Search found 295 matches

by chatbotte
Thu May 10, 2018 4:29 pm
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

rudeboy, Look, I don't even know what your chart is comparing. How is the global portfolio constructed? Is it equally-weighted by country/region, or equally-weighted by market caps? U.S. small caps returned much more than the S&P500 (have a look at the chart below), so adding small caps to the U.S. ...
by chatbotte
Thu May 10, 2018 7:24 am
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

Grt2bOutdoors, Vanguard recommends 20-40% allocated to international, most here choose 30% (right down the middle) and go with that. A 10% allocation is low, but if that is what you are comfortable with then go with that. This is the kind of language that drives me up the wall. So evasive. SHOULD nd...
by chatbotte
Wed May 09, 2018 7:16 pm
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

Re higher returns on international I never stated that International would have higher returns. All I said was that adding international adds diversification. People seem to think diversification leads to greater return. It doesn't, they may still want to add International because they want more Di...
by chatbotte
Wed May 09, 2018 7:02 pm
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

The problem with these types of threads is that everyone talks past one another. Words like best, need, even diversification are all relative. Will one be ok with only TSM? Probably. Is TSM diversified? Yes. Is adding International to TSM increasing your diversification? Yes. Does added diversifica...
by chatbotte
Wed May 09, 2018 1:37 pm
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

So to me, not holding half of the world's companies is not necessarily the sign of a lack of diversification or the sign of a suboptimal portfolio. I think you're overextrapolating the logic of Bill Sharpe's CAPM and taking too extreme a viewpoint. Or, to put it even better, you wrongly assume that...
by chatbotte
Wed May 09, 2018 12:09 pm
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

By adding international diversification an investor gets an additional 6,000 companies including great companies like Samsung and Toyota, and companies in economies that will likely be the largest in the world during this century (China and India). Not to mention that adding international diversifi...
by chatbotte
Wed May 09, 2018 8:24 am
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

By adding international diversification an investor gets an additional 6,000 companies including great companies like Samsung and Toyota, and companies in economies that will likely be the largest in the world during this century (China and India). Not to mention that adding international diversifi...
by chatbotte
Wed May 09, 2018 7:32 am
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

0% international works for me. :beer 0% international works for me, at the moment . Fixed that for you. Would you like to explain why you think betting on one single economy is a wise strategy? Or why you think it will work for you? hilink73, I'm with you, but maybe you should be the one to do the ...
by chatbotte
Tue May 08, 2018 6:36 am
Forum: Investing - Theory, News & General
Topic: Lower expected stock returns means lower expected volatility?
Replies: 28
Views: 2708

Re: Lower expected stock returns means lower expected volatility?

amp, Okay, I'll give you that. If these variables do predict long-term expected returns, then changes in these variables translate into changes in long-term expected returns. The problem is that as you come closer to your investment horizon, these variables gradually lose predictive power, because s...
by chatbotte
Mon May 07, 2018 8:29 pm
Forum: Investing - Theory, News & General
Topic: Lower expected stock returns means lower expected volatility?
Replies: 28
Views: 2708

Re: Lower expected stock returns means lower expected volatility?

amp,
amp wrote:
Mon May 07, 2018 8:04 pm
Future investments will have different expected returns.
Now THAT's a bold statement. Prove it. Absolutely no reason why that MUST be so, in expectation.
by chatbotte
Mon May 07, 2018 5:48 am
Forum: Investing - Theory, News & General
Topic: Lower expected stock returns means lower expected volatility?
Replies: 28
Views: 2708

Re: Lower expected stock returns means lower expected volatility?

It says in the Swedroe article that financial intermediation costs went down over the years, so if investors have the same utility functions (require identical time-varying premia), valuations will go up to the extent intermediation costs went down, giving you the same after-cost expected return. I ...
by chatbotte
Sun May 06, 2018 6:30 am
Forum: Investing - Theory, News & General
Topic: Lower expected stock returns means lower expected volatility?
Replies: 28
Views: 2708

Re: Lower expected stock returns means lower expected volatility?

