fk
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Post by fk on Feb 25, 2019 9:48:41 GMT 7
I'm not sure I would describe THB as a volatile currency, for many years now it's been a one way bet. Well, risk technically means straying from an expected result, and even though we often see it meaning under performing, it also refers to over performing. I expect long one way movements to eventually "even out", which is where the risk comes back in. Also it is extremely rare for developed markets to have the currency crash like Thailand did 20 years ago. I probably should have included the word "risk" with "volatility" to be clearer. FWIW I hold THB investments in the SET via an LTF, it has a tax advantage which I don't use but it's a decent way of staying invested in Thai equities, using onshore currency - CG-LTF from UOB is one. I also hold a large amount of legacy THB (purchased at 60+ to the Pound)in cash via fixed deposits, which whilst it cannot truly be described as an investment as such, it does allow me to escape the vagaries of the FOREX markets - I mention this solely to help posters understand why Thailand doesn't feature more heavily in my investments. Yes I think fixed deposits are a reasonable replacement for bonds (especially so in a low inflation/interest-rate environment). Can I ask which sites you use to find out where to get a good rate with a bank you consider safe (big?) ?
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Post by Fletchsmile on Feb 25, 2019 12:05:25 GMT 7
Looking at the first portfolio you posted, and some general thoughts on structure. First some of the positives. It's quite well diversfied, and over 3 years the portfolio would have slightly exceeded the IA Global sector average. That's quite decent since the IA global sector is based on equities, whereas you have 15.3% in 3 fixed income/bond funds and 8.5% in a managed fund. These diversify and bring down risk compared to just equities in your portfolio. So you would have exceeded the returns with lower risk. If you're a bit disappointed with the returns, that's possibly because of the timing of when you invested, rather than anything else. The last year or so has been tough. However, just over 51.3% would have been quite a nice return over 3 years as there have been some challenging times. The portfolio is also positive in each of the last 3 discrete rolling periods. Just on the analysis by Trustnet, I think the 35%-40% in other would be the funds that don't subscribe to Trustnet or don't provide analysis to them. However, I think the portfolio returns would be included as these are picked up by Trusnet even if the portfolio splits aren't. That's a large % to be unallocated/ in other and means te splits need to be taken with a pinch of salt. They do show reasonable diversification though. BTW I've just signed up for Trustnet again after reading this. I use HL for portfolio analysis, but think Trustnet may have a few features that are of interest. So thanks for bringing that to our attention. On number of funds, I wouldn't get too hung up on the actual number. I would note that you seem to chop and change quite a bit though. Before was 11, now was 13. Chopping and changing can be inefficient. For unit trusts with no initial charge and no bid-offer spread, you're really only losing a bit of time in the market so not too bad. For investment trusts and ETFs though you are incurring transaction costs, bid-offer spreads, navigating premiums/discounts so more inefficient than UT. 5 funds wouldn't be enough for me and 20 probably too many, but somewhere between about 8-12 would be OK. By comparison I used to hold 20 funds for my mum's portfolio when I started about 9/10 years ago for her. The total was a bit higher in value, but I've now reduced it to only 8. 20 to be honest was a bit many. However, as I owned quite a lot of them myself it didn't create a lot of extra work. I also wanted to spread the risk more and be conservative, and avoid screwing up rather than chasing stellar returns. I didn't want to be overexposed to any single fund. There were deliberately some duplicates in case certain funds didn't measure up. It was also the first time I was managing a portfolio for her, and at a time after my dad had just passed away, so there was a bit of added emotion in there too It was also the first time managing for a retiree rather than my own previous wealth creation stage. These days I'm comfortable with around 8 for her. That's close to a minimum. I read an article on Trustnet recently about whether 5 funds was enough for a truly diversified portfolio. I'd say it isn't unless you are buying diversified portolfio funds to start with. I di't much like their choice of funds but worth a thought. www.trustnet.com/news/845571/charles-stanley-directs-five-funds-for-a-truly-diversified-portfolioSo in your shoes with the type of thing you're choosing about 8 -12 feels OK. I wouldn't be too hung up on it there, so give or take a couple. More importantly look at what you've got, and does it achieve what you're trying to achieve rather than have you got too many or too little. Also look for duplication and ask why? Occasionally duplication can be OK if you don't have convinction or are uncertain or you already have a high weighting in a favourite fund you don't want to add to. I'd also add that with the funds you are looking at several of them have some good ongoing charges savings on HL. You're ongoing charge would be more like 0.3% give or take than 0.45%. You would also find the portfolio analysis X-ray tools by HL of interest, and your other would be much smaller. On thing HL doesn't give though is an aggregate performance, it only gives all the performances for each individual holding. I like that facility you've used on Trustnet.
