Official Shiny Things thread—Part IV

[revhappy]

Hey, I'm also looking at taking on more risk by focusing on some country / sectors specific etfs. I currently have around $100ksgd in vwrd at 28 years old; I am definitely capable of handling risks.

Maybe something like S&P 500 since it has been doing better historically, or maybe healthcare /tech etfs.

Hope to get some inputs from the members here.

Posted from PCWX using Ilovennp

Not worth it. If I were you, and if I wanted to take more risk, I would increase by equity exposure but still remain broadly diversified. I would look at adding to VWRD at falls.

 

[Wishdom]

Not worth it. If I were you, and if I wanted to take more risk, I would increase by equity exposure but still remain broadly diversified. I would look at adding to VWRD at falls.

Noted, but I'm already at 100% vwrd.

Posted from PCWX using Ilovennp

 

[Shiny Things]

OK, my goodness that was a head-spinning end to the previous thread; thanks to everyone who reported Chris’s unpleasant posts. Please keep reporting him if he keeps misbehaving; I think the only way he’s going to go away is if he gets banned.

Maybe we should all just agree to ignore him in this thread?

hi ST,
[regarding starting a robo-advisor]
1. do you think it's worth the trouble as SG's size is small?

2. what sort of licences are needed to do this? or can anyone retail do this?

3. what is the sort of funding required, what is your estimate?

1) SG is small, but there’s a lot of HNWIs and mass-affluent people in Singapore; it’s a wealthy country, and the pool of assets is huge. A good offering could potentially get a hell of a lot of assets.

2, 3) You’ll need an RLFMC (Retail Licensed Fund Management Company) license, which doesn’t come cheap. Half a million in capital requirements, plus at least three employees including a dedicated finance function, plus office space (there are rules around office space for fund management companies, and I don’t know if those are getting waived for COVID)... At a wild guess I’d say $2-5 million, either in bootstrap funding or a seed round, to get you off the ground.

The easier option would be to work with an established fund manager, and launch the robo-advisor as a sub-brand on their license. That gets you up and running a lot easier and a lot faster.

anyone knows how robust are quant based investment methods? This article seems to suggest they're not so robust afterall

This is a huuuuuuge rabbit hole that we could go down.

I think the article’s a bit overwrought, and people on FinTwit have been justly dunking on it, because saying stuff “could never happen” assumes normal distributions.. and financial markets are anything but normally distributed.

Also, the factor blowup earlier this week (when beaten-down value stocks exploded higher, while momo names collapsed) was, tbh, one of those things that happens every few years. Occasionally, popular strategies blow up. It happens.

I don’t think it’s an indictment of quant strategies so much as it’s an indictment of crowding. So many trend-followers are shorting value stocks and buying momo/growth stocks that it was inevitably going to get blown out eventually, I think.

tiger broker is safe or not? It is definitely the cheapest out there. But china company. ST, Any take on this broker?

I don’t know enough about Tiger to say, tbh. But I personally wouldn’t use them. It feels like you’re trying to save a few dollars by opening yourself up to a lot of risk?

That said, I’m not sure why they tout IB’s involvement. I don’t see Interactive on the list of largest holders of UP Fintech, the (publicly-listed) parent company of Tiger Brokers. At best, they might be an IB white-label, but I don’t actually know.

 

[Shiny Things]

Hey, I'm also looking at taking on more risk by focusing on some country / sectors specific etfs. I currently have around $100ksgd in vwrd at 28 years old; I am definitely capable of handling risks.

Maybe something like S&P 500 since it has been doing better historically, or maybe healthcare /tech etfs.

Hope to get some inputs from the members here.

This is a question that popped up in previous threads. I think in the previous one the question was specifically about tech, but to answer more generally...

You can slice-and-dice the stock universe a few ways. The default at the moment is to slice it by factors (value, growth, momentum, low-vol, etc etc); you can also look at it by sector (tech, healthcare, energy, etc etc), or by country, or even go down to the level of single stocks.

