Investment tips

[Guest voldemar]

I do not know much about investing. So when I arrived in Thailand I read many articles in the Pattaya Mail weekly written by a person that seemed to know what to do. I went this person here in Pattaya. He advised a life insurance policy from Isle of Man. I agreed to do this as he seemed to have a good track record. WRONG! What I thought he told me and then what happened were very different.

 

 

PM, you are long-term poster and make impression of a very sound man. My own attitude regarding Pattaya as a well-known playground for various conmasters would definitely preclude me from seeking investment advice from any Pattaya expat unless I know him/her personally for many years. My trust to local "enterpreneurs" goes as far as eating in local restaurants without preliminary checking chemical composition of the food. But this is as far as it goes (and, in fact, I may be too optimistic on that one). Bangkok has branches of various international investment firms. Did you try to check out any of this?

[Guest]

I've never even considered any type of "insurance" policy, as there is a lack of transparency and the investment advisor normally sells these policies because of the large commission he gets.

Furthermore, for my own investments I've never ever even spoken to an investment advisor for these reasons. I did once listen to a sales pitch made to a friend of mine. Just before he was about to sign up, I asked what the sales commission was & the answer stopped my friend from signing.

 

There's nothing wrong with carefully considered direct investments in stocks, investment trusts, unit trusts and etfs. These USUALLY have more transparency.

 

For trusts, I generally prefer Investment Trusts, as these often trade at a discount to NAV & this effectively offsets some of the annual management charges. There are some with terrific track records which give exposure to the Asia-Pacific region. Just the thing for anyone who hopes to retire to Thailand in a few years time.

 

As for stock picking, there are plenty of good books around, such as "What has worked in investing" by Tweedy Browne.

[Guest voldemar]

I've never even considered any type of "insurance" policy, as there is a lack of transparency and the investment advisor normally sells these policies because of the large commission he gets.

Furthermore, for my own investments I've never ever even spoken to an investment advisor for these reasons. I did once listen to a sales pitch made to a friend of mine. Just before he was about to sign up, I asked what the sales commission was & the answer stopped my friend from signing.

 

 

There is one type which is very popular in US: offshore annuities. This is typically offered by Swiss insurance companies and provide regular payments on investment. Principle is also recoverable. They can provide payments in various currencies including Swiss franc.

At some point this type of policies was considered unreportable in US and it was an attractive point. It is all changed now. However, this type of annuities is "wrapable"

in IRA (type of retirement accounts in US) and become in this way totally legitimate tax deferable retirement investments. To avoid problems like the one mentioned by PM there are reputable consulting companies in US which provide recommendations of Swiss insurers

and help with custodians of related IRA's. It is reasonably established business in US

and many consider it capital control proofed, though I am not sure about the last one.

[Guest]

I'm not sure what the payout rate is on those annuities. However, I guess the UK equivalent annuities offered to pensioners look quite profitable for the insurance companies. The payout percentage on non-index linked annuities could easily be matched by the dividend yield from a conservative portfolio of equities. The key difference is the latter should be expected to rise in value over time, which makes a big difference over 15~20 years worth of inflation.

 

Setting up a company selling annuities looks more profitable than buying them to me.

[Guest voldemar]

I'm not sure what the payout rate is on those annuities. However, I guess the UK equivalent annuities offered to pensioners look quite profitable for the insurance companies. The payout percentage on non-index linked annuities could easily be matched by the dividend yield from a conservative portfolio of equities. The key difference is the latter should be expected to rise in value over time, which makes a big difference over 15~20 years worth of inflation.

 

Setting up a company selling annuities looks more profitable than buying them to me.

I agree with you in the sense that structurally similar products exists in US and are not considered very popular. The payout depends on the structure of the product (e.g. whether principle preserved or not etc). The advantage it offers for Americans is that Swiss insures have a lot of experience with international bonds and stocks. E.g. if your policy

is valued in Swiss francs and guarantee ,say, 3 percent payout and preservation the principle in this currency, one can argue that it makes more sense that similar policy in US dollars (and probably UK pound). Besides, IRA wrap can make payouts tax free (Roth IRA).

It will be very difficult to achieve this goal with any type of stocks portfolio but quite possible (probably with less payout ) in portfolio of Swiss government and selected corporate bonds...

