International Investing in international equities [LICS / ETFs / direct]

One reasons I read recently. Probably 1st level marketing stuff unfortunately @Il Falco , but nevertheless appeals to me:

The typical behaviour of the AUD as a "risk on" currency. AUD typically goes up when global growth is optimistic, and hence international markets are going up. So in a crash, the AUD tends to crash as well, which mitigates some of the fall. Obviously if you never sell this doesn't work, but you could decide to do some rebalancing at that point and do quite well.

E.g. in the GFC, if you owned the US market via VTS or something. The market falls 50%, the AUD also fell a long way, maybe 30-40% from memory. Net result, VTS falls 10-20%. VAS has fallen 50%. You sell VTS and buy VAS, and pocket 30-40%.

Hmm well just seeing it all on paper, now it all seems a bit too complicated to pull off during the psychologically stressful times of a GFC. And a few assumptions and figures I'd definitely need to re check.

So I guess... writing it out was obviously a good exercise. Thank you!

 

Totally. You are on to it. Unhedged all the way. You'll reduce volatility and present rebalance opportunity (if you wish - bear in mind tax consideration). Both AUD and CAD tend to be have some positive correlation with US/World Developed market. AUD typically gets a hammering in global sell offs...

 

Deceiving appearance, but the above flags the below article

Australian investors miss out on the main game offshore

 

There is some strange image editing going on in that pic. The poor girl in blue has been given a huge hernia in her rower right abdomen, and a right arm M.C. Escher would be proud of. I think she has been added in to represent 3 asset classes. How bizarre...

Staying on track, I currently have about 17% VTS and 11% VEU against 15/10 benchmarks, (over due to performance). Interestingly VTS has been my best performer to date out of all ETFs/LICs since going down this ‘passive’ income growth focused path, despite being the lowest yielding. Swings and roundabouts no doubt.

I was originally a boglehead and have since added LICs, international for me is a risk/opportunity play esp with currency considerations

 

Sacre bleu! Just checked sharesight and with the latest dividend about to hit (I count divvies when owed to me, can’t shake off accrual accounting!) QVE is outperforming VTS by ...0.03%! Until tomorrow. Not that any of it matters of course, income income income...

 

I went LIC for international on the basis that they can switch focus between region as needed.

Despite talk of AU missing out, hasn't VAS outperformed NDQ this year?

 

Good point about international LICs being able to switch regions. I own several and especially like PMC and HHV as they pay large, fully franked dividends.

 

This one?

BETANASDAQ ETF UNITS
(ASX:NDQ)

 

Yes that's it but I just checked again and can't see VAS ahead of it over a recent time frame. Must have been something else.
Not QUAL either - just checked that too.
Hmmm

 

There seems to be a lot of media commentary about the US Market in particular heading for a crash. No one knows when but history suggests there will be one in the future. So perhaps a good time to be discussing International Investing in case opportunities arise.

And should the US market tank at least one seasoned investor / researcher suggests ASX won’t fall as hard:
US will fall more than Australia in next bust - Cuffelinks

Plus there’s been a lot of discussion about International LICS / ETFs in other unrelated threads so perhaps it would be good to concentrate the discussion here in the appropriate thread.

This comment from @SatayKing elsewhere I think sums up the view of a number of us here:

Others, particularly younger investors, may already have significant exposure to International funds.

In terms of “locally domiciled” index ETFs @dunno, whom I hold in very high regard and is way above my level, has offered what I think is an excellent simple solution for International allocation based on very sound reasoning:

Of course despite the convincing data that indexing is the superior solution to International Share Investing there remains those of us here who perhaps due to issues such as psychological makeup / income focus / dividend smoothing / franking credits / not interested in index benchmarks etc tend to favour LICs.

Then there’s those like me who favour a combination of cap weighted Index ETF(s) and LICs.

