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#41
General Discussion / Re: Fed Policies Driving Fligh...
Last post by Dexter - June 22, 2016, 08:21:19 PMI think the investors that are reaching for yield in this low interest rate environment are going to get burned at some point.
It seems like much of the market's movement has been based on accommodative Fed policies.
If the market's movement had been primarily based on sustainable economic growth, I doubt the Fed would be so hesitant to raise rates.
It seems like much of the market's movement has been based on accommodative Fed policies.
If the market's movement had been primarily based on sustainable economic growth, I doubt the Fed would be so hesitant to raise rates.
#42
Strategies / Re: International ETF Exposure
Last post by Dexter - June 22, 2016, 04:48:40 PMHi Arkad, welcome to the Capital Alligator Forum!
Passive indexing with dollar cost averaging can be a very effective investment strategy (especially for people who stick with it). It sounds like this strategy suits you, so that's great.
I think you've identified a lot of the pros and cons associated with buying an international ETF vs. a U.S. ETF.
I have a few additional thoughts though....
ETF providers usually construct their funds based on where a company is domiciled. However, just because a company is domiciled in one country doesn't mean the majority of its revenues and earnings come from that country. Along these same lines, many of the companies in an International ETF (VEU, for example) also do business in the U.S. So, some portion of their revenues and earnings are coming from the U.S.
Thus, international and U.S. ETFs are not pure-plays on their respective regions. So, you can't say that you have exactly 10% international exposure if you put 10% of your portfolio into an international ETF and the rest into U.S. ETFs. You can't even say that you have 10% international exposure if you put 10% into an international ETF and the other 90% into a U.S. based company that only does business in the U.S.
The only way to know what percentage of revenues and earnings are coming from international vs. the U.S. is to drill down into the companies that are included in these ETFs. Also, the mix of international vs. U.S. in each of these ETFs will probably change over time as the underlying companies receive more or less revenues/earnings from various countries. As you can imagine, it could easily be a full time job to track this stuff.
The international ETFs probably do have a higher concentration of international business -- it's just hard to put a number on it without digging into the details.
Also, the returns of the international ETF would have to be slightly better to overcome the slightly higher expense ratio. Without performing some kind of valuation, it would be hard to assess relative attractiveness of an international ETF vs. a U.S. ETF. But this may not be an issue for you if your main goal is to own some businesses that are domiciled outside the U.S.
You probably won't go wrong either way -- i.e., owning 100% U.S. ETFs vs. 80-90% U.S. ETFs / 10-20% International ETFs and rebalancing quarterly or annually. However, you'll definitely want to factor in trading costs when you make your decision.
Passive indexing with dollar cost averaging can be a very effective investment strategy (especially for people who stick with it). It sounds like this strategy suits you, so that's great.
I think you've identified a lot of the pros and cons associated with buying an international ETF vs. a U.S. ETF.
I have a few additional thoughts though....
ETF providers usually construct their funds based on where a company is domiciled. However, just because a company is domiciled in one country doesn't mean the majority of its revenues and earnings come from that country. Along these same lines, many of the companies in an International ETF (VEU, for example) also do business in the U.S. So, some portion of their revenues and earnings are coming from the U.S.
Thus, international and U.S. ETFs are not pure-plays on their respective regions. So, you can't say that you have exactly 10% international exposure if you put 10% of your portfolio into an international ETF and the rest into U.S. ETFs. You can't even say that you have 10% international exposure if you put 10% into an international ETF and the other 90% into a U.S. based company that only does business in the U.S.
The only way to know what percentage of revenues and earnings are coming from international vs. the U.S. is to drill down into the companies that are included in these ETFs. Also, the mix of international vs. U.S. in each of these ETFs will probably change over time as the underlying companies receive more or less revenues/earnings from various countries. As you can imagine, it could easily be a full time job to track this stuff.
The international ETFs probably do have a higher concentration of international business -- it's just hard to put a number on it without digging into the details.
Also, the returns of the international ETF would have to be slightly better to overcome the slightly higher expense ratio. Without performing some kind of valuation, it would be hard to assess relative attractiveness of an international ETF vs. a U.S. ETF. But this may not be an issue for you if your main goal is to own some businesses that are domiciled outside the U.S.
You probably won't go wrong either way -- i.e., owning 100% U.S. ETFs vs. 80-90% U.S. ETFs / 10-20% International ETFs and rebalancing quarterly or annually. However, you'll definitely want to factor in trading costs when you make your decision.
#43
General Discussion / Fed Policies Driving Flight to...
Last post by Arkad - June 22, 2016, 12:03:46 AMI recently saw this article in the Wall Street Journal. It seems that many are suggesting that the Fed's near-zero interest rate policies are driving investors looking for decent returns to riskier assets that in the past could be had with less volatile portfolios.
http://www.wsj.com/articles/pension-funds-pile-on-the-risk-just-to-get-a-reasonable-return-1464713013
Thoughts on what this means for investors? It begs the question...how much of the market's movement in the past couple of years has been based on sustainable economic growth, and how much has been based on easy money policies driving up asset prices, or some combination? I am not sure there is any way to know for sure.
http://www.wsj.com/articles/pension-funds-pile-on-the-risk-just-to-get-a-reasonable-return-1464713013
Thoughts on what this means for investors? It begs the question...how much of the market's movement in the past couple of years has been based on sustainable economic growth, and how much has been based on easy money policies driving up asset prices, or some combination? I am not sure there is any way to know for sure.
