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Post by eldivino on Mar 21, 2021 15:38:45 GMT 7
I am thinking about adding some tech fund to my portfolio. How would you weigh such fund in your portfolio? One way I am thinking is by investing 80% worldwide and the remaining 20% would be for some bets, such as tech here.
Or would you take (similar to weighing geographies) the percentage of tech market cap worldwide?
I see some senior members here have more than one tech-related fund --- how do you weigh that?
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AyG
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Post by AyG on Mar 21, 2021 17:22:16 GMT 7
"I am thinking about adding some tech fund to my portfolio."
Why would you do that? If you invest in a generalist global fund the fund manager will decide what is an appropriate allocation (in his or her opinion) to technology stocks.
Do you think you're smarter than a top fund manager, or have some special insight? (Sorry if that sounds confrontational - it's not meant to be.)
Anyway, if you do want to add tech, do consider what the fund invests in. I know I'm repeating myself, but if a fund invests in Tesla/Netflix/Amazon/Facebook &c. it's investing in stocks whose price is not justified by the fundamentals.
One investment trust that invests in tech and which avoids those overpriced stocks is Martin Currie Global Portfolio Investment Trust [MNP] on the London Stock Exchange.
Not a recommendation, but worth looking at.
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Post by eldivino on Mar 21, 2021 21:19:45 GMT 7
"I am thinking about adding some tech fund to my portfolio." Why would you do that? If you invest in a generalist global fund the fund manager will decide what is an appropriate allocation (in his or her opinion) to technology stocks. Do you think you're smarter than a top fund manager, or have some special insight? Shouldn’t we all be just investing in an MSCI World fund then, unless we think we or an active fund manager is smarter than the index? And I don’t mean this confrontational either. It’s partly because of this forum here and the senior members who seem to be preferring actively managed funds why I’m considering to put some of my money in such funds (whereas so far I’ve been investing in an MSCI World only, except for the Thai LTFs). So, to answer your question, I’m considering this because I hope that a particular fund or fund manager may be smarter than the index so I can add potential for outperformance to my portfolio. I think the buzzword is satellite-core-strategy. I am considering a particular fund that is managed by an old Uni friend of mine who is a serial entrepreneur in the European startup scene. He’s been founding and investing in successful startups and incubators and now setup this fund which was able to bring in c. 400% over the last three years and constantly beat the comparable index. This is the fund: BIT Global Internet Leaders 30 UCITS (https://bitcap.com/en/global-internet-leaders-ucits-en/?confirmed=1) I am also considering some of the funds held by senior members here, such as the Polar Capital Technology Trust or the Edinburgh Worldwide IT. Though I understand that the investment universe of the funds is a bit different, as the two latter funds seem to have more of the bigger and potentially overvalued companies. I tend to like the first fund more simply because of the fact that the fund manager is not just someone looking at the industry from the outside but who’s been building (part of) the industry himself. But I haven’t really spent enough time looking at the fund yet, and am not even sure how to judge a relatively young fund like that.
