International Some Considerations For Investing Globally

Discussion in 'Shares & Funds' started by Nodrog, 6th Jul, 2018.

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  1. Nodrog

    Nodrog Well-Known Member

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    Longer time frames can expose the investor to what is known as Deep Risk. The following highly regarded booklet might help you answer questions you have or hadn’t thought of yet. Don’t get caught up in all the data in the book, focus on the message:

    https://www.amazon.com.au/Deep-Risk...537991292&sr=1-1&keywords=Deep+risk+Bernstein

    Kindle edition is dirt cheap and you’ll have it instantly.
     
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  2. SatayKing

    SatayKing Well-Known Member

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    It’s really a personal thing in my view. So many individual factors at play: attitude, risk tolerance, aims, the desire to complicate, fine tune, chase the “best”. The list goes on.

    Haven’t got enough smarts myself, so I’ve gone down the path of X% Australia, Y% International (based on the funds to be invested not pricing), selected a few that have international aspects which suit me, go for it and then walk away to do more interesting things from my perspective.
     
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  3. Nodrog

    Nodrog Well-Known Member

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    67DC654F-5045-4690-B158-6964ADED0F96.jpeg

    PS: Well it’s raining outside again so unfortunately for others I need to entertain myself. And no doubt that is the only person I’m entertaining. But as SK would say, it’s all about me:).
     
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  4. dunno

    dunno Well-Known Member

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  5. Nodrog

    Nodrog Well-Known Member

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    He he. Bernstein was disappointed with that free booklet. It was aimed at millennials but the vast majority of positive feedback he got was from more mature types. He is one of my favourite Authors although his very conservative views on liability matching in retirement might not appeal to some. You in particular would likely be unimpressed:).

    But alas the skies appear to be clearing so any translation will need to be undertaken by someone else. I’d strongly suggest some younger folk here might find it a worthwhile exercise. Instead of slicing and dicing etc get the basics right first. A high savings rate and investing in a couple of low fee well diversified index funds will likely swamp any potential advantage from trying to get fancy.

    I must admit I do like your global portfolio. Still simple but looking at the current state of play I do think that having an allocation to “value” could be rewarding in the not too distant future.
     
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  6. dunno

    dunno Well-Known Member

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    Hope somebody takes it on or I might have to:(.

    It has the essences of the foundation that I will try and get my kids to understand in due course.

    I might not agree with Bernstein on all things built upon the foundation – but he pretty well nailed how to build a reliable foundation in that booklet.

    Some tweaks to identify suitable financial products in Australia and deal with our Super and Tax rules and you have a pretty good road map. But only as he says “IF YOU CAN” stick to it.
     
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  7. pippen

    pippen Well-Known Member

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    Very much agree!!!

    it seems more and more evident that the simpleton portfolio would probably work best as well as maintaining that work life balance!!! That is a core australian etf and or lic component along with a global eft (thinking VGS) along with simple cash at bank in high interest savers (for bond component) and you are pretty much set as long as you live within your means and you can save every year in order to invest and play great defense!!!!!

    It seems this forum has stages where investors are slicing and dicing and then periods where they bury down the hatches and understand the importance of simplicity in their portfolios along with behavioural finance.!!!!
     
    Last edited: 27th Sep, 2018
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  8. Zenith Chaos

    Zenith Chaos Well-Known Member

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  9. Nodrog

    Nodrog Well-Known Member

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    As you say the portfolio itself is simply the Boglehead three Fund Portfolio which has been discussed here many times with suggestions given for an Australian version.

    But as @dunno mentioned our tax environment need also be taken into consideration. For example Bonds are better suited to a low tax environment such as Super. Then given our small concentrated market, Global equities would ideally feature more prominently in the portfolio. Numerous other considerations.

    Lunch is waiting.
     
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  10. Pleep

    Pleep Well-Known Member

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    Thanks @Nodrog for the link and introduction to Kindle (which works on my phone quite nicely).

    Regarding deep risk and being concentrated in Australian Shares, I don’t see the harm in diversifying to some broad international index funds. True deep risk events (perm loss of capital), outside of emotional responses, doesn’t seem that common and something like dispossession would likely involve some invader taking all my shares including my international ETF’s on the ASX.

