Financial Page: REITs and International/Emerging Bonds

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siamond
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Financial Page: REITs and International/Emerging Bonds

Post by siamond » Mon Sep 11, 2017 1:31 pm

Here is a new article from our Bogleheads Financial Page blog:

Portfolio Diversification: REITs and International/Emerging Bonds

Here is the abstract:

Vanguard and others have put a lot of emphasis on bonds diversification using international bonds in recent years, while the Bogleheads community mostly shrugged. This article studies the effect of such diversification through backtesting techniques, looking at both regular International bonds and Emerging Market bonds. We’ll take a close look by studying monthly returns to better analyze the volatility and correlation properties of various portfolios. Then we’ll perform a similar study about diversification of equities with domestic, global or international real estate funds.

Feedback welcome!

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Re: Financial Page: REITs and International/Emerging Bonds

Post by Lou354 » Mon Sep 11, 2017 2:59 pm

Thanks for the article. Diversifying with US REITs (25% US stocks/ 25% int'l stocks/ 10% US REITs / 40% bonds) or with small and midcap value (25% US stocks/ 5% SCV/ 5% MCV/ 25% int'l stocks/ 40% bonds) yielded higher return than the base portfolio (30% US stocks/ 30% int'l stocks/ 40% bonds). Do you know whether the higher return was due to the diversifiers or to the lower percentage of international stocks (25% in the diversified portfilios vs 30% in the base portfolio)?

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Re: Financial Page: REITs and International/Emerging Bonds

Post by denovo » Mon Sep 11, 2017 3:07 pm

siamond wrote:
Mon Sep 11, 2017 1:31 pm
Here is a new article from our Bogleheads Financial Page blog:


Did not know it existed.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Mon Sep 11, 2017 3:09 pm

Lou354 wrote:
Mon Sep 11, 2017 2:59 pm
Thanks to the article's authors. Diversifying with US REITs (25% US stocks/ 25% int'l stocks/ 10% US REITs / 40% bonds) or with small and midcap value (25% US stocks/ 5% SCV/ 5% MCV/ 25% int'l stocks/ 40% bonds) yielded higher return than the base portfolio (30% US stocks/ 30% int'l stocks/ 40% bonds). Do you know whether the higher return was due to the diversifiers or to the lower percentage of international stocks (25% in the diversified portfilios vs 30% in the base portfolio)?
Good question, as the International returns were indeed in a down cycle during this time period. I think the answer is a little bit of both, as this little test seems to show:
* 30% US stocks/ 30% int'l stocks/ 0% US REITs / 40% bonds => CAGR 6.8%
* 35% US stocks/ 25% int'l stocks/ 0% US REITs / 40% bonds => CAGR 7.0%
* 25% US stocks/ 25% int'l stocks/ 10% Global REITs / 40% bonds => CAGR 7.1%
* 25% US stocks/ 25% int'l stocks/ 10% US REITs / 40% bonds => CAGR 7.2%

Frankly, the extra return didn't impress me that much, because premiums like that are cyclical and quite variable over time (Int'l vs. US is the prototypical example of that). But the low correlation of REITs and EM Bonds in time of crises, and the nice smoothing of the Internet crisis seemed more meaningful. I really wish we had data going back to the 70s though, but we don't (besides US REITs, I mean).

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Re: Financial Page: REITs and International/Emerging Bonds

Post by zonto » Mon Sep 11, 2017 3:11 pm

I think the conclusion drawn re: USD-hedged international bonds is incorrect (at least since 1999, the earliest date the asset class data is available on Portfolio Visualizer). Building on Vanguard's research, I posted an analysis about a month ago here: viewtopic.php?f=10&t=223796&p=3483301&h ... s#p3483301.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by SimpleGift » Mon Sep 11, 2017 3:19 pm