[Bob]

At some point this type of policies was considered unreportable in US and it was an attractive point.

 

Keeping things civil and calm, perhaps you could tell us why you think that a US citizen having to report such investments (and income therefrom) to the IRS or Treasury makes the investment any less or more attractive? I'm honestly trying to figure out why you don't like it that we US people have to report these kinds of things.

 

All financial results (employment income, bank interest, brokerage account activity, and even non-taxable events such as IRA account activity) for US citizens are annually reported by the outfits (employers, banks, investment firms, etc.) and that's been the case for decades. I don't see that as a bad thing and I also don't see it as a bad thing that US citizens must annually report potential sources of income that aren't normally reportable (at least directly by the institutions involved). Do you think that I ought to be able to maintain a bank account or brokerage account in Switzerland and/or Thailand and not have to report that activity or income?

[Guest fountainhall]

All financial results (employment income, bank interest, brokerage account activity, and even non-taxable events such as IRA account activity) for US citizens are annually reported by the outfits (employers, banks, investment firms, etc.) and that's been the case for decades.

That's one reason I have been glad I am from the UK and not the USA. Earning income overseas for more than 30 years, I was able to elect to be non-resident and so my overseas earnings were not subject to UK tax. Sure, they were - and still are - subject to Hong Kong tax, but with personal rates never much more than 15% on average, that is a huge benefit.

 

Plus I have a company registered in Hong Kong which allows me to set all manner of expenses against income. The flat which I own here in Bangkok is legitimately regarded as a place of work and so the 'rental' of it as an office space is tax-deductable. I may have been pretty lousy in my investments, but moving to Hong Kong was one of my best moves ever - for a whole variety or reasons.

[Guest fountainhall]

Reading this thread, it is aimed more at those of us living in retirement or close to retirement age. I started to wonder what those who are much younger should be doing to make sure that they avoid the mistakes made by people like me.

 

There’s an article on the marketwatch.com site today about the importance of regular savings from an early age – something many of us were taught in our youth and which I then conveniently set to one side, with the inevitable consequences.

 

The millionaire next door could be you.

 

All it takes is money and time; it always does. But what this really means is you have to save money over time, and that’s where so many of us struggle.

 

Reaching age 65 with $1 million saved requires strong discipline and sustained effort . . . Call it a 7% solution. Assume a 7% inflation-adjusted return from a portfolio of U.S. and international stocks, bonds and cash — not overly aggressive, but an expected return that requires taking some risk — and living well within your means . . .

 

Of course there will be bumps along the road — potholes, even, that challenge your resolve. The financial markets love to shake and stir individual investors; don’t give up, because it may be hard to get back in.

 

“It’s less about where the money is invested and more about your ability to be disciplined,” Dungan (Nathan Dungan, founder of financial education firm Share Save Spend) said . . . "The best savers don’t have magical thinking about money. They’re honest with themselves” . . . If a 25-year old with $10,000 invested $320 a month at a 7% annual compound rate of return until they turned 65, they would wind up with $1 million . . . At 7%, your money doubles every 10 years.

http://www.marketwatch.com/story/start-with-10000-and-retire-a-millionaire-2011-03-25?pagenumber=1

 

That’s all well and good. But, as has been discussed in this thread, is not one of the problems the matter of timing? If you set aside $320 per month and start to accumulate a nice little nest-egg, how disciplined can you be when you see the market crash – as it has done several times in the last 40 years? Do you limit your losses to 15% as Marc Faber wished he had done (see voldemar’s earlier post) and then get out? But individual investors are usually at the back of the queue when it comes to liquidating positions – and consequently get the worst deals.

 

I will never forget the Asian market crash which started with the devaluation of the Baht on 2 July 1997. Every day I saw my stocks fall, and every day I’d read a review of opinion from so-called experts. I’d then pick the ones that were most optimistic: the market will soon reach bottom and start to rise. So I’d sometimes buy a little more.

 

If you have the guts not to do that, at what point do you start to relax your discipline to buy back in? After all, individuals who are working and have other responsibilities may not have time to ‘play the market’ every day (strange phrase, I always think) and may not be aware when 'bottom-fishing' (another strange phrase) becomes worthwhile.