All in all, on structure, diversification and performance I wouldn't beat yourself up. We all have areas we could perhaps improve on - particular with hindsight. But I think your core is OK. I would make some changes and adjustments though. Key though is how happy and comfortable you are with things. I think you might be being a bit hard on yourself
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AyG
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Post by AyG on Feb 25, 2019 12:24:51 GMT 7
over 3 years the portfolio would have slightly exceeded the IA Global sector average.er spreads, navigating premiums/discounts so more inefficient than UT. However, the fund selection has been based, at least in part, upon recent performance - it's not the portfolio the OP has actually owned. There is no guarantee that there'll be similar outperformance over the next 3 years. 5 funds wouldn't be enough for me and 20 probably too many, but somewhere between about 8-12 would be OK. This is only a small part of the OP's investments. I expect that there are other funds there which increase the total number of funds owned. For a novice investor, and for those not fascinated by the business of selecting and monitoring funds, 8-12 funds overall is perhaps about right.
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chiangmai
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Post by chiangmai on Feb 25, 2019 12:37:27 GMT 7
I'm not sure I would describe THB as a volatile currency, for many years now it's been a one way bet. Well, risk technically means straying from an expected result, and even though we often see it meaning under performing, it also refers to over performing. I expect long one way movements to eventually "even out", which is where the risk comes back in. Also it is extremely rare for developed markets to have the currency crash like Thailand did 20 years ago. I probably should have included the word "risk" with "volatility" to be clearer. FWIW I hold THB investments in the SET via an LTF, it has a tax advantage which I don't use but it's a decent way of staying invested in Thai equities, using onshore currency - CG-LTF from UOB is one. I also hold a large amount of legacy THB (purchased at 60+ to the Pound)in cash via fixed deposits, which whilst it cannot truly be described as an investment as such, it does allow me to escape the vagaries of the FOREX markets - I mention this solely to help posters understand why Thailand doesn't feature more heavily in my investments. Yes I think fixed deposits are a reasonable replacement for bonds (especially so in a low inflation/interest-rate environment). Can I ask which sites you use to find out where to get a good rate with a bank you consider safe (big?) ? BOT lists the interest rates of all the banks but it doesn't include "specials" or one-offs, to understand what they are at any point in time, all you need do is walk around a good sized shopping centre and look at the signs on the bank windows. With base rate currently at 1.75%, fixed rate offerings are generally around the same level although banks such as CIMB are sometimes a little bit higher over 24 months. Fletchsmile has a thread on the forum that covers this exact same subject so it's worth checking to see if there's anything new on offer. But with base rates being stagnant for a long time I suspect there's very little that's new anywhere. When it comes to banks in Thailand I like and bank with UOB which is a Singaporean bank that is franchised here in Thailand. I was with CIMB for a while but they never seemed to be able to get anything right quickly or the first time, they also wouldn't give me access to their best rates, simply because I am not Thai, this despite me being a "Prefered" customer. Bank of Ayudhya (sp), the yellow bank, is owned by Bank Mitsubishi in Japan which is absolutely huge, as a consequence, there is not much risk involved with bank deposits at Thai banks. It's worth pointing out that even though some foreign banks exist in Thailand, CIMB (Malaysia), UOB (Singapore) and Citibank (US), they are all separate entities that are Thai owned and have almost no connection with their overseas counterparts, from a customer perspective. So don't think that just because you've got say a UOB account in Thailand that you'll be able to transact against that account in say Singapore or the UK, they won't want to know.