It’s fairly easy to get factor exposure through iShares UK’s lineup of ETFs (I’m deliberately steering away from US-listed ETFs here, because of the unfavorable dividend tax treatment).

Getting exposures to individual sectors is a bit trickier if you’re not a US investor. SSGA in the US offers the XL* series of Sector SPDR ETFs, which own individual sectors of the S&P 500 and are terrifically liquid and easy to trade; they have equivalents in the UK that track the individual sectors of the MSCI World, but those funds are a lot smaller, and, I suspect, a lot less liquid.

iShares UK has a few memey ETFs (“digitalisation!”), but those aren’t really “sectors” so much as “a collection of stocks that the sales dudes thought would look good in the brochure”, and I’m not a fan of them.

Long story short: It depends what sectors, or what factors, you want to get exposure to. If you can get specific, we can point you to the right ETFs. (Or maybe just go single-stock. Normally I don’t encourage people to stock-pick, but if you’re specifically looking to dial up your risk, a concentrated portfolio of single-names is going to give you that.)

Hello guys , I'm looking for invest in fast growing Asia economic etf type here.. any counter for recommendation..Thank you very much

Your question might be a little over-broad. Which particular Asian economies do you want to invest in?

 

[dullthings]

Hi ST/all, have been following this thread for 2-3 years. There’ve been several excellent contributors (eg ST, cfleee, hwckhs, BBC) who usually give relatively on point, detailed and insightful replies.

At the same time, because of the technical limitations of HWZ, the discussions around here is also plagued by repeated questions/answers (not anyone’s fault) and the occasional disagreements.

If you look at Reddit/bogleheads etc, the discussions there are mostly a little more constructive and civil.

To overcome HWZ’s limitations and perhaps mature this group into a DIY DCA interest group (and less of a fan vs critics’ arena), could we consider moving this group to “less anonymous” platform that offer us more control and also allow us to have some group admins (eg ST cfleee hwckhs)? For example, Telegram? (One of the robos recently started a telegram group for its users and it is working quite well).

 

[newjersey]

OK, my goodness that was a head-spinning end to the previous thread; thanks to everyone who reported Chris’s unpleasant posts. Please keep reporting him if he keeps misbehaving; I think the only way he’s going to go away is if he gets banned.

Maybe we should all just agree to ignore him in this thread?



1) SG is small, but there’s a lot of HNWIs and mass-affluent people in Singapore; it’s a wealthy country, and the pool of assets is huge. A good offering could potentially get a hell of a lot of assets.

2, 3) You’ll need an RLFMC (Retail Licensed Fund Management Company) license, which doesn’t come cheap. Half a million in capital requirements, plus at least three employees including a dedicated finance function, plus office space (there are rules around office space for fund management companies, and I don’t know if those are getting waived for COVID)... At a wild guess I’d say $2-5 million, either in bootstrap funding or a seed round, to get you off the ground.

The easier option would be to work with an established fund manager, and launch the robo-advisor as a sub-brand on their license. That gets you up and running a lot easier and a lot faster.



This is a huuuuuuge rabbit hole that we could go down.

I think the article’s a bit overwrought, and people on FinTwit have been justly dunking on it, because saying stuff “could never happen” assumes normal distributions.. and financial markets are anything but normally distributed.

Also, the factor blowup earlier this week (when beaten-down value stocks exploded higher, while momo names collapsed) was, tbh, one of those things that happens every few years. Occasionally, popular strategies blow up. It happens.

I don’t think it’s an indictment of quant strategies so much as it’s an indictment of crowding. So many trend-followers are shorting value stocks and buying momo/growth stocks that it was inevitably going to get blown out eventually, I think.



I don’t know enough about Tiger to say, tbh. But I personally wouldn’t use them. It feels like you’re trying to save a few dollars by opening yourself up to a lot of risk?