 

I have read a lot about dollar-cost-averaging, and it sounds a useful investment strategy over the longer term. But is not another issue here the state of the markets at the time you need to take at least part of your cash out? As in my case, if I had retired 12 years ago – or even 5 years ago, my nest-egg would be worth a great deal more than it is worth right now. So it seems that dollar-cost-averaging would have been of little use to me after a market crash. Of course, I now realise that you have to balance the risk in portfolios and reduce that risk as you get older. But I still cannot see the value of dollar-cost-averaging when markets seem to be getting more and more volatile. What am I not understanding here?

 

So, barring an ‘investment’ with Bernie Madoff in his younger days or a nice lottery win, how would older posters recommend younger readers, those with plenty of time before them till retirement, to invest in order to ensure that their dream retirement in Thailand or elsewhere can become reality?

[Guest]

Do you limit your losses to 15% as Marc Faber wished he had done (see voldemar’s earlier post) and then get out? But individual investors are usually at the back of the queue when it comes to liquidating positions – and consequently get the worst deals.

 

I will never forget the Asian market crash which started with the devaluation of the Baht on 2 July 1997. Every day I saw my stocks fall, and every day I’d read a review of opinion from so-called experts. I’d then pick the ones that were most optimistic: the market will soon reach bottom and start to rise. So I’d sometimes buy a little more.

 

If you have the guts not to do that, at what point do you start to relax your discipline to buy back in?

 

Many of these crashes are short lived.

Thankfully my natural instinct is to buy in when the market falls, but unfortunately I have a tendency to buy too early. So by the time the market reaches the bottom I'm putting money in at a slower rate than I should do. This needs correcting.

 

Equally, or even more important is avoiding buying too much or buying the wrong sectors when the market becomes irrationally over valued.

 

I also agree it's important for people to save long term.

 

Voldemar's point about buying a Swiss Franc annuity for the benefit of a strong well managed currency is a very good one. After all there have been too many Pounds & Dollars printed off in recent years and both the US & UK have been taking a very irresponsible attitude to debt.

[Guest anonone]

Reading this thread, it is aimed more at those of us living in retirement or close to retirement age. I started to wonder what those who are much younger should be doing to make sure that they avoid the mistakes made by people like me.

 

how disciplined can you be when you see the market crash

[Guest voldemar]

Keeping things civil and calm, perhaps you could tell us why you think that a US citizen having to report such investments (and income therefrom) to the IRS or Treasury makes the investment any less or more attractive? I'm honestly trying to figure out why you don't like it that we US people have to report these kinds of things.

 

All financial results (employment income, bank interest, brokerage account activity, and even non-taxable events such as IRA account activity) for US citizens are annually reported by the outfits (employers, banks, investment firms, etc.) and that's been the case for decades. I don't see that as a bad thing and I also don't see it as a bad thing that US citizens must annually report potential sources of income that aren't normally reportable (at least directly by the institutions involved). Do you think that I ought to be able to maintain a bank account or brokerage account in Switzerland and/or Thailand and not have to report that activity or income?

You said before that I am not American. I am as an American as you are. US is a country build by emigrants and chances are your parents or grandparents came to American shores too. What about millions of hispanics who are naturalized US citizens?

Do you not count them as Americans too? If so, let me tell you you are far on the right of Sarah Palin despite bragging to be liberal Democrat. You then suggested that Americans living overseas are pretty happy with current rules regarding offshore accounts and, in fact, onshore accounts. I indicated the website of leading US organization of Americans leaving overseas that record this as their major concern.

You are permanently caught with your pants down and I find your posts personally insulting. Therefore, I am not going to discuss anything with you till you publicly apologize.

We are trying to discuss here a serious issue and your pathetic attempts to

"catch me" or present me as a kind of Anti-american and yourself as "pseudo-patriot"

are totally ridiculous. You dislike me, Bob, I know that but let me tell you something:

your behavior on this forum shows your intolerance to viewpoints of others, your inability of maintaining the civilized discussion and your shallowness and bigotry.

[Guest voldemar]

Starting young, dollar cost averaging....finally some aspects of this thread I can actually relate to... Not much personal experience for me with the offshore Swiss banking

 

I was fortunate enough to start and regularly fund a retirement account when I started working as a teenager. I did not fund it as much as I should have, but I still feel I am more prepared than most.

