Portfolio Charts

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Solvent
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Re: Portfolio Charts

Post by Solvent »

Eeek. Well, I don't think it's a simple answer. When I was in Aus, I could directly buy US shares/funds, but my broker would charge much higher trade costs, and then in addition charge ongoing custody costs.
You can also buy, on the ASX, something like Vanguard's VTS, which as I understand it tracks a basic US index with no hedging. This is a better option for most investors I think, given trade costs. But how this plays into your charts, with fees, etc., I don't know.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 »

Solvent wrote: You can also buy, on the ASX, something like Vanguard's VTS, which as I understand it tracks a basic US index with no hedging. This is a better option for most investors I think, given trade costs. But how this plays into your charts, with fees, etc., I don't know.
Yeah, that's also been my impression with other countries and it seems like the best solution that I'm aware of. For example, the Canadian equivalent of VTI is VUN. I started a spreadsheet a while back to make a list of international fund equivalents, but didn't get very far. Maybe I'll revisit that.

Thanks for the info.

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Seppia
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Re: Portfolio Charts

Post by Seppia »

Tyler9000 wrote:Let's set taxes aside for a moment -- I agree those are really complex. How exactly does a foreign investor buy US-based funds? Does anyone have any experience with that, or can you point me to an online guide describing the process for your country?
Ciao Tyler
I recently moved back to Italy from the USA, so I studied the subject quite a bit.
To keep it short:
The best bet for European investors is generally (I say generally because there might be some slight differences by country) to avoid buying strictly American funds.
Vanguard and blackrock offer etfs, generally based in Ireland for tax efficiency and traded around Europe, who will be equivalent to the American etfs.
See here for example (holland has some of the best choices for vanguard etfs, I'm in Italy and buy their etfs on amsterdams stick exchange) https://www.vanguard.nl/portal/site/kii ... /documents
So we do have in general a more limited choice, and expense ratios are a bit higher, but other than that they're the same.
The advantage of these etfs is that they usually are armonized
This means that for example when I'm in Italy, I will only pay Italian taxes on dividends when I get the dividends from europes ETF VEUR, even if the ETF is traded in holland
Last edited by Seppia on Sun Oct 16, 2016 1:37 am, edited 1 time in total.

Ontarian
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Re: Portfolio Charts

Post by Ontarian »

Tyler9000 wrote:Let's set taxes aside for a moment -- I agree those are really complex. How exactly does a foreign investor buy US-based funds? Does anyone have any experience with that, or can you point me to an online guide describing the process for your country?
I'm Canadian (obvious given my username) yet all the ETFs I currently hold are US-listed. Before entering an order in my TFSA, RRSP, or taxable account, I use Norbert’s Gambit (it's a Canadian thing, though anyone could use it to less-expensively convert currency between CAD<->USD) to purchase USD. Then I simply place an order with my online broker (Questrade - the best Canadian one) for VTI or EWS or NGE. All three ETFs are traded on the NYSE. I included EWS and NGE because I'm wanting to buy them. I'm waiting for CAD to come up some against the USD before converting plus I'm betting NGE will fall more. Now is as good a time as ever to buy EWS though.

I feel like sharing that this is my first post in the ERE forums! I'm a big fan. Lots of wise people here I continue to learn from. Other 26 year old university students are gearing up for a night out filled with $6 Labatt Blue or Caesars, but I'm here reading the forums while I eat supper.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 »

@ Seppia & Ontarian -- Thanks! You've given me a lot to look into.

MrNotRobot
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Re: Portfolio Charts

Post by MrNotRobot »

@Tyler

Sorry I haven't been monitoring this properly. Notifications don't seem to be working for me.

Yes, from Oz, I can buy actual US traded equities and ETFs trading on the NYSE stock exchange (and others e.g. Nasdaq) using USD converted from AUD and held in a USD account until used. This can be done through most of our larger stock brokers, and also through multinational brokers like Interactive Brokers. Some provide very poor spreads and fairly high fees, but some are quite reasonable. Tax issues should just be ignored I think, but I'll mention that OZ has a tax treaty with the US. I think overall it can be done where the differences due to expenses are negligible.

There are global market ETFs on the Oz exchange bought with AUD and also hedged options, but our choices are extremely limited compared to what you guys have available. For example, it is very difficult to find any global small cap offerings, and various fixed interest instruments.

It's very difficult from outside of the US to assess how any of the portfolio might perform in one's own country, if it can even be implemented. So this option occurred to me as something that is definitely viable, except that exchange rates need to be considered and also inflation as you have mentioned. But this data should be easily obtainable.

I feel terrible suggesting anything that might result in more work for you, because of how much you have already given! But it seems it would be a very interesting study... and maybe an actionable one for us non-US types.
Last edited by MrNotRobot on Tue Oct 18, 2016 7:22 pm, edited 1 time in total.

MrNotRobot
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Re: Portfolio Charts

Post by MrNotRobot »

Just to follow up with an example, I can't see any way to implement Golden Butterfly using Oz traded instruments. We don't have the following equivalents available:

- SCV, LTT, STT

Another issue is that our TSM equivelant, which would be the ASX total market is incredibly, unbelievably, scarily concentrated to heavy cap banks and miners. Our small cap end is full of junior mineral explorers, many of which amount to not much more than just a couple of guys with shovels. So there is very good reason to suspect that what works in the US may not work in Oz.