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chiangmai
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Post by chiangmai on Mar 22, 2021 5:57:13 GMT 7
"I am thinking about adding some tech fund to my portfolio." Why would you do that? If you invest in a generalist global fund the fund manager will decide what is an appropriate allocation (in his or her opinion) to technology stocks. Do you think you're smarter than a top fund manager, or have some special insight? Shouldn’t we all be just investing in an MSCI World fund then, unless we think we or an active fund manager is smarter than the index? And I don’t mean this confrontational either. It’s partly because of this forum here and the senior members who seem to be preferring actively managed funds why I’m considering to put some of my money in such funds (whereas so far I’ve been investing in an MSCI World only, except for the Thai LTFs). So, to answer your question, I’m considering this because I hope that a particular fund or fund manager may be smarter than the index so I can add potential for outperformance to my portfolio. I think the buzzword is satellite-core-strategy. I am considering a particular fund that is managed by an old Uni friend of mine who is a serial entrepreneur in the European startup scene. He’s been founding and investing in successful startups and incubators and now setup this fund which was able to bring in c. 400% over the last three years and constantly beat the comparable index. This is the fund: BIT Global Internet Leaders 30 UCITS (https://bitcap.com/en/global-internet-leaders-ucits-en/?confirmed=1) I am also considering some of the funds held by senior members here, such as the Polar Capital Technology Trust or the Edinburgh Worldwide IT. Though I understand that the investment universe of the funds is a bit different, as the two latter funds seem to have more of the bigger and potentially overvalued companies. I tend to like the first fund more simply because of the fact that the fund manager is not just someone looking at the industry from the outside but who’s been building (part of) the industry himself. But I haven’t really spent enough time looking at the fund yet, and am not even sure how to judge a relatively young fund like that. I by no means have anything like AyG's experience and skill in investing but I can tell you one thing for absolute certain that I've learned after two plus years of trying to learn the trade. I won't even consider a fund unless it is managed by a Fund Manager who has an excellent track record over at least a decade. It's my starting to point for assessing a fund, if it doesn't pass that test the assessment stops right there. Buying into a fund just because it is run by a friend who has had three good years, sounds like it might be problematic.
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chiangmai
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Post by chiangmai on Mar 22, 2021 8:09:59 GMT 7
I forgot to add: I'm currently holding ten funds, the allocation towards tech. is under 10% currently with no more than 0.8% in any one tec. company.
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AyG
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Post by AyG on Mar 22, 2021 8:17:01 GMT 7
Shouldn’t we all be just investing in an MSCI World fund then, unless we think we or an active fund manager is smarter than the index? I suspect that many, if not most, investors would be better off investing in such a global index fund and holding it. It removes the temptation to sell when a sector does badly for a few months or a year. It removes the temptation to buy into what is fashionable at the moment (and often than means a fund that has performed extremely well for a year or two). I actually use a global fund as a place to park my money when can't make up my mind where to invest. Specifically, I use iShares Edge MSCI World Minimum Volatility ETF (MINV on the London Stock Exchange). (The minimum volatility bit just means I'm less exposed to particular stocks I think are overvalued.) I would also suggest using index funds for US large cap exposure since there's very little evidence active management can beat the index. So, to answer your question, I’m considering this because I hope that a particular fund or fund manager may be smarter than the index so I can add potential for outperformance to my portfolio. You need to separate out two factors: (1) the sector, and (2) the fund manager's performance relative to that sector. Normally, when we think of sectors, we think of something fairly broad, such as "Japanese equities", or maybe "Japanese small cap equities". If we are confident that Japanese equities are going to outperform broader markets, then it makes sense to be overweight in Japan. Then, within the sector, we look at individual fund performance. If a manager is consistently beating the index by 2-3%/year, he is (probably) showing some skill at stock picking. If he/she beats it by 10% in any year, that's either good luck, or extreme risk taking. In either case, that fund is not for me. I am considering a particular fund that is managed by an old Uni friend of mine who is a serial entrepreneur in the European startup scene. He’s been founding and investing in successful startups and incubators and now setup this fund which was able to bring in c. 400% over the last three years and constantly beat the comparable index. This is the fund: BIT Global Internet Leaders 30 UCITS (https://bitcap.com/en/global-internet-leaders-ucits-en/?confirmed=1) That is an extremely niche fund. I personally wouldn't buy it - it's simply too niche. However, I do like the underlying companies it's invested in. If you decide to go for it, I'd suggest you only put a small percentage of your total wealth into it - perhaps 2 or 3%. I am also considering ... Polar Capital Technology Trust or the Edinburgh Worldwide IT. One very common mistake amongst investors is to look at recent performance and to buy in, assuming that future performance will be similar. There's absolutely no guarantee of that. Furthermore, prices will have been driven up in popular sectors, often to unsustainable levels, so there will be a strong headwind against future price growth. In the case of PCT, it's packed with companies that I personally think are overvalued. EWI's not so bad in that respect (well, apart from its largest holding, Tesla).