Or keep saving the same %, but get a more fulfilling job. :) Maybe you're just not happy with what you're doing, so quitting early seems to be the only reasonable thing to do.
by chatbotte
Fri May 04, 2018 4:49 pm
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

Thank you for sharing this. Great doc. It seems odd to me the weighted cap by country in this study is MUCH MUCH different than what is weighted in FTSE Global All Cap Index (which is tracked by VT/VTWSX). It gives 52% to the US and your link gives 38%. Any idea why? guyesmith, I think the tangency...
by chatbotte
Fri May 04, 2018 7:33 am
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

If the return is similar, why adding the currency risk? carofe, In mean-variance analysis, idiosyncratic volatility isn't the only thing that matters, because an asset can reduce overall portfolio variance despite the asset's high volatility. Adding international stocks to your portfolio could redu...
by chatbotte
Fri May 04, 2018 6:00 am
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

If the return is similar, why adding the currency risk? carofe, In mean-variance analysis, idiosyncratic volatility isn't the only thing that matters, because an asset can reduce overall portfolio variance despite the asset's high volatility. Adding international stocks to your portfolio could redu...
by chatbotte
Thu May 03, 2018 9:02 pm
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

Boxtrap, I'm not talking about actual (ex post or realized) returns that you can use PV to analyze, but expected (ex ante) returns. You likely are looking at a streak of very high US REIT returns relative to what investors expected before the fact. It's like looking at a series of 10 fair coin tosse...
by chatbotte
Thu May 03, 2018 8:36 pm
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

Personally I prefer options that lower volatility through diversification AND increase return at the same time - like a small (10%) slice of US REIT’s. Boxtrap, I don't think this can work, because an asset that's a diversifier will have a low expected return: investors want it to the extent it is ...
by chatbotte
Wed May 02, 2018 3:25 am
Forum: Investing - Theory, News & General
Topic: International Stock and Currency Issues
Replies: 41
Views: 3846

Re: International Stock and Currency Issues

PPP is simple to understand. The Economist's Big Mac index does it in a page. For Bogleheads I think this is the right level of complexity. If you want to engage in a discussion on a alternative theory I would be up for that. The Big Mac index is a great example of the problems with PPP, not an exa...
by chatbotte
Mon Apr 30, 2018 9:22 am
Forum: Investing - Theory, News & General
Topic: International Stock and Currency Issues
Replies: 41
Views: 3846

Re: International Stock and Currency Issues

AlohaJoe, The economics textbook by Krugman, Obstfeld, and Melitz spends 225 pages on exchange rate theories so anyone who tries to tell you it is a simple subject with an open & shut answer is being misleading. Surely there's a theory that best describes rates. That's what you have at the moment, a...
by chatbotte
Mon Apr 30, 2018 8:45 am
Forum: Investing - Theory, News & General
Topic: International Stock and Currency Issues
Replies: 41
Views: 3846

Re: International Stock and Currency Issues

dknightd, I would be surprised if a 10% gain in non-US stocks could result in a 10% loss in $US. But suppose it is possible. And perhaps it has happened, I don't track it carefully. It is also possible that a 10% gain in non-US stocks could result in a 15% increase in $US. TSX seems to have gained a...
by chatbotte
Mon Apr 30, 2018 4:25 am
Forum: Investing - Theory, News & General
Topic: International Stock and Currency Issues
Replies: 41
Views: 3846

Re: International Stock and Currency Issues

Lauretta, thanks for the feedback. The Swiss franc was just an example of course. The USD was another case that was overvalued relative to my currency (the Euro) when I invested a lump sum over a yr ago. I didn't hedge and since then the dollar has lost ~10% relative to the Euro (and according to P...
by chatbotte
Mon Apr 30, 2018 4:01 am
Forum: Investing - Theory, News & General
Topic: International Stock and Currency Issues
Replies: 41
Views: 3846

Re: International Stock and Currency Issues

Lauretta, thanks for the feedback. The Swiss franc was just an example of course. The USD was another case that was overvalued relative to my currency (the Euro) when I invested a lump sum over a yr ago. I didn't hedge and since then the dollar has lost ~10% relative to the Euro (and according to PP...
by chatbotte
Sat Apr 28, 2018 4:54 pm
Forum: Investing - Theory, News & General
Topic: International Stock and Currency Issues
Replies: 41
Views: 3846

Re: International Stock and Currency Issues

Currency risk is bounded by Purchasing Power Parity (PPP) and thus mean reverting. This results in a atypical low risk profile. Please correct me if I am wrong, but it seems to me that PPP and mean reversion could actually be used as an argument in favour of currency hedging. If the dollar is overv...
by chatbotte
Fri Apr 27, 2018 8:04 pm
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

Valuethinker, The issue is OP's time horizon. I agree as you get close to the retirement age you need to cut your risk. The best way to do that (to my mind) is to own the government bonds of your own country *if* that is credit risk free (at the Federal government level, we can assume that Canada's ...
by chatbotte
Fri Apr 27, 2018 7:53 pm
Forum: Investing - Theory, News & General
Topic: International Stock and Currency Issues
Replies: 41
Views: 3846

Re: International Stock and Currency Issues

In short, unhedged foreign currency exposure offers protection against unexpected inflation in one's own country. Unless the price of domestic non-tradables rises faster than the price of domestic tradables. In this scenario, PPP will hold for tradables, but you'll have domestic non-tradables infla...
by chatbotte
Fri Apr 27, 2018 8:47 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

