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Saturday, October 20, 2018

Juggar - P2P Lending and Share Financing Platform

Disclaimer: This is our first sponsored article :)

Edmond Tan, one of the Co-Founder at Juggar reached out to us when Juggar did a soft launch a few weeks ago. After a few emails to and fro, I thought that this was pretty interesting and agreed to write an article on it.

What is Juggar?

Juggar is a P2P lending platform for share financing platform. If you are familiar with the other P2P lending platforms available in Singapore, names such as MoolahSense and Funding Societies would come to mind where you will be the "debtor", lending your money to various companies. However, with Juggar, you can actually become the "borrower" and use the money to invest in SGX shares using margin/leverage. In another word, Juggar is a combination of P2P lending + CFD trading.

As a borrower, there is the possibility of paying interest as low as 2% with 30% collateral. I thought this is pretty attractive because as a SCB Priority customer, we were given a fixed rate of 1.6% + 1-month SIBOR (in total, the interest rate we got would be ~3.1%) after pledging 70% collaterals - Leverage - A Double-Edged Sword. In addition, Juggar will provide the loan at a rate of 2.5% (claimed to be the lowest in the market by Juggar) while waiting for the loan to be funded by a lender.

Being a Lender

Being a lender is pretty straightforward, you go to the "Marketplace" and select a loan which you will like to lend to based on the various information such as loan amount, interest rate and maturity date. Do take note that the interest rate stated is on an annual basis and not on the loan tenure.

Being a Borrower

There are currently 40 stocks available for the borrower to buy.

As an example, if I would like to buy 1,000 units of DBS at $24.82. Under normal circumstances, I would need ~$25k cash to do that.

However, with Juggar, I would only need ~$7.5k including the trading commission. Do take note that the loan and fees are only paid at the end when the position is closed. Assuming if the price of DBS increase to $26.00 within the trade tenure, my profit would have been 13.33% [(26 - 24.82) * 1000 - 83.66 * 2] / (7529.66 + 123.38 + 8.57) as compared to 4.07% [(26 - 24.82) * 1000 - 83.66 * 2] / (24,903.66) without using any margin. The losses would also be magnified accordingly. That is why it is a double-edged sword. If you are not familiar with margin trading, I suggest that you read up more first.

Below are some of the questions I asked and Edmond's response:

KPO: When would you be expecting the MAS license to be granted? Technically, Juggar can't go live without one right?

Edmond: Our legal structure do not require us to apply for the MAS CMS license although we have to work with some limitations with our current legal structure. This structure is created in conjunction with our legal consultants and have been acknowledge by NUS Enterprise, SMU IIE and Spring Singapore.

KPO: Let's say if Juggar goes bankrupt/face liquidation, how would it work for both the lenders and borrowers?

Edmond: We maintain a separate account for cash and shares that is not commingled with Juggar's operations. Under the legal documents, it is also stated that we have to maintain a record for each lender and borrowers and their funds/shares is not an asset of Juggar and cannot be pledged for any other purposes.

KPO: At the start, I was told to select to be a borrower or lender. Does this mean after I selected the borrower, I will not be able to lend? In addition, I cannot find the option to change it.

Edmond: Yes, as part of our legal structure, user can only be either a borrower or lender. The change of role form a borrower to lender has to be done by us manually as we need to ensure there is no open positions.

KPO: Let's say if a borrower is unable to top up the difference and you guys had to force sell the shares before the loan period ends. Would the lender still be getting back the full amount? Will it be returned after the position is closed/force sell or would it be reloan to other borrowers until the initial loan period ends?

Edmond: If we force sell the shares, the principal, interest and early prepayment interest will be paid back to the lender. We trigger the force sell at 130% margin ratio (Market value of the shares is 30% more than the Principal of the loan). we do not lend the money out again to other borrowers.
KPO: If that is the case, it seems to be pretty safe for a lender to lend out their money. Under what scenario (if any) would a lender lose his capital?

Edmond: Lender will start losing their capital if in a very short time span (1 day) the share price drop by more than 30% and we did not have enough time to sell off the shares. 1 instance will be that something happen to the company after market close and the next day the market open,the price is down by more than 30%. We ran numbers on STI component stocks, this hadn't happen in the last 20 years.

KPO: What happens if I selected a 90 day period and decided to sell it on the 70th day? Do I pay interest for the 90 days or it will be automatically computed accordingly?

Edmond: You will pay 10% of the interest for the unused period. So for instance the interest for the remaining 20 days is $100, you will pay the lender a penalty of $10 that’s all.
KPO: For a borrower, once the loan tenure ends, I supposed the position will be auto-closed? How would the price be determined then? Or is there a way to extend the loan?

Edmond: Juggar will at its discretion sell the shares at the market price between 4.30pm - 5pm at the day the loan matures.

If you were to use our referral, you will be given a credit of $100 which will only be credited into the account after your first trade. To do that, simply email charlotte@juggar.co with the referral code "KPOCZM" and do keep us (kpooooooooooo@gmail.com) in the cc as well :) For every successful signup and upon your first trade, we will be paid $50.

Juggar: https://www.juggar.co/
LinkedIn: Edmond Tan

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Thursday, October 18, 2018

StashAway - September 2018

I blogged about StashAway Withholding Tax Reimbursement for FY 2017, compiled the total dividends and fees and concluded that the portfolio is pretty sustainable (dividends > fees) without injecting more funds.

In hindsight, CZM's decision to stick with the current P28 portfolio seems to be the better move as compared to a 100% equity (highest risk) portfolio as the stocks market went into another round of correction in the last 2 weeks.