#44
General Discussion / Re: 'How the Economic Machine ...
Last post by Arkad - June 21, 2016, 11:40:12 PMI have seen this before. Highly recommended! A fascinating economic perspective for understanding how economic transactions work together to drive larger economic trends. Better yet, it is narrated by a very interesting capital allocator, Ray Dalio.
#45
Strategies / International ETF Exposure
Last post by Arkad - June 21, 2016, 11:22:23 PMI am a passive investor that subscribes to a dollar cost averaging philosophy on broad indexes. Although in my view markets are not efficient and there are plenty of opportunities for bargains, I prefer the simplicity of passive index investing through ETFs. My portfolio is largely made up of S&P and US small cap ETFs.
One issue I am trying to figure out is how much international exposure I want, if any. I am looking at large-cap international ETF for around 10 to 20 percent of my portfolio (for example, Vanguard's VEU). As I have thought about this, I have gone back and forth in my thinking:
Pros: International exposure diversifies portfolio, US equities may be overheated increasing attractiveness of other markets/broader exposure.
Cons: Slightly higher fees, large-cap foreign is highly correlated to US S&P anyway, returns over past several years have been dismal (although this is no indicator of future, results), US Large cap stocks have plenty of foreign exposure anyway due to financial globalization.
Does anyone have any thoughts of the usefulness of broad foreign exposure to diversify a portfolio? Are there any pros or cons that I am missing? Part of me thinks that diversification into international ETFs is overrated, but part of my thinks it has a place in a balanced portfolio.
One issue I am trying to figure out is how much international exposure I want, if any. I am looking at large-cap international ETF for around 10 to 20 percent of my portfolio (for example, Vanguard's VEU). As I have thought about this, I have gone back and forth in my thinking:
Pros: International exposure diversifies portfolio, US equities may be overheated increasing attractiveness of other markets/broader exposure.
Cons: Slightly higher fees, large-cap foreign is highly correlated to US S&P anyway, returns over past several years have been dismal (although this is no indicator of future, results), US Large cap stocks have plenty of foreign exposure anyway due to financial globalization.
Does anyone have any thoughts of the usefulness of broad foreign exposure to diversify a portfolio? Are there any pros or cons that I am missing? Part of me thinks that diversification into international ETFs is overrated, but part of my thinks it has a place in a balanced portfolio.
#46
Investment Ideas / Re: TWTR - Twitter Inc.
Last post by Mark P. - June 15, 2016, 06:02:59 PMYes, it has had a nice small jump over the past few days with that news as well as news that Microsoft was acquiring LinkedIn.
http://www.cnbc.com/2016/06/15/linkedin-buyout-soundcloud-investment-lift-twitter-shares.html
http://www.cnbc.com/2016/06/15/linkedin-buyout-soundcloud-investment-lift-twitter-shares.html
#47
Investment Ideas / Re: TWTR - Twitter Inc.
Last post by Dexter - June 15, 2016, 11:55:40 AMTwitter Invests $70 Million in SoundCloud Music Service
http://www.nytimes.com/2016/06/15/business/media/twitter-invests-70-million-in-soundcloud-music-service.html?_r=0
http://www.nytimes.com/2016/06/15/business/media/twitter-invests-70-million-in-soundcloud-music-service.html?_r=0
#48
Investment Ideas / Re: TWTR - Twitter Inc.
Last post by Dexter - June 10, 2016, 06:39:36 PMHey Mark,
As I was doing some research on TWTR, I came across a series of articles that Aswath Damodaran had written on Twitter. Mr. Damodaran is a Professor of Finance at the NYU Stern School of Business. He teaches classes in corporate finance and valuation (primarily to MBAs).
Here's his latest article on Twitter:
http://aswathdamodaran.blogspot.com/2016/02/management-matters-facebook-and-twitter.html
His most current valuation for TWTR is here:
http://www.stern.nyu.edu/~adamodar/pc/blog/TwitterFeb2016.xls
If you're interested in reading his other articles, you can go to his blog and search for Twitter.
Mr. Damodaran has some interesting thoughts about Twitter's business; and it's helpful to see what assumptions he's making in his valuation.
As I was doing some research on TWTR, I came across a series of articles that Aswath Damodaran had written on Twitter. Mr. Damodaran is a Professor of Finance at the NYU Stern School of Business. He teaches classes in corporate finance and valuation (primarily to MBAs).
Here's his latest article on Twitter:
http://aswathdamodaran.blogspot.com/2016/02/management-matters-facebook-and-twitter.html
His most current valuation for TWTR is here:
http://www.stern.nyu.edu/~adamodar/pc/blog/TwitterFeb2016.xls
If you're interested in reading his other articles, you can go to his blog and search for Twitter.
Mr. Damodaran has some interesting thoughts about Twitter's business; and it's helpful to see what assumptions he's making in his valuation.
#49
Investment Ideas / Re: TWTR - Twitter Inc.
Last post by Mark P. - June 08, 2016, 12:51:28 AMThis was a great read. Thanks for sharing!
#50
Investment Ideas / Re: TWTR - Twitter Inc.
Last post by Dexter - June 07, 2016, 04:25:39 PMHere's the backstory of the management successions at Twitter....
http://www.vanityfair.com/news/2016/06/twitter-is-betting-everything-on-jack-dorsey
It's a pretty interesting read.
http://www.vanityfair.com/news/2016/06/twitter-is-betting-everything-on-jack-dorsey
It's a pretty interesting read.