Actually, I'm in the same camp as you guys but I would say a near 15 year history has made it less of an oddity(trendy,hot,buy of the year etc...) and more deserving of a second look.
From the looks of the GFC period, it didn't perform any worst(dropped near 50%) than S&P, Nasdaq or DJIA. This was a suprise.
Also, as it's an ETF, it's not as dangerous(vs individual stock) and the up side is tremendous(vs S&P,DJIA) comparatively over that 15 year period.
Here's an article that talks about 20years of small cap vs S&P.
http://seekingalpha.com/article/2738615-5-simple-ways-to-beat-the-market-part-1-of-5
It looks good to me.
Yeah, this is a fair point! The small-cap effect, the value effect (and by extension the smallcap-value effect) is an actual thing. It exists. Over the very long term, small-cap stocks and value stocks tend to outperform larger-cap and growth stocks; the value tilt is how Wozza made Berky into the all-consuming monster of Americana it is today.
The reason I don't bang on about it too much is for the same reason I tend to handwave away emerging markets and high-yield bonds, even though they're good things to own - it makes the portfolio more complex than a simple three-fund portfolio of ES3, A35, and IWDA. Telling people "you need to buy these six or seven stocks in these proportions and then you need to scale them down like this and this and this" is just going to scare new investors away.
That said, once you've got comfortable with your three-fund portfolio (and I mean a couple of years, not "oh I've made my first investment, I know what I'm doing"), there's nothing wrong with adding a 3-5% allocation to:
- Emerging markets;
- High-yield bonds;
- Global small-cap stocks (not just the USA).
I do this. I've got small allocations to all of the above - 5%, 3%, and 5% respectively.
Here's the thing, though: emergings and high-yield bonds have been disaster areas this year. I'd have made more money if I kept my cash in US stocks. That won't always be the case, though (for example, EM stocks absolutely flattened US stocks from 2000 to 2009); and the point of being invested during the bad times is so that you can participate in the rally when the good times come.
Take those allocations out of your equity allocation, though: these are all things that are
riskier than stocks. If you're reducing your bond allocation to buy EM stocks, or high-yield bonds, or small-cap stocks, you're doing it wrong.
Important: For those who wish to open a SCB brokerage account, passing the Customer Account Review (CAR) is a must. For other banks, failing the CAR simply means you cannot trade SIPs. For SCB, you cant even proceed with account opening. Not sure why SCB is so stringent though.
Frankly I think it's because they don't want to put the effort in. It wouldn't be
that hard to add a "SIP"/"EIP" flag to all the products loaded in the system, and prevent non-CAR customers from placing orders in SIPs.
Also on this note: if you tell Stanchart that you've made six trades in Specified Investment Products, so therefore you can open an account, they don't check. I'm just sayin'.
HI Shiny,
Could you kindly elaborate on below? Is it difficult because administratively cumbersome or legislation makes foreign investors jump through hoops etc.?
Because you can only really buy them from American brokers; and because you get the very unfavourable tax treatment on the dividends.
Shiny Things - Perhaps my phrasing was inappropriate. What I actually meant was that the general trend of those stocks follow the same peaks and troughs of ES3 for most part, albeit with more volatility, instead of splitting away like
Yeah, I'll give you that. I still think these don't track the STI particularly well (with the exception of one of the REITs, which was generally in the same direction, but there's no guarantee that those relationships will hold in the future). If you want a thing that tracks the STI, but an STI ETF.
So he will never advise to collect more stuff.
