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Post by Fletchsmile on Feb 26, 2019 13:22:51 GMT 7
... For quite a while now I've wondered about home country bias for those in Thailand, but have not found any information on it anywhere.
I agree that up to about 25% for a home country that is a small but developed market seems reasonable but have wondered how much is reasonable for an emerging (and massively corrupt) country such as Thailand. I have thought that about 10% as a maximum, but then also decided it was too small of an amount to make a difference on it's own, but for someone with Thai fixed income (bonds/CDs) it would help. For example a 60/40 allocation with 50% in global equities and 10% in Thai equities would end up with a 50% THB based portfolio which is a reasonable compromise between currency upside and downside risk and also concentration risk (provided 40% in fixed income was suitable for their risk tolerance).
I've also wondered about tilting towards the sounding markets to lower the concentration risk. There is an ETF in my home country that is Asia ex-Jp (ex pacific), so it is 70% emerging Asian countries which also make up 70% of EM by capitalisation, and the other is 30% developed asian countries (HK/SG/Korea). I haven't been able to find any information as to whether the surrounding markets are correlated with Thai currency though unfortunately. 18% seems like a lot for such a large amount of emerging markets, especially in addition to 7% Thai, but I suppose if you live there, then the increased risk of higher volatility markets is countered by the fact that you purchasing power is somewhat tied to it.
Of course the obvious and ideal solution would be a global index that is THB hedged. It would remove upside THB currency risk without adding in any concentration risk, but I won't hold my breath for that to arrive any time soon. It only arrived in my developed home country a couple of years ago.
I do like the idea of a compromise between Thai and Asia though, rather than my earlier thoughts only of one or the other. I think if I pulled the trigger and did this, I wouldn't go as much as yourself with 25% total, but 20% might be ok (7/13 Thai/Asia).
Also one thing that often gets lost is that a 25% equity allocation to Asia, does not mean 25% of your wealth. If you have a 60/40 portfolio, then 25% of the equities portion means you only hae 15% of your total wealth in it.
The last piece of the puzzle would be THB fixed income. For a person living here permanently, I suspect you would want most of your fixed income in THB. But then again, in such a volatile currency, and with much of your goods being imported, maybe it would be an idea to divide it between THB and USD bonds. The THB for purchasing power of things made in Thailand and the USD for purchasing power of imported goods.
Thanks for your thoughts. It's nice to (finally) find others have had the same ideas.
The question of how much of your assets in Thailand and how much in THB can be a tough one. I used to aim for 1/3 of assets in Thailand 1/3 UK and 1/3 offshore. These days it's more like half in Thailand as we now have a house and condo here, and I tended to retain money I earned here rather than transfer overseas. Also money is now in the Mrs.Name and kids name and there's thing like tax and inheritance tax to think about
For your investment portfolio that's a slightly different question than total wealth or assets as you recognise. Also what your exposures are are more key than where you hold them. Though I would generalise and say if you want Thai equity expsoure the best way to get it is in Thailand and if you want non-Thai /global exposure you could well be better outside Thailand.
You need to look at your assets vs liabilities and income vs expenses. Current and future.
I currently have about one third of my portfolio in Thai equities via mutual funds. Partly historic as I invested earned income into Thai LTFs and RMFs to obtain tax breaks, and they have performed quite well. Partly because I deliberately recognise that I still have a lot of Thai liabilities and expenses to come in the future.
A big factor for me is paying school fees for the next decade. That's quite a large liability in THB. So I wanted THB assets - don't want to be taking FX risk on the kids future - that will grow above inflation. The particular inflation for school fees tends to be increases of 3% - 4% p.a. THB cash and/or bonds won't meet that inflation rate. Thai equities are a logical fit.
I also need to think of university fees. Likely to be in GBP, but who knows AUD may be possible or SGD. Singapore would be cheap too
There's a couple of threads elsewhere, and Singapore and SGD assets can be useful for someone in Thailand, given the stronger correlation of SGD/THB whereas GBP/THB and USD/THB fluctuate much more.
