Lauretta wrote: ↑Mon Oct 26, 2020 11:31 am
Valuethinker wrote: ↑Mon Oct 26, 2020 9:59 am
But why go so micro? The standard EM fund is over 40% China - is this not enough? HK is another 8% or so and Taiwan another 14%? So 60% of your money is tied up in China or Chinese-connected locations.
good point. It's mainly Dalio's writings on China that made me think it might be a good idea to overweigh it. Otoh they had an article in the Guardian I think today where they said that China cheated in the values they published this year on their recovery, so it might be a bad idea to invest too much if they are dishonest...
The essence of the Boglehead philosophy is that markets are Type II informationally efficient.
In the absence of inside information, an investor is unlikely to be able to systematically outperform the market index. In addition, if there are investors who can do that, the majority of them charge such high fees that the outperformance net of fees is at or below the market index.
1. Ray Dalio says it. And this is a good idea, why? And if Dalio is so clever, why doesn't he keep his best ideas to himself? Or maybe he does? Or is he just trying to ramp his position to get out.
I knew some pretty amazing fund managers, once. However if they told you something, it was usually to get you buying it so they could offload. (laws were a bit more flexibly interpreted in those days).
But you can bet any Hedge Fund manager that has seen an opportunity, has already moved on it, and is talking up his/ her book.
2. you read in the Guardian -- not a financial newspaper and in fact in many ways an anti-capitalist newspaper (by European standards it is not particularly far left, I'd call it Social Democratic, by North American standards it is practically Soviet-style socialist). And you read some story that something something the Chinese cheat on "values" they publish, whatever that means.
And so now you are not sure the great idea in 1 is not a great idea? What does the Financial Times say? Because that really is a financial newspaper, for better or for worse.
You have to have strongly held convictions to go against a broad indexation strategy. If you don't have strongly held convictions, and the capacity to do thorough research of your ideas, you are better to index.
Because for sure there are people who have done their homework
, who are the other side of your trades.
You have said, elsewhere, that you have challenges in sticking to your investment policy. Now might be the ideal moment to progress on those challenges, by avoiding a distracting investment? I am not sure what this might add to the average portfolio?
China I have a certain impression has fairly wild-west attitudes about accounting & securities law. So 40% of the EM index funds is China, and this is plenty for me.
In fact I had an iShares Far East Japan ETF that I bought just before the 2008 Crash -- immaculate timing
. It has actually made money in the last 10 years, (amazingly), and +19% on last reported yearly performance (to end Q2 20 I think). And I checked the factsheet (for the first time in years) and realised that it had a large weighting in China, that duplicated my EM index funds (bought much more recently).
Thus, I sold it. That's what I think about China, right now. That I didn't want to be overweight.
My average holding period for a fund, btw, is over 10 years. I don't even trust myself to rebalance, because I know that I will be tempted to chop-and-change based on what I read in my FT at the weekend. I sacrifice portfolio efficiency for greater behavioural consistency, in other words.