chiangmai
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Post by chiangmai on Dec 26, 2019 16:08:34 GMT 7
I'm very pleased with my half-year with HL, what a comparison to my previous experience at Transact! My star performer was TB Amati UK Smaller Companies which returned 13.64% in six months. Next was Baillie Gifford International which produced 12.34% over the same period. JP Morgan Emerging Markets came next at 11.29% whilst L&G US Index and First State Asia both coughed up just under 11.50% And I didn't tweak anything, really! One of the better decisions of the year was to not invest too heavily in LT Global which remains under 9%, my poorest decision was to buy Fundsmith as well, thankfully only for a 4% stake.
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Post by rgs2001uk on Dec 26, 2019 20:28:23 GMT 7
I'm very pleased with my half-year with HL, what a comparison to my previous experience at Transact! My star performer was TB Amati UK Smaller Companies which returned 13.64% in six months. Next was Baillie Gifford International which produced 12.34% over the same period. JP Morgan Emerging Markets came next at 11.29% whilst L&G US Index and First State Asia both coughed up just under 11.50% And I didn't tweak anything, really! One of the better decisions of the year was to not invest too heavily in LT Global which remains under 9%, my poorest decision was to buy Fundsmith as well, thankfully only for a 4% stake. Great news, heng heng, ruay ruay, get your mrs to translate, . More of the same next year please.
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chiangmai
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Post by chiangmai on Dec 27, 2019 7:51:32 GMT 7
My geographical allocation is starting to look out of balance, despite the US being the worlds largest market I'm left feeling uncomfortable with 27% of my holdings in that market, here's how the rest of it looks:
UK - 27% Europe - 15% India - 5% Japan - 4% China - 1.5% Taiwan/Hong Kong - 7%
I've purposely broken out the above because they are popular investment markets but the total doesn't sum to 100, cut a different way Emerging Markets are about 13% whilst developed Asia is 6%.
I've no reason to sell any of my holdings on the basis of performance alone although a rebalancing at some point would probably see Fundsmith be sold, which as said is about 4% and would reduce somewhat my US holding. Note: First State Asia is a mix of emerging and developed countries and is probably max'ed at 14% whilst UK small companies is at 6%.
In your opinion am I right to be slightly nervous at holding 27% of US based assets or do people think this is not an issue? The US assets are mostly large caps but also an S&P tracker. My inclination is that China and US small caps might usefully replace Fundmsith's large caps at some point next year.
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Post by rgs2001uk on Dec 27, 2019 12:15:47 GMT 7
^^^^^, it’s just a snapshot in time, if the share prices change so will your percentages, at this moment in time I wouldn’t worry about it, but if it concerns you, track over a period of say 6 months and compare again.
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Post by rgs2001uk on Dec 27, 2019 21:47:44 GMT 7
My geographical allocation is starting to look out of balance, despite the US being the worlds largest market I'm left feeling uncomfortable with 27% of my holdings in that market, here's how the rest of it looks: UK - 27% Europe - 15% India - 5% Japan - 4% China - 1.5% Taiwan/Hong Kong - 7% I've purposely broken out the above because they are popular investment markets but the total doesn't sum to 100, cut a different way Emerging Markets are about 13% whilst developed Asia is 6%. I've no reason to sell any of my holdings on the basis of performance alone although a rebalancing at some point would probably see Fundsmith be sold, which as said is about 4% and would reduce somewhat my US holding. Note: First State Asia is a mix of emerging and developed countries and is probably max'ed at 14% whilst UK small companies is at 6%. In your opinion am I right to be slightly nervous at holding 27% of US based assets or do people think this is not an issue? The US assets are mostly large caps but also an S&P tracker. My inclination is that China and US small caps might usefully replace Fundmsith's large caps at some point next year. Dont know if the following is of any use to you or not. This is for my UK stockbroker account only. Oil & Gas Producers 8% Chemicals 8.9% Mining 2.7% Beverages 2.9% UK Investment Companies 8.7% North American Investments 2.5% Global Investments 66%
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chiangmai
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Post by chiangmai on Dec 28, 2019 5:36:55 GMT 7
Thanks but I'm trying to look at the issue at a more granular level to see which countries are capable of investment and which should be merely grouped as an entity. important markets are of course US, UK Europe, Developed Asia, Emerging Asia and (other) Emerging Markets. Developed and Emerging Asia are sometimes difficult to disassemble because different funds see them differently! Developed Asia is clearly Singapore and Japan which often puts India, China, Hong Kong and Taiwan into the emerging Asia category and I'm not sure that's correct. I think India and China are huge markets that should be regraded in their own right. Frequently a fund will be labelled as Global just because it contains two or more countries investments, to get full and appropriate global coverage you often need to hold four or five global funds, otherwise you're left holding specific countries only. Anyway, this is not a biggee, it's just a n aspect of investing that I'm trying to come to terms with. As for my original issue, excessive US holdings. It's my silly fault for having the emotional attachment to Fundsmith as well as holding LT Global, BG Inter. and an S&P tracker, that's like belt, braces and a roll of duct tape, just in case.