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chiangmai
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Post by chiangmai on Feb 25, 2019 12:46:40 GMT 7
Looking at the first portfolio you posted, and some general thoughts on structure. First some of the positives. It's quite well diversfied, and over 3 years the portfolio would have slightly exceeded the IA Global sector average. That's quite decent since the IA global sector is based on equities, whereas you have 15.3% in 3 fixed income/bond funds and 8.5% in a managed fund. These diversify and bring down risk compared to just equities in your portfolio. So you would have exceeded the returns with lower risk. If you're a bit disappointed with the returns, that's possibly because of the timing of when you invested, rather than anything else. The last year or so has been tough. However, just over 51.3% would have been quite a nice return over 3 years as there have been some challenging times. The portfolio is also positive in each of the last 3 discrete rolling periods. Just on the analysis by Trustnet, I think the 35%-40% in other would be the funds that don't subscribe to Trustnet or don't provide analysis to them. However, I think the portfolio returns would be included as these are picked up by Trusnet even if the portfolio splits aren't. That's a large % to be unallocated/ in other and means te splits need to be taken with a pinch of salt. They do show reasonable diversification though. BTW I've just signed up for Trustnet again after reading this. I use HL for portfolio analysis, but think Trustnet may have a few features that are of interest. So thanks for bringing that to our attention. On number of funds, I wouldn't get too hung up on the actual number. I would note that you seem to chop and change quite a bit though. Before was 11, now was 13. Chopping and changing can be inefficient. For unit trusts with no initial charge and no bid-offer spread, you're really only losing a bit of time in the market so not too bad. For investment trusts and ETFs though you are incurring transaction costs, bid-offer spreads, navigating premiums/discounts so more inefficient than UT. 5 funds wouldn't be enough for me and 20 probably too many, but somewhere between about 8-12 would be OK. By comparison I used to hold 20 funds for my mum's portfolio when I started about 9/10 years ago for her. The total was a bit higher in value, but I've now reduced it to only 8. 20 to be honest was a bit many. However, as I owned quite a lot of them myself it didn't create a lot of extra work. I also wanted to spread the risk more and be conservative, and avoid screwing up rather than chasing stellar returns. I didn't want to be overexposed to any single fund. There were deliberately some duplicates in case certain funds didn't measure up. It was also the first time I was managing a portfolio for her, and at a time after my dad had just passed away, so there was a bit of added emotion in there too It was also the first time managing for a retiree rather than my own previous wealth creation stage. These days I'm comfortable with around 8 for her. That's close to a minimum. I read an article on Trustnet recently about whether 5 funds was enough for a truly diversified portfolio. I'd say it isn't unless you are buying diversified portolfio funds to start with. I di't much like their choice of funds but worth a thought. www.trustnet.com/news/845571/charles-stanley-directs-five-funds-for-a-truly-diversified-portfolioSo in your shoes with the type of thing you're choosing about 8 -12 feels OK. I wouldn't be too hung up on it there, so give or take a couple. More importantly look at what you've got, and does it achieve what you're trying to achieve rather than have you got too many or too little. Also look for duplication and ask why? Occasionally duplication can be OK if you don't have convinction or are uncertain or you already have a high weighting in a favourite fund you don't want to add to. I'd also add that with the funds you are looking at several of them have some good ongoing charges savings on HL. You're ongoing charge would be more like 0.3% give or take than 0.45%. You would also find the portfolio analysis X-ray tools by HL of interest, and your other would be much smaller. On thing HL doesn't give though is an aggregate performance, it only gives all the performances for each individual holding. I like that facility you've used on Trustnet.
All in all, on structure, diversification and performance I wouldn't beat yourself up. We all have areas we could perhaps improve on - particular with hindsight. But I think your core is OK. I would make some changes and adjustments though. Key though is how happy and comfortable you are with things. I think you might be being a bit hard on yourself
My initial post was an attempt at humour and I'm not actually beating myself up, I did however want to make it clear to others who might read this thread that I am a novice in this field. I am not entirely pleased with progress during the past year but I recognise and accept what you say is true, it's been a torrid twelve months in the global markets. So I see the opportunity to switch platforms and reduce fees as an opportunity to streamline my approach and I do agree with much of what AyG has said, ultimately if I can reduce the number of funds I would like to do so and I think my latest offering includes just 8 funds which seems to work quite nicely in terms of coverage and manageability - my goal now is to put things in place and then leave it up to the FM's to do their job, hopefully without ever needing to change anything.