Very thorough and helpful analysis, siamond. About emerging market bonds:
siamond wrote:Emerging Bonds are more intriguing. It might be perceived as a risky asset class (and it is when analyzed on its own), but when used as part of a portfolio to replace some of the bonds portion, its historical high returns combined with fairly weak correlation with pretty much everything else would have added a little zing to one’s portfolio without significantly impacting volatility or drawdowns.
This asset class has had an amazing 20-year run. In fact, emerging market bonds have outperformed emerging market stocks, with much less risk (chart below). The T. Rowe Price bond fund had a Sharpe ratio of 0.92 over the past 15 years, compared with 0.41 for the stock fund, according to Morningstar.
  • T. Rowe Price Emerging Market Bonds (PREMX) vs. Emerging Market Stocks (PRMSX)
    Image
    Source: Morningstar
My concern is that emerging markets can only emerge once. A good portion of the bond returns over the last twenty years have been credit upgrades, as these countries developed, became more stable, and investors developed more faith in their credit worthiness. Can this run be repeated in the future? I'm skeptical — but I keep thinking this asset class is going to disappoint, and it keeps outperforming EM stocks!

Personally, I'm a believer in high-quality bonds and confining risk to equities, but this asset class has upended the normal way of thinking.
Cordially, Todd

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Mon Sep 11, 2017 3:33 pm

zonto wrote:
Mon Sep 11, 2017 3:11 pm
I think the conclusion drawn re: USD-hedged international bonds is incorrect (at least since 1999, the earliest date the asset class data is available on Portfolio Visualizer). Building on Vanguard's research, I posted an analysis about a month ago here: viewtopic.php?f=10&t=223796&p=3483301&h ... s#p3483301.
Well, you found a correlation of 0.65 using just a few years of past returns, and I found a correlation of 0.64 using index returns over a much longer time period. And I did indicate that Int'l Bonds displayed less volatility and slightly better returns (hence a better Sharpe ratio). So I don't know where we disagree! :wink:

Now, when we look at things at the portfolio level, fact is those nice characteristics didn't change anything meaningful. I was a bit surprised, and triple-checked, but I don't see any mistake. I actually came up with similar findings last time I looked at it (I was using annual returns by then). This is probably due to the fact that, as I indicated, correlation doesn't capture amplitude, only directionality.

This being said, I certainly wouldn't discourage anybody to use such (hedged) Int'l Bonds. They don't seem to help very much, but they don't seem to hurt either. And diversification is always a good thing.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by zonto » Mon Sep 11, 2017 3:47 pm

Apologies for my oversight. That extra $700 at the end could make all the difference! I'd bet that upping the percentage from 20% to 30% as recommended by Vanguard wouldn't sway things significantly either.

Thanks for all the time you put into this!

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Mon Sep 11, 2017 4:01 pm

zonto wrote:
Mon Sep 11, 2017 3:47 pm
Apologies for my oversight. That extra $700 at the end could make all the difference! I'd bet that upping the percentage from 20% to 30% as recommended by Vanguard wouldn't sway things significantly either.

Thanks for all the time you put into this!
Welcome. Yes, this is probably it. I didn't do a precise computation of the Sharpe ratio (will add T-Bills to my monthly spreadsheet later today, good idea), but quite clearly the 2nd portfolio would have been a smidge better in this respect. But that's just math, in real life, we wouldn't have seen a blip of difference.

And yes, I went as far as allocating the 40% bonds to Int'l, and this didn't change anything meaningful either. I am still scratching my head a little bit about this one, given the excellent characteristics displayed by Int'l Bonds in time of crises, to be honest!

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Mon Sep 11, 2017 4:09 pm

Simplegift wrote:
Mon Sep 11, 2017 3:19 pm
My concern is that emerging markets can only emerge once. A good portion of the bond returns over the last twenty years have been credit upgrades, as these countries developed, became more stable, and investors developed more faith in their credit worthiness. Can this run be repeated in the future? I'm skeptical — but I keep thinking this asset class is going to disappoint, and it keeps outperforming EM stocks!

Personally, I'm a believer in high-quality bonds and confining risk to equities, but this asset class has upended the normal way of thinking.
I was thinking exactly like you, and hastily ruled out the thought of EM Bonds multiple times in the past few years. Then I pondered more about the fact that the "bonds are for safety" saying is just terribly inaccurate at the asset class level, while being very true at the portfolio level. And then, I realized that I was still overly influenced by the characteristics of individual asset classes, but this really doesn't matter, what matters is the impact they have on the performance of the portfolio. Which opened new horizons, notably EM Bonds.

