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Re: Investing in foreign government bonds - theory and pract

Funny that you say "Living in a small (and economically insignificant) country, I don't have the luxury of thinking of my government treasuries as a riskless investment. For that reason I've decided to allocate at least 33% of my bond portion to US treasuries." That insignificant country ...
by t0x1n
Tue Apr 08, 2014 5:08 pm
 
Forum: Investing - Theory, News & General
Topic: Investing in foreign government bonds - theory and practice
Replies: 19
Views: 1268

Re: Investing in foreign government bonds - theory and pract

Hi slutz, thanks for your thoughtful answer ! Please see my answers inline: Hi t0x1n, Interesting and challenging questions. In my opinion, there a definite risks in just picking a broad global government bond fund. My preference would be to focus on countries that: a) borrow in their own currency (...
by t0x1n
Mon Apr 07, 2014 3:46 pm
 
Forum: Investing - Theory, News & General
Topic: Investing in foreign government bonds - theory and practice
Replies: 19
Views: 1268

Re: Investing in foreign government bonds - theory and pract

I'm not qualified to answer your questions, but in case you haven't already seen it here is a link to a Vanguard discussion of the hedging strategy for their International Bond fund: https://personal.vanguard.com/us/insights/audio/IC-IntlBond-03192013 Part of my retirement savings is invested in Va...
by t0x1n
Mon Apr 07, 2014 3:31 pm
 
Forum: Investing - Theory, News & General
Topic: Investing in foreign government bonds - theory and practice
Replies: 19
Views: 1268

Investing in foreign government bonds - theory and practice

Living in a small (and economically insignificant) country, I don't have the luxury of thinking of my government treasuries as a riskless investment. For that reason I've decided to allocate at least 33% of my bond portion to US treasuries. But then I got to thinking. Sure, the US is far less likely...
by t0x1n
Sat Apr 05, 2014 8:38 am
 
Forum: Investing - Theory, News & General
Topic: Investing in foreign government bonds - theory and practice
Replies: 19
Views: 1268

Re: Revising portfolio- corp&int. bonds, tax-efficiency (Isr

Thanks again VT, please see inline: No the currency risk does not make them 'stock like'- -that's not a good way to think about investment grade government bonds (because your big risk is actually interest rates, besides currency). So treat them as bonds. Yes in the Eurozone you either hold German B...
by t0x1n
Tue Apr 01, 2014 12:07 pm
 
Forum: Investing - Help with Personal Investments
Topic: Revising portfolio- corp&int. bonds, tax-efficiency (Israel)
Replies: 4
Views: 451

Re: Revising portfolio- corp&int. bonds, tax-efficiency (Isr

Hi VT, as always it's great to have your insights! Please see my comments inline: I wouldn't buy Israeli corporate bonds, especially not from banks. If there was another financial crash, your portfolio would get totalled. It is now widely understood that if there are future bank bailouts, depositors...
by t0x1n
Tue Apr 01, 2014 5:24 am
 
Forum: Investing - Help with Personal Investments
Topic: Revising portfolio- corp&int. bonds, tax-efficiency (Israel)
Replies: 4
Views: 451

Revising portfolio- corp&int. bonds, tax-efficiency (Israel)

In my previous discussion here I have reached the following asset allocation, with the generous help of the forum members (especially Valuethinker :D): IRA account (tax-exempt) 10% TA-100 Index 25% S&P 500 (both are tracked using local "tracking funds" - similar in principle to mutual ...
by t0x1n
Mon Mar 31, 2014 11:48 am
 
Forum: Investing - Help with Personal Investments
Topic: Revising portfolio- corp&int. bonds, tax-efficiency (Israel)
Replies: 4
Views: 451

Re: Discrepancy between returns of similar US and EU funds

Thanks ogd! I'm not fixated on EM, any apples to apples comparison would do if it simplifies things. For example, I added a comparison of two EURO STOXX 50 funds. Again, the US fund won even though all cards were stacked against it (higher taxes, non-accumulating, higher TER). I've read many recomme...
by t0x1n
Mon Jan 20, 2014 3:10 pm
 
