Index vs managed funds the great war

BananaRepublic

Thrugelmir wrote: »

The US influence on global weightings is going to decline over time.

Yup. My view is that the US is somewhat overvalued compared to for example the UK.

BananaRepublic

Prism wrote: »

There are some various Asia/EM funds around which behave very differently. There are funds which focus on developed Asia (Australia, Japan, Singapore) and barely touch China and India. Then you've got the China focuses ones which all invest in the same tech and insurance companies. Then you have the sustainable ones that focus on defensive companies for the emerging consumer.

For example, over the last 3 months my China fund is up 6% and my EM fund which avoids China is up 12%. Over the last year its 51% and 23% in favour of China.

Those sorts of gains would scare me, as they indicate a volatile market. That is why I expressed concern at so much invested in the Far East. There is also a lot of debt in China, as a result of the government creati;g cheap money around the time of the GFC.

Prism

BananaRepublic wrote: »

Those sorts of gains would scare me, as they indicate a volatile market. That is why I expressed concern at so much invested in the Far East. There is also a lot of debt in China, as a result of the government creati;g cheap money around the time of the GFC.

I assume you mean the China fund. Yes 51% for China is a little volatile but its coming from a low point in 2015. Its less than 3% of my portfolio.

The EM fund I am much happier with. Slow steady growth, admittedly with a recent burst of gains. It seems that's how emerging markets go. South Africa drops like a stone and then recovers week after week. When that finishes Russia goes nuts. I'm in it for the long term so volatility doesn't worry me too much yet.

The Vanguard EM fund is 6% of the VLS80 fund and its up and down like a yoyo but nobody seems to notice

Filo25

BananaRepublic wrote: »

Those sorts of gains would scare me, as they indicate a volatile market. That is why I expressed concern at so much invested in the Far East. There is also a lot of debt in China, as a result of the government creati;g cheap money around the time of the GFC.

China would probably be the one market in the EM space that would concern me most given its debt issues, but then again at present you can find reasons to be concerned in most markets.

For the US it is valuations, the UK political risk around Brexit and the possibility of a Corbyn administration, political risk in Europe, and still structural economic issues to address there albeit in an improving economic environment, Japan has demographic issues and EM will always be more volatile.

Equally if you decide that equity is too scary everywhere, bonds don't exactly look attractive and cash is returning next to nothing, these are the joys of the ultra loose monetary policy world.

My projected portfolio certainly wouldn't be something I would hold as my main fund, but it does act as an offset to my company scheme which is undoubtedly be more heavily invested in the US than I would choose to be, and underweight Asia Pacific and EM.

These are funds I don't aim to touch for 20 years so in my mind I can afford more volatility, equally given I am heavily feeding into my pension over the coming years I would welcome a correction in the near future, this fund hedges against the possibility of the long bull keeps on running and gives me greater participation in any short-medium term upside.

I do think there is a huge amount of potential in markets like India in the coming years as well

sixpence.

I feel like India is going to kick off in in the next ten years but the returns at the moment aren't terrible. I'd rather get in early, personally.

I agree that the UK is more unstable due to Brexit. I think Trump (although he makes me want to learn magic so that I can turn him into a frog) has the potential to boom the US economy in the next 3-7 years (I think he will be elected a second term).

From what I've learned, it seems to make sense to buy up EM/Asia because this balances out the US.

cloud_dog

sixpence. wrote: »

I think Trump (although he makes me want to learn magic so that I can turn him into a frog) has the potential to boom the US economy in the next 3-7 years (I think he will be elected a second term).

Please, no.

BananaRepublic

sixpence. wrote: »

I think Trump (although he makes me want to learn magic so that I can turn him into a frog) has the potential to boom the US economy in the next 3-7 years (I think he will be elected a second term).

The sad truth is you might be right. I hope your magic lessons go well.