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chiangmai
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Post by chiangmai on Mar 22, 2021 19:50:34 GMT 7
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Post by rgs2001uk on Mar 22, 2021 20:18:19 GMT 7
"I am thinking about adding some tech fund to my portfolio." Why would you do that? If you invest in a generalist global fund the fund manager will decide what is an appropriate allocation (in his or her opinion) to technology stocks. Do you think you're smarter than a top fund manager, or have some special insight? Shouldn’t we all be just investing in an MSCI World fund then, unless we think we or an active fund manager is smarter than the index? And I don’t mean this confrontational either. It’s partly because of this forum here and the senior members who seem to be preferring actively managed funds why I’m considering to put some of my money in such funds (whereas so far I’ve been investing in an MSCI World only, except for the Thai LTFs). So, to answer your question, I’m considering this because I hope that a particular fund or fund manager may be smarter than the index so I can add potential for outperformance to my portfolio. I think the buzzword is satellite-core-strategy. I am considering a particular fund that is managed by an old Uni friend of mine who is a serial entrepreneur in the European startup scene. He’s been founding and investing in successful startups and incubators and now setup this fund which was able to bring in c. 400% over the last three years and constantly beat the comparable index. This is the fund: BIT Global Internet Leaders 30 UCITS (https://bitcap.com/en/global-internet-leaders-ucits-en/?confirmed=1) I am also considering some of the funds held by senior members here, such as the Polar Capital Technology Trust or the Edinburgh Worldwide IT. Though I understand that the investment universe of the funds is a bit different, as the two latter funds seem to have more of the bigger and potentially overvalued companies. I tend to like the first fund more simply because of the fact that the fund manager is not just someone looking at the industry from the outside but who’s been building (part of) the industry himself. But I haven’t really spent enough time looking at the fund yet, and am not even sure how to judge a relatively young fund like that. Go for it, these funds arent for widows and orphans, and I wouldnt be putting my rainy day money into them. For a punt of what, 5 thousand quid, less than a months wages, why not, calculated risk, more to gain than lose. My only problem with these types of funds, show me the track record, get back to me after at least 5 if not 10 years and show me consistent growth. Remove your old friend from the equation, would you still be interested? Every global IT I hold has exposure to tech holdings in one way or another, in fact I would be asking question of the fund manager if he didnt. Polar was recommended to me by my stockbroker about 6 years ago, I have done well out of it, would I buy it today is a different question, but for the time being I wont be adding to it, neither willing I be selling, hold.
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AyG
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Post by AyG on Mar 22, 2021 20:50:52 GMT 7
Comment only briefly. It's past my bed time. All three appear to be US ETFs, so bad from a tax point of view for non-Americans. VSS invests in small cap companies, so is inherently more risky than a broader based ETF, and excludes US stocks. VEU is also ex-US. ACWI I can't immediately get a grip on. Can't work out how it's differentiated, unless it's the higher than usual exposure to emerging markets.
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Post by eldivino on Mar 22, 2021 21:27:48 GMT 7
All three funds cover developed world and emerging markets, whereas: ACWI is large and mid caps; VSS is small caps excluding the US; and VEU is large and mid caps excluding the US.
That’s why the article’s recommendation without any explanation is a bit odd.
It would make sense to combine VSS and VEU if you wanted to add small-caps and change the weight of it (as compared to one of the total market funds that already have it built-in), but then why exclude the whole US? That would make sense if you wanted to change the US weight as well, but for that they’re a missing a separate FTSE US fund.
ACWI as a single one-fits-all fund is a good choice if you just want to keep it simple and stupid, but then why does it appear in the same list with the Vanguard products? Having a separate small-caps fund would make sense if you wanted to change the weight of small-caps (as compared to the ACWI IMI that has the small-caps built-in) but then you would stick to iShares/MSCI and not mix with Vanguard/FTSE.
And finally, why does it have to be the iShares product and the Vanguard one or vice versa? Or why not SPDR or any of the other ones? Is it based on TER? Tracking difference?
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chiangmai
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Post by chiangmai on Mar 23, 2021 4:25:02 GMT 7
Thanks for all your comments. I was curious about them because Investopedia tends to be quite useful from a learning standpoint so I thought perhaps they were stating something obvious that I had overlooked. As you say, perhaps OK if you are an American.