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AyG
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Post by AyG on Dec 29, 2019 10:54:01 GMT 7
In your opinion am I right to be slightly nervous at holding 27% of US based assets US companies represent roughly 65% of investable markets globally. Holding less than that as a percentage is taking a bet against American companies. How large you think that bet against the US should be is very much a personal decision. My inclination is that China and US small caps might usefully replace Fundmsith's large caps at some point next year. That only makes sense if you have a very high appetite for risk and can tolerate large losses. If you value wealth preservation, better to stick with Fundsmith. Slow and steady wins the race.
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chiangmai
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Post by chiangmai on Dec 30, 2019 6:33:25 GMT 7
In your opinion am I right to be slightly nervous at holding 27% of US based assets US companies represent roughly 65% of investable markets globally. Holding less than that as a percentage is taking a bet against American companies. How large you think that bet against the US should be is very much a personal decision.My inclination is that China and US small caps might usefully replace Fundmsith's large caps at some point next year. That only makes sense if you have a very high appetite for risk and can tolerate large losses. If you value wealth preservation, better to stick with Fundsmith. Slow and steady wins the race. I like that interpretation, it makes sense.
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Post by Fletchsmile on Dec 30, 2019 8:03:28 GMT 7
In your opinion am I right to be slightly nervous at holding 27% of US based assets US companies represent roughly 65% of investable markets globally. Holding less than that as a percentage is taking a bet against American companies. How large you think that bet against the US should be is very much a personal decision. If someone was talking about us as indvidual investors, I would respectfully disagree with that completely.
As a Brit living in Thailand I've no desire to hold 65% of my investment portfolio in US centric assets, and additionally the USD exposure that naturally brings.
That's in no way a bet against American companies. It's simply recognising that I don't consider such as high weighting appropriate to match my circumstances.
One natural reason for that is that living in Thailand I'm more interested than the average global investor in gaining exposure to my host country. To weight my Thai exposure to global investment markets would also mean a weighting of only a couple of %. That I weight much more than that again is not a bet in favour of Thai companies, but just that I want Thai economic and THB exposure to match and better hedge the economic side of life.
USD and US companies simply aren't that relevant to me, to want 65% exposure. For me to allocate 65% of assets to US based assets would represent a large bet on American companies, that I would be uncomfortable making from a risk perspective. Even if I was positive on US markets, I would be uncomfortable with such a high level.
However, if someone was talking about a fund manager of a global markets fund allocating less than 65%, then that would be a bet against the US.
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chiangmai
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Post by chiangmai on Dec 30, 2019 8:21:04 GMT 7
Is it not the case that as private investors wishing to invest globally and diversifying our assets, we are in effect ourselves acting as fund managers? And should a person sensibly weight their investments in favour of their home market when there may be other markets that offer better returns, is that not emotional attachement.......a bit like me and Fundsmith?
I suppose my concern is not actually that I'm overweight US but that I'm underweight something else that might offer a decent level of diversification, resulting in lowered risk. It's almost as though the US is the automatic go to investment market, the default place to invest, I wonder if that doesn't make us overlook other better options....accepting of course that those other options may in themselves have an inherent risk that offset the benefit of diversification.
