chiangmai
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Post by chiangmai on Feb 27, 2019 15:44:25 GMT 7
I'm a big believer in risk avoidance and spreading risk where ever possible but I think it can be carried to an extreme to where it becomes a phobia rather than anything constructive. Trustnet suggests there are three funds managed by Lindsell Train, UK Equities, Japanese Equities and Global Equities. I have elected to hold two of the three and I don't know that changing one for another FM, just for the sake of it, would make sense nor reduce risk, if anything it's likely only to see portfolio performance suffer as a result.
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chiangmai
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Post by chiangmai on Feb 27, 2019 16:18:40 GMT 7
Is there a rule of thumb regarding which fund class to buy, Class B, Y etc?
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Post by Fletchsmile on Feb 27, 2019 16:56:54 GMT 7
Is there a rule of thumb regarding which fund class to buy, Class B, Y etc? Usually it will be the newer "unbundled units" rather than "inclusive units" if you use HL's platform. They are usually the cheapest version after discount.
Just check though that they are the same fund and have a quick look at performance to check it's the same/very similar before you just pick the cheapest.
Just a word of caution: There are some fund managers which use Classes in different ways, eg a hedged version rather than an unhedged version.
Hence check both 1) performance over 3 month, 6m, 1yr, 3 yr etc or the discrete 12m/24m/34m periods to check it's the same fund on Class B as Class Y, then 2) check fees for the cheaper one. Making sure of course that you select income units if you want the dividends paid out and accumulation units if just roll-up the divs
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Post by Fletchsmile on Feb 27, 2019 17:31:18 GMT 7
On the subject of pensions and TMB Property Income Fund, I also hold the retirement mutual fund (RMF) version of the fund. They are accumulation units and don't pay a dividend with being RMFs/ designed for retirement. This is in addition to my wife and I holding the regular dividend paying fund which is not an RMF Crudely put a Thai RMF fund has a lot of parallels to a fund held in a UK SIPP. I got Thai tax relief at my marginal rate of income when buying it, while working in Thailand, which was a nice incentive to take out an RMF. In January of this year I did a tidy up of my Thai RMFs/ pensions, in preparation for also tidying up and rebalancing my UK SIPP which was getting a lump sum transfer in. In Thailand, I ditched virtually all my non-Thai related RMFs, which included a gold fund RMF, Asian equities RMF, global bond RMF etc, and kept mainly just 2 funds that were Thailand specific: 1) TMB Property Income Fund = Singapore and Thai REITs
2) Aberdeen Smart Capital RMF = Thai Equities Basically there were better global, Asian, bond funds etc available outside Thailand, and while rebalancing my UK SIPP I took this into account. I switched all my global/non-Thai RMFs into these two Thai funds, as I'd already had the tax relief and got my global/ asset class diversity outside Thailand. It can be useful to buy global/ non-Thai RMF funds in Thailand while you're building things up and adding small regular savings amounts, and getting your tax relief. Particularly if you've no regular money going into your home pensions. When you do a large rebalance though, you can recognise that Thailand isn't necessarily the best for global/ non-Thai exposures. Whereas it does tend to have the best Thai equity funds and other funds for THB exposure and income
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fk
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Post by fk on Feb 28, 2019 14:23:57 GMT 7
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.
Was reading an interesting discussion referring to a Vanguard paper on international diversification (for investors in US/CA/UK/AU), and a few people mentioned the same thing that you did, which is that the bigger companies tend to be less linked to the local economy and it is the smaller ones that are more linked to the local economy.
If I look at something like the Asia-ex-Japan index as a more diversified proxy for the Thai economy, it will still (by definition of cap weighting) overwhelmingly contain large companies, making it more detached from the local economies and therefore less useful. (Although it may still help if you expect these companies to be trading a lot more with the rest of Asia vs the rest of the world in which case it would still be more connected to the Asian economies.)
I suppose a mid/small Asia-ex-Japan index would suit but I don't actually think that exists. So one would then really have no choice by to go for an actively managed fund, along with the risks of actively managed funds, which doesn't appeal to me. Another problem is that small companies tend to have a higher long term expected return due to the higher risk that is built into it, but that risk can show up for incredibly long periods (think decades) and can be difficult to hold on after 10 years or more of under performance, and if you sell before then, you would have done better not tilting towards small caps in the first place. All of this being on top of concentration risk of investing in a few hundred companies in one market vs 10,000 companies globally.