 

The benefit of dollar cost averaging is during the early years of investment. I have seen some hiccups in the market, but just kept plugging away. As the market recovered, the purchases I made during the low times grew nicely.

 

As you indicated, there is certainly a need to adjust investments as you get closer to retirement age. When you have a need to access the money in the short term, risk and volatility need to be kept to a minimum.

 

For those that are not actively playing the market, date targeted mutual funds might be an attractive option. You pick your assumed year that retirement will happen (say, 2045), and invest in that particular fund. The fund is actively managed to be more aggressive in the beginning, then taper risk as the retirement date approaches. It is a no-thought type of set up. Invest and forget.

 

I have been putting some funds into this type of account, though it actually is a little too conservative for me to totally embrace. I am using it more as a conservative portion of an overall portfolio.

 

I believe the biggest challenge for most (in the US) is to budget wisely and live within means. The instant gratification expectation that seems to have enveloped the US has led to nothing but a huge amount of personal debt. For most, saving for retirement isn't even a thought as the only goal is to "pay off credit cards". I can't tell you how many times I hear this....

 

For me, I am actively investing to bring retirement as soon as possible. While it is way too early for me to lock into a plan, I know myself well enough to know I will want enough funds to live comfortable, whether that is in Thailand, somewhere else in SE Asia, or some as of yet undiscovered gem in the world.

 

Of course, I was saving much more money before I discovered the Land Of Smiles....but everyone has to have a hobby.

I like your post and agree with everything you said except for the assertion that most Americans do not live within their means. I think, it is a myth. I, of course, have only anecdotal evidence but I can judge from my friends, neighbours, colleagues...

Unfortunate thing is that current policies of Washington DC disencourage this type of behavior and, in fact, encourage just opposite. You bought house you cannot afford-we force your banker to reduce the loan. You charged your credit card and cannot payoff-we

disallow your banker to raise your interest payments... You want to save money-you will get nothing in interest payments (due to policies of Federal reserve). You see huge inflation: forget about it, you are just dreaming: "core" inflation is very low.

Our government borrows huge amount of money, then buy its own debt and pay for it by printing money. The purchasing power of dollar drops. People who are trying preserve their assets taking them offshore are not patriots and "tax evaders". List goes on and on. And majority of most productive Americans suffer...

[Guest fountainhall]

A couple of questions for voldemar. With China having just raised interest rates again, do you think this is still a good time to buy renminbi bonds? Secondly, I notice quite a number of Australian bonds are offering returns of 5.5% to 6%. With the ozzie dollar have risen to such heights, do you think there is a medium term currency risk?

[Guest]

Th Chinese bonds suffer from inflation risks in my view. I would also want to invest in something with more upside.

[Guest fountainhall]

Th Chinese bonds suffer from inflation risks in my view. I would also want to invest in something with more upside.

If you look at the medium term, surely the potential for currency gain with the renminbi (which seems to be the universal consensus) more than offsets any inflationary effect?

 

What would you recommend as a better 'bet' for medium term investment.

[Guest]

Well, the Reminbi bonds will barely keep up with inflation, so to me they only make sense if you believe the revaluation of the Reminbi will be relatively soon. Say 0~3 years. On fundamentals, the currency revaluation should happen right now, but exchange rates rarely follow logic in the short term.

 

 

I'm attempting to assemble a global portfolio of stocks & investment trusts. The Scottish Oriental Smaller Companies Trust (SST) has a very satisfactory long term record. At current valuations, I certainly would not jump in & bet the farm on this. However, I top up a long term holding in this now & again.

 

Right now, I don't see any obvious sure bets, like there have been at points in the last decade or so. However, I keep searching for value. The Insurance sector looks interesting & I have made some purchases there, although it may make sense to buy in when liabilities for all the recent earthquakes become clearer.

 

China does seem to have the mother of all property bubbles. You don't need to search for long to find videos of uninhabited towns. If this all blows up, no doubt there would be some fine opportunities to buy into the Hong Kong market at lower prices.

 

Right now, I should be making another investment & haven't worked out where the money will go.