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Post by Fletchsmile on Jan 2, 2020 3:51:09 GMT 7
Weighting yourself more towards your home market and host market makes a lot of sense to me: 1) The natural reduction in currency risk. I really wouldn't want anything like 65% exposure to USD 2) When your home and host country are doing well, you want to share in it relative to your peers in your country. Similarly when things are going badly you can tolerate that better as relatively you are moving more in sync with your peers. Last thing I would want would be Thailand and THB doing well and being heavily invested in USD and US equities if they were tanking. I really don't want that risk. Let's also not forget that a large part of that 65% isn't down to which market is best, it is largely down to where investors come from, political and economic systems etc. The US equity market is the largest in the world partly because the US people invest more in equities than other countries. On the other hand the Thai market is small and Thai investors are small. France as an example although similar to the UK has a smaller equity market just because share ownership is less common. I see no reason to align my fortunes to those of US people, just because they are doing what they know and understand and are doing what they think is right for them. I'll do what I think is right for me. Conversely the Thai stock is not well developed at all in comparison and equity ownership is concentrated in the hands of a few people. Hence Thai stock markets are only say something like 2%. It would be ludicrous to me to match global market weightings and such a small weighting in Thailand just because there are so many poor, uneducated people here. If we followed that sort of logic thru, I'd be investing in rice farms as that's what most Thais do. Yes there can be emotional bias. At the same time though you have to be practical and logical. I don't want to own US equities just because so many US citizens do, in the same way I don't buy myself a rice paddy or buffalo in Thailand That really would be emotional bias
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chiangmai
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Post by chiangmai on Jan 2, 2020 5:33:45 GMT 7
I can certainly understand the argument that favours weighting your holdings towards your home market, that makes a lot of sense to me. And if that means two home markets, in our case the UK and Thailand, that's probably OK too.
And being disproportionately invested in the worlds largest market, the US, also makes some sense, there's no point in investing elsewhere just for the sake of it, everything must have a reason.
OK so this is a weighting issue but with different reasons: the home market weighting is high because it's the home currency; the US market weighting is high because that market is the largest and most developed; the rest is diversification and risk aversion. So my 27% in the US is actually not bad, gottit!
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Post by rgs2001uk on Jan 3, 2020 20:40:39 GMT 7
^^^^ FYI, here are some of the Glbal ITs I hold, check out the American weighting, in the top ten countries and performance. www.hl.co.uk/shares/shares-search-results/s/scottish-mortgage-it-ordinary-shares-5pwww.hl.co.uk/shares/shares-search-results/m/monks-investment-trust-ordinary-5pwww.hl.co.uk/shares/shares-search-results/w/witan-investment-trust-plc-ord-gbp0.05www.hl.co.uk/shares/shares-search-results/f/f-and-c-investment-trust-ord-25pPersonally I an not willing to forego performance for geographical spread, but as they say here, up to you. I do appreciate that in years to come, my holdings will change, I also understand, not all markets will behave the same way all the time, what is it they say, 'follow the money' .
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chiangmai
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Post by chiangmai on Jan 4, 2020 5:21:09 GMT 7
Yes, point made!
Thanks
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AyG
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Post by AyG on Jan 5, 2020 10:38:01 GMT 7
As F. Scott Fitzgerald wrote in The Crack-Up “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.” I feel rather like that when it comes to asset allocation: there are so many different ways of cutting the pie. Starting with RGS’ philosophy of “I am not willing to forego performance for geographical spread”, one can take the following as a starting point: If one invests in all investible equities, then one will get (by definition, and ignoring fees) average performance. Some investors, with different investments, will do better, but a majority will do worse thanks to fees and chasing recent good performance just before it turns bad. Of course, it’s not practical to invest in all equities, but one can get a reasonable approximation by buying an ETF such as iShares Core MSCI World [IWDA on the LSE]. That would have given you (in USD), an annualised return of 11.8% over the last 10 years, which isn’t too shabby. Indeed, it looks like “average” isn’t too bad. There may be ways to improve upon this, for example, by tilting one’s investments towards small caps, or using active management for certain sectors. However, if one fails to match the performance of such a benchmark*, then one is destroying value. There, of course, may be perfectly good reasons for destroying value. They might include: - Providing additional protection against inflation (e.g. being overweight in infrastructure stocks) - Personal philosophy (e.g. avoiding un-Islamic/unethical companies, or eschewing companies with the letter “J” in their name. Reasoning doesn’t need to be rational.) - Circumstances. (It might be impractical to invest outside one’s country, or one has concerns about passing on one’s investments to one’s inheritors, or it’s expensive to perform FX, or one’s country has amazing tax advantages for investing domestically) This is all fine. However, I think it’s important fully to understand the one’s decision to accept inferior performance. * Or a comparable one. Personally I use MINV on the London Stock Exchange for benchmarking since (a) it’s denominated in Sterling which is the accounting currency I use, and (b) it is less heavy on what I consider to be overpriced technology stocks. (I try to avoid funds which invest in the likes of Facebook, Netflix, Tessla, AOL, Theranos and MySpace.)
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