Going wider Asia exposure generally can help too if you're uncomfortable with Thailand. I'm comfortable these days investing in Thailand and Thai equities, after doing that for 20 years though. Comfort levels is important with your investments. I took the decision to learn and experience the Thai makets early on.
Your comment on wanting most of your fixed income exposure in Thailand is interesting. In an ideal world I would have a significant part of it in Thailand, but would still recognise the opportunities elsewhere. In reality the Thai fixed income market just doesn't have what I want. So I've currently almost no Thai fixed income. Prefer THB cash.
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Post by Fletchsmile on Feb 26, 2019 14:33:36 GMT 7
Chiangmai If you've some time on your hands, have a look at using Pivot tables in Excel. Later versions of excel these days also have tutorials on how to use. They're very useful for the type of thing you're doing. Just think what data you want to capture, organise it into the right rows and columns, i.e a table (no spaces) then start your pivot table that feeds off that data table. The beauty of pivot tables is you can have multiple pivot tables feeding off one original data table. So you can slice and dice however you want, eg have a table to look by asset class, another by geography, another by fund management house, asset class then geography, geography then asset class etc. You can easily throw in whether you want the values as %, GBP amount etc. Once constructed you just add another line for a new fund, click refresh and all the tables update automatically without you having to worry about formulas
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fk
Crazy Mango
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Post by fk on Feb 26, 2019 15:06:13 GMT 7
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
A few points on this.
If you prefer me not to join in, tell me to bugger off and will not bother you.
Mistaking currency risk for diversification risk
You should be careful to not mix up currency diversification with company diversification.
Why invest in more than 1 company. Why invest in more than 1 sector. Why invest in more than 1 country. If you can answer the first, you can answer the last.
The problem you face is is not diversifying into more companies or markets, it is currency risk. They are not the same.
For someone in the UK, an easy solution is a global fund hedged into the UK currency. You then have maximum company diversification without currency upside risk.
USD risk is not reduced by avoiding US companies
Avoiding US equities does not avoid USD risk.
Firstly, if the USD is affected, the entire world is affected.
Secondly, quite a lot of the income from businesses in the UK come from exporting, which has a huge USD influence as most of the world trades in USD. Thirdly, about 40% of the income from US companies is from countries outside the US.
Thinking we know more than the entire market
Whether you say it as straight out or not, straying from the cap weighted index is saying you know more than the entire market, and making a bet on it.
These opinions come from everywhere, even from people at the top.
Was it Bogle or Buffet that laughed at the idea of investing in Europe, giving the example that France just passed a law about a 35 hour work implying people had no motivation to work as hard as someone in a capitalist country like the US. My argument against that is that if this is the case, then it is also priced in.
Others say the US market is over priced, which was said by people in the US in 2013, '14, '15, '16, '17, '18, and anyone who avoided the US because it was so 'over priced' have missed out on a lot of money.
I have given up on listening to anyone (this is not directed specifically at you) and instead accept that nobody really knows more than the rest of the market as a whole regardless of whether they think they do, and I use that as a foundation when constructing a portfolio by investing in the entire world. Then currency hedge to remove home currency risk without sacrificing company/sector/country diversification.
Hopefully I have not been too in-your-face. Some people get p**sed off when people disagree with them.
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Post by Fletchsmile on Feb 26, 2019 15:13:11 GMT 7
A few points on this.
If you prefer me not to join in, tell me to bugger off and will not bother you.
The more the merrier ... and useful
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fk
Crazy Mango
Posts: 37
Likes: 8
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Post by fk on Feb 26, 2019 15:27:41 GMT 7
The question of how much of your assets in Thailand and how much in THB can be a tough one. I used to aim for 1/3 of assets in Thailand 1/3 UK and 1/3 offshore. These days it's more like half in Thailand as we now have a house and condo here, and I tended to retain money I earned here rather than transfer overseas. Also money is now in the Mrs.Name and kids name and there's thing like tax and inheritance tax to think about
For your investment portfolio that's a slightly different question than total wealth or assets as you recognise. Also what your exposures are are more key than where you hold them. Though I would generalise and say if you want Thai equity expsoure the best way to get it is in Thailand and if you want non-Thai /global exposure you could well be better outside Thailand.
