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What is a three fund portfolio?
What is a three fund portfolio?
A three fund portfolio is one which is divided into three mutual funds/ETFs:
A local Total Stock Market Index Fund
An international Total Stock Market Index Fund
A local Total Bond Market Index Fund
Learn more of this by reading If You Can by Bill Bernstein
Steps to building a three fund portfolio
Steps to building a three fund portfolio
Finding the funds that best suit your needs and wants
Follow the three market index funds
Consider the expense ratio
Consider withholding tax (how Irish-domiciled funds have a lower withholding tax rate)
Decide on the most suitable asset allocation
Stock/Bond ratio determines the expected risk and return (higher the expected return, the higher the expected risk)
A good guide of % of bonds is 120 - age = x, where x% is allocated to bonds
Gauge of asset allocation here
Deciding between mutual funds and ETFS
Does not make much of a difference unless you are a trader
Mutual funds have a minimum sum
Invest in a tax-advantaged retirement plan
No capital gains tax in SG
For US stocks, there is a 30% Withholding tax on dividends, hence Irish Domiciled ETFs have are a more attractive alternative with 15% withholding tax on dividends
What to do when...
What to do when...
In a Bull Market
Rebalance every time your stock allocation exceeds 10% of its desired allocation
In the accumulation phase, you can do this buy putting all new contributions into your bond fund or by selling stocks
In the withdrawal phase, you should take withdrawals from your stock funds, or exchange stocks for additional bonds
In a Bear Market
DO NOT sell your stock allocations
In rebalance it will lead to buying low and selling high
Other things to take note:
Other things to take note:
For Ireland - Domiciled ETFs they can only be purchased through certain brokers (eg IBKR) as others (eg Tiger/Moo Moo) does not support.
LSE Trading Times:
Standard: 4pm - 12.30am
Daylight saving time: 3pm - 11.30pm
Singapore Stock Market Trading Times: 9am - 5pm (Mid-day break at 12 - 1pm)
Which ETFs to choose?
Which ETFs to choose?
International Stock Market Index Fund
International Stock Market Index Fund
Incepted on 23 July 2019, it is a worldwide ETF with a mixture of large, medium and small cap stocks tracking the FTSE All-World Index. It is an Irish-Domiciled ETF with an expense ratio of 0.22% and 3,758 stocks. It is an accumulating ETF
Pros and Cons of VWRA
Pros
Cons
Incepted in 21 October 2021, it tracks the MSCI ACWI Index which covers large and mid cap companies across developed and developing countries. It is an Irish-Domiciled ETF with an expense ratio of 0.20%. It is an accumulating ETF.
Pros and Cons of ISAC
Pros
Cons
Incepted in 23 March 2021, it tracks the FTSE Global All Cap Choice Index, with large mid and small cap companies from developed and developing countries. It is an Irish-Domiciled ETF with an expense ratio of 0.24%. It is an accumulating etf.
Pros and Cons of V3AA
Pros
Cons
Incepted in 28 Feb 2019, it captures large and mid cap companies across developed countries. It is an Irish-Domiciled ETF with an expense ratio of 0.12%. It is an accumulating ETF.
Pros and Cons of SWRD
Pros
Cons
Incepted in 25 September 2009, it tracks the MSCI World Index, covering large and mid cap companies across developed countries. It is an Irish-Domiciled ETF with an expense ratio of 0.20%. It is an accumulating ETF.
*Note: IWDA and SWDA track the exact same index and are the same fund managed by iShares, just that IWDA is in USD, while SWDA is in GBP
Pros and Cons of IWDA
Pros
Cons
Incepted in 30 May 2014, it has exposure to over 2,800 large, mid and small cap companies in emerging markets. It is an Irish-Domiciled ETF with an expense ratio of 0.18%. It is an accumulating ETF
Pros and Cons of EIMI
Pros
Cons
Excel for Summary of the various ETFs
Excel for Summary of the various ETFs
Last Updated: 26 November 2021
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