1. ACCOUNT SUMMARY (as of the last day of the month)

Based on the statement (30 September 2018), we gain $310.18.

As of 18 October 2018, the total return has been reduced to just $39.27. In fact, it was negative a few days ago. We lost -$264.43 from investment returns with a huge currency impact of  $303.70. Not good! In our last monthly update, I said that I would have preferred the USD to be weaker because we will be going to the US for our honeymoon. Weaker USD meant that we can convert the same SGD for more USD to invest too.

SGD time-weighted returns: 0.7%
USD time-weighted returns: -4.7%



SGD $990.00 converted to USD $723.01 (USD $722.64 last month)
Exchange Rate:  1.3693 (1.3700 last month)


The fee stated is based on the monthly-average assets SGD $11,674.30 x 0.8% / 365 days * 30 days = $7.68

StashAway VS STI ETF
Since there is no way to compare the performances among the robo-advisors, I came out with a spreadsheet to track our StashAway portfolio performance (General Investing - Risk Level 28) against that of STI ETF which I will be updating on a monthly basis. For simplicity, I shall assume that one can either invest in Nikko STI ETF using POSB Invest-Saver or invest in Nikko STI ETF/SPDR STI ETF using SCB Priority Online Trading (no minimum commission). These would be the opportunity costs while we continue to invest in StashAway.

Apart from the absolute P&L, we should also look at the Reward-to-Risk Ratio where risk/volatility is taken into account. For more information, do read StashAway Clarifications - Reward-to-Risk Ratio. StashAway has the highest ratio of 1.25 which is significantly higher than the other 2 STI ETFs (< 0.4). Let me quote Freddy Lim (Co-Founder & Chief Investment Officer of StashAway), "for every dollar of risk taken, StashAway P28 is producing 1.25 times the return".

This month commentary: All the investments regardless of the platform or underlying ETF are in red/losing money. StashAway is considered to be outperforming the STI ETFs as it is not losing as much. Assuming a capital of $1,000, losing $500 is equivalent to a 50% loss but to earn back that $500 (back to $1,000) requires a gain of 100%. The example may not be intuitive to some but a conservative portfolio will limit the losses and protect your capital.

Going forward it will be even more interesting when the commissions/fees incurred by StashAway exceed that of POSB Invest-Saver. This will be a battle between cheaper/lesser fees and asset allocation/diversification...

I believe there is a need to redo/regenerate the volatility used to compute the Reward-to-Risk Ratio. Do take it with a pinch of salt for now. I have been compiling some data in order to do so :) 

Which is the best? Only time will tell :)

This is the link to our spreadsheet - KPO & CZM StashAway Portfolio VS STI ETF which I have also added to Our Portfolio page.

StashAway Referral Link for Our Readers
Here you go: KPO and CZM Referral Link

You might be interested in previous months update too:
StashAway - January 2018
StashAway - February 2018
StashAway - March 2018
StashAway - April 2018
StashAway - May 2018
StashAway - June 2018
StashAway - July 2018
StashAway - August 2018 + An Unpleasant Experience

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right -->)

StashAway Withholding Tax Reimbursement FY 2017

2 weeks back, I received an email from StashAway titled "You've received a dividend withholding tax reimbursement" but have yet to look into it until a few days ago. Chances are you (StashAway users) would have received it as well.

This was a pleasant surprise because we had long accepted it as one of the cost to invest in the US and were not expecting to get the withholding tax back.

Interestingly, it was stated in one of the FAQs that the taxes can be claimed back and is done by the broker (in this case, StashAway's broker is Saxo). Not sure if this is unique to Saxo or is done by all the other brokers in Singapore. Do leave a comment if you have more information on this :)

Anyway, I realized that only 3 out of the 8 ETFs (TLT, TIP, and CWB) had withholding tax reimbursed so I dropped their support an email for more information. The response I got was roughly similar to what was stated on the above FAQs with slightly more details and a link to a PDF that states the ETFs that qualify for reimbursement:

For the withholding tax (WHT) reimbursement, we do not receive dividend reimbursement for all ETFs but only those that qualify under the QII (Qualified Interest Income) rule.

Only some of the dividend WHT from US domiciled funds (e.g. US government bonds) can be claimed back. As such, we did not receive any dividend reimbursement for XLK and XLY.

For further illustration, you may like to view the Dec 2017 iShares report on QII ETFs. Some examples of QII ETFs that StashAway invests in are 20+ Year Treasury Bond (TLT) and 10-20 Year Treasury Bond (TLH).

Our broker, Saxo, applies for the tax reimbursement on our behalf with the relevant tax authorities and we may not get all of the dividend WHT back. Just to share, the reclaiming of WHT will be done once a year, and we will notify you via email if you have any claimable WHT, which would be redistributed to your portfolio and automatically reinvested. 
- Kathleen

I also took this chance to compile the total dividends we received for the financial year 2017 including the withholding tax reimbursement which comes up to USD $14.64. On the other hand, the total fees charged by StashAway adds up to SGD $7.49 which seems pretty sustainable (dividends > fees). Ideally, the portfolio should grow in the future even without the injection of fresh funds and if the fees > dividends, that would mean that the fees would eventually eat into the capital.

A "Dividends" tab has been added to the spreadsheet - KPO & CZM StashAway Portfolio VS STI ETF but I have yet to update the numbers using the latest statement. Shall get it done over the weekend!

StashAway Referral Link for Our Readers
Here you go: KPO and CZM Referral Link

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)