You need to look at your assets vs liabilities and income vs expenses. Current and future.
I currently have about one third of my portfolio in Thai equities via mutual funds. Partly historic as I invested earned income into Thai LTFs and RMFs to obtain tax breaks, and they have performed quite well. Partly because I deliberately recognise that I still have a lot of Thai liabilities and expenses to come in the future.
A big factor for me is paying school fees for the next decade. That's quite a large liability in THB. So I wanted THB assets - don't want to be taking FX risk on the kids future - that will grow above inflation. The particular inflation for school fees tends to be increases of 3% - 4% p.a. THB cash and/or bonds won't meet that inflation rate. Thai equities are a logical fit.
I also need to think of university fees. Likely to be in GBP, but who knows AUD may be possible or SGD. Singapore would be cheap too
There's a couple of threads elsewhere, and Singapore and SGD assets can be useful for someone in Thailand, given the stronger correlation of SGD/THB whereas GBP/THB and USD/THB fluctuate much more.
Going wider Asia exposure generally can help too if you're uncomfortable with Thailand. I'm comfortable these days investing in Thailand and Thai equities, after doing that for 20 years though. Comfort levels is important with your investments. I took the decision to learn and experience the Thai makets early on.
Your comment on wanting most of your fixed income exposure in Thailand is interesting. In an ideal world I would have a significant part of it in Thailand, but would still recognise the opportunities elsewhere. In reality the Thai fixed income market just doesn't have what I want. So I've currently almost no Thai fixed income. Prefer THB cash.
Thanks very much for your reply. Good point on assets, liabilities, income, spending.
Unforutnately no assets or income in THB, but on the plus side, no liabilities in THB either. It is all about expenditure, which is all in THB (well not accounting for goods here that are imported).
Thanks god I have no kids and that my partner supports herself from her earnings in THB.
If there is one thing I'm jealous of, it is that I can not purchase land in Thailand. It is really the ultimate currency hedge for expenditure. A THB hedged global equities fund would be the next best thing but I don't believe there is one. Besides THB equities which has a high concentration risk of just 50 companies, the last thing I can think of is fixed income say in bonds or cash deposits, but my home currency is down vs USD and THB is up, so it seems it is just about the worst possible time to bring it in.
But at some point this will turn around and I need to face the reality of bringing some assets to be linked to the THB, and this is the most basic starting point. I am finding it a hard hump to get over due to the corruption here. Maybe an international bank will help ease my mind.
Interesting point about school fees being above inflation. I wonder how this is affected by those investing outside THB. Some say that PPP is maintained when you invest outside that country, but in an emerging market I suspect it may not hold up, which is another reason to invest in THB based assets.
If you see any threads on currency correlations especially with Thailand, please pass it in. That is very interesting regarding SGD/THB.
Edit: wow just saw the SGD vs THB and it is freakishly close! Ah even vs the CHY it is much more stable, and they make up around 1/3 of the EM market.
Oh regarding fixed income, I meant that broadly as bonds or cash deposits, basically something that is "in" THB so there is no currency risk.
Thanks again for the insights.
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Post by Fletchsmile on Feb 26, 2019 16:32:52 GMT 7
Mistaking currency risk for diversification risk
You should be careful to not mix up currency diversification with company diversification.
Why invest in more than 1 company. Why invest in more than 1 sector. Why invest in more than 1 country. If you can answer the first, you can answer the last.
The problem you face is is not diversifying into more companies or markets, it is currency risk. They are not the same.
For someone in the UK, an easy solution is a global fund hedged into the UK currency. You then have maximum company diversification without currency upside risk.
USD risk is not reduced by avoiding US companies
Avoiding US equities does not avoid USD risk.
Firstly, if the USD is affected, the entire world is affected.
