Global Investment Portfolio

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dice

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I am currently deciding on a portfolio - I remember seeing threads on askaboutmoney.com that discussed allocations with regard to global region but cannot find these threads despite having used every reasonable search term I can think of.

Can anyone point me in the direction of those threads or any online material that might make a good read.

I am currently considering something along the lines of the following
USA 35%
UK 15%
Europe 25%
India 25% (split between property fund and sensex tracker)

with the intention of rebalancing on a yearly basis or after any major market shifts, though I will redistibute in asia once feel a bit more sure about entering the chinese market.

If anyone has any related comments I would be interested in hearing them - especially with respect to some outside influences on my portfolio choices , namely that fact that between my partner and I we are quite exposed to a single company in the USA through an employee stock purchase scheme with favourable terms, and the fact that our pensions may skew our overall balance. Would it be best to disregard these factors when assembling the portfolio?
 
Given the uncertainty around the dollar exchange rate, and the fact that you are already "quite exposed" to the US economy, I personally would not have such a high percentage of my portfolio in US stocks/funds.

The Economist has recently run some articles on overheating in India's economy, but I do not know how this would expose your investment.

I guess the decisions are down to your appetite for risk. Personally, I would feel safer with an increased European content.

Good luck
 
One problem on this is that most of the literature is written from a US or sometimes UK perspective but I haven’t been able to find anything on it from Euro perspective. Personally I think there is a lot to be said from a diversification angle to invest internationally and here is an article on it (but again note that it is written from a US perspective):
[broken link removed]
 
I have been considering the dollar exchange rate as favourable for US investment, though I am by no means an expert on exhange rates.

Admittedly India may be overheated - but in the long term I still feel optimistic.

The article mentioned by PMU is an interesting read - and raises the allocation by market cap method that I am in part considering along with some reasons that make me unsure of it.

The actual approach I am considering is to weight the investments based on market cap adjusted for currency risk and further adjusted to favour markets that have underperformed when rebalancing - the problem is that if I adjust percentages when re-balancing then this starts to get suspiciously like attempting to time the markets. Also if the percentages move in line with market cap then I would expect returns from re-balancing to be diminished.

Can anyone suggest other approaches that I should be researching and considering?
 
I think that the dollar has further to fall before it starts to come back again v the euro. The twin deficits haven't gone anywhere in the last 12 months. The dollar HAS to weaken further because water doesn't flow uphill.

China and India are both great places to invest right now, because they've both got so much room for further expansion, if you compare their economies with those in the developed world. And this is why I don't think there will be a 'bubble bursting' scenario there for some while yet.

The problem is how to get in: both of these stockmarkets are overvalued at the moment IMO, if you use any metric. And as a small retail investor, your options are limited.
 
max said:
I think that the dollar has further to fall before it starts to come back again v the euro.
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Max: you may very well be correct , but I’m not sure if it’s worthwhile for retail investors in Ireland to second guess currency movements. If the average person can’t time the market, he or she will also be unable to time currency movements. Like it or not, unless you wish to invest only in euro-denominated securities you need international exposure. However, if you are worried about currency risk, you can diversify this risk away by investing widely, and if the currencies have low or negative correlations it may actually lower your overall portfolio volatility.
 
If that's the case then there's no point in having any strategy at all, or doing any research, and just investing in a fully diversified portfolio and sitting on it
 
I would say that investing in a fully diversified portfolio and sitting on it is a reasonable long term strategy, and would certainly require some research. Though occasional re-balancing should in theory reap a small additional reward.

I hadn't come across the term "Twin Deficit" before, do you know of any recent articles about this - the latest I have found is dated 2004.
 
25% is an enormous over weight for India. i think you're chasing returns here. A bit like buying tech in the late 90's.
Good Luck.
 
maybe an emerging market etf rather than pinning hopes on just india?
eem for example
and also commodities ige
 
For further diversification, you could throw in an allocation to global reits, either via an etf, or a closed-end fund such as igr.
You could then dilute the whole mixture by adding in a global bond fund.
Good luck!
 
25% is a large wighting in India and when I think about it it is probably more of a punt than part of a reasonable strategy.

I suppose what I was really thinking of was almost 2 portfolios - one where I had a long term balanced outlook and one where I would attempt to pick areas of potentially greater performance, the India allocation would fall into the latter, I would also have added South Korea to this when I figured out how to. However I dont really think that I would have the time to develop the skills to run the second portfolio sucessfully; so I will be re-thinking that a bit.

thanks everyone for your input - any opinions on wether you should weight towards medium, small or large caps in the current climate for usa and for europe?
 
max said:
If that's the case then there's no point in having any strategy at all, or doing any research, and just investing in a fully diversified portfolio and sitting on it
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I’m not certain if you understand what’s involved in developing a fully diversified portfolio.

The strategy is to develop a portfolio that gives you a level of reward that meets your financial objectives for which you accept for a level of risk that is appropriate to your personal risk profile (i.e. you need to develop a strategy). So you’ve got to calculate your own risk profile; decide on the allocation of your portfolio between equities, bonds, properties, cash, commodities and whatever else to give you a portfolio with an acceptable level of return for the level of risk you are willing to accept; and this involves a degree of research; then you have to find the financial instruments that will make up your allocations; so you need to do some calculation of their performance, standard deviations, etc. and then decide the cheapest way to buy them (another lot of research). Then you do a bit of fine tuning; and then you can ‘sit on it’.

Except every year, as a prudent investor you need, as a matter of course, to review your personal financial situations, and ensure that your portfolio meets your financial objectives. You need to re-balance periodically to maintain your allocations, and if your personal circumstances change (and by implication your risk profile) you need to re-allocate to match your new risk profile, etc. So it’s not ‘no point in having any strategy’ and ‘no point in doing any research’, it’s the opposite.
Alternatively, you could, of course, pay an independent financial adviser to recommend a diversified fund with a good track record, put all your dosh in it, and sit on it.
 
In a discussion I read recently including names such as David Fuller, Martin Barnes, John Mauldin, Barry Ritholtz a number of interesting observations were made.

they seem to favour overweighting towards asian currencies (ex yen) at the moment, but dont expect a huge further drop in the dollar versus the euro

they are all "long term bulls" for comodities and dont favour bonds at the moment

one comment that was made is that now is not a great time to buy trackers - picking of stocks with strong fundamentals would be better

I had thought that the earlier post by max was a bit crazy (mostly due to stating that China and India were great places to invest) but much of what was said is echoed in the above.

It looks like I will widen my spread on investments further, maybe closer to

us 20% in index trackers split between large medium and small caps
europe 20% in index trackers
uk 20% in index trackers
property 5% in managed fund
china 5% in index trackers
vietnam 5% in index trackers
india 5% in index trackers
south korea 5% in index trackers
japan 5% in index trackers
commodities 10%

actually I want to include emerging markets in there somewhere also - possibly by reducing the us and uk weightings.

my concern is that I may be spreading my money too thinly at this, and taking exessive trading charges. Though careful selection of funds or index trackers may give me a similar spread through a smaller number of products.

Any comments or ideas?
 
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tyoung said:
25% is an enormous over weight for India. i think you're chasing returns here. A bit like buying tech in the late 90's.
Good Luck.
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Its good to be aware that anyone who holds Vodafone shares (as many of us do) now already has exposure to India and perhaps this should be taken into account when deciding on how much to invest further into the Indian economy.
 
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