Forum: Investing - Theory, News & General
Topic: Discrepancy between returns of similar US and EU funds
Replies: 7
Views: 567

Re: Discrepancy between returns of similar US and EU funds

They track differnet indexes. I lookep up iShares Core MSCI Emerging Markets ETF (which tracks the "MSCI Emerging Markets Investable Market Index") and DBXt (which tracks MSCI Total Return Net Emerging Markets Index). Thanks for pointing that out. I've now explicitly stated in the spreads...
by t0x1n
Fri Jan 17, 2014 9:09 am
 
Forum: Investing - Theory, News & General
Topic: Discrepancy between returns of similar US and EU funds
Replies: 7
Views: 567

Re: Discrepancy between returns of similar US and EU funds

Most likely currency. Check the 10 year CNY vs EUR against CNY vs USD. If CNY has appreciated more over USD than EUR, then the China allocation of EM (the largest slice) would have a higher return for US-based EM funds. Then you can run this same exercise for the rest of the major countries in EM. ...
by t0x1n
Sat Jan 11, 2014 11:54 am
 
Forum: Investing - Theory, News & General
Topic: Discrepancy between returns of similar US and EU funds
Replies: 7
Views: 567

Discrepancy between returns of similar US and EU funds

Consider the following spreadsheet, comparing USD-based US and EUR ETFs tracking the MSCI Emerging Markets index (in order to look at the formulas, you need to download the file and open it in your desktop Excel client): https://skydrive.live.com/redir?page=view&resid=DED6DB63D5309C3D!2561&a...
by t0x1n
Sat Jan 11, 2014 10:09 am
 
Forum: Investing - Theory, News & General
Topic: Discrepancy between returns of similar US and EU funds
Replies: 7
Views: 567

Re: Buy VS Rent as a factor in Asset Allocation

And you could also argue that when you are going to buy a new car is also a factor - if it's going to be 10 years in the future you can have more in equities but should be more conservative if it'll be next year? Just as a house price is sort of prepaid future rents, a car price is prepaid transpor...
by t0x1n
Sat Jan 04, 2014 7:30 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Re: Buy VS Rent as a factor in Asset Allocation

Yes, this is correct; the reason I took out the mortgage is that the tax laws favor it. I can deduct my mortgage interest, but if I sold stock to pay cash for the house, I would have a big tax bill, and if I withdrew from my retirement plans, I would lose the tax-deferred growth. Instead, I chose t...
by t0x1n
Fri Jan 03, 2014 12:42 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Re: Buy VS Rent as a factor in Asset Allocation

For those who are still accumulating, I wouldn't think that you'd want to rebalance out of stocks into bonds. I'll sell bonds to buy stocks cheap, but not vice versa. I would get back to my desired AA by putting all new contributions into bonds until the numbers were back where they ought to be. An...
by t0x1n
Fri Jan 03, 2014 12:27 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Re: Buy VS Rent as a factor in Asset Allocation

I believe that it is reasonable, and common place, to have a separate *savings plan* to purchase real estate (direct ownership). You don't seem to be one who cares to own, so your target savings for something else (retirement?). If things change, the change forces a different set of decisions. Isn'...
by t0x1n
Thu Jan 02, 2014 7:42 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Re: Buy VS Rent as a factor in Asset Allocation

Once I bought the condo, I counted the mortgage as a negative bond in my asset allocation, and bought an equal amount of positive bonds to make my net bond allocation zero. This assumes, of course, you have enough assets to counter the negative bond effect of the mortgage. In that case, you could a...
by t0x1n
Thu Jan 02, 2014 7:39 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Re: Buy VS Rent as a factor in Asset Allocation

They only need to lower their volatility if their need to have the cash on hand for whenever they happen to choose to execute on that outlay is so certain that they can't risk it - otherwise, when they decide they want it they can evaluate it against their existing financial situation even if they ...
by t0x1n
Sat Dec 28, 2013 8:46 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Re: Buy VS Rent as a factor in Asset Allocation

Presumably, you won't make that decision overnight right? Say you have your money 80/20 because you think you'll decide to rent in 5 years, then 3 years from now you decide you might want to buy a house. Unless you're adamant about buying asap, you don't have to sell and rebalance, you can just dir...
by t0x1n
Sat Dec 28, 2013 7:48 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Re: Buy VS Rent as a factor in Asset Allocation

