I think as humans we are pack animals. It was useful when we lived in the jungle because being in the middle of the pack helped us to survive and as the descendents of those who survived it's now programmed into us. The problem is that those instincts are exactly the opposite of what you should do when investing.
Buffett said something quite profound on this
I will tell you the secret to getting rich on Wall Street. You try to be greedy when others are fearful. And you try to be fearful when others are greedy
JR I understand your concern about not getting enough diversification with HSI but in terms of risk somehow I find holding HSI at a PE ratio of 15 more comforting than S&P 500 at 25. What are your thoughts on this?Original Post Deleted
To clarify, these are stocks I have owned and have done so for quite some time (some of them going back several years), so not really initial. As you all know I'm re-evaluating many things and one of these things is should I hold on to these or sell them.Original Post Deleted
I've been thinking about this quite a bit lately. As you said conventional wisdom is to put about half of your stocks in the index of the country where you live and the other half in an international index. The point being that your cost of living is highly correlated with the economy (and in theory the stock market) of the country you live in.Original Post Deleted
I buy into this to a point. If the HSI takes a big drop bankers aren't getting huge bonuses, Chinese investors aren't as flush with cash and so on.
However since I own the property I live in that cost is already hedged out. I'm also a pretty frugal so my other major costs are food and clothing, who's prices are probably more correlated with the cost of oil than the HSI.
With all that said the HSI seems much better priced in terms of PE ratio than the S&P 500 and the tax situation with dividends is much better as well.
What's your approach ?
Has anyone actually backtested this 'strategy' to see how it performs historically in terms of risk normalised return?Original Post Deleted
My guess is people do this kind of stuff because it sounds good not because there's any principled study behind it.
Thanks. This is really insightful and very helpful.Original Post Deleted
Out of interest, the following comprise around 80% of the HSI by weight. Do any of these fit in your utter dross category?
Tencent
HSBC
AIA
China Mobile
CCB
ICBC
Bank of China
CKH Holdings
HKEx
Ping An
CNOOC
CK Property
SHK Ppt
Sinopec Corp
CLP Holdings
China Life
PetroChina
Hang Seng Bank
Link REIT
Power Assets
HK & China Gas
Thanks!
Yeah, this is spot on. This devolves into a stock picking game very quickly. If you take the mindset that stock picking is to be avoided, then index picking is just as bad.Original Post Deleted
- punts just for fun would probably the best way to describe them. Well that's how they started.Original Post Deleted
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.Original Post Deleted