Investment Planning Flashcards
1
Q
What are growth stocks?
A
- Companies that are expected to grow at ABOVE market average returns
- Pays LOW or 0 dividends
- Investors anticipate immense growth when they sell shares in the future
- High risk
2
Q
What are Value stocks?
A
- Low prices
- Trade at a price BELOW its intrinsic value (Undervalued by the market)
- High potential to grow and generate returns for investors in the future
- Low risks
- Moderately conservative investors
3
Q
What are dividend (income) stocks?
A
- Pay relatively stable dividends
- Has stable share prices
- May pay an increasing dividend over time
- Blue-chip companies
- REITS and business trusts are included too
4
Q
What are unit trusts/mutual funds?
A
Collective Investment Scheme
- A pool of money managed collectively by a fund manager
- Buy units in a trust to invest
- Pool money with other investors and invest in a portfolio of assets to achieve investment objective of a unit trust
5
Q
What is Specialised Funds?
A
Higher Risk, Higher Return
They focus on specific industries (Commodities, regions etc)
6
Q
What is Global Equity Funds?
A
Moderately High Risk, Moderately High Return
They invest in companies around the world. –> Benefit from foreign exchange fluctuations.
7
Q
What is balanced funds?
A
Moderate Risk, Moderate Return
- A mix of bonds, equities, money market instruments.
- Mixture of safety, income, modest capital appreciation.
8
Q
What is bond funds?
A
Moderately Low Risk, Moderately Low Returns
- Known as income fund
- Primarily invest in bonds or other types of debt securities
9
Q
What is Money Market Funds?
A
Low Risk, Low Return
- Many robo-advisors have their own money market funds
- Invest in short-term debt (highly liquid) instruments, cash, cash equivalents
10
Q
Why do Fund Managers need to rebalance portfolios?
A
Allows them to maintain the desired level of risk and investment goals over time.
11
Q
How do Fund Managers rebalance portfolios?
A
They can either sell one investment and buy another
OR
Allocate additional funds to either stocks or bonds.
12
Q
What are the 3 main benefits about Unit Trusts?
A
- Professional Management (Monitor investments on a day-to-day basis, have the research and analytical tools that you have no access to)
- More Investment Opportunities (Pool money with other investors; tap overseas markets with less hassle; lower transaction costs)
- Diversification (Invest in a wider range of assets –> Spread risks)
13
Q
What are the 3 one-time fees for Unit Trust?
A
- Initial Sales Charge
- Redemption/Realisation Charge
- Switching Fee
14
Q
What is the range of initial sales charge for unit trusts? (Front-end Load)
A
1%-5%
15
Q
What is the range of redemption/realisation charge for unit trusts? (Back-end Load)
A
1%-5%
16
Q
What is the range of switching fee for unit trust?
A
about 1% or free
17
Q
What are the 2 types of recurring fees for unit trust?
A
- Management fee
- Trustee Fee
You do not pay these fees out of their own pocket but its is paid for by the unit trust –> Reduces the investment return
18
Q
What is the range of management fee for unit trusts?
A
0.5%-2% per annum of the fund’s NAV (Assets minus Liabilities)
19
Q
What is the range of trustee fee for unit trust?
A
0.1%-0.15% per annum of the fund’s NAV (Assets minus Liabilities)
20
Q
What is the Total Expense Ratio (TER)?
A
- Operating expenses of the fund expressed as a percentage of the fund’s assets.
- The management fees and trustee fees form a large component of TER
- Calculated to ensure that investors are informed of all relevant costs
- Enable meaningful comparison among fund managers with different cost
structures - The more actively managed the fund, the higher the TER
21
Q
What are Indexed funds?
A
A portfolio of stocks or bonds designed to mimic the composition and performance of a financial market index.
22
Q
How many companies are in SP 500
A
500
23
Q
How many companies are in STI? (Singapore Index)
A
30
24
Q
What are blue-chip companies?
A
A national or internally recognised well-established, financially sound company that is publicly traded.
E.g. Coca Cola, Pepsi, P&G, Walmart, McDonald
25
What is the asset allocation when you are young?
- Life Cycle Fund -
- More equities
- Lesser Fixed Income instruments
26
What is the asset allocation when you are old?
- Life Cycle Fund -
- More fixed income instruments (e.g. Bonds)
- Lesser equities
27
What are the 5 platforms that sell funds?
1. Banks
2. Financial Advisory Firms
3. Bundled in Investment-Linked Insurance Plans (ILPs)
4. Robo Advisory Platforms (DBS digiPortfolio, Syfe)
5. Unit Trusts Platforms (Fundsupermart, dollarDex, POEMs)
28
What are the 4 main points if you change your mind for unit trusts?