I have no clue if EM Bonds will continue to do well or not, but I am pretty sure that they will continue to have a mind of their own for a long, long time. And this should be good enough.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by livesoft » Mon Sep 11, 2017 4:20 pm

siamond wrote:
Mon Sep 11, 2017 1:31 pm
Feedback welcome!
Thanks for this bit of work. I saw that "correlation" was found about 25 times in the article and is in the tables, but not in any plot. Would it be visually useful to have a plot or two of Correlation somewhere in the article since it is featured so much in the analysis and conclusion?
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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Mon Sep 11, 2017 4:23 pm

livesoft wrote:
Mon Sep 11, 2017 4:20 pm
Thanks for this bit of work. I saw that "correlation" was found about 25 times in the article and is in the tables, but not in any plot. Would it be visually useful to have a plot or two of Correlation somewhere in the article since it is featured so much in the analysis and conclusion?
Yes, this is a great point, I vaguely pondered about it, then got lazy... What plot do you think would be the most useful?

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Re: Financial Page: REITs and International/Emerging Bonds

Post by livesoft » Mon Sep 11, 2017 4:46 pm

I am not sure which plot would be most useful. What are some other correlations plots out there?

I can see a matrix plot might be useful: http://www.sthda.com/sthda/RDoc/figure/ ... ents-1.png

But also a plot of correlation over time, too, with a line for each comparison. That might show how correlations get higher at the wrong times for some things.
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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Mon Sep 11, 2017 5:56 pm

livesoft wrote:
Mon Sep 11, 2017 4:46 pm
I can see a matrix plot might be useful: http://www.sthda.com/sthda/RDoc/figure/ ... ents-1.png
Well, this is exactly the same thing as the table I provided, except that the cells are colored (similar to what we do in the Simba spreadsheet). Seemed like a good idea, so I updated my spreadsheet and the blog post accordingly. Thanks.
livesoft wrote:
Mon Sep 11, 2017 4:46 pm
But also a plot of correlation over time, too, with a line for each comparison. That might show how correlations get higher at the wrong times for some things.
Trouble is this is adding a third dimension (time) to the table, which already has a lot of cells. I did provide the correlations in time of crisis in a separate table, this seems good enough to capture the key point. Let me know if you have another idea.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Mon Sep 11, 2017 6:01 pm

siamond wrote:
Mon Sep 11, 2017 4:01 pm
zonto wrote:
Mon Sep 11, 2017 3:47 pm
Apologies for my oversight. That extra $700 at the end could make all the difference! I'd bet that upping the percentage from 20% to 30% as recommended by Vanguard wouldn't sway things significantly either.

Thanks for all the time you put into this!
Welcome. Yes, this is probably it. I didn't do a precise computation of the Sharpe ratio (will add T-Bills to my monthly spreadsheet later today, good idea), but quite clearly the 2nd portfolio would have been a smidge better in this respect. But that's just math, in real life, we wouldn't have seen a blip of difference.
I added T-Bills and Sharpe ratio math to my spreadsheet, and it takes three decimals for the difference to even register! It's interesting, because Int'l Bonds as an independent asset class has a truly stellar Sharpe ratio, no discussion, but at the portfolio level, this gets completely drowned. When diversifying with REITs, the Sharpe ratio does improve much more significantly, as one might expect from the portfolio trajectories.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by AlohaJoe » Tue Sep 12, 2017 2:18 am

Simplegift wrote:
Mon Sep 11, 2017 3:19 pm
My concern is that emerging markets can only emerge once.
This isn't actually true. A few countries have emerged, then been downgraded, and then re-emerged, I believe. (Argentina maybe?)

On the contrary, I would expect EM to be -- on average -- nothing but improving things. Everything starts life as a frontier market, then becomes an emerging market, then becomes a developed market. (Well, assuming solutions are found to the middle income trap.)