The downsides of not being linked into the local economy (over the longer term) is a big one, but the downsides of doing it the wrong way also seem pretty big. I don't see a clear solution.
Having said that, I still have a bias towards my country of origin, so that is something for me to wrestle with. But in that situation, the reasons are more clear - firstly it is a much more stable developed economy, secondly there is a large tax break for residents owning home country equities, and thirdly, to lower concentration risk you can just use a currency-hedged global equities index fund to remove the concentration risk entirely. The advantages of overweighting Asian/Thai markets are less clear cut. It's a bummer that there is not a THB hedged version of the MSCI global index, but then again, a 1% fee is enormous so even if it was available I'm not sure I'd be willing to pay that.
It's a messy issue to say the least.
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Post by Fletchsmile on Feb 28, 2019 15:59:12 GMT 7
Looking at Asia to address concerns with Thailand and using it as a proxy for Thai exposure can help
If you compare it to Europe though, Asia is far less homogenous compared to say Europe. There's a massive differnce between say HK or Singapore and Vietnam/Indonesia/Philippines compared to say Germany and some of the European basket cases or even the PIGS
Schroder Small Cap Discovery is actually a small cap Asia-ex Japan fund. Chiangmai cut it from his list. As I said during this thread I'd been thinking for a while to cut it. Conceptually Asian smaller companies given seems more difficult than say European smaller companies. For my small investment trusts I hold Montanaro Euro smaller companies, and previously JPM Euro smaller companies, which has done well. I also hold UK smaller companies and US smaller companies fund. But Asia is maybe just too wide. So actually a couple of days I just cut it. These threads can help focus your own thoughts as well as get input from others.
I totally agree with the downside of not being linked into the local economy can be a big one. Something I realised and thankfully did something about years ago. Biting the bullet and not listening to the bar stool experts of don't invest in Thailand blah blah blah. I started with small steps in ways I was familiar with. i.e Aberdeen fund managers (previously Schroders) + unit trusts/ mutual funds + equities. Small steps based on principles of what I know and my own expertise worked out. That was my solution. Reduces the risk of doing it the wrong way if you start small and leverage your strengths. If someone was good with properties and hopeless with shares etc, perhaps property investment may be better for them. Stick to what you know and take it slow while you learn.
As for home country bias. I'm mindful of it, but not worried about it. The UK is a market I understand well, it's where I come from, always a change I may go back (though less these days), plus a decent market in my view , unlike say if I came from Argentina. Plus the kids may go there. I still have family. Hence not to harp on too much but my original 1/3 where I came from (home) in case I go back 1/3 where I am (host) and 1/3 elsewhere. Simple and needs tweaking but a decent concept. Important also to not burn all your bridges.
If was an Australian I'd also have a bias to Australia with a lot of similarities to the UK. Nothing wrong wth that given life's uncertainties and playing to your strengths. If you see Thailand as longer term though, start dipping your toes in more now.
If you can't get a THB hedged version of MSCI global index, are there other days you could arrive at the solution in the same way? eg
- could you hedge in some way (buying property/cash deposits etc) and get the global index elsewhere.
- what about learning to currency hedge yourself? and invest in global index back home in Oz. I trade Thai SET50 equity index options as a hobby/ extra income generator as well as SET 50 futures to a lesser degree. On my platform I could also trade USD/THB futures should I want to. Not really my cup of tea. But it could be used to hedge USD/THB via futures on a rolling basis, in ways not dissimilar to how the pros manage your heged fund
- MSCI index has say FCY exposure (large USD) + equity risk among other things. So getting THB + equity = Thai equities to an extent can help in converting FCY/USD risk into THB risk and Thai equity vs global equity is still equity.
Sometimes you need to break down what you want to achieve.
You mentioned property as another thing. In the UK I would own a house 50/50 with my wife and we'd probably have investments in our own names too let's say even 50/50. So all I do here is change the splits:my wife gets the house and I get proportoniately more investments. I'd love to do like my parents and half/ half more balanced on everything, but you need to play the cards you're dealt.