I agree that a tracker for the US is the way to go, I held L&G S&P which performed well. Despite the fund being in GBP the underlying instruments are denominated in USD so there is some currency loss since it's not fully hedged. If you were going to try and cover the globe using trackers I'm not sure what you'd buy or how you would weight them. I understand the logic that Investopedia used of one tracker covering all countries excluding the US and then one tracker covering only the US. Maybe you'd do that and then include a separate US small caps., dunno!
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AyG
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Post by AyG on Mar 23, 2021 6:29:20 GMT 7
All three funds cover developed world and emerging markets, whereas: ACWI is large and mid caps; VSS is small caps excluding the US; and VEU is large and mid caps excluding the US. That’s why the article’s recommendation without any explanation is a bit odd. It would make sense to combine VSS and VEU if you wanted to add small-caps and change the weight of it (as compared to one of the total market funds that already have it built-in), but then why exclude the whole US? That would make sense if you wanted to change the US weight as well, but for that they’re a missing a separate FTSE US fund. ACWI as a single one-fits-all fund is a good choice if you just want to keep it simple and stupid, but then why does it appear in the same list with the Vanguard products? Having a separate small-caps fund would make sense if you wanted to change the weight of small-caps (as compared to the ACWI IMI that has the small-caps built-in) but then you would stick to iShares/MSCI and not mix with Vanguard/FTSE. And finally, why does it have to be the iShares product and the Vanguard one or vice versa? Or why not SPDR or any of the other ones? Is it based on TER? Tracking difference? I think the article is very much written with an American audience in mind. The starting point for many people there (including financial advisers) is to build a US-only portfolio (i.e. severe home country bias), and then tack on say 15% of international stocks. VSS and VEU would fit the bill. I could imagine an American having 10% VEU and 5% VSS, or something like that. "ACWI as a single one-fits-all fund is a good choice if you just want to keep it simple and stupid," I wouldn't say " and stupid". It will outperform many investors who think they're smart and try to guess the markets or panic on market dips. "ACWI IMI that has the small-caps built-in" Small point, but no, it doesn't. It only covers large and mid caps. "but then you would stick to iShares/MSCI and not mix with Vanguard/FTSE" There's no real reason to stick with just one ETF provider. Many of these index products are virtually identical. A global index is a global index, whoever constructs it. When I select an ETF I look at whether it's physical replication, or synthetic. (Synthetic is a 100% no-no for me.) Then at what exactly it's investing in. For example, with Emerging Markets ETFs some include South Korea, and others don't. And finally charges. "And finally, why does it have to be the iShares product and the Vanguard one or vice versa?" Impossible to tell from the article. However, it may be because they are the top performers of their ilk over the last year.
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Post by eldivino on Mar 23, 2021 11:08:31 GMT 7
All three funds cover developed world and emerging markets, whereas: ACWI is large and mid caps; VSS is small caps excluding the US; and VEU is large and mid caps excluding the US. That’s why the article’s recommendation without any explanation is a bit odd. It would make sense to combine VSS and VEU if you wanted to add small-caps and change the weight of it (as compared to one of the total market funds that already have it built-in), but then why exclude the whole US? That would make sense if you wanted to change the US weight as well, but for that they’re a missing a separate FTSE US fund. ACWI as a single one-fits-all fund is a good choice if you just want to keep it simple and stupid, but then why does it appear in the same list with the Vanguard products? Having a separate small-caps fund would make sense if you wanted to change the weight of small-caps (as compared to the ACWI IMI that has the small-caps built-in) but then you would stick to iShares/MSCI and not mix with Vanguard/FTSE. And finally, why does it have to be the iShares product and the Vanguard one or vice versa? Or why not SPDR or any of the other ones? Is it based on TER? Tracking difference? I think the article is very much written with an American audience in mind. The starting point for many people there (including financial advisers) is to build a US-only portfolio (i.e. severe home country bias), and then tack on say 15% of international stocks. VSS and VEU would fit the bill. I could imagine an American