AlohaJoe wrote: ↑
Tue Oct 09, 2018 12:49 am
watchnerd wrote: ↑
Tue Oct 09, 2018 12:13 am
PFInterest wrote: ↑
Mon Oct 08, 2018 6:38 pm
Ill take my risk on the equity side.
So your bonds have no term risk, no interest rate risk, no reinvestment risk, and no default risk? Nice trick, how'd you manage that?
Everyone takes risk with their bonds. Everyone.
The only question is which risks but that becomes an actual conversation with tradeoffs instead of pithy one-liners.
hdas wrote: ↑
Mon Oct 08, 2018 6:12 pm
I use VWOB....for BH's the allocate to emerging market bonds what other fund you recommend and why?
I also use VWOB. Well, the mutual fund version, since it is sitting in a Rollover IRA at Vanguard. I've never understood why EM equities are so often recommended and EM bonds aren't. If you get past the bond/stock nomenclature and just look at them both as bundles of factors, EM bonds have a stronger argument for being in a portfolio than EM equities, IMHO.
You could even imagine a "Larry Portfolio" that is 90% US bonds and 10% EM bonds. A "100% bond" portfolio that still has attractive returns.
I've never really looked at other EM bond options. I know Research Affiliates likes local currency EM bonds but I don't know what funds offer them; just never looked.
What are the factors that you think are in EM bonds (government?) that are not in EM stocks?
If there was an EM corporate bond fund - that would be racy. But the Agency costs of corporate bonds are lower than for equities - so in theory at least it might be a better investment (it's easier to enforce creditor rights than shareholder rights, even in western legal systems). However Swensen takes one through the logic as to why corporate bonds are just a bad idea for individual investors.
You live in Vietnam? Is it a concern that if you hold EM bonds you are therefore increasing your correlation with the EM in which you live?
I accept that EM are now much more differentiated than in 1998. But we have not had an (EM) crisis of that scale since. Remembering the daisy chain, which started with Thailand and then SE Asia but wound up in Brazil, Argentina and Russia.
If there is a China crisis of some kind (say geopolitical standoff in the S. China Sea, or a real property-debt bust so huge the Party cannot manage it) then I could see all of SE Asia going down, again. (Australian and New Zealand markets would also get slammed, ditto Singapore, probably Canada). If it extended to supply chains (see below) then it could get really messy - world GDP would probably take a stutter if iphone production were interrupted for a significant period.
If someone came out of the blue here as a new poster, and said they lived (and owned property?) in Vietnam, I would suggest they don't need any EM exposure (debt nor equity) at all**.
** reading in The Economist how integrated the smartphone supply chain is across SE Asia - components made in various countries (chips, screens, antennae, keypad etc), then assembled in China (or Vietnam). So there is certainly a risk factor there with the tech sector - if Apple gets a cold, then probably also Samsung and (insert name of Chinese mobile phone manufacturer) do as well, and the knock on effect will be in a series of countries that are part of that supply chain (it's really a supply web, rather than a chain).