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Post by Fletchsmile on Feb 25, 2019 13:06:40 GMT 7
On the actual investments of the first portfolio. Again there's a lot right with it in my view. So bear that in mind. Below are the exceptions rather than the norm. The comments below are key things I'd change: First State Asia Focus and Stewart Asia Pacific Leaders are really duplications. You have 15.4% combined in these. First State / Stewart are the same fund management house just different brand names through history. The funds are similar in nature with similar holdings. First State Asia Focus is newer as well as cheaper - particularly if done thru HL. But although it's newer you know you are basically getting a similar product - different fund managers BTW even though same fund management group. I've also held both these. What I've done though is start to phase out Asia Pacific Leaders and prefer Asia Focus. In your case I'd eliminate Asia Pacific Leaders. I probably wouldn't put all the proceeds into Asia Focus though, and would leave it with a max of around 1/10th 1/8th or 10 - 12.5% max You don't have much in Emerging markets. They have been beaten up in recent years, and looking forward have potential. I'd probably put the excess into something like JPM Emerging Markets. Janus Henderson - HDIVL I used to hold, but I sold it. I was disappointed with it. I also posted about it in a thread on here. Additionally I don't like regular Fixed Income funds in Investment Trusts. Fixed Income is supposed to be for stability. ITs like HDIVL have too many drawbacks. Small funds. Can be illiquid. Can't benefit from economies of scale. Bid-offer spreads, extra transaction costs. It took me a while to exit at a reasonable price and that was at a time of non-crisis / low volatility. Unlike equities where you might want niche players and focus, bond markets are often higher value plays. As you can see performance over 3 years was nothing to write home about. I think Royal London is far superior. Larger funds, economies of scale, UT so no worries on bid-offer, premium, transaction costs etc, and performance over 3 years is very respectable for a bond fund = double HDIVL As I'd like some fixed interest exposure, I'd simply switch it all into Royal London. That would give about 10.6% in the fund. I find Royal useful to generate stable income. It has a high dividend yield and consistently decent returns for a bond fund. Schroder Small Cap discovery. I also hold this. I've been a bit disappointed with it to be honest. Schroder have a strong pedigree in smaller company funds, but doesn't seem to have quite translated that into success here. I'm been thinking recently whether that is due to focus. eg a fund focusing on UK smaller companies allows expertise in this focus in a single country, US smaller companies is another. Asia is a big market as is EM, and I'm less convinced of the ability to do smaller companies across multi/ quite different countries in an Asia and EM focus. One thing to note though is Asia and EMs have had a difficult time in recent years, so maybe it hasn't had the chance yet. Often in the cycle the large caps do well first and smaller companies come in later For now, I've kept a small holding. In your case, I feel 6.3% is high. I don't hold that high a weighting and on a smaller portfolio would be less inclined. So I would reduce the weighting at least. 5% would be a definite max, but around half that would be more apropriate. But at only say 2.5% you may then have to think whether it is worthwhile to have such a small holding. That may link into how many holdings you want. I wouldn't really want holdings below 1,000 pounds in a 50k portfolio. Maybe just 1k - 2k if you really want to keep it. Instead of this maybe a UK or US Smaller companies fund and/or a broader Emerging Markets fund as mentioned above For UK Smaller Companies Funds I hold and like: Marlborough UK Micro Cap (on HL's W50 with a discounted ongoing charge) and TB Amati UK Smaller Companies (not on W50) an even more niche fund JPM Emerging markets again springs to mind. Index Linked Bonds. We've a thread on this and a few posts elsewhere. I think they can have a place. On a 50k portfolio I'm not sure they add much. I really wouldn't want above 5%. But again if only 2,500 you might need to think are you really adding any value, and is that sort of amount going to make much difference. Even over 3 years it has been a drag. 3 years also benefits from a very unusual gain in one year as mentioned on the other thread. We're not going to Brexit twice . I sort of think their best year (singular) is behind it. Index linked bonds are a much more complex holding than people think. There are times they really don't make sense. Are you going to be comfortable identifying those times? If you have a convinction maybe go up to 5%. I probably wouldn't bother on your portfolio size and would prefer sticking that 5% in Royal London - simplifying holdings. If you also converted HDIVL into RL that would give around 15.3% in that fund. A reasonable amount. Wouldn't say it's a mistake to keep if you have a conviction and makes you happy. Just not for me. These would probably be the main changes I would make, one for one. Several of the ones being removed also happen to be the weaker performers.
