Author Topic: Singaporean - invest through Interactive Brokers?  (Read 10737 times)

GnSoma

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Singaporean - invest through Interactive Brokers?
« on: August 29, 2015, 09:29:18 AM »
Hi all, I've just started work (in July this year), and my goal is to have a sufficient retirement 'stash in 10+ years :)

I'm all for buying Vanguard ETFs, but as I'm from Singapore, I can't seem to find any specifics on how to invest in it from the blog (so far). I'm wondering if using Interactive Brokers as a platform is a good idea? They seem to have the lowest commission charges for online brokerages (beating local bank commissions) that will allow me to buy U.S. stocks and ETFs. Singapore also does not tax capital gains, and exchange rate risk is minimal (from what I know of local government monetary policy)

I'm hoping to put in SGD 2,850 (about USD 2,000) monthly (after payday), or SGD 34,200 (about USD 24,000) annually, with expenses of about SGD 14,300 (about USD 10,150) annually. Inflation here averages to about 2-3% annually.

My savings (and expenditure) are expected to scale this way (roughly):
 - First year: Savings - USD 24,000 / Expenditure - USD 10,150
 - Second year: Savings - USD 24,000 / Expenditure - USD 10,150
 - Third year: Savings - USD 27,400 / Expenditure - USD 11,850
 - Fourth year: Savings - USD 32,400 / Expenditure - USD 11,850
 - Fifth year onwards: Savings - USD 37,000 / Expenditure - USD 12,000

These are of course VERY rough numbers, which hover at a roughly 70% savings rate throughout, so that's 8.5 years of working (if I'm disciplined).

For IB commissions, I understand it's minimum USD 1 per order, maximum 0.5% of trade value. If I pay less than USD 10 in trade commissions a month, I have to pay the difference, too (so a minimum USD 10 commission fee a month).

Based on this, is it a good idea to start buying Vanguard ETFs via Interactive Brokers? Or is there a better way? Or is there something horribly wrong I've gotten wrong / am missing out on? Any and all feedback appreciated!!!

*From a clean-shaven, wet-behind-the-ears, less-than-badass Mustachian ;)

P.S. - No student loans either; very lucky to have gotten a scholarship :)

ShoulderThingThatGoesUp

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Re: Singaporean - invest through Interactive Brokers?
« Reply #1 on: August 29, 2015, 10:12:17 AM »
Do you feel that the Singapore exchange is too small to invest in, or are there not Singapore index funds, or is going through the effort to invest in the U.S. index funds cheaper/lower-fee than investing locally?

GnSoma

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Re: Singaporean - invest through Interactive Brokers?
« Reply #2 on: August 29, 2015, 11:17:22 AM »
Well, to be honest the Singapore Exchange is really quite small - we have a local Straits Times Index that tracks the largest 30 companies, but the returns vary from 4-5%, so I'm wondering if it would be better overall to invest in U.S. stocks, really.

mickeyj

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Re: Singaporean - invest through Interactive Brokers?
« Reply #3 on: August 31, 2015, 12:33:26 AM »
Hey there, I'm also a Singaporean.

If you are fully invested in U.S. stocks, the challenge is that there's a FX risk in your entire portfolio. Imagine the case where U.S. stocks perform really well but the currency tanks against SGD and you are retired in Singapore. Then your overall portfolio value still drops when you convert it in SGD.

SunnySaver

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Re: Singaporean - invest through Interactive Brokers?
« Reply #4 on: September 01, 2015, 08:30:47 AM »
Hi all, I've just started work (in July this year), and my goal is to have a sufficient retirement 'stash in 10+ years :)

Congratulations! You are already leaps and bounds ahead of almost everyone else in this position, so give yourself a pat on the back.

I'm all for buying Vanguard ETFs, but as I'm from Singapore, I can't seem to find any specifics on how to invest in it from the blog (so far). I'm wondering if using Interactive Brokers as a platform is a good idea? They seem to have the lowest commission charges for online brokerages (beating local bank commissions) that will allow me to buy U.S. stocks and ETFs.

Have you looked at Standard Chartered? They offer access to local and major overseas markets, and I believe their commissions are lower than IB: 0.20% for SGX and 0.25% for other markets, with no minimum. There are also exchange fees and GST, but I think those will be the same anywhere. Their online trading platform is pretty simple, but it doesn't sound like that will be a problem for your investing style.

One potential hurdle is their 'customer account review', so have a look at the form (https://www.sc.com/sg/_pdf/Y20157_310480_SCB_Online_Trading_AppF_6PP_Single.pdf) and see if you can answer 'yes' to one of the questions. If not, you'll have to open an account somewhere else and make 6 trades first.