Does that mean that EM is poised for a large cyclical bad period as e.g. Korea, Taiwan, the Czech Republic, and Poland go from EM to developed over the next decade or two? And are replaced by Kuwait, Vietnam, and Kenya as those countries graduate from frontier market status? That is will EM go from "quasi-developed" to "quasi-frontier" over the next decade or two? And then have a bad stretch followed by a strong stretch as those previously-frontier economies develop towards developed markets status?

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Re: Financial Page: REITs and International/Emerging Bonds

Post by Valuethinker » Tue Sep 12, 2017 5:49 am

AlohaJoe wrote:
Tue Sep 12, 2017 2:18 am
Simplegift wrote:
Mon Sep 11, 2017 3:19 pm
My concern is that emerging markets can only emerge once.
This isn't actually true. A few countries have emerged, then been downgraded, and then re-emerged, I believe. (Argentina maybe?)

On the contrary, I would expect EM to be -- on average -- nothing but improving things. Everything starts life as a frontier market, then becomes an emerging market, then becomes a developed market. (Well, assuming solutions are found to the middle income trap.)
Living in SE Asia would give you that impression.

I worry things are more cyclical than that. That countries look like they are "Emerged" and then they "de-emerge" due to war, politics or other issues.

Agree with you re "the Middle Income Trap". It seems to be very hard, or almost impossible, to get out of that. Some countries in emerging Europe, Brazil, Mexico, Israel-- all come to mind. Also Malaysia and Thailand perhaps. Maybe even China itself.

What Singapore did, and to an extent Taiwan and South Korea (and Japan before them) seems quite unique in world history. To become as, or more, developed than the countries of Western Europe and the Anglo Diaspora.
Does that mean that EM is poised for a large cyclical bad period as e.g. Korea, Taiwan, the Czech Republic, and Poland go from EM to developed over the next decade or two? And are replaced by Kuwait, Vietnam, and Kenya as those countries graduate from frontier market status? That is will EM go from "quasi-developed" to "quasi-frontier" over the next decade or two? And then have a bad stretch followed by a strong stretch as those previously-frontier economies develop towards developed markets status?
Perhaps. I am with you that it is likely Vietnam will graduate (in fact, I thought it *was* an EM, if you'd asked me). The others? Not so clear.

There was an Arab saying in the 1970s:

"My father, he rode a camel.
I? I drive a Cadillac.
My son? He flies a jet plane.
My grandson? He will ride a camel"

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Thu Sep 14, 2017 9:59 am

Another Bogleheads pointed out to me by e-mail that I focused on TBM as a baseline, and never compared to US Treasuries (say IT Treasuries), although treasuries have a solid track record of negative correlation with the stock market in times of crisis. I explored the topic, and he was quite right... And shall I note, those ITTs displayed a much deeper negative correlation than gold.

Here is an extended version of my correlation matrix in times of crisis. I added a column for IT Treasuries (akin to Vanguard VFIUX) and while I was at it, another column for IT Corp/Govt (akin to Vanguard VBILX). Click on the image for a larger version:

Image

Now, lower correlation is one thing, actual benefits at the portfolio level is another, so I checked the drawdowns. And although the change isn't that large, fact is the portfolio with IT Treasuries did behave better during both crises.

Image

I remained skeptical, thinking that the lack of bonds diversification would hurt returns on the overall trajectory compared to a TBM choice. I was wrong (that is, at least for the time period I looked at), as the following portfolio growth chart demonstrates. Interestingly enough, the better behavior during the depth of the financial crisis clinched a small advantage that didn't falter since then.

Image

That is eye opening, at least to me. The tests with bonds diversification as reported by the blog article didn't really improve drawdowns (only the REIT tests did), but they did improve returns when EM Bonds were used. While using pure treasuries did improve drawdowns and didn't hurt returns (actually improved a tad). I also ran another test with a mix of US Treasuries and Int'l (Government/Hedged) Bonds, and got pretty much the same outcome, unsurprisingly. Well, yet another learning experience for me!

PS. the whole investigation really showed me that correlation and drawdown analysis is coarse to the point of being misleading when using annual numbers. Such monthly analysis, although more cumbersome, definitely provides unique insights.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by bigred77 » Thu Sep 14, 2017 10:38 am

Non-US sovereign debt is a topic that I have had in the back of my mind but I kind of purposefully don't want to think about.