1. Can change your mind within 7 calendar days
2. No administrative penalty
3. You may suffer a loss if the unit trust has fallen in market value after you bought it
4. If the market value of the unit trust has risen, you will get a full refund but you will not be entitled to the gain
29
What are Exchange Traded Funds (ETFs)?
1. There can be ETF index fund (STI but ETF on exchange)
2. Designed to track specific indices or fixed basket of stocks (Domestic/International, broad market/sectoral)
3. Provide access to a wide range of asset classes, markets and sectors
4. Compared to unit trusts, ETFs trade like a stock as they are listed
30
What are REITs?
- NOT RESIDENTIAL properties
- Retail, hospitality, logistics, industrial parks
- Profits from rental income
- Publicly traded on stock exchanges
- Pay out at least 90% of taxable income each year to unitholders
31
What are some examples of Singapore REITs?
1. Frasers Centrepoint Trust
2. Paragon REIT
32
What are the 6 benefits of REITs for investors?
1. **Low cost entry** vs Buying the property directly
2. More liquid
3. **Low correlation to stocks and bonds** --> Portfolio diversification
4. **Inflation hedge** --> Inflation leads to higher rents --> Good for REITs
5. **Steady Income** --> Income is passed to investors as dividends
6. **Growth potential** --> Income and asset value can grow on the back of rising rents, asset enhancement and inorganic acquisitions
33
How many REITs are there in Singapore?
42
34
What are the 3 objectives of the Singapore Savings Bond (SSB)?
1. Expand range of SIMPLE, LOW-COST Investment options for the masses
2. Help them with long-term financial & retirement goals
3. Launched in Sep 2015
35
What are the 8 features of SSBs?
1. Flexible
2. Low entry point (**min $500, max $200k**)
3. Max tenure of 10 years
4. No lock-in period
5. CDP (Central Depository Pte Ltd) account
6. Can use SRS funds
7. Step-up Interest
8. My Savings Bonds Portal
36
What is the entry point for SSBs?
$500
37
What is the max tenure for SSBs?
10 Years
38
Does SSB have compounding benefits?
No
39
What are T-Bills?
1. Short-term Singapore Government Securities issued at a discount to a face value.
2. Investors receive the full face value at maturity
3. Can be sold prior to maturity
40
What are the 2 types of Singapore T-Bills?
1. 6-month
2. 1-year
41
What are Astrea Bonds?
1. Azalea Asset Management (Part of Temasek Grp)
2. Access to private equity investments for retail investors
3. IV: 4.35% | V: 3.85% | VI: 3%
42
How many funds is Astrea Bonds diversified across?
30-40 funds (Mitigates risk of any single fund)
43
When was Astrea IV, V, VI launched to retail investors?
2018/2019/2021
44
When was SRS implemented?
April 2001
45
What is the contribution cap for SC and SGPR?
- SRS -
$15,300 per year
46
What is the contribution cap for foreigners?
- SRS -
$35,700 per year
47
What is the minimum age to open a SRS?
- 18 years old
- Sound mind
- Not bankrupt
48
How many SRS operators are there?
3 local banks
49
How many accounts can I open?
1 (Can transfer between operators)
50
How much tax relief do I receive from putting $$ in SRS?
Contribute $1,000, taxable income reduced by $1,000
51
When is the last date to put funds in SRS to receive tax relief benefits in the next year?
31 Dec in CASH
52
What is the overall personal income tax relief cap?
- SRS -
From YA 2018, $80k
53
How many SRS account holders are there as at Dec 2021?
288,793
54
What is the total SRS contribtions as at Dec 2021?
$14.36 Billion
55
What are the 7 types of SRS Approved Products? (SGD-denominated domestic instruments)
1. Time deposits
2. Singapore Savings Bond
3. Unit Trust
4. Shares
5. ETFs
6. REITs
7. Single and Recurring Premium
56
What are the 4 considerations before getting SRS Investments?
1. Risk Appetite
2. Diversification
3. Adopt long-term view
4. Make use of long term horizon to compound returns
56
How much is taxed when money is withdrawn from SRS **on or after** statutory retirement?
50%
57
What is the withdrawal period for SRS?
10 years
58
Why stagger your SRS withdrawals?
Full withdrawals can mean higher taxes than what was saved
59
How much is the penalty if you withdraw cash from SRS before statutory retirement age?
5%
60
What happens if you withdraw from SRS account as you are bankrupt?
- 100% taxable
- 5% penalty waived
61
What happens when your SRS withdrawals are payout from life annuity?
