International International Shares - Hedged vs Unhedged?

Great posts you lot keep up the good work! Tend to agree as @Nodrog said in regards to Vas and its self cleansing nature, and not being embedded with CG, along with tax and structural angles.

10 to 20 years ago kodak, xerox, enron and others were big stocks in the us, now they are out and the fang stocks are in and holding VGS and being self cleansing we get them all and dont have to look at historic performance to predict future performance!

 

All lies I tell you. As a well paid spy for the LIC Association (it’s a secret) it’s all part of the cunning plan to infiltrate the Boglehead network to gather information for evil intent.

 

Anybody hold international funds hedged or unhedged outside super in their own name at their marginal tax rate?

 

VGS (unhedged) yes as low turnover so minimal CGT. VGAD (hedged)I wouldn’t given the taxable makeup of distributions at times as a result of the hedging process.

That said some are happy to hold VGAD in own names. If investing personally in any of Vanguards Diversified products there will be poor tax efficiency as a result of bonds and hedged assets. Though having the best product for each investor can be more important than tax outcome.

 

Cheers for that! Mrs Pippen was curious! As she holds both unlisted vanguard australian and international share funds individually via vanguard wholesalr and just bpays every month or quarter with no avail in her personal name. Super is invested in high growth so that is covered as well.

 

Quality post, thank you @Nodrog

 

IVV for me

Cheers,
Oracle.

 

I do admire you @oracle. Just because nowadays one can easily own every stock in the universe doesn’t mean one has to. It’s so easy to get caught up in the hunt for perfect diversification.

Interesting I had a more careful read of Barefoot’s Idiot Grandson’s Portfolio report. This is designed to be a very long term intergenerational portfolio. However it appears both Pape and his highly regarded analyst wanted an ALL ASX portfolio to maximise harvesting of dividends. The only reason VTS / VEU were added was due to behavioural concerns that they thought the idiot grandson might have. That is, way down the track when the grandson had inherited the portfolio they thought if VAS being the only holding was going through a bad period the idiot grandson might end up selling ASX to buy global! Behold the danger of the behavioural.

Behavioural concerns aside the end result of hundreds of hours research by Barefoot and his analyst would have been a 100% VAS portfolio!

Getting back to hedged vs unhedged Global the first decision is whether one needs Hedging at all? This can depend on a whole host of factors and in most cases the answer is probably no. However debate could go on endlessly in regard to this.

Also returning to the Hamish Douglas Interview in regard to “perhaps” hedging part of the Global Equity allocation there is a very important point almost missed if one wasn’t taking notice:

Douglas was referring to seeking some additional “performance” through switching to hedging NOT diversification in this instance. In fact prior to the above statement he highlighted the importance of being unhedged for it’s much greater protection during bad times.

Of course for those who are convinced that investing too much in Australian shares is major concern and hence have large global exposure then there might be an argument for hedging some of the global exposure.

There are a whole host of arguments for needing perfect diversification which might include seeking better performance, correlation, hedged vs unhedged, small caps, EM, optimal rebalancing, bonds both local / hedged global and trying to mitigate nearly every conceivable Risk one can possibly think of.

One can do their head in searching for the optimal. Yet there are the likes of Barefoot and Thornhill, hardly what you’d call idiots, who seem content to have long term faith in the future of Australia and invest accordingly. In fact I was one of them until seemingly falling victim to the search for the investing Holy Grail.

I suppose it could be considered theory vs emotional which I’m guilty of at times or is it a case of because of a whole plethora of product now available and way too information we’ve simply chosen to complicate what should be such a simple endeavour?

 

Vas and IVV could do the trick!

 

Yes but that’s not possible as @oracle has a patent on it.

 

I only have time to skim the Idiot Grandson report right now, but I find it a bit funny it took "hundreds of hours" to narrow it down to VAS/VTS/VEU.

And I don't see any mention of currency risk as an argument of the large home bias, only dividends.

If my idiot friend asked me if that portfolio is a good idea for them - I'd tell them to go with VDHG instead.

 

Yep 3k a month set and forget for 25 years would do the job! Timing and fine tuning the market isnt gonna add a whole lot for you! I dont see industry super funds riding out when to buy on my behalf! Every month or quarter away she goes!

 

And after 25 years you'll probably have enough to live off the distributions. No need to chase the high yield concentration risk of Australia! I've heard SANF is very important

 

Actually the patent is on VAS, IVV and AUI

Cheers
Oracle

 

3 fund portfolio @oracle ?? Any other tinkering at all?

 

Just finished reading John Bogle's book, special thanks to The Falcon for suggesting that I read it.
Mr Bogle suggested that " S&P 500 index as a whole, you own a diversified global portfolio".
He also stated 10 years later "I have no reluctance whatsoever to emphasize a truly global strategy, focused largely on US Stocks." Also in 2008 foreign sales represented 48% of all sales for the firms in S&P 500 index.
So IVV appears to be a good global strategy.

 

Investing in the US overall is a great idea, I have two pages saved to show why:

• Safe Withdrawal Rate Calculator – Ordinary Dollar - compare the SWR for a 100% Australian equities portfolio vs. a 50/50 split with US equities
  
• US will fall more than Australia in next bust

 

Interestingly, revenue from the ASX 200 is 37% is from overseas.

Not at all suggesting US and Oz are the same thing just interesting.

 

Every now and then the urge comes to tinker but so far have been able to resist.

The idea of simplification is very important then odd chance of few basis points outperformance over the long term.

Cheers
Oracle.

 

I suppose VEU being ex-US would be a logical addition?