I think youre over emphasizing the significance of buy vs rent when considering your AA. Just pick an AA that works for you now, and rebalance if and when your situation changes. It doesn't work that way. If I experience 50% loss, "rebalancing" is another word of bailing out of stocks and...
by t0x1n
Sat Dec 28, 2013 5:41 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Buy VS Rent as a factor in Asset Allocation

Deciding on whether to buy or rent depends on many variables. Sometimes, many of these variables are unknown. For example, a young person may not be married, or may not know where he is going to work. In these cases the general consensus advice is "when in doubt, rent". This makes a lot of...
by t0x1n
Sat Dec 28, 2013 3:24 pm
 
Forum: Investing - Theory, News & General
Topic: Buy VS Rent as a factor in Asset Allocation
Replies: 26
Views: 1477

Approximating Total Intl Stock Market (ex-US) in Israel

Hi, I"m trying to apply the concepts of the following wiki page in my country (Israel): http://www.bogleheads.org/wiki/Approximating_total_international_stock_market The page suggests use of the FTSE All-World ex-US Small Cap Index which is not tracked here, so this is the closest I could come ...
by t0x1n
Fri Nov 01, 2013 12:21 pm
 
Forum: Investing - Theory, News & General
Topic: Approximating Total Intl Stock Market (ex-US) in Israel
Replies: 2
Views: 334

Is there a Europe-domiciled Total world ex-US fund ?

Due to tax considerations (that have to do with tax treaties between different countries, affecting withheld dividend taxation) , I'm looking for a Europe-domiciled (preferably Ireland or Luxembourg) fund that tracks global equity ex-US (I'm exposed to US directly through local funds). I could not f...
by t0x1n
Thu Oct 31, 2013 6:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Is there a Europe-domiciled Total world ex-US fund ?
Replies: 0
Views: 126

Re: Portfolio in a very small economy (Israel)

Ok in a British context, you *lose* the tax credit then. You have the tax withheld (at source) in the USA, and you cannot get it back, because you are holding it in a tax free account (ditto Canada). So it's better to have the investment where you pay foreign withholding tax in a taxable account I ...
by t0x1n
Sun Sep 01, 2013 5:00 pm
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Portfolio in a very small economy (Israel)

In a UK context, I get a statement from the fund 'distributions' and 'tax withheld'. I simply offset that tax withheld against the UK tax I have to pay (capital gains or dividend income). In Israel, I believe that's done automatically, due to the tax treaty with the US. However my problem is in the...
by t0x1n
Sun Sep 01, 2013 11:28 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Portfolio in a very small economy (Israel)

I confess confusion. Is it an all world ETF or a European ETF? Do you mean a global index ETF listed in Europe? Indeed, the FTSE All-World ETF is an Ireland-domiciled ETF tracking the global FTSE All-World Index. When you say 'investing in Europe' do you mean investing in a Europe-listed vehicle? Y...
by t0x1n
Sat Aug 31, 2013 5:38 pm
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Portfolio in a very small economy (Israel)

Valuethinker, As always your posts are very valuable :) I apologize for the delay, but it took my some time to get the facts . It seems that by investing in Europe rather than the US I can reduce dividend taxation in my tax-exempt account (for example in the US - from 25% to 15%). Incorporating your...
by t0x1n
Tue Aug 27, 2013 10:05 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Difference in dividends between US and Europe domiciled

Mystery solved. I mailed SPDR and this was their response: The reason for the difference in dividend payments is down to US withholding tax. The US normally withholds 30% of dividends for foreign investors but given the Irish tax treaty (where S&P 500 UCITS ETF is domiciled) only 15% is withheld.
by t0x1n
Tue Aug 27, 2013 8:13 am
 
Forum: Investing - Theory, News & General
Topic: Difference in dividends between US and Europe domiciled ETFs
Replies: 1
Views: 316

