trade-risk-default-risk

Q&ACategory: Questionstrade-risk-default-risk
Joey Ting asked 4 years ago

Hi PC,    I\’m not sure the most appropriate words to use here. May I ask what is the default or trade risk for investing in US shares (especially in the event of economic collapse?   As I earn in Sing dollars, should I withdraw my investment from US market should Sing dollar becomes stronger than US dollar?   Thank you.

3 Answers
pcwong Staff answered 4 years ago

The companies in my stock picks have all vetted through for the debt to equity ratios which many are way above the KPI. So the default risk is low. If the US economy collapse not all companies will be in default only those with high debt to equity ratios will be risky, such US oil companies, retailers and technology companies.
In an economic collapse, gold and silver miners will be the main benefactors. Several of the gold and silver miners which I recommended in late 2015 have gained more than 150%. That is why I recommend you should include some miners in your portfolio.
Gold and silver will continue to advance and could go past the previous highs. This could give the extra push for miners to reach their all time highs. 
The other high yield investment with lesser price volatility are REITs.
This is what I anticipate, if US$ drops in value vs SGD, the gains in the miners will far exceed the gain in value of SGD vs US$. Miners will likely gain 100% to 300%  depending on the price of gold and silver whereas SGD will likely gain 10% – 15% vs US$. The reason is this: If SGD value goes up, it will impact Singapore’s economy, especially in the export and tourism sectors. So most likely MAS will step in to prevent SGD from gaining too excessively vs US$.
Hope this helps.
 
 

Joey Ting replied 4 years ago

Thank you. Is there any brokerage risk?

pcwong Staff answered 4 years ago

I think it best to use a local bank brokerage rather than other overseas brokerage. This is because some of the foreign institutions are highly levered. Singapore’s OCBC, UOB and DBS are in the list of the top 20 safest banks in the world. I use both Hong Leong Investment Bank in Malaysia and UOB Kay Hian in Singapore.

Joey Ting replied 4 years ago

I used UOB Kay Hian too. Just wondering if there is default risk with ETF?

pcwong Staff answered 4 years ago

So far I have not come across any ETFs that have defaulted but ETFs do carry a certain amount of risks. Therefore it is important to know what type of ETFs are on the safe sid eof the bet. Currently any ETFs that short the indices, gold and silver ETFs and gold and silver miners ETFs are the safer bets. You also need to know the size of the fund. The smaller the size the greater the risks. However, do not be too greedy with the gains, Do refer to the historic highs for the above mentioned  ETFs as that was when the 2008 financial crisis happened.