MrNotRobot
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Re: Portfolio Charts

Post by MrNotRobot »

BRUTE wrote:can't anyone do currency and local inflation calculations on their own?
Not without re-inventing the wheel, unless the raw spreadsheets were made available.
afabk
Lol!

MrNotRobot
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Re: Portfolio Charts

Post by MrNotRobot »

I just checked the actual fees from a big broker here, NabTrade:

ASX trades: 0.11% of trade value
International Trades (wait for it!): 0.11% of trade value

Additional fees:
- SEC fee for sell trades 0.00184%
- Custody fee of 0.5% of the average balance of international holdings over the year, but only charged if you make zero trades throughout the year. Shouldn't be an issue if you re-balance at least annually.

I think Interactive Brokers is even better, and there are others. All in all completely viable I think.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 »

Very cool. Thanks for the info! I can't promise I'll be able to act on it any time soon, but figuring out a way to help international investors is definitely high on my wish list.

JohnnyFactor
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Re: Portfolio Charts

Post by JohnnyFactor »

Being from Canada, I've been using The Stingy Investor Asset Mixer and Periodic Table. They have full data on Treasuries, TSX, SP500, MCSI, and Gold in Canadian dollars going back to 1954 for some asset classes. I don't know where the data comes from, but I'm using it nonetheless. I import the annual returns into Google Sheets and play around with AA percentages to get a feel for the numbers.

Buying US ETFs and stocks in Canada is just as simple as buying CAD ones. Specify your account is in US dollars, contributions are converted on deposit, and trade away. No extra costs. The catch is, it can fluctuate by up to 30% annually just from currency exchange. It's a risk I'm not willing to take so I just buy CAN-listed US and Intl. index ETFs.

Considering the US makes up half the global economy, it's not unreasonable to keep your site US-only. International would be nice of course but I'm reminded of why we have only, like, two Target stores here. All of Canada adds 10% to the bottom line, at most.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 »

Thanks, JohnnyFactor. I appreciate the info, and also the Stingy Investor reference. I saw that a while back but lost track. It seems like a good resource.

BRUTE
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Re: Portfolio Charts

Post by BRUTE »

50% Small Cap Value
50% Emerging Markets

discuss.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 »

It's basically the Swedroe portfolio of high risk/return equity assets but without the offsetting bond stability. It's a little too focused for my tastes, but I see the appeal.

BTW, I've been working a lot with the guy who maintains the Simba spreadsheet and there's a big update coming. One of the likely changes is that EM may be removed prior to 1985. The more we look into data before that date the less we trust it. Just something to think about.

But plug in International Small instead and it's still interesting. ;)

BRUTE
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Re: Portfolio Charts

Post by BRUTE »

where does the data come from, anyway?

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 »

The data is compiled in Simba's Backtesting Spreadsheet on the Bogleheads forum. The original sources are public information from all over the place -- Vanguard fund annual reports, index provider history, academic papers, and even some custom calculations that I (and others) have provided. The guy currently scrubbing them is very meticulous, and I appreciate his attention to detail. You can trace them all either in the Simba spreadsheet or in the individual Asset pages on the site.

FBeyer
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Re: Portfolio Charts

Post by FBeyer »

BRUTE wrote:50% Small Cap Value
50% Emerging Markets

discuss.
1) Drawdowns.
2) Backtesting for CAGR.

BRUTE
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Re: Portfolio Charts

Post by BRUTE »

drawdowns are much shorter than TSM. but they're hard.

brute doesn't really see an alternative for 2). history is pretty much all there is.

FBeyer
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Re: Portfolio Charts

Post by FBeyer »

Why compare to the TSM? Why not to a three part TSM TBM REIT? Why not compare to The Permanent Portfolio? Why not compare to the history of Aristocrat Dividend Investing? Your choice of reference is arbitrary. You can choose almost any other allocation and get a different profile. Is 9 years okay with you, just because something else is worse?

Looking at CAGR is the one thing I feel is the most misleading about portfolio backtesting. Testing is about seeing how the portfolio fares under different circumstances: Bubbles in the US, high inflation, oil crisis etc. Most people are looking for low volatility, stable returns or slow growth under a lot of different circumstances, if BRUTE is looking for high returns BRUTE should get itself[1] properly educated and stop thinking in terms of indexing/diversification and more in terms of being 'right' enough not to NEED to diversify in order to make money.

Also, the history of EM is bound to be different from the future of EM unless the total global economy is arranged in exactly the same manner as it was in the past. In case it is not, you need to figure out what is different now compared to then.

My bet is on infrastructure in the developing parts of Africa...

[1] I used to say himself here, but I figured that might not be the case...

BRUTE
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Re: Portfolio Charts

Post by BRUTE »

brute has actually compared it to many other ones, including PP and GB. 100% TSM is just a pretty common piece of advice in FIRE circles, maybe less so here. but MMM, jlcollinsnh, Curry Cracker, all recommend it.

and brute is not merely looking at maximizing CAGR. this portfolio seems to backtest very well in almost any economical climate. it does crash hard, but it historically recovers very quickly.

if hedged a bit by adding 15/15 of LTT/Gold or so, it has very short drawdowns - certainly much shorter than the 9 years of a TSM/TBM/REIT. it also survived the 2008 crisis much better than said 3 part portfolio.

of course history is bound to be different, but that is true for all portfolio choices based on historical data.

brute is always a little irritated when humans tell him not to chase backtesting or rely on historical data. historical data is the only data there is. if brute doesn't want to predict the future and time the market (he doesn't), then it's either history or diversification. there are no guarantees with past performance, but there are also no other guarantees.

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