The other thing to remember is that you need a day-to-day (current or savings) account with them in order to have online trading access. Note they just introduced a S$1000 minimum average daily balance to avoid a S$5 monthly fee on their formerly free option (e$aver account). It's still not a bad deal if you don't already have or want a more substantial banking relationship with them. You transfer funds from your current/savings account into your securities clearing account in the appropriate currency (they'll automatically create accounts in all the usual currencies for you), and then place your order. They do make some profit on the currency conversion from SGD to non-SGD clearing accounts (the rate isn't terrible), so transfer only what you need when you are ready to trade.

Singapore also does not tax capital gains, and exchange rate risk is minimal (from what I know of local government monetary policy)

Be careful with that last part... USD/SGD over the last 10 years has ranged from around 1.20 to 1.70 (http://www.xe.com/currencycharts/?from=USD&to=SGD&view=10Y), so I think you have a real FX risk to consider. Don't let that scare you away from an internationally diversified portfolio, but don't ignore the risk, either. There's an STI ETF with 0.3% ER if you want some easy local exposure (http://www.spdrs.com.sg/etf/fund/fund_detail_STTF.html#)

Or is there something horribly wrong I've gotten wrong / am missing out on? Any and all feedback appreciated!!!

Assuming you participate in CPF, don't forget to consider that in your overall asset allocation strategy. You likely wouldn't need any bond funds or other conservative options in your non-CPF investments.

mickeyj

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Re: Singaporean - invest through Interactive Brokers?
« Reply #5 on: September 01, 2015, 09:44:29 AM »
Hi all, I've just started work (in July this year), and my goal is to have a sufficient retirement 'stash in 10+ years :)

Congratulations! You are already leaps and bounds ahead of almost everyone else in this position, so give yourself a pat on the back.

I'm all for buying Vanguard ETFs, but as I'm from Singapore, I can't seem to find any specifics on how to invest in it from the blog (so far). I'm wondering if using Interactive Brokers as a platform is a good idea? They seem to have the lowest commission charges for online brokerages (beating local bank commissions) that will allow me to buy U.S. stocks and ETFs.

Have you looked at Standard Chartered? They offer access to local and major overseas markets, and I believe their commissions are lower than IB: 0.20% for SGX and 0.25% for other markets, with no minimum. There are also exchange fees and GST, but I think those will be the same anywhere. Their online trading platform is pretty simple, but it doesn't sound like that will be a problem for your investing style.

One potential hurdle is their 'customer account review', so have a look at the form (https://www.sc.com/sg/_pdf/Y20157_310480_SCB_Online_Trading_AppF_6PP_Single.pdf) and see if you can answer 'yes' to one of the questions. If not, you'll have to open an account somewhere else and make 6 trades first.

The other thing to remember is that you need a day-to-day (current or savings) account with them in order to have online trading access. Note they just introduced a S$1000 minimum average daily balance to avoid a S$5 monthly fee on their formerly free option (e$aver account). It's still not a bad deal if you don't already have or want a more substantial banking relationship with them. You transfer funds from your current/savings account into your securities clearing account in the appropriate currency (they'll automatically create accounts in all the usual currencies for you), and then place your order. They do make some profit on the currency conversion from SGD to non-SGD clearing accounts (the rate isn't terrible), so transfer only what you need when you are ready to trade.

Singapore also does not tax capital gains, and exchange rate risk is minimal (from what I know of local government monetary policy)

Be careful with that last part... USD/SGD over the last 10 years has ranged from around 1.20 to 1.70 (http://www.xe.com/currencycharts/?from=USD&to=SGD&view=10Y), so I think you have a real FX risk to consider. Don't let that scare you away from an internationally diversified portfolio, but don't ignore the risk, either. There's an STI ETF with 0.3% ER if you want some easy local exposure (http://www.spdrs.com.sg/etf/fund/fund_detail_STTF.html#)

Or is there something horribly wrong I've gotten wrong / am missing out on? Any and all feedback appreciated!!!

Assuming you participate in CPF, don't forget to consider that in your overall asset allocation strategy. You likely wouldn't need any bond funds or other conservative options in your non-CPF investments.

For Standard Chartered, it's possible to avoid the minimum balance requirement if you switch to their Dash account instead of using eSaver.

SunnySaver

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Re: Singaporean - invest through Interactive Brokers?
« Reply #6 on: September 01, 2015, 10:21:23 AM »
For Standard Chartered, it's possible to avoid the minimum balance requirement if you switch to their Dash account instead of using eSaver.

Great tip, thanks! I had forgotten the Dash savings account was through Standard Chartered. I don't have any first/second hand knowledge, but it seems like it should be enough for online trading access.

mickeyj

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Re: Singaporean - invest through Interactive Brokers?
« Reply #7 on: September 01, 2015, 10:38:30 AM »
For Standard Chartered, it's possible to avoid the minimum balance requirement if you switch to their Dash account instead of using eSaver.

Great tip, thanks! I had forgotten the Dash savings account was through Standard Chartered. I don't have any first/second hand knowledge, but it seems like it should be enough for online trading access.

Just tested and it worked. Transferred dividends from my trading account to Dash and then out to my main bank account. :)