That said, I’m not sure why they tout IB’s involvement. I don’t see Interactive on the list of largest holders of UP Fintech, the (publicly-listed) parent company of Tiger Brokers. At best, they might be an IB white-label, but I don’t actually know.

if funding is available to what u detailed, what sort of returns are we looking at?

pm if u like

 

[brfish]

suggestion on SAR

Hi ST, I have a question on SAR that I can't figure out and wonder if you can provide some insight.

So, I follow your advice and invest in low cost index ETF, never individual stocks. However, I do get RSUs from the company I work for. I don't see any reason why I should hold on to them. I myself, which is the largest component of my asset, is invested in this company and I shouldn't invest anything more into it. What I do is to sell the company stock on specific days of the year (not when they are vested as a lot of stocks are vested for other employees hence there might be a lot of people doing the selling), and use the cash to buy IWDA etc. The stock price fluctuates but I don't want to time the market and am comfortable with it.

The problem is that I don't know how to deal with stock appreciation rights. You see, on the day I choose to sell the company stock, my SAR might be under water hence I wouldn't execute. Say if the cost to my SAR is $10 and the current stock price is at $8, when should I execute? Should I do that as soon as it's positive, $10.01? I would get only 1 cent in this case. I'd rather wait for the stick to rise. If it doesn't, my downside is capped at 1c. No big deal. But then if I wait the stock price to rise, I'm technically timing the market...

I don't know how I can deal with SAR if I want to convert them into ETFs more effectively. My guess is that the fact that SARs aren't symmetric (the downside is capped) has some value in it and I don't know how to capture it. Any advice is appreciated.

 

[Okenba]

Hey, I'm also looking at taking on more risk by focusing on some country / sectors specific etfs. I currently have around $100ksgd in vwrd at 28 years old; I am definitely capable of handling risks.

Maybe something like S&P 500 since it has been doing better historically, or maybe healthcare /tech etfs.

Hope to get some inputs from the members here.

Posted from PCWX using Ilovennp

The entire idea of passive index investing is not about out performance, but being able to stay long enough so that compounding does it's job.

From the safety perspective, the main concern I would have is what Dalio is predicting, the rise of China at the expense of US. Since China is very small in a world ETF and not represented at all in Developed Countries ETFs, it seems to me that if Dalio turns out to be right, many who buy VWRD or IWDA would be under weighted for China. Shrug.

Disclaimer: I'm not an expert at how indexes work. I just decided to buy some China A to hedge against what Dalio has said. If it turns out that my VWRA also increases its proportion of China as that happens, I can always divest of the China A ETFs.

 

[BBCWatcher]

Hey, I'm also looking at taking on more risk by focusing on some country / sectors specific etfs. I currently have around $100ksgd in vwrd at 28 years old; I am definitely capable of handling risks.

At age 28, that’s great. You’re making progress. But unfortunately S$100K isn’t a lot. It’s the equivalent of about 1/10th of the value of a shoebox condo in (crazy) Singapore.

“Stay the course.”

Noted, but I'm already at 100% vwrd.

You can switch to VWRA for new purchases from this point forward.

From the safety perspective, the main concern I would have is what Dalio is predicting, the rise of China at the expense of US. Since China is very small in a world ETF and not represented at all in Developed Countries ETFs, it seems to me that if Dalio turns out to be right, many who buy VWRD or IWDA would be under weighted for China.

VWRD/VWRA is a market capitalization weighted index. It’s neither overweighted nor underweighted in terms of stocks listed/traded in China. Moreover, it doesn’t matter whether Xiaomi ever makes more smartphones than every other manufacturer if they’re only making one penny of profit on each one. Long-term enterprise value is based on profit expectations. Apple is a great example. Apple is only the third or fourth largest smartphone maker in the world (and mostly manufactured in China), but they’re making more profit (by far) than everyone else making smartphones.

“Let the global index speak.” Don’t try to second or third guess it. Relatedly, does it matter where Apple’s stock is listed and traded? Not really — that’s fairly arbitrary. Is Apple a Chinese company? Pretty much! But VWRA/VWRD also holds stocks listed/traded in China. They’re just not worth that much, relatively speaking.

