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  1. #31

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    Quote Originally Posted by jrkob
    TB, can you clarify your performance matrix for this statement ? You're certainly introducing a measure of risk to this (as I would).
    Just comparing the weights of the positions I own with the MSCI World weights. Rightly or wrongly (mostly the latter) I have been thinking the US is too expensive for several years now, so have owned more Europe and EM at the expense of the US. My allocations generally within 5-10% of the MSCI "benchmark" though.

  2. #32

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    Quote Originally Posted by cendrillon
    What's your approach @nivantj?
    Honestly, im not in a position to answer that as i neither have enough experience nor well diversified portfolio yet.. Me throwing around questions/scenarios is just a way of trying to look at things in different angle, probably kick-starting discussion, learning and/or validating if my understanding make any sense..

    Though, i do believe that the rule may not be very significant in HK mainly for the reason that HKD is pegged.. Otherwise in the long run, currency risk is probably the single most important factor rather than cost of living or any other strings attached with economy (Thinking of hypothetical scenario where 50% of someone's portfolio was invested in GBP before brexit and 50% locally, assuming Brexit causes even harder landing of GBP, things might get ugly.. More crazy hypothetical, Xi dada suddenly decides to un-peg HKD/USD and peg HKD/RMB)..

  3. #33

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    Quote Originally Posted by nivantj
    Though, i do believe that the rule may not be very significant in HK mainly for the reason that HKD is pegged.. Otherwise in the long run, currency risk is probably the single most important factor rather than cost of living or any other strings attached with economy (Thinking of hypothetical scenario where 50% of someone's portfolio was invested in GBP before brexit and 50% locally, assuming Brexit causes even harder landing of GBP, things might get ugly.. More crazy hypothetical, Xi dada suddenly decides to un-peg HKD/USD and peg HKD/RMB)..
    If you own stocks of companies that serve an international market I don't think currency risk is an issue, its hedged out. For example whether you own HSBC stock in HK, London or the US doesn't really matter, even though the stock is listed in 3 different currencies. In fact, in the event of a brexit hard landing I'd rather own a London listed stock that serves an international market than say a US listed stock that primarily serves the UK.

  4. #34

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    Quote Originally Posted by cendrillon
    If you own stocks of companies that serve an international market I don't think currency risk is an issue, its hedged out. For example whether you own HSBC stock in HK, London or the US doesn't really matter, even though the stock is listed in 3 different currencies. In fact, in the event of a brexit hard landing I'd rather own a London listed stock that serves an international market than say a US listed stock that primarily serves the UK.
    But then why would anyone invest in international stock in other currency when its available in local currency! Gives more flexibility in terms of liquidity.. I was thinking about stocks/other asset classes domiciled in that country which is probably the whole point of diversification! Regarding Brexit, i was thinking about investment done before something like that happens and somehow one is unable to get rid of it on time either due to not easily liquidable nature of asset or wait-game in anticipation of things might improve and all that which might cause major currency loss!

  5. #35

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    Quote Originally Posted by nivantj
    But then why would anyone invest in international stock in other currency when its available in local currency! Gives more flexibility in terms of liquidity.. I was thinking about stocks/other asset classes domiciled in that country which is probably the whole point of diversification! Regarding Brexit, i was thinking about investment done before something like that happens and somehow one is unable to get rid of it on time either due to not easily liquidable nature of asset or wait-game in anticipation of things might improve and all that which might cause major currency loss!
    I don't think it matters where the stock is domiciled. For example the Vanguard VUSD ETF is domiciled in Ireland but tracks the S&P 500. It is not going to give you any different diversification than a S&P 500 ETF that is domiciled in the US. VUSD is traded on the London stock exchange but I don't think the brexit will cause any issues with VUSD, either in terms of liquidity or currency loss.

  6. #36

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    Quote Originally Posted by cendrillon
    If you own stocks of companies that serve an international market I don't think currency risk is an issue, its hedged out. For example whether you own HSBC stock in HK, London or the US doesn't really matter, even though the stock is listed in 3 different currencies. In fact, in the event of a brexit hard landing I'd rather own a London listed stock that serves an international market than say a US listed stock that primarily serves the UK.
    sorry can you elaborate more on this???

    for an international company - the fx risk may be hedged against their base currency / home country

    but you buying their stock in foreign currency doesnt protect you from that at all!

    unless that company is hedging their fx risk to HKD as their base currency!

  7. #37

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    Quote Originally Posted by aussie_oi_oi_oi
    sorry can you elaborate more on this???

    for an international company - the fx risk may be hedged against their base currency / home country

    but you buying their stock in foreign currency doesnt protect you from that at all!

    unless that company is hedging their fx risk to HKD as their base currency!
    I'm not sure what isn't clear here. Let's say a company listed in London with a stock trading in British pounds sells only to US consumers and has sales of $100M USD per year. Say the British pound devalues by 20%, the earnings of this company in USD remains unchanged, but it's earnings in British pounds goes up by 20%. All things being equal this will lead to a 20% increase in stock price in British pounds.

    If you convert the stock price to USD you'll see that before and after the British pound devalues makes no difference to the price in USD. Point being that where the company is domiciled and where the stock is listed is irrelevant. All that matters is the currency of the market(s) the underlying company serves.

    If you want an extreme example think of a gold ETF. Do you think the currency it's listed in leads to currency risk. Absolutely not.
    nivantj likes this.

  8. #38

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    Quote Originally Posted by cendrillon
    I'm not sure what isn't clear here. Let's say a company listed in London with a stock trading in British pounds sells only to US consumers and has sales of $100M USD per year. Say the British pound devalues by 20%, the earnings of this company in USD remains unchanged, but it's earnings in British pounds goes up by 20%. All things being equal this will lead to a 20% increase in stock price in British pounds.

    If you convert the stock price to USD you'll see that before and after the British pound devalues makes no difference to the price in USD. Point being that where the company is domiciled and where the stock is listed is irrelevant. All that matters is the currency of the market(s) the underlying company serves.

    If you want an extreme example think of a gold ETF. Do you think the currency it's listed in leads to currency risk. Absolutely not.
    Yeah, I'm kind of with Aussie on this. I don't understand what you say, but clever people than me (including you) agree with you, so I"m going with it.

    https://andrewhallam.com/2016/05/exp...-is-listed-in/

  9. #39

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    Following on this topic I have a similar question:

    I used to invest 20K every month on the tracker, now I cashed most of it making a decent profit and I'm wondering what's next

    I feel like I should diversify a bit more hence I was thinking of doing the below:

    25% 03140 VG S%P 500
    25% 03101 VG FTSE DEV EUR
    50% 02800 TRACKER

    Does it make sense? Or should I lower my Tracker %?
    Does it make sense to add 02828 HS H ETF in the mix?


  10. #40

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    Quote Originally Posted by pin
    Yeah, I'm kind of with Aussie on this. I don't understand what you say, but clever people than me (including you) agree with you, so I"m going with it.

    https://andrewhallam.com/2016/05/exp...-is-listed-in/
    Here's a simple example. Do you think it matters which exchange you buy HSBC on? Hong Kong, London or the US? They trade in HKD, UKP and USD respectively. Do you think it makes any difference?

    Go through the same example with gold. If you buy an ounce of gold through an ETF, do you think the currency it is listed in matters?

    Can you see why there would be an arbitrage opportunity if this wasn't the case?

    If this is not clear I'll explain to you over a beer sometime.
    Last edited by cendrillon; 13-09-2017 at 06:02 PM.

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