Investment Stuff - alpha, beta, sharpe ratio

The HSBC fund fact sheets have all these figures that I didn't know what they meant, so I did some googling and found out.

Alpha - The higher the better. A positive alpha means this fund outperformed the benchmark by that percentage (1 = 1 percent better). A negative number is bad.

Beta - measures volatility. The lower the better. A beta of 1 means this fund is as volatile as the market. Utilities and bonds have a low beta, tech stocks have a high beta.

Sharpe Ratio - higher the better, measuring risk adjusted performance. Wikipedia has a good example so I'll just plagiarize here:

"As a guide post, one could substitute in the longer term return of the S&P500 as 10%. Assume the risk-free return is 3.5%. And the average standard deviation of the S&P500 is about 16%. Doing the math, we get that the average, long-term Sharpe ratio of the US market is about 0.4 ((10%-3.5%)/16%). But we should note that if one were to calculate the ratio over, for example, three-year rolling periods, then the Sharpe ratio could vary dramatically."

So you should look for funds with at least a Sharpe Ratio of 0.4, if not more.

The ideal fund would have a high alpha, low beta, and a high sharpe ratio. In English that means you want a fund that outperforms its benchmark, has low volatility, and has a higher risk adjusted return than the S&P 500 (10%) as compared to 30 year Treasuries (3.5%).

Best way to automatically invest if using HSBC in HK

First, if you go to the branch and talk to a wealth manager, they will steer you towards their Wealthinvest Insurance plan, which blows.

Of course, what's not clear online is the 'early encashment charge' which is what they charge you if you withdraw before 10 years. During year 1, it's 50%, and it rapidly goes down (50%, 30%, 21%, 17%, 14%, 12%, 10%, 8%, 6%, and finally 0%), but it's definitely not flexible. Add on top the 2% fee/year you are paying for their platform, and you can quickly conclude that this is not a good plan.

The better plan (which they will steer you away from) is the Unit Trust Monthly Investment Plan. The reason they will use is that you will get charged 5% every time you buy a fund. Of course, they neglect to mention (and they tell me actually that you can't actually buy) their no fee funds with the UTMIP :

The 27 No Fee Unit Trusts available from HSBC HK as of 6/23/2011

The UTMIP plan can be stopped at anytime (I set mine to stop after 1 year automatically), has a 1000 HK minimum per fund, and if you buy the no fee funds there's no 5% fee. You only pay for the funds management fee (which is the same with Wealthinvest) and if you stop before the year is up there's another 1% charge.

This is a much, much better deal than the Wealthinvest plan. The Wealthinvest plan is only worth it if you love the 44 funds in the plan they are offering, and don't plan on touching it for 10 years, and like the idea of paying for some capital preservation insurance if you die (basically, if the amount of investments goes below your principal and you die within the 10 years, there's a death benefit that covers the difference, up to 500k USD).

I emailed my wealth manager a screenshot of my confirmation screen buying my no fee fund of choice using UTMIP, just to make sure he knows for sure that what his colleague was telling him was not true.

Just changed RMB

Went to the HSBC counter here in Tsuen Wan. The rate I got was 117.150.

According to google, the spot rate today is 116.695734.

So I paid about 4/10ths of a percent

Buying RMB

There's some things you should know if you are trying to buy RMB in Hong Kong.

Generally, you can only buy RMB with HKD. Any other currency you want to use to buy RMB must be converted to HKD first.

Then, there's a daily purchase limit of 20k RMB per day for HSBC (and BOC HK, and probably all other banks). Yes, there are restrictions even though the RMB account does not reside in China.

The rate you get if you buy RMB at HSBC isn't as good as the street money changers. The difference is negligble though - only a .1% difference last I checked (.874 from HSBC vs .875 from money changer). In total, it's a .6% charge from HSBC vs a .5% charge from street money changer compared to spot rate.

However, the main benefit to using a money changer is that they don't care about your identity, so you can change as much as you want at a time (provided they have the cash). This means you will be carrying cash though, so depending on your situation it may not be worth it.

Here are the 'indicative rates' from HSBC for today 3/15/10:

1 USD = 7.745993385 HKD from USD to HKD

1 CNY = 1.144 HKD from HKD to RMB (You get 874 RMB if you exchange 1000 HKD)

Here are the spot rates according to google for today 3/15/10:

1 USD = 7.75819265 HKD

1 RMB = 1.13651316 HKD (You get 875 RMB if you exchange 1000 HKD)

Best way to move money from US to HK

There's a couple of ways to move money around, but some are better than others.

From doing some internet research and some of my own investigation, here's the best way to do it if you use HSBC.

First, for your local Hong Kong HSBC account, be sure to setup a USD denominated account. You will transfer money to this USD account first. There should not be any charge for this service (if you transfer 10k from your US HSBC account, 10k will appear in your HK HSBC account). I transferred money using the Global View feature of my online account.

Now, if you were to try to do a transfer from your US HSBC account into your HK HSBC account directly from USD to HKD in one shot (transfer initiated from your US based online account), the charge will be about 1% over the current spot rate.

If you instead transfer from your US HSBC account to your HK HSBC account as USD first, then exchange from USD to HKD locally (using your HK based online account), the charge is about .15% over the current spot rate.

PCCW Blackberry Enterprise Service now charging for GPRS data

Be sure to get the 18hkd/month 30mb plan for local gprs data if you use Google Maps or any other 3rd party application that uses data, as grps data is now being billed. This was not the case previously.

There is no such plan for non-local data, so if you are overseas try to restrict your usage to plain blackberry browser usage.

Kodak Fotomax to print and scan documents

Lots of people in Hong Kong don't have a printer/scanner. I sure don't. So when HSBC emailed me some documents to sign and email back, I had to find a place to do it.

Luckily, my local Kodak Fotomax center which is usually a place to get photos developed can also print and scan documents off a thumb drive.

The cost is modest - $8 HKD per document to print (no minimum), and $10 HKD per document to scan, minimum of 3.

The scanned documents get burned onto a CD, which explains the minimum charge... I asked if they could just put the scanned docs onto my thumbdrive, but the staff said that they normally burned the scans onto CD.