Question: "I have just retired. After reading various blogs, books and attending courses, I decided to invest all my money worth $500,000 into the STI ETF. and US$1,000,000 into SPDR® S&P 500® ETF. However, I would like seek your second opinion whether is this an appropriate decision."
Answer: You are trying to get an affirmation that your decision is correct which unfortunately I have to inform you that your decision to invest in these two ETFs is a foolish one.
First, the STI ETF follows a very bad index. The reason is because the FTSE Straits Times index do not appear to cap the holding weightage. As a result, you end up having 40% of the STI ETF invested in just four companies namely SingTel, DBS, UOB and OCBC. Three out of four of these companies are banks!
Second, the SPY ETF is listed in the New York Stock Exchange. It is highly tax inefficient as dividends are taxed at 30%. Moreover, upon your demise, there is a hefty estate duty of a whopping 40% in excess of US$60,000. This means, upon your demise (1000000-60000) * 0.4 = US$376,000 will be paid to the US government! If you are not concerned with estate duty because you have no dependents, why don’t you consider donating your money to those who are in need? Do not be selfish.
Third, putting all your money into equities imply that your risk tolerance is super high. Generally retirees have a lower risk tolerance compared to a young person because you do not have any income to “average down”. It is likely you have invested beyond your risk tolerance.
Fourth, if your risk tolerance is low, you will end up selling your investment when the ETFs drop by XX%. Remember, investors buy high and sell low. This is the rule of the market.
Instead of following advice of unknown persons through blogs (like this one and many others) and seminars, why don’t you start taking up responsible in your own financial planning matters. Making a decision first and then having second thoughts by asking me shows that you are not taking responsibility.
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There was a recent hardware failure resulting in two days worth data being destroyed. I recall there were three comments made for this blog. So sorry that the comments cannot be restored.
Hi Wilfred, it seems that Singaporean investors do not have much options when comes to low-cost and diversified ETFs?
There is an option. But you should consult your financial adviser before making any decision.
Also, the poor returns of investments comes from investors’ own (wrong) behavior, rather than the cost of the investments.
Hi Wilfred, I am considering to engage your company’s service for Basic Financial Planning for Investments. Is the option that you mention accessible to DIY investor? i.e. are we able to carry out the plan ourselves after the one-time session? Thanks,
Hi wj,
I think you may have misunderstood what is financial planning. Anyway, you can give me a call during office hours so that I can have greater clarity of your case. My number is on the “Contact” link. If I am not available, you can leave your contact number with my staff. Look forward for your phone call.
Hi Wilfred. What is your opinion on posb invest saver for beginners?
Do you know exactly what are you investing in?
OK lah. As long you are prepared to withdraw not more than $50K yearly for all living expenses and hold until you die (Cannot sell even if your investments drop 60%). BTW, appropriate medical insurance and some emergency savings are a must.
Select a tax-efficient version of the SPY — dividends will be reinvested. You sell to extract annual living expenses. You just need to pay 15% capital gains tax if you hold for at least 12 months. Remember to do tax harvesting in negative years. Or might as well just buy a SP500 index fund or ETF in S’pore.
Other methods for international tax-efficient ETFs involve other tax haven jurisdictions — more reputable countries are Ireland and Luxembourg. You can have advisor do this for you using wrapper — of course you need to pay for services e.g. annual wrapper fee.
What are the ETFs or passively managed (low cost) Index funds available on SGX that automatically reinvest dividends?
The good ETFs are traded in the foreign exchanges.
hi wilfred, i find that its really difficult. you are asking the readers to take responsibility instead of trusting blogs and seminars. so some of these commenters are taking responsibility, that’s why they are coming to blogs like this or reading by themselves.
you have basically told them that this isn’t the way to go and told them off. so the solution is to find a financial adviser (like yourself to advise them better)
so how to balance this? trust an adviser or take up responsibility to check what your adviser advise? do note that many of your readers would have experience with advisers selling them stuff that you believe is foolish as well.
this basically means that they will do better by putting their money in safety deposits.
For those who want to seek advice, they should consider whether the person who supply the advice can be held accountable and if so, what is the recourse.
Many trainers who conduct seminars are not held accountable for what they teach because there is a gray area under the law. I wrote to the Straits Times on this gray area and MAS’ reply was as good as none. Some of these trainers are not even qualified and yet they charge many thousands of dollars for teaching nonsense. Yet, many consumers are willing to pay them for a useless course but on the other hand does not even want to pay a single cent to qualified and regulated adviser like me. Do you think this is “taking responsibility”?
Many bloggers write about investments. They too cannot be held accountable to what they write. They say all sort of nice things about their portfolios. When financial crisis came, they just close down their blogs because their portfolio died. Pity those who mirror their portfolio / advice. The same as some blogs on insurance. One blog even say Medisheild is enough and the blogger advised people to cancel their integrated shield plan. Still, many readers just follow the blogs blindly.
Many people claimed their financial advisers ‘cheated’ them. But these same consumers were too lazy even to complain. For the past 8 years, I had met countless clients who were sold products that were not suitable. Only 1 individual took my advice to complain and I taught him the proper channel to complain. He got his full compensation eventually without even spending a single cent on lawyer’s fee. The “cost” was his time to write a comprehensive report to support his case of being mi-sold. How about the rest? They were too lazy to write report to file the complain. Is this taking responsibility?
Singaporeans like to complain. But when they are asked to make an official complain, they just chicken out even if the complain does not even cost them a single cent.
I am not answering your question directly. But if everyone bothers to be responsible to take action – such as holding the supplier of the advice accountable – the finance industry would not be like what it is like today.