Even if PPP held in the long term, this wouldn't change the fundamental fact that the returns and risks of the same investment would remain different for two investors, a domestic and a foreign one. The possibility that one return could match, over one specific long-term time frame, doesn't change ...
by chatbotte
Fri Apr 27, 2018 8:12 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

longinvest, Interesting thoughts. Your position is clearer now. You don't seem to believe in PPP convergence between the U.S. and Canada, and you see some benefit in home bias as a way to reduce currency risk in international investing. Even if PPP held in the long term, this wouldn't change the fun...
by chatbotte
Fri Apr 27, 2018 7:21 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

longinvest wrote:
Fri Apr 27, 2018 7:19 am
(...) This is fundamental and can't be changed. (...)
longinvest,

Some people might argue that long-run PPP holds, which would make your proposition untrue, at least in the long term.
by chatbotte
Fri Apr 27, 2018 7:13 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

longinvest, I said that it was enlightening because it shed light on the significant impact of currency exchange on returns. Not exactly. You didn't say anything about real returns, because you didn't say anything about inflation rates. Under PPP, the ex post return on your unhedged foreign equity ...
by chatbotte
Fri Apr 27, 2018 7:06 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

longinvest, I said that it was enlightening because it shed light on the significant impact of currency exchange on returns. Not exactly. You didn't say anything about real returns, because you didn't say anything about inflation rates. Under PPP, the ex post return on your unhedged foreign equity w...
by chatbotte
Fri Apr 27, 2018 6:34 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

Valuethinker, Now what are you saying? I said that the FTSE 100 (equity index) goes up when the GBP goes down, (...)? GBPUSD doesn't seem to be highly correlated to FTSE 100, so you may be right in that when the pound gets weaker, FTSE 100 goes up, offsetting the currency loss. I mentioned gilts to ...
by chatbotte
Fri Apr 27, 2018 5:15 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

Valuethinker, I've lost track of what I think you are arguing. This started as a discussion about a Canadian investor and currency hedging on US equity exposure-- and I said, why bother? (...) You're saying why bother, so a Canadian shouldn't hedge, but if you were a U.S. investor, you would have ma...
by chatbotte
Thu Apr 26, 2018 1:09 pm
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

Valuethinker, You want to use the example the other way. It's very unlikely an American would have more than 5% of his/ her stock portfolio in Canada (ie world weighting). So if you're a U.S. investor, you shouldn't hold a lot in CAD after all, because there's risk in holding CAD, if that's what you...
by chatbotte
Thu Apr 26, 2018 5:02 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

Valuethinker, Hard to think of a productivity shock that would hit one country and not the other, in the long run*. Did you not have a look at longinvest's CADUSD chart? The U.S. dollar got a lot stronger over the past four years. That's a fact. In this case, PPP failed spectacularly, over a four-ye...
by chatbotte
Tue Apr 24, 2018 11:04 am
Forum: Investing - Theory, News & General
Topic: I’m still not a fan of international bond funds
Replies: 307
Views: 41472

Re: I’m still not a fan of international bond funds

Complexity - another reason not to own hedged international bond funds. If you don't understand what you're buying (in this case currency hedging), you'll be inclined to sell it at the wrong time and that harms your long-term return. Rick Ferri Are you saying international bonds have no hedging/div...
by chatbotte
Tue Apr 24, 2018 8:46 am
Forum: Investing - Theory, News & General
Topic: I’m still not a fan of international bond funds
Replies: 307
Views: 41472

Re: I’m still not a fan of international bond funds

JBTX wrote:
Tue Apr 24, 2018 8:29 am
All due respect, you don’t seem to understand the concept of hedging and diversification.
JBTX,

That's a possibility, but a 4Y USD bond would have protected you much better, in the situation I described. You wouldn't have lost 21 percent on the amount held in Canada.
by chatbotte
Tue Apr 24, 2018 8:22 am
Forum: Investing - Theory, News & General
Topic: I’m still not a fan of international bond funds
Replies: 307
Views: 41472

Re: I’m still not a fan of international bond funds

By definition a hedge will usually lose money when your core investment is doing well, which is exactly what happened, and is precisely my point. JBTX, In this particular scenario, a U.S. investor spending U.S. dollars would have been better off holding a 4Y USD bond, not an unhedged 4Y CAD bond. T...
by chatbotte
Tue Apr 24, 2018 7:34 am
Forum: Investing - Theory, News & General
Topic: I’m still not a fan of international bond funds
Replies: 307
Views: 41472

