Why It Keeps Getting Tougher To Beat Index Funds

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Investment writer and researcher, Larry Swedroe, has a new book out.  

He explains why it keeps getting tougher to beat index funds.  

Image courtesy of pixabay.com

Read my article at AssetBuilder.com

 

 





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I’m happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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9 Responses

  1. David says:

    Hello again Andrew,

    I am a 25 year old starting his teaching career making good money in Central Asia.

    I am on the fence right now between choosing TD International in Luxembourg and DBS Vickers in Singapore for my long-term off-shore trading account. Which one is optimal for me in terms of initial investment (about 10,000), ease of opening the account, and taxation on capital gains?

    Your help would be GREATLY appreciated.

    Thank you,

    David

  2. Daniel says:

    Hi David.
    I cannot do the comparison, but I opened an account with DBS Vickers a little more than a month ago. I live in Singapore, hold Sg PR status and have a relatively sound economy here including a steady income higher than my expenses. DBS Vickers looked at all this. I needed to provide proof of my person, much easier if you have a relation to Singapore as PR or EP.,proof of address in Singapore. , no problem with a phone bill in your own name. Proof of income, the latest 3 payslips or similar. This is probably because they will grant you a budget first of 50000, and then they will deduct the money you spend from the Singapore bank account , which you have given them access to. And finally they insisted on seeing me in person. So I had to take of early from work and go to the corporate office to fill out the application. I got reply and approval about 8 days later. And after a telephone conversation with my allocated broker, I got my 50000 limit or budget if you like.
    All this has been easy for me because of my situation.
    After I have started to use the account I become more and more frustrated. The low cost index funds that Andrew keeps talking about is simply not present. REITs, EFTs, yes. They are low cost. Typically around a single dollar, and you purchase in lots of 100 or 1000. Indexes like the FTSE..something something.. which is traded on SGX cost typical 750-1000 dollar. And I can’t find out why I can’t purchase them.
    Therefore the use of this account has been extremely limited used so far. The fees are high also, compared to my trading account in Denmark, which I have a longer relationship with. Without having the numbers here, I would go as far as saying DBS is twice as much in fees compared with Danish account. And the Danish account trading system and access is far superior to the very limited Singapore.
    BR, Daniel

  3. Owen says:

    David and Daniel,

    I also went through the process of signing up with DBS Vickers a month ago and seem to have had a different experience. There are the hoops you have to jump through, as Daniel describes, but this is Singapore after all. The process was quite easy overall, although the quiz from SGX could be a bit tricky – read carefully! There might be a few more hoops to jump through if you aren’t currently living in Singapore.

    I’m Canadian so the process works well for me as I’ve bought the ETF’s off of the Toronto Stock Exchange in Canadian dollars. Vanguard and iShares ETFs and bonds, including the ones from Andrew’s book, are all there. I made an error with Market vs. Limit orders the first time but have since figured that out.

    Have no information on the Luxembourg option but thought I’d put my 2 cents in on DBS Vickers.
    Cheers
    Owen

  4. Dave says:

    Hi Andrew

    Just a question regarding my plan of investing in index fund portfolio…

    Currently, my index portfolio is 100% in ASX index… Its a far distance from my asset allocation of 33.3% ASX, 33.3% BONDS and 33.3% International Shares…

    Of course I have cash waiting on the sidelines for investing once a month into the lower performing fund, but the problem for me at the moment is the BONDS and the international shares seem to be priced fairly high and I dont feel comfortable buying shares when they seem overpriced…

    I come from a background as a trader who would buy stocks that were oversold and sell them when they were overbought, so its ingrained in my mindset to buy when the price is low, not high… And im obsessed with looking at charts…

    Any thoughts on how I can use this to my advantage as an investor and how to best approach this situation…

    Thanks Andrew,,,

    Dave

  5. Vig Lacera says:

    May I talk of Saxo Singapore for a moment?

    Recently got notice that on 1 April they are changing their fees “for the purpose of ensuring a cost structure that reflects [my] actual usage of the trading platforms.” Translation: “You are not trading enough and we’re not making enough money off of you. So we’re going to implement a new fee, of which you’ll have no choice except to pay.”

    I use their platform (which, incidentally, is woefully convoluted) to rebalance my portfolio once or twice a year. I’m not a manic day trader.

    Here’s what Saxo says:
    “For accounts with stocks, ETFs/ETCs or bond positions, an annual custody fee of 0.12% with a monthly minimum fee of SGD 5 will apply. The custody fee will be calculated daily using the end of day values and charged on a monthly basis.”

    Products on the Singapore Exchange will be exempt.

    When I emailed Saxo not long ago, they said they didn’t charge any holding fees. They weren’t lying but they also weren’t revealing that they had every intention to start charging new fees on April 1st. Very clever.

    So how do these fees compare to TD Luxembourg or DBS Vickers? Anyone done the calcs?

    My cash will move to wherever it’s treated right (i.e. the location with the least amount of fees). Time will tell….

    • Hi Vig,

      I did these calculations in my expat book. I can’t recall the pages, as I’m traveling in Vietnam. DBS Vickers, despite its higher trading commissions, comes out cheaper than Saxo and TD when accounting for the total account fees. But it’s close.

      • Vig Lacera says:

        Thanks for the quick reply, Andrew.
        I do have your latest book. I’ll take another look for those calcs. If it’s close, as you say, then there’s no point getting bent out of shape to try to save a couple of nickels in the end. Enjoy your travels in VN!

  6. Brad says:

    I know we can’t time the market, I totally get that. Still….right now, with so many indicators flashing red – should we wait on the sidelines with cash?

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