I believe pretty strongly in global cap weighting in equities. I understand and believe in most of the arguments for global cap weighting in fixed income. I just don't really want to actually do it myself :D .

It's not the correlations or sharp ratios or max draw downs that make me think deep down that I should really add it to my portfolio. Its that in the future there is absolutely no reason that the US HAS to keep a AAA credit rating or the US dollar can't depreciate greatly against other currencies. It's the black swan events that could hit the US that really worries me, especially if ALL my fixed income is in that country. My concern would grow as fixed income gets a larger and larger percentage of my portfolio over time.

It's similar to US and INTL equities. They should have similar return characteristics over time and take turns outperforming each other. But if I hold everything in US equities and the US loses a war, well then I'm in really big trouble. I strongly believe that on the equity side of the equation and I don't see why that wouldn't directly carry over to the fixed income side of things?

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Thu Sep 14, 2017 11:04 am

bigred77 wrote:
Thu Sep 14, 2017 10:38 am
I strongly believe that on the equity side of the equation and I don't see why that wouldn't directly carry over to the fixed income side of things?
I definitely agree with you, and have had the same struggle with myself for a little while. I am a strong proponent of hedging my bets on the equity side (AA 50/50), and yet I have all my eggs in one basket on the bonds side. Why? Nothing in the historical record (short-term or long-term) seems to justify that, on the contrary. And I share the fear of black swans events severely hurting the US in the future.

The only thing that annoys me is to further split my AA (oh, and also those pesky fees for EM bonds). If Vanguard would offer a global bond fund at low cost, I would definitely jump on it... Funny thing is they apparently do, but this isn't offered to US investors. Why, oh why.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by AlohaJoe » Thu Sep 14, 2017 11:28 am

siamond wrote:
Thu Sep 14, 2017 9:59 am
although treasuries have a solid track record of negative correlation with the stock market in times of crisis
I think this (widespread) belief is due to a tremendous amount of recency bias.

Since 1929 there have been 14 recessions in the US. In 7 of them Treasuries had a positive correlation with stocks. In 7 of them Treasuries had a negative correlation with stocks.

It just happens that the last 3 recession (2008, 2000, 1990) all had (fairly large) negative correlations. Those 3 make up nearly 50% of the recessions with a negative correlation. But the recession of 1981-82 had a correlation of 0.18. And even more concerning, both parts of the Great Depression (the 1929 recession and the 1937 recession) saw positive correlations. In 1937 the correlation was as high as 0.32, which is not what you want to see.

And there's all the panics before 1929, where correlations were generally positive. Though that was a long time ago and the financial system has changed substantially since then, so their applicability is dubious. In the 1890 recession correlations were 0.70! So much for flight to safety!

Nevertheless, when only 50% of modern recessions have featured negative correlations, I think people are often overstating the case. Unless the argument is that in the mid-1980s we underwent a regime shift and negative correlations in recessions are no longer likely. I think it is just that most people don't remember that far back :happy

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Thu Sep 14, 2017 11:37 am

AlohaJoe wrote:
Thu Sep 14, 2017 11:28 am
Since 1929 there have been 14 recessions in the US. In 7 of them Treasuries had a positive correlation with stocks. In 7 of them Treasuries had a negative correlation with stocks.
Thanks for the feedback, I was wondering about that. Did you run the monthly numbers with your bond fund simulator tool to verify this assertion? I'm getting more and more wary about annual numbers... Could you provide more details?
AlohaJoe wrote:
Thu Sep 14, 2017 11:28 am
It just happens that the last 3 recession (2008, 2000, 1990) all had (fairly large) negative correlations. Those 3 make up nearly 50% of the recessions with a negative correlation. But the recession of 1981-82 had a correlation of 0.18. And even more concerning, both parts of the Great Depression (the 1929 recession and the 1937 recession) saw positive correlations. In 1937 the correlation was as high as 0.32, which is not what you want to see.
Well, ok, but that kind of low correlation is still solid diversification. Certainly not as impressive in recent crises though, point granted. But then, I suspect that there was just no safe(r) harbor by then. Besides hiding a bar of gold under the mattress (which isn't exactly safe, to say the least!).

