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

Not anymore. In theory it usually makes sense to invest in the ticket clipper rather than the funds themselves. But for some weird reason I like to only invest in funds. In our case that being PMC (not PTM). I don’t own anything from Magellan except their Global fund indirectly through FGG where I get it at 1% with no performance fee.

Probably silly but that’s me and what I feel comfortable with.

 

Yes, but have no doubt the leverage to fund flows and performance fees means it will be a wild ride.

You are riding the pendulum swings on the end of a 100-foot rope. Better hang on tight. Should be fine if your a young adrenalin seekers that can hang on through a few full swings and time the dismount. Maybe not the best idea if you've got a bit of arthritis creeping into your grip you wouldn't want to slip and let go at the wrong time.

 

Yeah, I'll add my convoluted thoughts. Generally I'd go for ticket clippers but my preference has been towards those which are mainly focused on home grown such as SOL, which by the way is classified by S&P Classification as an energy company (I think I said that somewhere. No matter I've said it again.)

I've thought about PTM and MFG but for some reason there is this nagging doubt. I've never pulled the buy trigger and it's unlikely I ever will. But that's just me.

 

Thanks for reminding me what my money could have been doing!

 

Thanks for the responses on PTM and MFG.

I guess my argument is they are both driven by the same success and the dividends are good.

Your argument probably stems from the fact that if the fund got out of favour, there would be no value remaining while shares in the fund itself always have their fundamental value.

 

Just catching up on this I haven't been logged in lately.

Kind words Austing but take my views with the caveat I often try to invest by doing the opposite to what those with funds management experience are recommending!

I think the article summed up my view that some of the LICs I mentioned there to me have been forgotten about and are relatively cheap. I refer to those instead choosing some of the shiny and new LICs like Antipodes, the VGI partners, new Magellan and even Fat Prophets global that have been at premiums this year.

I should emphasize the word relatively cheap, as it is a tough market to find value. As I said in the article I am quietly confident the ones I referred to there can outperform the S&P500 over the medium to longer term.

You may notice I chose ones that may not focus heavily on the US market, or if so are prepared to hold stocks there that are not large weights in the US indices. I am personally a bit worried about the valuations there.I like the concept of Australian investors diversifying overseas a bit more but worry at the present time if they choose a US passive fund for a large exposure.

I must admit I don't own EGI, but still think they are one of the better choices. I invested in EAI earlier in the year, and I believe EGI tends to hedge the currency so that was not my preferred exposure at the time. So I would just add to dig deep and make sure you understand what EGI are doing on currency. I just remembered now I am attending a presentation from Ellerston in Melbourne next week so maybe they will talk about that and other measures on closing the discount.

Not advice of course. And it is just an opinion. Opinions are like noses and other parts, everyone has one.

 

Investing in global exposure is good for diversification, as you are exposed to different risks and opportunities.
However, it is costly investing in foreign companies directly, as you need to factor in currency exchanges, different countries tax, understanding of local laws and regulations.
One option is ASX listed LICs with global exposure.
Another option with similar diversification benefits is looking at ASX listed companies with global operations or sales. Companies like CSL, Cochlear, Westfield, and Brambles to name a few.

 

Whilst the US is having a great run and The Donald is putting it all down to his influence, the rest of the world is having a good run for the year also



The International YTD scorecard according to iShares looks like the below

Ranking, Stock Market, iShares Symbol, % Gain

1 China MCHI +53.13%
2 Poland EPOL +46.98%
3 Austria EWO +46.18%
4 South Korea EWY +40.47%
5 Chile ECH +34.89%
6 Hong Kong EWH +31.11%
7 Netherlands EWN +30.79%
8 Singapore EWS +30.16%
9 India INDA +30.0%
10 Italy EWI +29.08%
11 Denmark EDN +28.79%
12 Peru EPU +28.06%
13 Turkey TUR +27.77%
14 Taiwan EWT +26.92%
15 France EWQ +26.47%
16 Germany EWG +25.48%
17 Sweden EWD +23.97%
18 Spain EWP +23.94%
19 Ireland EIRL +22.79%
20 Japan EWJ +22.67%
21 Thailand THD +22.52%
22 Norway ENOR +22.27%
23 Finland EFNL +21.25%
24 Belgium EWK +21.03%
25 Switzerland EWL +18.28%
26 United States IVV (S&P 500) +17.30%
27 Philippines EPHE +16.69%
28 Brazil EWZ +16.81%
29 Australia EWA +16.54%
30 Malaysia EWN +16.06%
31 New Zealand ENZL +15.72%
32 United Kingdom EWU +14.50%
33 Mexico EWW +14.34%
34 Canada EWC +13.23%
35 Indonesia EIDO +12.13%
36 Colombia ICOL +8.20%
37 Russia ERUS +3.99%
38 Qatar QAT -25.79%

 

Haha funny. I remember him saying it was a giant bubble...of course that was before he became president.

Now it's all roses and it's due to his Midas Touch!

 

@Nodrog just curious in regards to your international exposure being for insurance only. Does this mean you’re international exposure is hedged to international currency? Obviously if Australia went down the clapper, the AUS dollar would be worthless and I assume that means any international exposure not hedged would have a significant impact on the insurance policy. I’m still learning so I’m not sure my thinking is correct and I seek clarification as I like a little bit of an INternational spread for the same reasons you suggest. I tend to lean towards using LIC’s for International exposure for income purposes and early retirement aspirations, but if my thinking above is correct I’d be better of investing in VGS unhedged ETF?

 

Absolutely 100% unhedged International equities for insurance. This table provides some solutions to the risks we face but it depends on one’s timeframe (ie deep vs shallow risk):


Deep Risk Under President Trump

LIC International exposure might be ok for income but in terms of protection against Home country risk I feel more comfortable with “unhedged” index exposure.

I only hold VGS and PMC. PMC gives me income and “discretionary” exposure in part to emerging markets in particular Asia. But for insurance VGS is hopefully what will save our arse if ever Australia experiences a nasty prolonged equity risk event.

 

Thanks for the clarification @Nodrog