Re: I’m still not a fan of international bond funds

JBTX, I guess the question is whether exchange rate fluctuation is an added risk, or does it serve as a diversifier? Imagine you purchased a 4Y CAD bond in 2014 and want to unwind the position now. You bought 1.04 CAD for 1 USD back in 2014, but you need 1.28 CAD to buy 1 USD now. That translates i...
by chatbotte
Tue Apr 24, 2018 3:46 am
Forum: Investing - Theory, News & General
Topic: I’m still not a fan of international bond funds
Replies: 307
Views: 41472

Re: I’m still not a fan of international bond funds

JBTX, I guess the question is whether exchange rate fluctuation is an added risk, or does it serve as a diversifier? Imagine you purchased a 4Y CAD bond in 2014 and want to unwind the position now. You bought 1.04 CAD for 1 USD back in 2014, but you need 1.28 CAD to buy 1 USD now. That translates in...
by chatbotte
Mon Apr 23, 2018 3:34 pm
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

If there are 2 currencies who should converge to a Purchasing Power Parity basis, it is USD and CAD. Can you provide any evidence please? Real exchange rates can vary a lot. What you are saying makes sense, but there are a number of variables affecting real exchange rates, such as the ratio of trad...
by chatbotte
Mon Apr 23, 2018 10:58 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

randomizer,

What do you mean? I asked a simple yes/no question. It has nothing to do with foresight.
by chatbotte
Mon Apr 23, 2018 10:40 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

randomizer,

Not sure I got your point. Is it not true that a U.S. investor would have made a sizeable profit from hedging their CAD holdings back into USD over the period indicated in the above post (2014 - 2018)?
by chatbotte
Mon Apr 23, 2018 1:20 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

longinvest wrote:
Sun Apr 22, 2018 12:49 pm
It is enlightening to compare the growth charts of VTI (blue), VUS (red), and VUN (orange) from September 2013 to March 2018.
Does that mean a U.S. investor should have hedged their CAD holdings back into USD?
by chatbotte
Mon Apr 23, 2018 12:39 am
Forum: Non-US Investing
Topic: Currency Risk for ETFs [Canada]
Replies: 37
Views: 3329

Re: Currency Risk for ETFs [Canada]

But currency fluctuations are kinda random, and tend to equalize over time. Can you provide evidence please? PPP doesn't hold (at least in the short run), so no two countries expect*** the same real return on a global ptf of all assets. Evidence of long-run PPP seems to be mixed. ***On second thoug...
by chatbotte
Sat Apr 21, 2018 9:14 am
Forum: Investing - Theory, News & General
Topic: Bill Sharpe's preferred portfolio
Replies: 146
Views: 34019

Re: Bill Sharpe's preferred portfolio

Had to laugh when he said he wasn't sure how he felt about the currency hedging in the int'l bond fund. Also, the bonsai really stole the show. saltycaper, Sorry, I know this is an old thread. Why did you have to laugh? :) I'm not sure why he doesn't like the currency hedging in the bond fund. He s...
by chatbotte
Fri Apr 20, 2018 11:18 am
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

I see what you mean. Thanks for the explanation. When I look backwards though does the zig and zag come out in the wash because of our global economy? I realize we don’t know the appreciation/depreciation of the future. No, it does not. PPP (purchasing power parity) doesn't hold, so there's always ...
by chatbotte
Fri Apr 20, 2018 4:58 am
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

Also keep in mind that your returns will be highly influenced by the relative strength (or weakness) of the USD. By investing in international, you are just as exposed to currrency movements as you are to the performance of the underlying companies. That's true. Currency is a big part of the equati...
by chatbotte
Fri Apr 20, 2018 3:07 am
Forum: Investing - Theory, News & General
Topic: Why International again?
Replies: 224
Views: 33903

Re: Why International again?

Also keep in mind that your returns will be highly influenced by the relative strength (or weakness) of the USD. By investing in international, you are just as exposed to currrency movements as you are to the performance of the underlying companies. That's true. Currency is a big part of the equati...
by chatbotte
Thu Apr 19, 2018 6:37 am
Forum: Investing - Theory, News & General
Topic: The portfolio currency-hedging decision
Replies: 4
Views: 565

Re: The portfolio currency-hedging decision

I'm not sure what "currency trailing returns" means. It's Figure 1 on page three. Can you please explain in more detail? Thank you. It is actually "trailing currency returns" (you wrote it slightly backwards). It is just the returns due to currency over the past 3 years or the past 10 years. What a...
by chatbotte
Thu Apr 19, 2018 6:34 am
Forum: Investing - Theory, News & General
Topic: The portfolio currency-hedging decision
Replies: 4
Views: 565

Re: The portfolio currency-hedging decision

Thank you. Does this mean that if a nominal exchange rate is e.g. 5 today, then the same rate will likely be 5 in 10 years' time, whereas it can be way off in 3 years' time? Am I interpreting the chart correctly?