 

Incidentally, can anyone advise on stockbrokers? TD Waterhouse charge a thoroughly unreasonable 1.75% on currency exchanges. IWEB (Halifax) have just increased the charge from 0.4 to 1.0%. So I need yet another account.

What about BabyBoom in Hong Kong?

[Bob]

I'm mildly confused about the "inflation" risk you both are talking about. I understand that what you're talking about in general is that internal inflation in China is going to drive up interest rates, that will end up causing new bonds to have higher yields, and that will make the old bonds (with a lower interest rate) less attractive and the price will drop. So, if you're in the game of buying the bonds to later sell them, then I guess I see your points.

 

But, if we (I'm speaking of non-Chinese here) intend to hold one of the bonds to maturity (and you're willing to assume the general risk of bond default and that your home currency will likely stay the same or depreciate to the Chinese currency), then why is internal Chinese inflation relevant at all?

[Guest fountainhall]

But, if we (I'm speaking of non-Chinese here) intend to hold one of the bonds to maturity (and you're willing to assume the general risk of bond default and that your home currency will likely stay the same or depreciate to the Chinese currency), then why is internal Chinese inflation relevant at all?

Don

[Guest]

As to z909

[Bob]

Don

[Guest fountainhall]

Sorry, Bob. I'm, the one that's confused. Well, I did say I'm lousy at investment!!

[Rogie]

Sorry, Bob. I'm, the one that's confused. Well, I did say I'm lousy at investment!!

That's very funny! I haven't been following this thread but tonight I thought I'd better catch up and see what's cooking with a view to tapping the best minds Gay Thailand has to offer. In a way I am relieved to have an excuse not to go back and read all 46 earlier posts!

[Bob]

tapping the best minds Gay Thailand has to offer.

 

You (Z and Fountainhill) should thank Rogie as he sure as hell isn't talking about me. I can conjure up a few of us sitting at Dick's in Bangkok attempting to talk about how to wisely invest our money and, after several drinks, I suspect we'd end up with investing it in #27 at Boys of Bangkok. Better, I suppose, than being screwed by a stockbroker...

 

[before I get the question, no, I have no clue who #27 might be....]

[Guest fountainhall]

I suspect we'd end up with investing it in #27 at Boys of Bangkok. Better, I suppose, than being screwed by a stockbroker...

You know something? I think you may have hit on an idea here! Not sure if you follow soccer. About 5 years ago, there was an outcry in the UK when it became known that two footballers who had been transferred from their clubs in South America to the London club West Ham were actually 'owned' by a group of investors. Apparently this is not an uncommon form of investment in South America and the investment pool takes huge cuts from transfer deals once the players have been transferred out of South America.

 

The essential contradiction of South American football in this globalised world, is that it runs at a financial loss but produces some of the most marketable commodities: the best players. So investment consortia take advantage of the financial weakness of the clubs to secure the rights to sell the players - which is where the money is.

 

MSI - who also own a stake in Corinthians - bought Tevez's registration for $20m (£10.5m). South American football just doesn't generate the sort of money that makes that investment worthwhile. So where's the return on the investment? From selling the players to European football. And where can you get the biggest transfer fees? In a deal between two English clubs - so sell-on clauses are negotiated and money is made that way.

http://news.bbc.co.uk/sport2/hi/football/teams/w/west_ham_utd/5305724.stm

 

Anyway, both these players quickly 'came good'. One was transferred to Liverpool and is now with Barcelona - 2 big transfers. The other was at Manchester United for a couple of season and is now one of the highest players at the Arab-owned Manchester City - 2 even bigger transfers. So the investment pool ended up with mega profits.

 

Well, maybe we should form an investment pool to pick out guys who want to become go-go boys, select the best ones (definitely only those with potential star quality), put them under contract and then 'manage' their careers to maximise their revenues as well as those for the pool.

 

I haven't worked out that can be done yet - but I'm sure there's a way. (I guess every mug says that!)

[Guest BeginnersMind]

Well, maybe we should form an investment pool to pick out guys who want to become go-go boys, select the best ones (definitely only those with potential star quality), put them under contract and then 'manage' their careers to maximise their revenues as well as those for the pool.

 

I suggest the name 'Payment Incoming from Multiple Partners' Fund, or PIMP Fund for short!