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Post by Fletchsmile on Feb 25, 2019 13:17:26 GMT 7
I would suggest that the asset classes relevant to your situation, based upon what I know and your proposed portfolio, are: - UK equities - Global equities - Asian equity (probably excluding Japan and Australia) - Index-linked bonds - Conventional bonds All you really need is 5 funds. If you want to tilt your portfolio, you might invest two thirds of the first two asset classes in a "regular" fund, and one third in a small cap fund. This does increase risk, but also increases potential returns, and is a strategy I myself use. Doing this would give you 7 funds. (I wouldn't do this with Asian equity since this would be rather too risky for my taste.) I would want to add:
1) Some exposure to EMs. They've been beaten up over recent years, but will turn around and have potential going forward.
2) European exposure. I don't like relying on global funds to do this. They are often too overweight on the US. I like someone with particular expertise on Europe. Global can be a bit wide.
A lot of the very good performance in recent years on global funds is because of their US weighting. When the US and USD eventually takes a turn for the worse, I don't think the remaining 4 sectors of UK and Asia, conventional bonds and index linked will be all I need.
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Post by Fletchsmile on Feb 25, 2019 13:22:10 GMT 7
A recent article on European funds: The most consistent IA Europe ex UK funds of the decadeMan GLG Continental European Growth is the most consistent IA Europe ex UK fund of the past decade, beating its sector average in every single one of the past 10 years, according to a study by FE Trustnet. www.trustnet.com/News/2272942/the-most-consistent-ia-europe-ex-uk-funds-of-the-decadeDon't hold it, but I was impressed Man GLG had done it in 10 out of 10 years. For me though it reinforces the value of Jupiter European = top peformer in total terms. I've held this fund for about 20 years. When I look at it: first it just picks itself based on its quality, second is it happens to be Europe - a large sector worth having expsoure to.
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Post by Fletchsmile on Feb 25, 2019 14:21:21 GMT 7
Chiangmai I prefer the second portfolio. The individual funds look solid. I just wonder about the portfolio as a whole and its suitability. It looks a bit agressive. Aside for Royal London and the index gilts that's 81% in equities. (FWIW I went for 62.5% equities + 25% Fixed income + 12.5% balanced when choosing a bit more conservative/ balanced portfolio for my mum) My own portfolios are overall high risk in aggregate and not that far from your own. But I need to take higher risk for the returns I want
The index linked gilts exposure is also a bit high for my liking at over 5%. Could also be a drag on performance going forward. Of the 25.6% 3 year performance, remember it made 18.8% in one single discrete 12 month period. The other two 12m were 5.3% and 0.4%. The preceding period was also only 3.5%. That very good 12 month period was around the Brexit uncertainty. It wasn't necessarily because inflation picked up - which is why many people think they are buying this type of investment. It increased for other reasons Do you really understand what you're buying here? I think you could answer probably yes for the others, but not sure for this. For me they're not just a buy and hold forever investment. I'd be happy holding the other individual funds, knowing what I have and they make sense. Inflation linked bonds have periods where they don't really make sense. So they might debatedly have some value at the moment, but when will you change ? Would some form of strategic bond suit you better. These often afford exposure to gilts, coprporate bonds, high yield bonds etc, among others. You rely on them to time the exposures for you whereas with an ILG fund I think you need to call it, as it offers no escape aside from sell when it's not right or uncertain to hold them. They may offer the defensive properties you're looking for.