- 10-year period does not apply
- 50% tax concession as long as you receive payouts
62
Do SRS withdrawals need to be in cash?
No, can transfer investment to CDP account
63
What happens at the end of the 10-year SRS withdrawal period?
50% of the balance SRS monies will be taxed
64
What are the main changes to the Working Mother's Child Relief from 1 Jan 2024 onwards? (WMCR)
Past: Percentage of eligible working mothers' earned income
Now: Fixed dollar tax relief
- Bad because for mothers who earn more, they will receive lesser relief
65
What is the WCMR for the 1st child (before and after)?
Before: 15% of mother's earned income
After: $8k
66
What is the WCMR for the 2nd child (before and after?)
Before: 20% of mother's earned income
After: $10k
67
What is the WCMR for the 3rd child (before and after)?
Before: 25% of mother's earned income
After: $12k
68
Who can invest in CPFIS from 1 Oct 2018?
Those who take the Self-Awareness Questionnaire (SAQ).
- Helps to assess if CPFIS is suitable
69
What is the sales charge for CPFIS?
**0** (it used to be 3% of investment amount)
70
What are the CPFIS wrap fees?
- They are charged by financial advisers for CPFIS members with wrap accounts.
- Covers both advisory services and the costs to maintain the wrap account
71
How much are the CPFIS wrap fees?
0.4% (used to be 1% of AUM/year)
72
What is the TER cap for Higher Risks CPFIS funds?
1.75%
73
What is the TER cap for Medium to High Risks CPFIS funds?
1.55%
74
What is the TER cap for Low to Medium Risks CPFIS funds?
0.95%
75
What is the TER cap for Lower Risks CPFIS funds?
0.35%
76
How to choose CPFIS funds?
1. Consistent track record
2. Avoid funds with high expense ratio
77
How many CPF members invested using OA savings in FY Oct 2019 to FY Sep 2020?
534,000 people
78
How many CPF members made losses from FY Oct 2019 to FY Sep 2020?
- CPFIS
41.6%
79
How many CPF members made money but < 2.5% from FY Oct 2019 to FY Sep 2020?
- CPFIS
8.8%
80
How many CPF members made money > 2.5% from FY Oct 2019 to FY Sep 2020?
- CPFIS
49.6% (performance likely to be better over a longer term)
81
What 3 factors guide our own personal investment decisions?
1. Goals
2. Risk Tolerance
3. Future needs for capital (time horizon)
82
What are the 3 strategies for personal investment?
1. Growth-oriented
2. Income-oriented
3. Barbell Strategy
83
What are the 4 main points of a growth-oriented strategy?
1. Strong, rapid growth
2. More concerned with capital appreciation
3. Higher risk
4. Favoured by younger investors
84
What are the 4 main points of a income-oriented strategy?
1. Regular income/dividend payouts
2. Concerned with preserving wealth
3. Lower risk
4. Favoured by older investors
85
What are the 4 main points of a barbell strategy?
1. Blend both growth and income strategies
2. Achieve balance by investing in assets at both ends of the risk spectrum
3. Growth: High conviction secular growth trends, equities
4. Income: Dividend equities, REITS, Bonds
86
What are the 2 steps to diversify
1. Diversify across different individual stocks (Index funds/ETFs)
2. Diversify across different asset classes (stocks, bonds, REITs, crypto, commodities etc)
87
What are the 3 benefits of long-term investing?
1. Compounding
2. Potential income streams (dividends)
3. Stock markets historically rise over a long period
88
What was the annual returns for the S&P 500 from 1978 to 2019 (41 years)?
8.7%
89
What was the annual returns for the S&P 500 from 1978 to 2019 (41 years) if you take away the worst 50 days?
Jumped to 16.4%
90
What was the annual returns for the S&P 500 from 1978 to 2019 (41 years) if you take away the best 50 days?
Dropped to 2.6%
91
Over 1953 to 2019 (67 years), how many years has the market **risen**?
46 years
92
Over 1953 to 2019 (67 years), how many years has the market been **even**?
3 years
93
Over 1953 to 2019 (67 years), how many years has the market **declined**?
18 years
94
What are the 2 conditions to staying invested?
1. **Have enough time** (10 years for a full 100% equities portfolio | not enough time --> allocate a portion to bonds)
2. Invest in global diversified markets
95
What is the management fees for indexed funds?
Average 0.3% per annum
96
What is the management fees for ETFs?
Average 0.15% per annum
97
What is the management fees for evidence-based funds?
Average 0.4% per annum
98
What are Active funds?
Using forecasting to select undervalued securities OR time the market