having 10% VEU and 5% VSS, or something like that. "ACWI as a single one-fits-all fund is a good choice if you just want to keep it simple and stupid," I wouldn't say " and stupid". It will outperform many investors who think they're smart and try to guess the markets or panic on market dips. "ACWI IMI that has the small-caps built-in" Small point, but no, it doesn't. It only covers large and mid caps. "but then you would stick to iShares/MSCI and not mix with Vanguard/FTSE" There's no real reason to stick with just one ETF provider. Many of these index products are virtually identical. A global index is a global index, whoever constructs it. When I select an ETF I look at whether it's physical replication, or synthetic. (Synthetic is a 100% no-no for me.) Then at what exactly it's investing in. For example, with Emerging Markets ETFs some include South Korea, and others don't. And finally charges. "And finally, why does it have to be the iShares product and the Vanguard one or vice versa?" Impossible to tell from the article. However, it may be because they are the top performers of their ilk over the last year. "ACWI IMI that has the small-caps built-in" “Small point, but no, it doesn't. It only covers large and mid caps.” — I’m pretty sure small-caps is the difference of the -IMI funds. I used to buy it. See here as well: “ To get the 10 - 20% small-cap slice on top of mid and large-caps, look out for MSCI’s investable market indices (IMI).” (https://www.justetf.com/uk/news/etf/msci-index-classification-and-how-they-divide-up-the-world.html) "but then you would stick to iShares/MSCI and not mix with Vanguard/FTSE" “There's no real reason to stick with just one ETF provider. Many of these index products are virtually identical. A global index is a global index, whoever constructs it.” — iShares and Vanguard use different indices. iShares used MSCI and Vanguard uses FTSE, and they are constructed slightly differently. For example, South Korea is the second strongest country in the MSCI Emerging Markets (13%), whereas FTSE assigns it to the developed world. Say you combine an FTSE Developed Market fund with an MSCI Emerging Market fund you would be overweighting it; combine a MSCI World with an FTSE Emerging Markets you would be missing out on it. But yeah, in the greater scheme of things it probably doesn’t make much of a difference. Just saying.
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GavinK
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Post by GavinK on Mar 23, 2021 11:16:55 GMT 7
I agree that a tracker for the US is the way to go I bought VTI a few months back but as mentioned above the dividends get a 30% withholding tax hit (even though I submitted a W8BEN as non-resident alien). Looking for an more tax friendly alternative, or an accumulating UCITS (USD priced).
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Post by eldivino on Mar 23, 2021 11:18:20 GMT 7
Thanks for all your comments. I was curious about them because Investopedia tends to be quite useful from a learning standpoint so I thought perhaps they were stating something obvious that I had overlooked. As you say, perhaps OK if you are an American. I agree that a tracker for the US is the way to go, I held L&G S&P which performed well. Despite the fund being in GBP the underlying instruments are denominated in USD so there is some currency loss since it's not fully hedged. If you were going to try and cover the globe using trackers I'm not sure what you'd buy or how you would weight them. I understand the logic that Investopedia used of one tracker covering all countries excluding the US and then one tracker covering only the US. Maybe you'd do that and then include a separate US small caps., dunno! “If you were going to try and cover the globe using trackers I'm not sure what you'd buy or how you would weight them.” — there are two main competing logics, one is using market cap, the other one is using GDP. I think the major indices use market cap but not sure. Also, when you look at historical performance, there doesn’t seem to be much of a difference; a portfolio constructed based on market cap would yield the same returns as one constructed based on GDP. In addition, you may want to overweight/underweight certain countries or regions, I.e. you’re breaking up the passive investing by making active decisions when betting on a certain country or region. For example, some people want more exposure to emerging markets, so instead of buying an MSCI ACWI they would combine an MSCI World with a MSCI EM. I believe most passive investors would tell you to just buy a simple all-world ETF and forget about trying to beat the market, as you’re just increasing cost for rebalancing while you won’t be beating the market anyway. So something like the MSCI ACWI or the FTSE equivalent which already weigh by market cap (afaik) would be enough.
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