 

[limster]

Disclaimer: I'm not an expert at how indexes work. I just decided to buy some China A to hedge against what Dalio has said. If it turns out that my VWRA also increases its proportion of China as that happens, I can always divest of the China A ETFs.

Dalio is not the only one advocating adding China to your portfolio.

Malkiel, the passive indexing guru, and author of Random Walk Down Wall Street also advocates for adding China exposure. When it comes to China, he points out that the news in the USA is extremely negative on China. So it is no surprise that many US investors parrot the negative views they get from the US media.

This affects investor sentiment which is why China is still not a crowded trade. (If US media starts saying that China is a fantastic place to invest and everyone starts jumping onto the China train, then its time to get off).

Anyway, no one is saying you have to put 50% of your portfolio into China, but if you feel like overweighting China by say, adding 10% into your portfolio DYODD and go ahead. You don't need to get validation from anonymous internet users. When it comes to investment, there is no single right answer - if there was only one way to invest than most of the finance industry does not need to exist

In fact, this is in Random Walk Down Wall Street. I strongly recommend investors to read this book and DYODD

 

[chrisloh65]

Shiny Things,
I believe I have been doing my part to educate people here and pointing out the loop-holes and flaws in what you are advocating here on investments, like:

1) you advocating the long-term buy and hold and don't sell passive index ETFs pseudo-ponzi scheme into VWRD or IWDA (which mainly consists of >65% US stocks when US GDP is only about 22% of this world and PPP-adjusted GDP of US is only 15.2% and expected to decline further in future!.

https://www.statista.com/statistics/270267/united-states-share-of-global-gross-domestic-product-gdp
Published by H. Plecher, May 27, 2020
In 2018, the United States accounted for 15.2 percent of global gross domestic product (GDP) after adjusting for purchasing power parity (PPP). This share was expected to decrease to 13.86 percent by 2024, which is roughly a seventh of the global total.

So people who put so much money into IWDA and VWRD are basically too much over-weight US stocks and US economy which is declining in importance and relative GDP (especially PPP-adjusted-GDP) every year, and basically contradicts even the basic principles of diversified investing!

2) your lies about China banks in gargantuan debts and will go bankrupt sooner or later (but when I challenge you to provide facts to back up your claim you are unable to provide any).

3) you asking people to invest in Blackrock managed fund 2801 HK and 2802 HK which has terribly very little transactions and terribly high bid-ask spread, and is terribly bad advice!

I can understand why you are so mad at me for exposing your investment loop-holes and flaws, and your desire to ban me so that I cannot keep exposing you for your flawed investment scheme and you trying to talk up US and US stocks and propagating anti-Chinese views and anti-China stocks and pandering people to use products and services of mainly US companies and to over-weight US stocks holdings etc (which are terribly biased and based on personal self vested interest in US and US stocks)!

May be many people are stupid here, but definitely not all (despite them keeping quiet here, unlike your brown-tonguers)!

OK, my goodness that was a head-spinning end to the previous thread; thanks to everyone who reported Chris’s unpleasant posts. Please keep reporting him if he keeps misbehaving; I think the only way he’s going to go away is if he gets banned.

Maybe we should all just agree to ignore him in this thread?

...........................

I don’t know enough about Tiger to say, tbh. But I personally wouldn’t use them. It feels like you’re trying to save a few dollars by opening yourself up to a lot of risk?

That said, I’m not sure why they tout IB’s involvement. I don’t see Interactive on the list of largest holders of UP Fintech, the (publicly-listed) parent company of Tiger Brokers. At best, they might be an IB white-label, but I don’t actually know.

 

[cassowary18]

limster and chrisloh65 are making the same point about China but one person is making their point more civilly.

 

[BBCWatcher]

Dalio is not the only one advocating adding China to your portfolio.

Malkiel, the passive indexing guru, and author of Random Walk Down Wall Street also advocates for adding China exposure. When it comes to China, he points out that the news in the USA is extremely negative on China. So it is no surprise that many US investors parrot the negative views they get from the US media.

