First, I had someone reach out to me over email from outside of Singapore with a few interesting questions about investing when you live in an emerging-market economy. The country in question is in Latin America, but the same principle applies to people with exposure to EM countries—like Malaysia, Indonesia, Thailand, the Philippines—that have a lot of depreciation risk and a restricted capital account. So these answers will be worth a read if you have exposure to EM countries...
1. For bonds where And which to buy them if you come from weak economy
with high devaluation rate?
2. For ETFs where And which to buy them if you come from weak economy
with high devaluation rate?
3. Which ETFs perform better vs tax treatment ?
4. In occasions where investing abroad is a more solid choice (native
country with high devaluation rate ) how to reduce fx impact?
1 and 2) For both bonds and stock ETFs: if you're a US tax resident, you should buy US listed ETFs, otherwise the tax situation gets amazingly gnarly. If you're not a US tax resident and your country doesn't have a tax treaty with the USA (the writer lives in a country that doesn't have a tax treaty with the USA), then you want UK-listed Irish-domiciled ETFs.
The "in a weak economy with a high devaluation rate" just makes the case for UK-listed Irish-domiciled ETFs even stronger.
The portfolio in both cases would be pretty similar: use IWDA for stocks (all your stocks, there's no need for a local-stocks component if you're in a country with a developing economy), and I'd personally use LQDA for bonds, because it only holds USD-denominated bonds, and I'm not a fan of the truly dismal yields on euro and yen bonds.
3) Same answer.
4) I'd give the same advice to anyone from an EM country with devaluation risk: you don't
want to hedge the FX. That way, if and when a devaluation comes, you'll have assets in a hard currency rather than the iffy local currency.
I have a few ten thousands that I can invest in accordance to Shjny's sound strategy detailed in his book. How should I put this lump sum in seeing that IWDA is still considered to be on the cheaper side even though I've missed the recent bottom? Should I split it into a few months? I want to make up for my lost 20s..
You probably don't want to invest it as one single lump sum, surprisingly enough. If you buy in in one lump and the price goes down, you're going to feel pretty terrible, and you might end up pulling your money out and hiding it under the bed instead—and that would be the worst outcome.
You also don't want to spread it out over toooo much time. The reason is that leaving your money in cash is the worst option. Cash just sits there and does nothing; it's not being put to work, it's just earning a pittance in interest.
The best compromise is to split it into a small number of equal parts - four to six is fine - and invest one part each month. That way: if the stock goes up, you'll have bought some, and you'll be participating in the rally; and if the stock goes down, you'll be able to buy more at a lower price. Either way, that's an outcome that you can remind yourself is a good thing.
Isn't disagreement part and parcel of a civil discourse?
It is, but also:
1) This is the internet. People act like idiots when they think they're hiding behind a screen name, and we could use a lot less of that. That's what EDMW is for;
2) There are a lot of new investors in this thread. Disagreement is healthy, but when people are being jackasses it scares people off and it ruins people's experience. The readers in this particular thread deserve a higher standard of conversation.
And I do have a basis on how someone can decide on a certain ratio. I believe that no Singaporean should own more of the largest market cap company in STI (15% for DBS) than the largest cap in a globally diversified world index (3% for MSFT) That works out to be 17:83.
That's cool, I think that's a reasonable argument. My difficulty with it is that it's focusing on single-name risk, rather than encouraging balance between local and global equity exposure. It penalises countries that simply have a small number of names in their main index, rather than countries that genuinely shouldn't be invested in.
I guess the other question is "which index do you use?" Say you're in Australia: ASX 200, ASX 30... and does that mean your allocation will change depending on which index you benchmark off? And it falls over in a heap for US investors—by this rule, US investors can't have
any local stocks exposure, because if you buy any SPX you'll instantly break the exposure cap to MSFT/AMZN.
Since you've been hitting on it, my reasons for preferring a 50/50 ratio focus on two things:
1) It's a sensible rule for investors no matter where they are (assuming you aren't homed in a flaky EM economy, see above); and,
2) It's very very easy to explain, and very very easy to follow. Expecting newbie investors to parse index weightings to figure out the appropriate allocation is a bit of a reach.
It's not particularly controversial that investors should have
some international exposure (to remedy so-called "home country bias"), and some local exposure as well because you want exposure to your local economy. Zero-weighting the local economy is needlessly fatalistic.
And a 50/50 mix of local and global equity is easy for people to understand and stick to. It means that if the local economy performs
well, you'll be participating in it with a meaningful amount of your portfolio, which is part of the goal of saving for retirement; conversely, if you're zero-weighted in your local economy and it performs well, you're going to be running a long way behind everyone else who had some exposure to local markets.
One other thing to note: between the end of 2001 and the end of 2007, the STI outperformed the S&P 500 by sixty percent—not because the STI was stuffed full of cool tech stocks, but because it
wasn't. The best-performing STI sectors in 2006 and 2007 were consumer goods, maritime stocks, and utilities—not trendy, but huge beneficiaries of the EM boom and the pop in commodity prices that was going on around that time.
Markets are cyclical. The US has been a huge beneficiary of flows into tech stocks (and, as BBCW rightly points out, a virtuous cycle of liquidity begetting liquidity on US exchanges). But this is not a one-way street. The US will not be the world's best-performing market forever and ever amen. And when the baton gets passed, you want to be ready.
In short: I understand where you're coming from in making the case for a higher allocation to global stocks than to local stocks, but I'm not persuaded.
Based on the Policy Surrender Value, will only get back breakeven by age 80 (assuming 0% investment return).
I’m wondering if I should surrender it and buy a DPI Term 100K (~413/yr with CI and ~157/yr without) and SAF Group Term for 250K (~$123/yr) and invest the rest. [...].
You got absolutely railed by the salesman. Surrender it.
In terms of investment, I plan to DCA about 1.3K a month into either SWRD or VHVE. Any idea which ETF I should choose?
Will switch to a Distributing Version closer to retirement I would think.
I'd use IWDA over either of these. What drew you to these two ETFs?
If you understand economics and current US situation, you will know why US is so afraid of China over-taking US in terms of GDP and economic status and world-standing that they need to resort to outright lies to smear China and pressuring many other countries from being friendly with China and threatening them from working with China, and also resorting to hacking and stealing to get ahead of China, including hacking into Huawei servers and blacklisting many successful Chinese companies and trying to kill them.
Chris, your posts have devolved into rants that have absolutely nothing to do with the thread. Please leave this thread; I've said over and over again you're not welcome.