Secondly, quite a lot of the income from businesses in the UK come from exporting, which has a huge USD influence as most of the world trades in USD. Thirdly, about 40% of the income from US companies is from countries outside the US.
Thinking we know more than the entire market
Whether you say it as straight out or not, straying from the cap weighted index is saying you know more than the entire market, and making a bet on it.
These opinions come from everywhere, even from people at the top.
Was it Bogle or Buffet that laughed at the idea of investing in Europe, giving the example that France just passed a law about a 35 hour work implying people had no motivation to work as hard as someone in a capitalist country like the US. My argument against that is that if this is the case, then it is also priced in.
Others say the US market is over priced, which was said by people in the US in 2013, '14, '15, '16, '17, '18, and anyone who avoided the US because it was so 'over priced' have missed out on a lot of money.
I have given up on listening to anyone (this is not directed specifically at you) and instead accept that nobody really knows more than the rest of the market as a whole regardless of whether they think they do, and I use that as a foundation when constructing a portfolio by investing in the entire world. Then currency hedge to remove home currency risk without sacrificing company/sector/country diversification.
Hopefully I have not been too in-your-face. Some people get p**sed off when people disagree with them.
Would agree with a lot of what you say.
One thing I would say is that the various risk categories are not nice simple compartments and often aren't that esaily segregated. Not as simple as company risk and/or currency risk. Also need to throw in for example liquidity risk, market risk (systemic as well as belonging to the individual company/ ideosyncratic), legal risk, operational risk, other financial risks such as tax. Not forgetting also credit risk, be it sovereign, country or company specific.
Then there are the natural competitive advantages of particular countries, eg I like US for technology, Singapore for property, some countries are resource rich. So a company in the same sector in a different country may be a different proposition for many reasons.
Even currency risk you can divide into various categories strategic, transactional, translational. And you could push it further to look at competitor risk if they have different currency base.
I would agree with a statement that USD risk is not eliminated by avoiding US companies. On the other hand generally the more US companies you include in your holdings the more USD risk. That's the key point I was making on linking US equity exposure with US risk. The more US equity exposure you take on the likely more USD exposure you will create. Particulary with funds where they won't be the exception companies but a number of companies
While these days there are some truly global large companies/MNCs, once you start getting down to the middle and small tier companies they will have much more of their revenue and costs in their home country - although there are always exceptions this on average holds true. A mid or small UK company is likely to sell and buy more domestically in the UK than it does in the US, and hence have more GBP exosure; a mid or small US company will sell and but more domestically than in the UK etc. Your own stat of 40% reinforces this, 40% is overseas but 60% therefore domestic. Domestic trade is very likely done in domestic currency. A key point. 40% seems high to me BTW. But even accepting that it still holds more is domestic.
Of that 40% (overseas) also think what proportion will remain in USD. I'd guess most. While in Europe/UK, USD trade may still dominate overseas, the % traded in GBP and EUR will be higher than the % in GBP and EUR for US companes.
If one looks at exports as a % of GDP, US is one of the most self-contained countries at around 10%-12% give or take a couple of % points. UK is more volatile but averages around 25%. That higher degree of being US self-contained also affects the balance. Again USD.
It's for these type of reasons I make the link on adding US equities will likely add USD exposure. While removing US equities will likely reduce USD exposure. However, it will not eliminate it.
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As a fund manager it may be valid to say that deviating from an index suggests you think you know more than the market. As an individual I would totally disagree with saying that deviating from the market suggests you know more than the market. In my case it suggests that I don't think the world index geographic spread fits my needs. It doesn't match my assets/liabilities, cashflow, income /expenditure even if hedged.
Country risk is an important factor. I can diversify away a lot of the individual company risk and hedge the currencies but that doesn't mean I want a global country weighting according at all
In 2002 most of my investments tanked with double digit negative % returns. Thailand had a great year. Aberdeen Growth was up nearly 50%. Diversifying individual company risk and hedging the currency wouldn't have helped me much at all. Exposure to Thai instead of developed western markets made a massive difference
I really don't want a portfolio that will tank when Thailand is thriving. Worst thing possible to be invested in all/ too much western developed markets your money goes down, Thailand goes up, prices and standard of living goes up in Thailand. On the other hand if Thailand tanks and I tank with it, that is more palatable, as we're all in the same boat. Far different than everyone in Thailand being in the same boat doing well and me drowing.
