Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Sunday, 26 April 2015

Key take-aways from The Edge ETF Forum 2015

My apologies for the long 1-month hiatus from this blog as I was handling some personal issues while juggling NS at the same time. Just an update, I was managing my family's insurance coverage and finding out more on the Direct Purchase Insurance (DPI) Initiative launched by MAS recently. Hence, I was busy shuffling between investment advisors, insurance agents and insurance forums to check out different information. I would be crafting out a detailed guide on the new initiative and suggestions on how this could potentially reduce your premiums while maintaining your coverage. However, it will only be released to the readers whom had subscribed on the mailing list as I had promised to as written on previous post.

Back to this blog post, I had just attended The Edge ETF Forum with the basis of finding out more on how I can harness the use of ETFs in my portfolio. Since the program outline was not provided, I was basically sceptical on the coverage of this event. This was especially after seeing that Saxo Capital, one of the sponsors of the event, was to start the day. To sponsor an event, the sponsors have to make a return in exchange for the costs shed, and one was to entice more customers to increase sales. Despite the initial negative 'judgement', I felt that the talk given by Mr Adam Reynolds was exceptionally informative in terms of his views on macro trends. He gave a few macro trends that could affect the world but 3 that are, in my view, particularly important are: The global disinflation due to crashing oil prices, difference between EU and US, and rise of India.

Many parts of world has been experiencing disinflation due to the rapid drop of oil prices, partly due to the shale boom back in US, which led to a rising supply. Being a substitute for conventional crude oil, the US is slowly changing from a major exporter to an importer. With US having a better economic performance and achieving a moderate inflation rate, people are looking to the September meeting where the Fed might start to hike interest rates. Meanwhile, the European Central Bank has just done a Quantitative Easing, essentially depressing the Euro to almost a 12-year-low. This has in turn raised the competitiveness of the Euro producers against those in US, which could potentially allow higher upsides in the euro markets. It was also said that one should be vested in the Euro ETFs excluding the financials as these should benefit from the rising discrepancies.

Historical Data Chart
Source: http://www.tradingeconomics.com/euro-area/currency


The rise of India is a phenomenon that no investor should miss. Notably, it is estimated that India will outperform China's performance. With so much hidden potential, institutions are also following the trend. As such, one should also be vested in the India ETF so capture this upside. Even more so is that the India BSE Sensex Index has retraced from its previous peak.

Personally, I feel that ETFs should be used as a passive investment tool or a tactical tool to capture hidden upsides from existing macro trends. However, you do not wish to take on additional unnecessary risks from picking specific stocks. As such, you can benefit from the general market movements and diversify industry-specific risks. To add on, it has a low cost advantage compared to other existing solutions in the market.

All in all, ETFs are good portfolio complements and if used correctly, they can buff up the portfolio returns while reducing downside risks. If you have any questions or comments, do leave them below for discussion.




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4 comments:

  1. hi there, you should ask them their views on estate taxes and dividend withholding taxes, but i think that is not their concern really haha.

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    1. Hi Kyith, I believed one of the audience asked this question on how to avoid the taxes should investors buy into the US equities market via ETFs. However, if I'm not wrong, there seems to be no way out except reducing the underlying tax liabilities by purchasing ETFs with the code UCITS and domiciled in the EU. It was stated that such ETFs are able to enjoy tax reductions due to the tax pact between both regions. This maybe be wrong as I have not yet research into this class of ETFs.

      I hope this may help.

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  2. Howdy!

    ETFs are simply tools, nothing more, nothing less. They don't care how or why you use it (you can be a savvy investor taking a calculated risk or a gambler betting on specific markets/sectors based on newspaper reports) - they want you to trade, they don't really care if you invest. Sometimes, even SGX gives me this weird vibe as well.

    Nonetheless, I'm glad to have ETFs available and hopefully, continue to garner more interests in our sunny island.

    @Kyith : Haha! Good one there.

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    Replies
    1. Hey there!

      It is true that the brokers simply want to generate more trade volumes as it is their basic sales revenue generator. However, ETFs do have their advantages which can be potentially powerfully if they are harnessed in the right way. It is also true for any instruments.

      Lastly, it is definitely true that Singaporeans are getting really heated up in other financial instruments as they get more savvy. This will certainly open up more choices in investment in a local context.

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