This affects investor sentiment which is why China is still not a crowded trade. (If US media starts saying that China is a fantastic place to invest and everyone starts jumping onto the China train, then its time to get off).

There's a lot to unpack there.

First of all, who are these mythical people saying that investors should avoid "China"?

Second, what do you think companies (that happen to be headquartered in the U.S.) have been doing for decades? Ignoring China? I don't think so! Have a look at these data for example.

Anyway, no one is saying you have to put 50% of your portfolio into China, but if you feel like overweighting China by say, adding 10% into your portfolio DYODD and go ahead.

Well, why? What's the point? If you want to follow that "logic," why not overweight an economy that's more likely to grow faster, such as Guyana's and/or Bangladesh's?

If you followed that "logic" in the 1990s you would have overweighted stocks listed/traded in Japan. Oooops!

Just let the global stock index speak! What's the point in adding complexity? If "China" exceeds its already lofty expectations (and associated valuations), OK, no problem! VWRA will pick that up! Even IWDA will pick up some of it.

Anyway, if you're going to overweight something, either do it because there's some actual, sound investment logic (e.g. stocks listed in Singapore if you're expecting to retire in Singapore) or do it with full recognition it's gambling, in which case you should try to be the smartest gambler. For example, if you think you're speculating on a country's GDP growth prospects, then there are some countries that rank ahead of China. (Guyana and Bangladesh are two such examples.)

 

[Okenba]

Anyway, no one is saying you have to put 50% of your portfolio into China, but if you feel like overweighting China by say, adding 10% into your portfolio DYODD and go ahead. You don't need to get validation from anonymous internet users. When it comes to investment, there is no single right answer - if there was only one way to invest than most of the finance industry does not need to exist

Yeah. Not here for validation. Just answering to a question about country specific ETFs.

The way I see it, most people here aren't entirely globally weighted anyway. If they wanted to argue about letting the index speak for itself, they would first have to explain why IWDA over VWRA (the fact that they closely mirror each other isn't a reason. Past performance is no indication of future results.) And then, they would have to explain why severely overweighting what is less than 1% of the global stock market makes sense. It certainly doesn't if we are advocating letting the index speak for itself.

We all have our own opinions and biases.

 

[limster]

Well, why? What's the point? If you want to follow that "logic," why not overweight an economy that's more likely to grow faster, such as Guyana's and/or Bangladesh's?

Malkiel has provided reasons in his book and in numerous interviews (anyone can google "Malkiel China" to find them) why he overweights China. So I'm providing a source for investors who wish to DYODD before investing.

Certainly, if an investor is not willing to do some research, but content to rely on advice from anonymous internet sources, then maybe the investor is better off not investing in China. For those willing to read up more, decide for yourself whether to follow Dalio's and Malkiel's advice.

I've cited Malkiel, so here's one report about Dalio (its as easy as going to google and typing "Dalio China" by the way): https://www.marketwatch.com/story/r...al-moment-for-global-market-shift-11605377679

 

[BBCWatcher]

There was some discussion of this idea in this Bogleheads thread.

One of the commenters mentioned Japan, then the world's second largest national economy, now the world's third largest. In 1990 the total value of stocks listed in Japanese stock markets (mostly the Tokyo Stock Exchange) briefly ranked #1 in the world. The value of those stocks then fell by about 2/3rds even while Japan's GDP has continued to grow. If you had overweighted stocks listed in Japan with the same "logic," you would have been very, very badly burned.

I don't think you should overweight or underweight the stocks listed in any specific stock market that happens to be located in a particular geography or country, with the possible exception of the stocks listed/traded in a stock market that happens to be located in your planned retirement country. I don't think you should second guess the global index.

Oh, one more thing: if you want to put your faith in Ray Dalio's advice, well....maybe that's a bad idea?