------------------------------------ Currency hedging can be useful. More or less non-existent in Thailand though.
A large proportion of the funds I hold in Singapore are SGD hedged - partly because I borrow in SGD so match the assets and liabilities as well as income and interest expense, and cashflows, partly because of the SGD/ THB correlation compared to GBP or USD vs THB. Sort of a partial hedge for THB if you will. In the UK currency hedged funds aren't as common proportionally as Singapore, plus I want and need GBP to an extent anyway
Effectiveness of the hedging is another issue. Particularly as there are many more FX risks in there than just hedging the value or cashflow or returns.
... and of course it comes at a cost
... which then raises the question of whether you are better going for a return that naturally comes to you in the currency you want in the first place. This naturally affects your weightings. Then of course tax implications, admin etc
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I wouldn't claim I know more than the market, and similarly few people ever get that consistently right.
What I would say though is I know better than anyone my own needs/ requirements, financial situation, risk tolerance etc. That's the way to look at it. Then educate yourself. Once you do that, you become likely the best person to manage your own money in a way that's suitable to you.
---------------------------------
Anyway enjoyed your post. Good to get differing opinions
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Post by Fletchsmile on Feb 26, 2019 18:00:21 GMT 7
Thanks very much for your reply. Good point on assets, liabilities, income, spending.
Unforutnately no assets or income in THB, but on the plus side, no liabilities in THB either. It is all about expenditure, which is all in THB (well not accounting for goods here that are imported).
Thanks god I have no kids and that my partner supports herself from her earnings in THB.
If there is one thing I'm jealous of, it is that I can not purchase land in Thailand. It is really the ultimate currency hedge for expenditure. A THB hedged global equities fund would be the next best thing but I don't believe there is one. Besides THB equities which has a high concentration risk of just 50 companies, the last thing I can think of is fixed income say in bonds or cash deposits, but my home currency is down vs USD and THB is up, so it seems it is just about the worst possible time to bring it in.
But at some point this will turn around and I need to face the reality of bringing some assets to be linked to the THB, and this is the most basic starting point. I am finding it a hard hump to get over due to the corruption here. Maybe an international bank will help ease my mind.
Interesting point about school fees being above inflation. I wonder how this is affected by those investing outside THB. Some say that PPP is maintained when you invest outside that country, but in an emerging market I suspect it may not hold up, which is another reason to invest in THB based assets.
If you see any threads on currency correlations especially with Thailand, please pass it in. That is very interesting regarding SGD/THB.
Edit: wow just saw the SGD vs THB and it is freakishly close! Ah even vs the CHY it is much more stable, and they make up around 1/3 of the EM market.
Oh regarding fixed income, I meant that broadly as bonds or cash deposits, basically something that is "in" THB so there is no currency risk.
Thanks again for the insights.
There's a couple of threads on BigMango that touch on SGD/THB, e.g.
While Thai bonds/fixed income may not appeal, you might find Thai (and Singapore) REITs of interest.
TMB Property Income Plus fund comes up on here a few times. Decent yield in THB with low currency risk as around half used to be in Thai/THB REITs and half SGD REITs - not sure the split these days. Wouldn't be a fan of picking my own Thai REITs but this is quite a nice way to do. Adds some diversification away from just pure Thai equity plays.