You have 3 very good international funds: Baillie Gifford, LT and Fundsmith. Not sure I would want all 3 though. The latter are 2nd and 3rd over 5 years, as we've discussed elsewhere. They are narrow in focus though, with under 30 holdings each. Baillie Gifford ranks 13th but has around 100 holdings, and is better diversified. It is also the only one of the 3 that has EM expsoure, which you are otherwise a bit lacking here. Although if you hold UOB Good Corporate Governance in Thailand you also have EM exposure as well as host country expsoure, which further reduces the gap. Baillie Gifford has nearly half in US, then 20% in GEM, 17% Europe and 13% Asia, Fundsmith 2/3s in US, rest in Europe and UK. LT: 1/3 US, 1/3 UK, 20% Japan and rest Europe If held via HL. The charges on Baiilie Gifford and LT are just over 0.5% and Fundsmith there and elsewhere nearly 1% I'd tend towards dropping Fundsmith. Then that would mean some rebalancing: - Maybe some of it in Baillie Gifford to get a bit more EM exposure unless you pick a specific EM fund. - Look at making the portfolio overall a bit less aggressive - perhaps bring back the managed fund or more fixed income. - You don't have any small company exposure. Smaller companes can be powerful longer term. I would tend towards US and/or UK I mentioned a couple of UK ones I hold above for the UK. I've also held Schroder US Smaller companies for a long time. If with HL the class Z costs 0.86% after discount. I wouldn't buy the other classes these days - particularly thru other providers - as they can be expensive. [Edit: If starting from scratch and completely objectively without the comfort I've had for many years, maybe the ones below might be worth a harder look] Schroders have a particular strength in smaller companies which I first noticed in my days when I used to work for them decades back in UK. One reason I picked the Small cap discovery - a newer fund - which hasn't worked out as well though, and think makes sense oif you want to cut it. A US smaller companies fund would help maintain your US weighting if you got rid of fundsmth. T Rowe also have a fund in this space. Some of their US funds are among the best as we've mentioned elsewhere and that holds similar for their smaller companies fund T Rowe Price US Smaller Companies. JPM US Small companies is also worth a look. JPM's European smaller companies Investment Trust is also a strong fund, but don't think you really want a second Europe specific fund, and you've also Europe exposure in your global funds Worth looking at the UK smaller companies space though. US has done better in recent years, but don't let that put you off UK completely and don't just go on past performance, given the strong US equities and USD run in recent years
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AyG
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Post by AyG on Feb 25, 2019 14:34:03 GMT 7
I would want to add: 1) Some exposure to EMs. They've been beaten up over recent years, but will turn around and have potential going forward.
2) European exposure. I don't like relying on global funds to do this. They are often too overweight on the US. I like someone with particular expertise on Europe. Global can be a bit wide.
A lot of the very good performance in recent years on global funds is because of their US weighting. When the US and USD eventually takes a turn for the worse, I don't think the remaining 4 sectors of UK and Asia, conventional bonds and index linked will be all I need.
Surely by investing in Asia there is a significant EM exposure. However, broader EM funds are investing in South America, which is (a) politically very unstable, (b) heavily dependent upon commodities. Personally I don't see a need for South American exposure. As for Europe, how is it relevant to the OP's situation? And really, given the utter mess that is the European Union (and particularly the Eurozone), can one honestly be positive about the outlook for the region? (That said, I am fairly keen on the Nordic countries and have a modest exposure through the Xtrackers MSCI Nordic UCITS ETF. Probably not an investment for most people.) As for global funds being overweight in the US (and I don't know whether this is true or not), surely the reason would be because the highly paid and (one hopes) experienced fund managers see more potential there than in other countries. There's no point in keeping a dog and barking oneself.
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Post by Fletchsmile on Feb 25, 2019 15:23:49 GMT 7
I would want to add: 1) Some exposure to EMs. They've been beaten up over recent years, but will turn around and have potential going forward.
2) European exposure. I don't like relying on global funds to do this. They are often too overweight on the US. I like someone with particular expertise on Europe. Global can be a bit wide.
A lot of the very good performance in recent years on global funds is because of their US weighting. When the US and USD eventually takes a turn for the worse, I don't think the remaining 4 sectors of UK and Asia, conventional bonds and index linked will be all I need.
Surely by investing in Asia there is a significant EM exposure. However, broader EM funds are investing in South America, which is (a) politically very unstable, (b) heavily dependent upon commodities. Personally I don't see a need for South American exposure. As for Europe, how is it relevant to the OP's situation? And really, given the utter mess that is the European Union (and particularly the Eurozone), can one honestly be positive about the outlook for the region? (That said, I am fairly keen on the Nordic countries and have a modest exposure through the Xtrackers MSCI Nordic UCITS ETF. Probably not an investment for most people.) As for global funds being overweight in the US (and I don't know whether this is true or not), surely the reason would be because the highly paid and (one hopes) experienced fund managers see more potential there than in other countries. There's no point in keeping a dog and barking oneself. That very much depends on the Asia fund you pick. Asia doesn't equal EM. Singapore, HK obviously aren't EM. Many Asian funds also include Australia. If looking for EM I really don't want these. South Korea I would say is more developed than emerging these days etc.