 

[chrisloh65]

BBCWatcher,

In response to your question: "First of all, who are these mythical people saying that investors should avoid "China"?",
well, Shiny Things did claimed that China stock market market cap is mainly made up of China banks and China banks have gargantuan debts and will go bankrupt sooner or later! So, who is saying "avoid China"? Strange that you are asking this question when Shiny Things made those claim in this thread and yet you didn't know when all these while you have so active in this thread?!

Regarding your statement "Just let the global stock index speak! What's the point in adding complexity? If "China" exceeds its already lofty expectations (and associated valuations), OK, no problem! VWRA will pick that up! Even IWDA will pick up some of it.",
well there is a problem here:
https://www.rubio.senate.gov/public...o-add-chinese-companies-in-its-equity-indexes
Rubio Requests Information from MSCI Over Controversial Decision to add Chinese Companies in its Equity Indexes
JUN 13 2019

Indexing companies had been threatened about including Chinese stocks in their indices, and forcing US pension funds and investment companies to eschew investing in China stocks/funds!

So, this resulted in global index ETFs being under-weight on China stocks, while being terribly over-weight on US stocks (which is not in line with the GDP of China vs US)! Below provided the facts which you can see for yourself:

https://americas.vanguard.com/insti...erview?portId=9505&assetCode=EQUITY##overview
FTSE All-World UCITS ETF - (USD) Distributing (VWRD)

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
List of countries by GDP (nominal) - Per the World Bank (2019)

So in 2019, US' GDP as % of world GDP is only 24%, but VWRD contains about 57% of US stocks, while China's GDP % is about 16%, but VWRD only contains about 5.6% of China stocks, so indexing is supposing to be GDP-weight based but clearly there is serious biases here.
Furthermore, when we invest, we should be forward looking and not looking at the rear mirror, so with US GDP growth expected to be at 1% vs China at 6%, it is no brainer where I would want to over-weight more on China vs US (on top of GDP weightage consideration)!

Given that world index ETF like VWRD is not doing a proper job, then we would have to go for or add country-based index ETFs e.g. of China to ensure that we are adequately diversified in terms of GDP-weighted based investments and capturing the future growth!

There's a lot to unpack there.

First of all, who are these mythical people saying that investors should avoid "China"?

Second, what do you think companies (that happen to be headquartered in the U.S.) have been doing for decades? Ignoring China? I don't think so! Have a look at these data for example.

Well, why? What's the point? If you want to follow that "logic," why not overweight an economy that's more likely to grow faster, such as Guyana's and/or Bangladesh's?

If you followed that "logic" in the 1990s you would have overweighted stocks listed/traded in Japan. Oooops!

Just let the global stock index speak! What's the point in adding complexity? If "China" exceeds its already lofty expectations (and associated valuations), OK, no problem! VWRA will pick that up! Even IWDA will pick up some of it.

Anyway, if you're going to overweight something, either do it because there's some actual, sound investment logic (e.g. stocks listed in Singapore if you're expecting to retire in Singapore) or do it with full recognition it's gambling, in which case you should try to be the smartest gambler. For example, if you think you're speculating on a country's GDP growth prospects, then there are some countries that rank ahead of China. (Guyana and Bangladesh are two such examples.)

 

[chrisloh65]

BBCWatcher,

Think you made a good point here, so I suppose you would agree now that all those people investing all their money into VWRD (which consists of >57% of stocks from a single country called USA when USA's GDP is only about 24% of world GDP) is making huge mistake since they are NOT retiring in USA right?!

Only you and Shiny Things who are US persons and have vested personal self interest in US and US stocks should be so heavily vested in US stocks (at >57% of VWRD) and not the rest of us!

Regarding your comment "Oh, one more thing: if you want to put your faith in Ray Dalio's advice, well....maybe that's a bad idea?", that really makes me question whether you are really a long term investor you claimed yourself to be, since you pointed to Ray Dalio's 1 year poor performance and claimed following him is a bad idea, but shouldn't you be pointing to his long-term performance which he did quite well?!