We initially bought a condo rather than a house. That could have been done in my name. Another way to hedge. I chose not to and put in my wife's name for other reasons. Can't say I would have liked the idea of buying a Thai girlfriend a condo in her name being not long off the plane. But if you have wife and kids and understand Thailand better after a decade here is a different ball game. Just rearrange your objectives to play the cards you've been dealt.
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Post by Fletchsmile on Feb 28, 2019 16:23:46 GMT 7
If financial stability, established reputation, size, economies of scale etc are factors in choosing a platform provider the following looks positive for AJ Bell:
Soaring AJ Bell to fly into FTSE 250 three months after IPO
AJ Bell is expected to enter the FTSE 250 in this week's quarterly index reshuffle, with shares in the online stockbroker having surged 82% since flotation in December.
.....
and in other news
small world. I do hope Neil Woodford was in there too as he and Barnett seem to crop up a lot in the same places
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fk
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Post by fk on Mar 1, 2019 13:26:54 GMT 7
Looking at Asia to address concerns with Thailand and using it as a proxy for Thai exposure can help If you compare it to Europe though, Asia is far less homogenous compared to say Europe. There's a massive differnce between say HK or Singapore and Vietnam/Indonesia/Philippines compared to say Germany and some of the European basket cases or even the PIGS Schroder Small Cap Discovery is actually a small cap Asia-ex Japan fund. Chiangmai cut it from his list. As I said during this thread I'd been thinking for a while to cut it. Conceptually Asian smaller companies given seems more difficult than say European smaller companies. For my small investment trusts I hold Montanaro Euro smaller companies, and previously JPM Euro smaller companies, which has done well. I also hold UK smaller companies and US smaller companies fund. But Asia is maybe just too wide. So actually a couple of days I just cut it. These threads can help focus your own thoughts as well as get input from others. I totally agree with the downside of not being linked into the local economy can be a big one. Something I realised and thankfully did something about years ago. Biting the bullet and not listening to the bar stool experts of don't invest in Thailand blah blah blah. I started with small steps in ways I was familiar with. i.e Aberdeen fund managers (previously Schroders) + unit trusts/ mutual funds + equities. Small steps based on principles of what I know and my own expertise worked out. That was my solution. Reduces the risk of doing it the wrong way if you start small and leverage your strengths. If someone was good with properties and hopeless with shares etc, perhaps property investment may be better for them. Stick to what you know and take it slow while you learn. As for home country bias. I'm mindful of it, but not worried about it. The UK is a market I understand well, it's where I come from, always a change I may go back (though less these days), plus a decent market in my view , unlike say if I came from Argentina. Plus the kids may go there. I still have family. Hence not to harp on too much but my original 1/3 where I came from (home) in case I go back 1/3 where I am (host) and 1/3 elsewhere. Simple and needs tweaking but a decent concept. Important also to not burn all your bridges. If was an Australian I'd also have a bias to Australia with a lot of similarities to the UK. Nothing wrong wth that given life's uncertainties and playing to your strengths. If you see Thailand as longer term though, start dipping your toes in more now. If you can't get a THB hedged version of MSCI global index, are there other days you could arrive at the solution in the same way? eg - could you hedge in some way (buying property/cash deposits etc) and get the global index elsewhere. - what about learning to currency hedge yourself? and invest in global index back home in Oz. I trade Thai SET50 equity index options as a hobby/ extra income generator as well as SET 50 futures to a lesser degree. On my platform I could also trade USD/THB futures should I want to. Not really my cup of tea. But it could be used to hedge USD/THB via futures on a rolling basis, in ways not dissimilar to how the pros manage your heged fund - MSCI index has say FCY exposure (large USD) + equity risk among other things. So getting THB + equity = Thai equities to an extent can help in converting FCY/USD risk into THB risk and Thai equity vs global equity is still equity. Sometimes you need to break down what you want to achieve. You mentioned property as another thing. In the UK I would own a house 50/50 with my wife and we'd probably have investments in our own names too let's say even 50/50. So all I do here is change the splits:my wife gets the house and I get proportoniately more investments. I'd love to do like my parents and half/ half more balanced on everything, but you need to play the cards you're dealt. We initially bought a condo rather than a house. That could have been done in my name. Another way to hedge. I chose not to and put in my wife's name for other reasons. Can't say I would have liked the idea of buying a Thai girlfriend a condo in her name being not long off the plane. But if you have wife and kids and understand Thailand better after a decade here is a different ball game. Just rearrange your objectives to play the cards you've been dealt.