    So I come back to international ETF as a hedge against potential long term (10-15 years) economic doldrums in Australia. However I have an emotional battle now, to invest in a true world index which means large exposure to the U.S. which is on a “happy” run right now.
    D72CE9FF-A888-43E2-B264-9F730AA7E7B3.jpeg
     
  11. Nodrog

    Nodrog Well-Known Member

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    Just because there’s a risk doesn’t mean it will eventuate. Thornhill doesn’t feel the need for global diversification but that’s just his personal view. Our exposure to same is relatively small compared to some. I’m personally not investing in International at the moment but our circumstances are very different.

    No use investing in something if you’re uncomfortable with it. Let your SANF be your guide. But the main thing is to invest. If at this time ASX appeals then perhaps stick with that. In addition you could just begin averaging a small amount regularly into an International ETF which over the next 10 - 15 years will even itself out. In 15 years time are you really going to be concerned about what happened in the first few years? Or you can wait on the sidelines in cash in the hope the market tanks. But when will this happen nobody knows.

    The hardest part about investing is one’s emotions. Taking a course of action that’s in conflict with one’s emotions mightn’t be ideal!
     
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  12. Nodrog

    Nodrog Well-Known Member

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    Just another reason to consider investing globally. Not much to inspire investors about Australia’s future if this pans out:
    Prosperity at risk under modern Labor Party
     
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  13. Alex Straker

    Alex Straker Financial Life Coach Business Member

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    And another... upload_2018-10-12_16-34-27.png
     

    Attached Files:

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  14. Snowball

    Snowball Well-Known Member

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    If I was thinking about investing overseas it certainly wouldn’t be because of a ten year performance period. And if anything it makes Australia look more attractive to invest in currently, not less.
     
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  15. Nodrog

    Nodrog Well-Known Member

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    Yes. Thanks in part to the royal commission into banking etc at least 25% plus of our market is on the nose big time. I’m keen on International but think (dangerous:confused:) that ASX is more appealing at this point in time.
     
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  16. Alex Straker

    Alex Straker Financial Life Coach Business Member

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    100% agree and have said something similar in a post elsewhere - can't remember where.

    The point of the comparison was how important international exposure was for the last 10 years :)

    Agree that this situation will tend to 'revert to the mean'. A commodities boom and turnaround in China would be helpful.
     
    Last edited: 14th Oct, 2018
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  17. Redwing

    Redwing Well-Known Member

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    Population perspective I found interesting

    1. China 1,415,045,928 - 18.5% of world
    2. India 1,354,051,854 - 17.7% of world
    3. United States 326,766,748 - 4.3% of world
     
  18. Befuddled

    Befuddled Well-Known Member

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    Meb Faber's "Global Asset Allocation" looks at different allocation strategies

    http://www.derpreport.com/wp-content/uploads/2017/02/GAA_Book.pdf

    Skipping to pg 67 - Most of the strategies annualised returns over a 40 year period (1973-2013) were within ~1% of each other.

    And the summary...

    "As long as you have some of the main ingredients –stocks, bonds, and real assets - the exact amount really doesn’t matter all that much. Does adding small allocations to emerging bonds (nuts), frontier markets (vanilla), or more chocolate chips (stocks) vastly change the outcome? Not really. The only thing that does really alter the outcome is if you go and mess with all the ingredients while they are cooking - a sure recipe for disaster. The single biggest take away from this book is to not ruin your allocation by paying too much in fees."
     
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  19. dunno

    dunno Well-Known Member

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    200 Countries, 200 years, 4 Minute visualisation



    I like the size and position of those Asian red dots to support a VAE punt during my investing lifetime.
     
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  20. Nodrog

    Nodrog Well-Known Member

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    @duuno, has the release of Vanguard’s Global Small Cap ETF tempted you to add it to your Global ETF holdings? I vaguely remember you saying you might consider adding something like this at some stage but it was not a priority given the likely negligible impact on the overall portfolio?