There was some discussion of this idea in this Bogleheads thread.

One of the commenters mentioned Japan, then the world's second largest national economy, now the world's third largest. In 1990 the total value of stocks listed in Japanese stock markets (mostly the Tokyo Stock Exchange) briefly ranked #1 in the world. The value of those stocks then fell by about 2/3rds even while Japan's GDP has continued to grow. If you had overweighted stocks listed in Japan with the same "logic," you would have been very, very badly burned.

I don't think you should overweight or underweight the stocks listed in any specific stock market that happens to be located in a particular geography or country, with the possible exception of the stocks listed/traded in a stock market that happens to be located in your planned retirement country. I don't think you should second guess the global index.

Oh, one more thing: if you want to put your faith in Ray Dalio's advice, well....maybe that's a bad idea?

 

[BBCWatcher]

Here are some other ways you could weight investments, in no particular order:

1. You could weight stocks based on the populations of the countries where stock markets happen to be located. If you do this then stocks listed/traded in India should represent about 17% of your stock portfolio, the second largest percentage and soon to be largest. (Stocks listed/traded in Jakarta would represent your fourth largest percentage according to this “logic.” And how do you like Pakistan’s stock exchange? That’d be your 5th largest.)

2. You could weight stocks based on the nominal GDPs of the countries where stock markets happen to be located.

3. You could weight stocks based on purchasing power parity (PPP) adjusted GDP.

4. You could weight stocks based on the nominal or PPP GDPs of the states, provinces, or municipalities where stocks markets happen to be located.

5. You could weight stocks based on their average trading volumes.

6. You could weight stocks based on the geographic sizes (square kilometers of land) of the countries, states, provinces, or municipalities where stock markets happen to be located.

7. You could weight stocks based on the nominal or PPP adjusted exports (or imports) of the countries, states, provinces, or municipalities where stock markets happen to be located.

8. You could weight stocks based on some exotic mathematical combination of any/all the above weightings.

....But come on! This is all quite silly. What’s wrong with a market capitalization-based weighting? Surely we know it’s utterly dumb to penalize Nestle (for example) because its stock happens to be listed/traded on the SIX (Swiss stock market), and Switzerland’s national economy just happens to represent a very small share of global GDP. That’s crazy! But that’s the “logic” a few people are suggesting. Samsung stock “bad,” Hitachi stock “good”? South Korea’s GDP is much smaller than Japan’s, so that’s what a GDP-weighted allocation would require, that Hitachi stock should be favored relative to Samsung stock simply because of where the stock happens to be listed/traded. Seriously? Really? Sorry, that’s completely nuts.

I don’t think you should choose demonstrably dumb weighting “logic,” not unless you’re prepared to explain why Nestle stock must be penalized relative to B&G Foods stock. (B&G Foods makes, among a few other things, baked beans. B&G stock happens to be listed/traded in New York, and New York happens to be located within the world’s largest economy. WTF? That’s a sensible stock weighting? Seriously?)

 

[Okenba]

I don't think you should overweight or underweight the stocks listed in any specific stock market that happens to be located in a particular geography or country, with the possible exception of the stocks listed/traded in a stock market that happens to be located in your planned retirement country. I don't think you should second guess the global index.

Oh, one more thing: if you want to put your faith in Ray Dalio's advice, well....maybe that's a bad idea?

I find your arguments lacking in coherence. You defend the global index, yet makes allowance for people to overweight their local stock market by more than 50 times it's global weight, even though they may not be in drawdown stage.

You defend long term index investing, and yet use point data of how Dalio is doing this year to point out why he isn't credible. Really?

In the end, I doubt I will convince you (and frankly, never meant to), but just thought I'd point out the irony.

In the end, people tilt however they want. By sector, by country. Even pure IWDA is clearly a tilt towards developed markets that completely ignores emerging markets. (Okay, sounds like more than just a tilt.)

It's weird that people ignore those tilts and yet seem so adamant that tilting towards China is such a sin. Shrug.