With International Listed share funds, given my very long term focus I have to admit that due to numerous issues such as income, key person risk, survivorship, activism, tax, fees, currency etc I haven’t found it as easy an area to make decisions compared to local investing. And of course I’m only an amateur.

So please everyone give us all you’ve got in terms of your views on International investing, preferred holdings, reasons why you hold same, tax issues and anything else related you can think of?

 

With both my SMSF and Trust I am aiming to hold around 25% as international funds. I am using a mix of ETFs and LICs. For simplicity I am only touching Australian domiciled funds. Around 40-50% is in VGS and the balance is made up of PMC, FGG and MFF. I've still got 20+ years until I can touch my super so every share has ticked the box for DRP and in the case of MFF a low dividend doesn't concern me as long as it's compensated by growth.
I've also been looking at EGI which has a fair discount to NAV and adding some PIC with a little international exposure.

 

Agree - we are in a unique position as AUD is a risk currency which means it will sell off in times of global slowdown...

Its a good opportunity... and unhedged was an absolute no-brainer when it was close to parity.. Still good value now.

 

Retired, income focused but prepared to accept a combination of dividend payers and growers. Our International allocation is currently around 18%. Likely to reach 20% or even 25% if excellent opportunities arose. I favour listed funds that have a high probability of long term survival. Set and forget, desert island funds preferred.

International Holdings across SMSF, Trust (to close) and Personal portfolios:

VGS - passive, developed, large / mid cap, very low fee.

FGG - active, lower volatily, relatively low fee as charity donation, mix of Absolute return, Market Neutral, Quant, Long only, hedged, unhedged, Developed, Asia, Emerging markets, large / mid / Small Cap. Almost everything active in the one package.

PMC - active, Asian bias, income focused, currency hedged.

PIC - active, value, opportunistic, max 25% allocation, mostly ASX Mid cap focused.

Given we’re unable to get much into the SMSF now one further International holding in own name would probably wrap it up for me.

For those that suggest this is too many holdings, these are funds not individual stocks and virtually set and forget. Other than for the one ETF a couple of dividend statements pa for each holding is hardly onerous.

Please feel free to critique other than suggest buy VGS then forget about it. An all index portfolio is not a match for my investing personality and would have me uncomfortable including poor SANF.

 

Is anyone invested in EGI? I've looked at it for a little while but haven't jumped in yet. I notice in the AGM notes that they are looking to try to close the discount to NAV and are going to up the dividend slightly and also try to increase their profile.

 

If @Ianvestor is around he could add more. They’re supposed to be a proven quality Mgr but new to the LIC environment.

Steve mentions Ellerston in his excellent article written for ETFWatch. In fact given the passive vs active debate raging lately if you’re a contrarian investor and believe in cycles it’s well worth a read as is following his blog:

Time for global active managers to outperform & common catalysts for LICs

Steve worked in the fund management industry prior to leaving it to become a full time investor so he’s well worth following.

C’mon Steve with an intro like that how can you resist.

 

@TazDevil_666 Over what period were you looking at?

 

Posted elsewhere but a suitable resource for here. Also relevant to the active vs passive debate:

http://us.spindices.com/documents/spiva/spiva-australia-mid-year-2017.pdf?force_download=true

 

@Redwing based on Sharesight p.a. total return, bit over 1 year for QVE, couple for VTS.

Includes some purchases on weakness over that time, e.g. VTS post brexit and during US election when I thought all the silly fear over Trump winning was a great opportunity to buy. Then Trump won, I thought **** there goes my money, and then the S&P jumped through the roof! So I looked right despite being completely wrong and received a great reminder that I don't know diddly squat about jack.

Since I mentioned it QVE has dipped down an few %, VTS now leading the race. Tomorrow QVE will prob jump up or down another 3%. Goes to show the pointlessness of short term performance tracking, even though I usually check prices every day. A nasty habit.

 

A crude look below, but worth considering

5 yr



and 10 yr

 

Is anyone choosing PTM or MFG as a proxy for international?