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chiangmai
Crazy Mango Extraordinaire
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Post by chiangmai on Feb 27, 2019 11:17:09 GMT 7
There, all done, I even got rid of Fundsmith plus I got the number of funds down to 8, just to keep AyG happy I'm actually quite pleased with the geographic spread and the contents, the funds are all solid and the FM's have good track records. Once purchased I PROMISE not to dabble or tweak, honest. Many thanks to all for your inputs, I am very grateful. Attachment Deleted
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AyG
Crazy Mango Extraordinaire
Posts: 5,871
Likes: 4,555
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Post by AyG on Feb 27, 2019 11:40:43 GMT 7
There, all done, I even got rid of Fundsmith plus I got the number of funds down to 8, just to keep AyG happy You know it makes sense.I'm actually quite pleased with the geographic spread and the contents, the funds are all solid and the FM's have good track records. Just one comment: good geographic spread, but rather concentrated with one particular fund manager (LT) with its house style. I'd consider swapping one or other of the funds for a similar geographic spread, but different fund manager.Once purchased I PROMISE not to dabble or tweak, honest. I'll believe that when it happens. Check back in two years?Many thanks to all for your inputs, I am very grateful. "Inputs? Didn't you mean "insults"?
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Post by Fletchsmile on Feb 27, 2019 12:57:15 GMT 7
Many thanks to all for your inputs, I am very grateful. "Inputs? Didn't you mean "insults"?
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fk
Crazy Mango
Posts: 37
Likes: 8
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Post by fk on Feb 27, 2019 13:32:33 GMT 7
Would agree with a lot of what you say. One thing I would say is that the various risk categories are not nice simple compartments and often aren't that esaily segregated. Not as simple as company risk and/or currency risk. Also need to throw in for example liquidity risk, market risk (systemic as well as belonging to the individual company/ ideosyncratic), legal risk, operational risk, other financial risks such as tax. Not forgetting also credit risk, be it sovereign, country or company specific.
Then there are the natural competitive advantages of particular countries, eg I like US for technology, Singapore for property, some countries are resource rich. So a company in the same sector in a different country may be a different proposition for many reasons.
Even currency risk you can divide into various categories strategic, transactional, translational. And you could push it further to look at competitor risk if they have different currency base. I would agree with a statement that USD risk is not eliminated by avoiding US companies. On the other hand generally the more US companies you include in your holdings the more USD risk. That's the key point I was making on linking US equity exposure with US risk. The more US equity exposure you take on the likely more USD exposure you will create. Particulary with funds where they won't be the exception companies but a number of companies
While these days there are some truly global large companies/MNCs, once you start getting down to the middle and small tier companies they will have much more of their revenue and costs in their home country - although there are always exceptions this on average holds true. A mid or small UK company is likely to sell and buy more domestically in the UK than it does in the US, and hence have more GBP exosure; a mid or small US company will sell and but more domestically than in the UK etc. Your own stat of 40% reinforces this, 40% is overseas but 60% therefore domestic. Domestic trade is very likely done in domestic currency. A key point. 40% seems high to me BTW. But even accepting that it still holds more is domestic.
Of that 40% (overseas) also think what proportion will remain in USD. I'd guess most. While in Europe/UK, USD trade may still dominate overseas, the % traded in GBP and EUR will be higher than the % in GBP and EUR for US companes. If one looks at exports as a % of GDP, US is one of the most self-contained countries at around 10%-12% give or take a couple of % points. UK is more volatile but averages around 25%. That higher degree of being US self-contained also affects the balance. Again USD.
It's for these type of reasons I make the link on adding US equities will likely add USD exposure. While removing US equities will likely reduce USD exposure. However, it will not eliminate it.
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As a fund manager it may be valid to say that deviating from an index suggests you think you know more than the market. As an individual I would totally disagree with saying that deviating from the market suggests you know more than the market. In my case it suggests that I don't think the world index geographic spread fits my needs. It doesn't match my assets/liabilities, cashflow, income /expenditure even if hedged. Country risk is an important factor. I can diversify away a lot of the individual company risk and hedge the currencies but that doesn't mean I want a global country weighting according at all
In 2002 most of my investments tanked with double digit negative % returns. Thailand had a great year. Aberdeen Growth was up nearly 50%. Diversifying individual company risk and hedging the currency wouldn't have helped me much at all. Exposure to Thai instead of developed western markets made a massive difference
I really don't want a portfolio that will tank when Thailand is thriving. Worst thing possible to be invested in all/ too much western developed markets your money goes down, Thailand goes up, prices and standard of living goes up in Thailand. On the other hand if Thailand tanks and I tank with it, that is more palatable, as we're all in the same boat. Far different than everyone in Thailand being in the same boat doing well and me drowing.
