–Commodity price ^ commodity stock price have high correlation, but over a long horizon, commodity price can climb very high — not possible for the mining stocks.
I believe the mining companies face lots of competition. They aren’t always “best managed companies”
–EM stocks ^ U.S. stocks have high correlation, but over a long horizon U.S. stocks usually outperforms.
All can be top performers in some year, but over 5Y or 10Y horizon, there’s big difference.
Nowadays I am convinced that the “best-performing” is mostly due to timing, and unrelated to fund manager skill.
best eg: Tech stocks tend to outperform in some window and under-perform in another window. It’s mostly driven by hot money and hypes
For a comparison against EM stocks. see Tech^EM^Commodity equity funds
In these products, the risk is basically credit risk i.e. default risk.
(Some of these products come with an embedded option that retail investor grants to the issuer, to give issuer the option to stop paying the guaranteed return — callable bond.)
To compare this risk, I have to assign some numbers. My own rating “system” is exclusively based on brand awareness, influenced by product marketing. I basically disregard all other factors such as
Now let’s look at the products:
Q: What’s a realistic, reasonable expectation of long-term annualized compound return?
%%%%%%A: primarily depends on the historical period you are looking at, assuming we use historical return as a basis for forecast. Regime change is rather common. For example, real estate growth was very high for some time, but now … slower.
Rental yield is more stable and resistant to regime change.
%%%%%% A: depends on the asset class
These are mostly but not all Minestones. Towards the recent years, the more brief I write, the better .. beware oth
One of the misleading statistics is the “compounding effect”. Here’s another misleading statistics.
EM (including China) equities, Commodities equities … can top the annual (or quarterly) ROI chart many times within a 10Y window, but they often lose all the gains in a down turn. Over a longer horizon like 10Y, majority of them under-perform US stocks.
Disclaimer — I didn’t read all the news about yield curve and commodity prices.
I feel my SGD and USD cash flow is more constrained due to the 2 recent overseas properties. SGD esp. constrained if I go to the US. I can’t afford to have SGD 100k locked up in unit trusts.
US stocks seem to be too high.
Fed rates are going up, so perhaps I should avoid high yield. Any other asset class I may also take action to divest.
Looking at the historical graph, the steady-growth era is behind us. I feel nowadays the only way a fund could rise 100% is after a crash. Can we go in after the crash? Well most investors (myself included) is simply unable to time the market so well. Therefore my answer to the opening question is
None
Take-away: So I’d say be realistic and don’t try to be a god on the market.
Individual stocks could, but they are off limits.
Q: is it no difference? Assuming two identical twins are managing the 2 funds with the same strategy.
A: different.
Imagine the old fund manager is holding some very toxic assets (perhaps some energy stocks). She dare not liquidate them for fear of realizing the loss. Now, suppose you invest $10k. Your “fresh” fund might be parked in cash (or some unusual, questionable hedge) because her top priority is protection of her existing (dangerous) positions. Also if the fund has suffered losses the ensuing redemption by other investors may force her to take unfavorable trades such as but not limited to forced liquidation.
In contrast, the $10k you put into a new fund is likely to be invested in a brand new “strategy” with no baggage.