Any thoughts on India - Aberdeen New India

RomfordNavy

Would be interested in your thoughts on India. From what I read they are quite an insular, self-sustaining economy with 80% of GDP coming from domestic markets so not overly affected by the vaguaries of the rest of the worlds equity markets.

Aberdeen New India Investment Trust Plc ANII looked ok with the following returns:
1 year = 9.86%
3 yrs = 47.17%
5 yrs = 108%
However the downside is:
1 mth = 10.51%
Does that suggest that the profit for the year has been gained already and may not produce much more for a while?

ColdIron

Seems a poor fit with your recent desire to hold stable low risk investments

bowlhead99

RomfordNavy wrote: »

Would be interested in your thoughts on India. From what I read they are quite an insular, self-sustaining economy with 80% of GDP coming from domestic markets so not overly affected by the vaguaries of the rest of the worlds equity markets.

That's a massive simplification and the theory hasn't historically been borne out in practice.

The FTSE India (RIC Capped) Index is an index of large and medium capitalisation companies in India which puts a cap on the concentration of any one company, like an active investment manager would do. You can see from this factsheet:
(pdf linked here on FTSE site) , that between 2007 and 2009 the India index lost over 71% of its value in dollar terms (compared to FTSE Emerging's maximum drawdown of 64.5% and FTSE All World's more modest 57.8%.

So, this is clearly a country whose listed companies can lose value at the same times as the rest of the developed and emerging markets.

And with a specialist India fund, unlike a global fund, you don't get pockets of positives on one side of the world offsetting the negatives on another, because your risk is concentrated in one country - and if that country or its currency has a bad time, so will your concentrated single-country fund. With currency movements, the drop in value from peak to trough for a Western investor holding a specialist India fund could be 75% or more, much greater than a balanced global fund.

Don't get suckered into seeing a recent 10% one year return or nice 100% five year return, thinking it's relatively stable. What goes up can and does come down. For example on that factsheet just looking at one year calendar chunks, you can see the India market index had a total return of negative 62.9% in 2008, came back with a gain of 95.8% during calendar 2009, then lost 36% in 2011 (the FTSE All-world only lost 7.3% in 2011). Single-country investing, especially in emerging markets, is a wild ride indeed.

However the downside is:
1 mth = 10.51%
Does that suggest that the profit for the year has been gained already and may not produce much more for a while?

That fund can return or lose several tens of percent in any one year. Markets have generally gone up since the new year. That doesn't mean they (or India specifically) have gone up all they're going to go up, but nor can you rule out a fall of more than the gains made so far this month or year. The fund is the type where you need to have the courage of your convictions to hold for the long term, but also to periodically check and rebalance it against the rest of your holdings.

For example, say you add it as 4% of your whole portfolio. If it goes up by 50% while the rest of your portfolio stands still, you have made a profit equal to 2% of your portfolio, but now it is using up more like 6% of your overall portfolio which is high for a single specialist fund. So you would sell a portion of it to get back to 4%. By contrast, if the fund representing 4% of your portfolio drops by half, you have lost 2% off your portfolio value, so you can sell other assets to top it back up to 4% again so that when it rebounds, you will make the money back and hopefully more on top.

However, those percentages to hold and rebalance are just examples to make the maths easy, and the numbers are probably bigger than most people would have in India

A typical UK investor, if he's not super-cautious or massively aggressive, might have up to 10-15% of his equity investments in emerging markets. If only 60-70% of his portfolio is in equities in the first place, because he also holds bonds, commercial property, conservative funds etc (like the ones you were talking about being the core of your portfolio on your other thread), then 10-15% of those 60%-70% equities is only 6-10% of the whole portfolio. That's for the whole emerging/frontier markets allocation.

And global emerging markets covers China, developing South East Asia, Russia, Eastern Europe, Africa, South America etc as well as the Indian subcontinent. So if the whole emerging markets is only going to be 6-10% of your total portfolio, most people would find they can't really justify putting half or two thirds of that into India ahead of all the other locations. With 6-10% in emerging markets overall, India might be 2-3% at the most, typically less. So most people wouldn't go and buy an India specialist fund to fill that 1-2% of their overall portfolio. Rather than messing around researching and buying a fund to fill just a couple of percent of their portfolio, they would instead just buy an Asia or emerging markets fund which included India but was not exclusively India.

This is not to say that particular fund you mentioned is a bad example of an India fund, or that you shouldn't buy an India fund if you want to spend your money on buying lots of very specialist funds to go with your mixed-asset core holdings. However, you are coming from a position of low knowledge, and I'd question whether, hand-on-heart, you really know what you are getting into when trying to build a portfolio using country-by-country specialist allocations. Most novice investors don't attempt that. Or if they do attempt it, they mess it up.

No offence intended etc.

cloud_dog

RomfordNavy wrote: »

Does that suggest that the profit for the year has been gained already and may not produce much more for a while?

Are you really sure you are comfortable with investigating, identifying, and making appropriate investment choices?

From the number and meandering focus of the threads you may benefit from looking at a single multi-asset geographically diverse fund with an appropriate asset allocation split that meets your risk profile.