Difference in dividends between US and Europe domiciled ETFs

I'm trying to understand the dividend difference between two funds that should be very similar in their holdings. SPDR S&P 500 (SPY) [US domiciled] - Jun 21, 2013: 0.839$ SPDR S&P 500 UCITS ETF [Europe domiciled] - Jun 21, 2013: 0.7245$ Could it be a matter of taxation ? The difference appea...
by t0x1n
Sun Aug 25, 2013 12:35 pm
 
Forum: Investing - Theory, News & General
Topic: Difference in dividends between US and Europe domiciled ETFs
Replies: 1
Views: 316

Re: Portfolio in a very small economy (Israel)

Valuethinker, I apologize for my late response, it took me a while to get clear answers, but now I'm rather convinced that taxes on dividends from all foreign stocks (US included) are withheld, even in tax-exempt accounts. This gives a taxation advantage to Israeli stocks - would you say that merits...
by t0x1n
Wed Aug 21, 2013 9:11 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Your thoughts on my portfolio (foreigner) [Israel]

LadyGeek,

I was thinking more about a digital chapter (i.e. a forum), too lazy to actually go to meetings and stuff :D
The Wiki idea sounds interesting, once I'm done with my research I'll see if I have enough meat for a Wiki article.

Thanks !
by t0x1n
Tue Aug 06, 2013 4:58 pm
 
Forum: Investing - Help with Personal Investments
Topic: Your thoughts on my portfolio (foreigner) [Israel]
Replies: 19
Views: 1585

Re: Portfolio in a very small economy (Israel)

Valuethinker, Thanks again for the dual lesson ! As for taxation, in Israel most mutual funds are tax-exmpt, which means the only taxable event (for local underlying securities at least) occurs when you sell the fund, upon which you pay 25% on the real return on the entire fund. I therefore don't se...
by t0x1n
Mon Aug 05, 2013 12:29 pm
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Portfolio in a very small economy (Israel)

In principle 50/50 is OK, *but* if you decide to reduce equities (or money markets) then inflation linked bonds should be the safest and least volatile investments What do you mean by "reduce equities" ? Lower their percentage from 70% to a lower figure ? Why would that affect my linked /...
by t0x1n
Mon Aug 05, 2013 11:02 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Your thoughts on my portfolio (foreigner) [Israel]

10% is, to my mind, the absolute maximum you want to hold in Israeli stocks (about 2% of the world index?). You are 5 times overweighted. I believe Israel is much closer to 0.2% than it is to 2% , which would bring the over-weighting factor closer to 50 (and that's without accounting for the double...
by t0x1n
Mon Aug 05, 2013 10:14 am
 
Forum: Investing - Help with Personal Investments
Topic: Your thoughts on my portfolio (foreigner) [Israel]
Replies: 19
Views: 1585

Re: Portfolio in a very small economy (Israel)

@Valuethinker
Thanks for the explanation.
I take it you advocate a higher percentage of inflation-linked Israeli government bonds (as opposed to the nominal variety) ?
What would be an allocation that makes sense ? 70% linked and 30% nominal? Maybe even 100% linked and 0% nominal ?
by t0x1n
Mon Aug 05, 2013 10:10 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Your thoughts on my portfolio (foreigner) [Israel]

@asmodeus Indeed, Israeli Bogleheads are few and far between (sadly), and it is refreshing to see a fellow Israeli here (even more refreshing would be an Israeli Boglehead forum, but that seems like a wild dream right now). The bond fund you mentioned is a tracking fund, and seems like a perfectly v...
by t0x1n
Mon Aug 05, 2013 6:51 am
 
Forum: Investing - Help with Personal Investments
Topic: Your thoughts on my portfolio (foreigner) [Israel]
Replies: 19
Views: 1585

Re: Portfolio in a very small economy (Israel)

@asmodeus 1. I don't plan to, I'll explain why in your post. 2. Yes. @kramer Thanks for your insights. I've updated the original post to reflect my current portfolio. Regarding my pension, indeed I have a government plan which will pay in NIS (shekels). I don't have much control over it though, beyo...
by t0x1n
Mon Aug 05, 2013 6:06 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Portfolio in a very small economy (Israel)

