2.91 x 2500 shares)

It's a gambling "portfolio" not an investment portfolio. Considering your time horizon is only less than 5 years away anything more than 50% equity is too much.

XOM - Single stock on 50% allocation!?!?!?!. I never own single stocks. I never (x2) own single stock using 50% of the portfolio.
GLD - Single commodity considering it is in a bubble (in my opinion). Risky but since it's limited to 10% I won't comment further
IWRD - I would probably use a Vanguard equivalent VEU or VEA.
EEM - I would probably use a Vanguard equivalent VWO.
FXI - Single country fund. I don't use it unless it is my home country.
STI ETF - Ok la, since nothing better.

Finally note that you are above the US$55,000 estate tax exemption for foreign investors in US market. Be prepared to give Uncle Sam money should you pass away and your stocks appreciate.

If Exxon Mobil goes bankrupt prepare to lose your money. I say there is a non-trivial chance of a huge chunk of the money by year 2015.

[kimchi]

Reason for XOM 50% is because I have some insider informations. That's the reason why I take the higher risk.

May I ask what's the different or advantages on the Vanguard vs the ishares ETF? I am taking your recommedation seriously, if need to I will switch funds.

For GOLD ETF, I understand its near bubble. But latest forecast point towards crude oil price increase and US currency dropping. The GOLD ETF will help to absorb some exchange shock.

FXI, china will be the next high growth market, can see the govt is doing a good job, imprementing measures to control the the property bubble. If the chines govt continue to be proactive plus the past few years South east ASIA oil companies expansion, I am sure they are expecting a very high demand here in asia esp. China, India and Korea.

2015 is just my estimation if everything goes well. I am prepared to hold the funds longer than 15years if need to. No urgent need for this $100k cash unless there is a good property deal.

No worries on US estate tax. I used my LP account for XOM, and the rest under my account. So the amount will be less than US$55,000 for each name.


Thanks for your valuable and truthful feedback.

[Rommie2k6]

Reason for XOM 50% is because I have some insider informations. That's the reason why I take the higher risk.

May I ask what's the different or advantages on the Vanguard vs the ishares ETF? I am taking your recommedation seriously, if need to I will switch funds.

Oh... in that case then I wouldn't comment further.

No no no... don't switch if you have invested already. I prefer Vanguard to iShares because of lower expense ratio and replication method. Vanguard uses full replication whereas iShares uses sampling replication, so in my opinion Vanguard funds will track the index better than iShares funds. BUT don't bother switching, the bid-ask spread loss and commission for buying and selling is going to be more than any reduction in expense ratio, especially when considering you're only holding for 5 years.

For GOLD ETF, I understand its near bubble. But latest forecast point towards crude oil price increase and US currency dropping. The GOLD ETF will help to absorb some exchange shock.

Yeah well... I really don't know what to believe honestly. You should ask mako as he reads into such forecasts. The argument for gold as a diversifier is reasonable in both the "for" and "against" camp. As long as you keep it below 10% it should be fine anyway.

FXI, china will be the next high growth market, can see the govt is doing a good job, imprementing measures to control the the property bubble. If the chines govt continue to be proactive plus the past few years South east ASIA oil companies expansion, I am sure they are expecting a very high demand here in asia esp. China, India and Korea

Hmm... I thought China has been the high growth market for the last decade? Still my personal preference is not to target a single country. Note that EEM has about 20% China exposure I think.