------------------------------------ Currency hedging can be useful. More or less non-existent in Thailand though.
A large proportion of the funds I hold in Singapore are SGD hedged - partly because I borrow in SGD so match the assets and liabilities as well as income and interest expense, and cashflows, partly because of the SGD/ THB correlation compared to GBP or USD vs THB. Sort of a partial hedge for THB if you will. In the UK currency hedged funds aren't as common proportionally as Singapore, plus I want and need GBP to an extent anyway
Effectiveness of the hedging is another issue. Particularly as there are many more FX risks in there than just hedging the value or cashflow or returns. ... and of course it comes at a cost ... which then raises the question of whether you are better going for a return that naturally comes to you in the currency you want in the first place. This naturally affects your weightings. Then of course tax implications, admin etc
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I wouldn't claim I know more than the market, and similarly few people ever get that consistently right.
What I would say though is I know better than anyone my own needs/ requirements, financial situation, risk tolerance etc. That's the way to look at it. Then educate yourself. Once you do that, you become likely the best person to manage your own money in a way that's suitable to you.
--------------------------------- Anyway enjoyed your post. Good to get differing opinions Thanks for your reply. Well articulated too.
Good point that while you can not eliminate USD risk by changing the amount of US equities, you can modify the tilt towards or away from it. And particularly that even the 40% international income will contain a portion that is still linked to their home currency.
On 'geographic spread' as you termed it, I suppose being from a country that is more segregated from the rest of the world (Australia), it has escaped me that other regions contain multiple countries, and that their economies and currencies are somewhat more closely linked, particularly Europe and Asia. Actually, going by the 4 year old link you posted from AvG elsewhere, quite significantly linked in Asia, so it seems like a great way to hedge into the local economy/currency while still being able to diversify through more companies/sectors/countries. MSCI Asia-Ex-Japan has 944 companies fairly well spread throughout 6 countries, with China making up about 1/3 and the rest fairly evenly spread, and the sectors are also pretty nicely spread out, so it seems vastly more diversified than the Australian market, although I suppose being emerging markets comes into it. Actually now I think about it, this is the same way that New Zealand funds contain a lot of Australian stock as their kind of proxy home equity bias, because the economy and currency are tied quite closely to Australia.
I think your example of 2002 where the global stock markets suffered while the Thai stock market was running fine is not a great example, but the underlying point is still valid. The problem with the example is that even though many developed stock markets crashed, there wasn't a drop of that magnitude in the overall economy, ie short term stock market changes are not highly correlated to the economy - but your underlying point is still valid since the stock market is more correlated with the economy over the longer term, which can show up as a risk, especially in developing markets as their growth is often faster than in already developed markets.
Thanks for your thoughts. At some point I will have to integrate it into my portfolio. There's a couple of threads on BigMango that touch on SGD/THB, e.g.
While Thai bonds/fixed income may not appeal, you might find Thai (and Singapore) REITs of interest.
TMB Property Income Plus fund comes up on here a few times. Decent yield in THB with low currency risk as around half used to be in Thai/THB REITs and half SGD REITs - not sure the split these days. Wouldn't be a fan of picking my own Thai REITs but this is quite a nice way to do. Adds some diversification away from just pure Thai equity plays.
Thanks for that link, was surprised how closely the other Asian currencies track the THB. Very reassuring that there is a way to diversify by company/sector/country with much less currency risk.
Noticed on another thread you linked to your thaivisa comments from 6 years ago that you start off with the idea of 1/3 each Thai/UK/Global split in equities. As someone unsure of whether I will retire to Thailand or my country of origin, it seems like a good starting point.