EMs by nature are often politically unstable. Thailand for instance. Indonesia's politics leaves a lot to be desired. Or politically undesirable in other ways: Vietnam, Laos, Cambodia all Asian with dubious politics, and India of course.
Only picking EMs in Asia misses opportunities, that crop up from time to time. You might personally not like LatAm but look at the Bovespa up 27.5% last year when you probably lost money overall, up 27% in 2017, up 39% in 2016. Not to say you want to be in all EM markets all the time, just that it varies.
JRS- Russia is another useful holding I've had in the last few years. (Think you suggested that for me when I wanted to take a Russia view - thanks BTW ) +75% in 2016, -4% in 2017, only down 2% in 2018 when most others tanked. South Africa and some European countries crop up as value from time to time. So a good fund manager that can rotate and call to include others outside Asia such as Brazil and Russia as appropriate is useful.
I'd agree that overall I currently prefer Asia EMs to LatAm EMs but it's nice to not be limited, and to include the Brazil's, Russia etc as appropriate
If you ask why Europe is relevant to OP, you might as well ask why any country other than Thailand and UK is relevant. Just because an area may be in a mess politically and even economically doesn't mean you automatically exclude it. If that were the case no-one would have been holding US, UK, Europe after the GFC. They were all in a mess. But if you bought the right things (or even most things) during that mess (as opposed to before) you did very well. You also need to look at how much is priced in, value and longer term potential etc.
US has had a very good run as has USD. At some point Europe will get it's turn.
The biggest reason global funds are heavily exposed to the US is that by value the US makes up the biggest % of global stock markets. The MSCI world index has approx 62% in US stocks.
So these global funds aren't necessarily overweight at all. Often just tweaking the index weightings. So no, it's not often where they see most value, just broadly following the herd. Perhaps sheep rather than dogs may be more accurate Many just happen to have found themselves on the right pastures in recent years as the US has done well.
Where were most of these global funds in the lost decade of 2000 -2010? When US index (excluding divs) went nowhere? Most were still mainly in US equities. As such for this 10 years US centric global funds really were dogs and you'd have been better off barking yourself
The global funds I have like LT are because of their stock picking abilities bottom up rather than country picking abilities. Fundsmith is similar. To be honest I can't think of many global funds that are exceptional at calling the right countries. I don't hold any, though it isn't really my strategy to look for them
Bottom line: They are overweight for what I want.
To ask you in return. Why would I as someone living in Thailand as a host country and UK as original home country want nearly 2/3 s in US? I also really want to avoid that noughties scenario.
Funnily enough during that decade EMs were a much better place to be.
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Post by Fletchsmile on Feb 25, 2019 21:54:09 GMT 7
WTAN which was in Chiangmai's original portfolio but didn't make the cut for the 2nd is quite interesting to look at. not just for performance but also: from the Provider's Own factsheet in the download section at the link below: www.trustnet.com/factsheets/t/he09/witan-investment-trust-plcTheir multi manager approach and which managers they use: Manager breakdown - Manager Region % Lansdowne Partners Global 15 Pzena Global 14 Veritas Global 15 Artemis UK 8 Heronbridge UK 6 Lindsell Train UK 9 Crux Europe ex-UK 4 SW Mitchell Europe ex-UK 4 Matthews Asia Pacific 11 GQG Emerging 5 Direct holdings - 10 Total may not sum to 100% due to rounding. Geographical Split: Regional breakdown (%) n UK 29.4 n North America 22.3 n Europe 18.5 n Far East 14.7 n Investment Companies 9.4 n Japan 5.3 n Other 0.4 Benchmark: bearing in mind these are equities not other asset classes, and that the main target market is UK investors Witan’s benchmark is a composite of: 30% FTSE All-Share (UK), 25% FTSE All-World North America, 20% FTSE All-World Asia Pacific, 20% FTSE All-World Europe (ex UK), 5% FTSE All-World Emerging Markets. That's quite a balanced geographical split. Important to bear that balance in mind if looking at performance. Many other global funds are heavily US weighted like the MCSI world index, so their 5 year historic performance for example will look better than WTAN because of that skew.
