Hendy's Blog

Investing investing investing

One book I finished reading during my "inactivity" is The Bogleheads' Guide to Investing. It's a practical book to get anyone to starts investing. Mind you that it's very US centric but most of the contents are general enough for people outside US.

Some of the new things I learned from the book are the importance of asset allocation and rebalancing. Rebalancing actually reduces risk. A portfolio which is not rebalanced increases the risk while the increased returns are small or even nonexistent. I used to think the other way around. You see, I bought the high climbing fund at a low price. When it keeps increasing, my profit of course will be higher compared to if I reduce my holdings. But that's actually not the case. What goes up doesn't go up forever. Rebalancing also means selling high and buying low. So with that in mind, surely I'm going to have a regular rebalancing.

According to Jack Bogle, "Asset allocation is critically important; but cost is critically important, too - All other factors pale into insignificance."

Now, about cost, I admit that my current investment has a high cost. It's a wrap account with 1% fee per year and 3% transaction fee for buying a fund. That's a total pain. But at least I have started. It's better than doing nothing.

Moving on, I'm planning to open a trading account so that I can buy ETF. In Singapore, I guess that's the only option for indexing. Then I'll stop adding money to the wrap account and once it made profit, I'll pull them out and close the account for good.

On other note, interest rate is dropping like hell. Standard Chartered's e$aver now only offers 0.80% p.a. for under $50K. I'm planning to move my money to my Citibank's step up account, which now has a higher rate. But that account has a catch that I don't like, namely your lowest balance can't be lower than previous month. Lowest balance, mind you, not average balance. One fine withdrawing too much money and your step ups are gone. On the other hand, it's very liquid. I can withdraw my money from ATM. So I guess I'll just move my money there bits by bits.

Labels: book, money

posted by Hendy Tanata @ 14:55