@Duckie Thanks for the suggestion! My portfolio would now be: 30% Israel total government bond index (about half of which is inflation-indexed) 10% TA-100 Index (the broadest local index I can invest in practically, this can be probably thought of as the equivalent of S&P 500) 30% Vanguard Total...
by t0x1n
Mon Aug 05, 2013 4:27 am
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Your thoughts on my portfolio (foreigner) [Israel]

@asmodeus Instead of taking two bond funds, you can take one that follows the total total government bond index . An interesting recent series of articles you may wish to read can be found here (in Hebrew). You may also want to read my comments there (they will be very obvious to spot with their Bog...
by t0x1n
Sun Aug 04, 2013 5:41 pm
 
Forum: Investing - Help with Personal Investments
Topic: Your thoughts on my portfolio (foreigner) [Israel]
Replies: 19
Views: 1585

Re: Portfolio in a very small economy (Israel)

Thank you all for the thoughtful responses ! @duckie Nice catch, thanks ! I actually looked for similar threads in the past but this is indeed a new one I hadn't noticed. @asset_chaos my concern regarding the tax efficiency of US-domiciled international funds has to do with dividends in taxable-exem...
by t0x1n
Sun Aug 04, 2013 3:35 pm
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Portfolio in a very small economy (Israel)

Hi, I've read quite a bit about home bias, mostly in this forum, but also in other resources such as vanguard papers. Perhaps the paper that influenced me most in this regard is The role of home bias in global asset allocation decisions . Another useful resource has been the Canadian couch potato (s...
by t0x1n
Sat Aug 03, 2013 4:29 pm
 
Forum: Investing - Help with Personal Investments
Topic: Portfolio in a very small economy (Israel)
Replies: 29
Views: 1969

Re: Jack Bogle on International Investing at Bogleheads 11

I apologize for the bump, but going over some home bias threads (much harder when your country constitutes 0.4% of the world's economy) I keep running into Noobvestor's excellent advice and flawless logic. I think he deserves some kind of prize :sharebeer That being said, another angle worth mention...
by t0x1n
Sat May 18, 2013 4:49 pm
 
Forum: Investing - Theory, News & General
Topic: Jack Bogle on International Investing at Bogleheads 11
Replies: 45
Views: 4675

Re: Do other countries have very low cost index funds?

In Israel we don't have ETFs, only ETNs (Exchange-Traded Notes) and TFs (Tracking Funds - similar to mutual funds). ETNs are the most popular around here, even though IMO they are a lousy product due to their credit risk (notes are basically bonds). Tracking funds are much better but more rare. Some...
by t0x1n
Sat May 18, 2013 4:29 pm
 
Forum: Investing - Theory, News & General
Topic: Do other countries have very low cost index funds?
Replies: 33
Views: 3561

More alleged limitations placed on institutional investors

I previously presented some alleged individual investor advantages over institutionals . I have since run into a couple more supposed limitations placed on institutional investors: 1. They have regulations constraining them that individual investors don't. For example, they may be forced out of cert...
by t0x1n
Sat May 04, 2013 9:29 am
 
Forum: Investing - Theory, News & General
Topic: More alleged limitations placed on institutional investors
Replies: 2
Views: 360

Re: Five Myths of Active Portfolio Management (Jonathan B. B

@Rick Also, actively managed small cap funds are more expensive than index funds. This extra cost needed to be overcome before earning any excess return. So in short, the pre-expenses alpha generated from such a strategy is not translated to after-expenses excess alpha. In other words, the market eq...
by t0x1n
Sat Apr 06, 2013 6:22 am
 
Forum: Investing - Theory, News & General
Topic: Five Myths of Active Portfolio Management (Jonathan B. Berk)
Replies: 9
Views: 1134

Re: Five Myths of Active Portfolio Management (Jonathan B. B

Actually, it did. The idea was to isolate small cap managers who were successful at one company and either moved to another or started their own firm. One problem with this strategy was that there wasn't many of these managers. A second problem was determining whether their past performance was ski...
by t0x1n
Fri Apr 05, 2013 4:07 pm
 
Forum: Investing - Theory, News & General
Topic: Five Myths of Active Portfolio Management (Jonathan B. Berk)
Replies: 9
Views: 1134
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