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chiangmai
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Post by chiangmai on Feb 26, 2019 8:49:08 GMT 7
I've taken on board many of the suggestions that have been made but in some areas I've compromised, here's where I am currently:
I've tried to tone down the aggressive nature of the portfolio but it remains at 78% equities, which is OK by me. Rather than eliminate Fundsmith entirely I've reduced it to a minor holding....it's an emotional thing! Increased the bond holdings and derisked them by splitting them with a second holding. Added US smaller companies TBD Added a separate EM, TBD
I've put all of this into a spreadsheet because it helps me better understand the data, plus it allows me to model the portfolio on a what if basis, it's a me thing, it's how I do these things! I've had a good long fight with myself over EM and have decided there's two types of EM, ones I know of in Asia and others that are unknown to me elsewhere globally - in the final asset classification I've separated these for my benefit. Why? Well, China is classified as an EM but it's a huge economy, one that I have confidence in and I don't think it should be clustered with the likes of the PI or say Venezuela, or similar.
I haven't yet re-read all of the more recent posts but I will, yesterday was my 70th so we were celebrating and I ran out of time - I'll get back on the job!
With regards to the total number of funds - this is now up to 8, plus my Thai LTF, plus my Vanguard holding - I'm OK with this.
It's all still WIP and may change yet again so stay alert!
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AyG
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Post by AyG on Feb 26, 2019 9:42:58 GMT 7
If you ask why Europe is relevant to OP, you might as well ask why any country other than Thailand and UK is relevant. One logical starting point for any asset allocation by region is to start with a global, market-weighted allocation. Such a portfolio is going to give you global average returns (before costs). That's something like iShares Core MSCI World UCITS ETF. One then needs to consider (a) how can I make the asset allocation more appropriate to my economic circumstances, and (b) how can I get better than market average performance? (a) can make one tilt the portfolio towards one's home and related economies, so in the OP's case, for this particular portfolio, this would mean increasing exposure to Thailand and other Asian countries. (b) can make one: - increase the weight in income stocks and small caps - reduce allocation for countries with unreliable governments, massive corruption, and poorly run economies - chose active management over passive One may also wish to add a thematic overlay, such as avoiding economies which are overly dependent on oil given that oil may not have a great future, or adding to economies which have a rapidly growing middle class. When it comes to Europe, given the OP's circumstances, I see no compelling reason to go beyond a market-neutral allocation.
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Post by Fletchsmile on Feb 26, 2019 12:46:59 GMT 7
If you're managing a global equity fund for clients/investors wanting global exposure, starting with the the MSCI World as a market weighted allocation and then adjusting it for your views perhaps makes sense. On the other hand, I'm not a global fund manager managing money for my clients/investors. I'm managing for me. When managing my own money, it really doesn't make sense to me to start with a 2/3 s weighting to the US and then try and make it more appropriate to my economic circumstances. Why would I would to start with 62% US equity and perhaps more importantly USD risk? It starts so far away from where I want to be. Such a baseline would have crucified me if I was retired in Thailand and living off a portfolio with such a baseline in the noughties. 1 Jan 2000 to 31 Dec 2009: > S&P went from 1469.25 to 1115.1 = a fall of almost a quarter/ 25% . That's before charges/ transaction costs. You'd probaly have dividends of 1-2% p.a. but still underwater > USD lost 11% in value vs THB . Again before charges/ FX costs of converting USD into THB I'm a Brit living in Thailand. No connection whatsoever to the US, and no particular use for USD day to day. I'd much rather start recognising my UK and GBP needs as well as my Thailand and THB needs, and adjust those for global exposures to improve risk adjusted return. Fair point on Europe if you see no compelling reason to go beyond a market neutral allocation. Some may want to be overweight, some underweight, some neutral. It should have an allocation though. Most global funds are not the ideal way to access the best of the best in Europe. That's where a specific fund like Jupiter European comes in, or JPM Euro Smaller companies IT that you like On Europe, the below article a few days back made some reasonable points. The question of whether the ugly duckling becomes a swan... www.trustnet.com/news/2273433/will-ugly-duckling-europe-ever-become-a-swan
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