Also noticed in another thread on here the insane volatility of the Thai stock market. Going from 1600 to 1280 to 1600 to 1280 to 1830 to 1600, all within the past 5 years. I suppose this can actually be a positive due to rebalancing bonus, but also a reason to be wary of too much invested there.
Apologies to chiangmai for derailing your thread.
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chiangmai
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Post by chiangmai on Feb 27, 2019 13:54:34 GMT 7
There, all done, I even got rid of Fundsmith plus I got the number of funds down to 8, just to keep AyG happy You know it makes sense.I'm actually quite pleased with the geographic spread and the contents, the funds are all solid and the FM's have good track records. Just one comment: good geographic spread, but rather concentrated with one particular fund manager (LT) with its house style. I'd consider swapping one or other of the funds for a similar geographic spread, but different fund manager.Once purchased I PROMISE not to dabble or tweak, honest. I'll believe that when it happens. Check back in two years?Many thanks to all for your inputs, I am very grateful. "Inputs? Didn't you mean "insults"?I can tolerate personality quirks and character flaws to a limited degree, that's usually when the negatives outweigh the positives!
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chiangmai
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Post by chiangmai on Feb 27, 2019 13:57:39 GMT 7
"Apologies to Chiangmai for derailing the thread".
Have it lad, we're done and dusted here, we were just sniping to fill in the time until somebody came up with a new direction.
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AyG
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Post by AyG on Feb 27, 2019 14:30:00 GMT 7
TMB Property Income Plus fund comes up on here a few times. Decent yield in THB with low currency risk as around half used to be in Thai/THB REITs and half SGD REITs TMBPIPF is a good fund, and thanks to Fletch to alerting me to it. However, I have sold out and replace my holding with PHATRA PROP-D. It has a different charging structure, and works out cheaper if one's holding for more than a couple of years or so thanks to a lower AMC. Similar mix of Thai and Singapore property investments. A couple of negatives with the PHATRA fund, however, (a) PHATRA won't let foreigners open an account with themselves, so one has to buy through a third party (at least, that was my experience when I tried to open an account), (b) it pays a dividend, so there's a withholding tax. (PHATRA PROP, which I'd really wanted to invest in, doesn't pay a dividend, however, it is closed to new investment.) Oh, and all the documentation is in Thai. PHATRA really doesn't like foreigners. There was even a problem when it came to receiving my first dividend payment: my passport number didn't have 13 digits like a Thai national ID, so they couldn't process the dividend payment. (It was sorted eventually.)
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Post by Fletchsmile on Feb 27, 2019 15:09:29 GMT 7
TMB Property Income Plus fund comes up on here a few times. Decent yield in THB with low currency risk as around half used to be in Thai/THB REITs and half SGD REITs TMBPIPF is a good fund, and thanks to Fletch to alerting me to it. However, I have sold out and replace my holding with PHATRA PROP-D. It has a different charging structure, and works out cheaper if one's holding for more than a couple of years or so thanks to a lower AMC. Similar mix of Thai and Singapore property investments. A couple of negatives with the PHATRA fund, however, (a) PHATRA won't let foreigners open an account with themselves, so one has to buy through a third party (at least, that was my experience when I tried to open an account), (b) it pays a dividend, so there's a withholding tax. (PHATRA PROP, which I'd really wanted to invest in, doesn't pay a dividend, however, it is closed to new investment.) Oh, and all the documentation is in Thai. PHATRA really doesn't like foreigners. There was even a problem when it came to receiving my first dividend payment: my passport number didn't have 13 digits like a Thai national ID, so they couldn't process the dividend payment. (It was sorted eventually.) For funds that pay a dividend you can make an election to either: 1) suffer WHT at a flat rate of 10% or 2) have no tax deucted and then be taxed at your marginal rate when you do a tax return = useful if you've no other income and take advantage of the allowances nil rate band etc, so that you suffer 0% WHT
Whoever you bought the fund thru should be able to adjust to your choice for you. You'll likely need copy of your passport, Thai tax number etc. I've done both ways depending on working or not
BTW Did you buy it direct thru KGI?
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