When I say home country bias, I'm referring to overweighting the region you are living in or going to retire to rather than country of origin.
I haven't looked at doing currency hedging myself but I've heard that there are risks with hedging as a reason for people going for a home country bias over a global index that is currency hedged, so going by that I'm going to put the idea of hedging myself in the too-hard basket.
I suppose you're right that it is more a matter of comfort level, and that going in slowly is most likely to help with that. Also with equities, you have the option to move it over from global to local equities slowly since the expected return is similar, unlike the problem of moving from bonds or cash into equities having the cost of lower return while you average it in.
Thanks for all the thoughts and ideas.
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Post by Fletchsmile on Mar 1, 2019 16:36:24 GMT 7
I've been in the process of rebalancing my UK SIPP (pension) after a lump sum transfer in from an old defined benefit scheme. FWIW here's what it looks like at the moment. A few caveats: - I have other portfolios and this isn't just a stand alone portfolio - Doesn't have any Thai holdings as these are all held onshore in Thailand - Still a WIP - I've still around 15% in cash not invested. I'm looking around/ deciding what to invest in as well as when. i.e so far kept a little powder dry. Before the transfer in it had been 100% invested for years - I will likely start it in drawdown in about 5 years
I don't really like having 13 funds. That will either go to 12 / 14 or 15 . It makes quick maths in my head much easier when monitoring things.
The American funds are recent additions. Couldn't make my mind up between T.Rowe Price and Baillie Gifford. I've had my eye on both for quite a while, but have tended to prefer Index Funds rather than Active managed for US equities which are not small caps
The asset class and geographical analysis comes from HL's portfolio analysis tools
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Post by Fletchsmile on Mar 1, 2019 17:12:13 GMT 7
Out of interest I also did a quick and simple addition of my SIPP + 2 Thai retirement related portfolios with a few ball park roundings and simplifications. One is an ex-employer scheme that was limited in choice and is roughly 1/3 Thai equities and 2/3 s Thai fixed income. The other is 2 main RMFs which combined are now most of my RMF holdings after a tidy up. Caveats again: - I have other portfolios - Uninvested cash in SIPP
- Portfolios will only be accessed in about 5 years When these 3 pensions are combined I see them as sort of reserves for my main investments in UK/Singapore/Thailand. When aggregated they're actually quite reasonable in terms of allocations/ asset class / geography
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AyG
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Post by AyG on Mar 1, 2019 17:20:49 GMT 7
The asset class and geographical analysis comes from HL's portfolio analysis tools Slightly odd: "Standard Life Investments UK Real Estate Institutional 2.5% UK Direct Property" But under "Asset Class" "Property 0.5%"
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Post by Fletchsmile on Mar 1, 2019 17:27:45 GMT 7
The asset class and geographical analysis comes from HL's portfolio analysis tools Slightly odd: "Standard Life Investments UK Real Estate Institutional 2.5% UK Direct Property" But under "Asset Class" "Property 0.5%" Yes I thought that too . I think they put it under UK equities, but they have a tendency also to omit funds they can't analyse too so not 100% sure. Luckily it's small and the main one they don't analyse properlly
Putting properties under region as though it was a geography is also odd to me too.
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Post by rgs2001uk on Mar 1, 2019 20:56:51 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.
No offence, but my question is why? If you intend to retire here then I understand, if you are just passing thru then stick to what you know and keep your money there.
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fk
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Post by fk on Mar 2, 2019 16:18:47 GMT 7
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 No offence, but my question is why? If you intend to retire here then I understand, if you are just passing thru then stick to what you know and keep your money there. Well, I've been here for a lot of years now, so not just passing through, and I think there is roughly an equal chance of retiring here as of retiring back home.
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Post by rgs2001uk on Mar 4, 2019 20:49:55 GMT 7
^^^^ it will be a cold day in hell before I pump my assets into a country that offers me no more than 365 days at a time.
Thankfully as a pom, my gains in the UK are tax free, its a risk I am willing to take to offset currency swings.
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