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Re: Financial Page: REITs and International/Emerging Bonds

Post by AlohaJoe » Thu Sep 14, 2017 11:49 am

siamond wrote:
Thu Sep 14, 2017 11:37 am
Thanks for the feedback, I was wondering about that. Did you run the monthly numbers with your bond fund simulator tool to verify this assertion? I'm getting more and more wary about annual numbers... Could you provide more details?
Yes, I used the monthly bond numbers using longinvest's bond simulator and Shiller's monthly rate data. The monthly S&P 500 is also based on Shiller's monthly data. A spreadsheet with the monthly total return data is here (in the right-most columns): https://docs.google.com/spreadsheets/d/ ... sp=sharing

Since most recessions don't line up nicely with annual numbers -- they may start in November and end in the following June, leaving the annual numbers looking reasonably okay -- I agree that monthly data works better for this kind of thing. Especially since most of us look at our portfolios more often than just once a year.
siamond wrote:
Thu Sep 14, 2017 11:37 am
Well, ok, but that kind of low correlation is still solid diversification.
Agreed. I should add a postscript: this isn't to say that bonds aren't "safe" in crises. Even when they have positive correlation we're usually talking about things like "stocks lost 5% in June and bonds lost 0.2% in June". This is more just a pet peeve of mine when people talk about "flight to safety". There are all kinds of crashes and crises. Bonds don't go up in all of them so just be prepared for that eventuality. :shock:

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Re: Financial Page: REITs and International/Emerging Bonds

Post by siamond » Thu Sep 14, 2017 1:11 pm

AlohaJoe wrote:
Thu Sep 14, 2017 11:49 am
This is more just a pet peeve of mine when people talk about "flight to safety". There are all kinds of crashes and crises. Bonds don't go up in all of them so just be prepared for that eventuality.
Totally agreed. And can't agree more about the 'recency bias' displayed by so many people (including very experienced ones on this forum) when it comes to bonds. I restricted my charts to 1994-2016 because the primary topic of the study was emerging bonds and Int'l/Global REITs, and that's all we have, but this is nowhere good enough of a sample.

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Re: Financial Page: REITs and International/Emerging Bonds

Post by abuss368 » Fri Sep 15, 2017 1:06 pm

We have invested in the Vanguard U.S. and International REIT/RE Index funds for many years. The two funds seem to compliment each other well.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: Financial Page: REITs and International/Emerging Bonds

Post by BuyAndHoldOn » Sat Sep 16, 2017 8:32 pm

Simplegift wrote:
Mon Sep 11, 2017 3:19 pm
Very thorough and helpful analysis, siamond. About emerging market bonds:
siamond wrote:Emerging Bonds are more intriguing. It might be perceived as a risky asset class (and it is when analyzed on its own), but when used as part of a portfolio to replace some of the bonds portion, its historical high returns combined with fairly weak correlation with pretty much everything else would have added a little zing to one’s portfolio without significantly impacting volatility or drawdowns.
This asset class has had an amazing 20-year run. In fact, emerging market bonds have outperformed emerging market stocks, with much less risk (chart below). The T. Rowe Price bond fund had a Sharpe ratio of 0.92 over the past 15 years, compared with 0.41 for the stock fund, according to Morningstar.
  • T. Rowe Price Emerging Market Bonds (PREMX) vs. Emerging Market Stocks (PRMSX)
    Image
    Source: Morningstar
My concern is that emerging markets can only emerge once. A good portion of the bond returns over the last twenty years have been credit upgrades, as these countries developed, became more stable, and investors developed more faith in their credit worthiness. Can this run be repeated in the future? I'm skeptical — but I keep thinking this asset class is going to disappoint, and it keeps outperforming EM stocks!

Personally, I'm a believer in high-quality bonds and confining risk to equities, but this asset class has upended the normal way of thinking.

I have thought/felt similar things. I keep my eye on EM Bonds and may buy on a dip; but, it would have to be a "blood in the water" type of situation. (Or at least a steep discount to the present).

I don't think EM bonds are the kind of thing one dollar-cost averages into, unless you really need income AND have a long time horizon.

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