Category: invest_gtmp

picking a unit trust fund – %%habits

Posted on by tiger40490

#1 The conventional yardstick is the “standard performance benchmark” such as an index. I don’t use that yardstick because I want a stable reference not a floating reference. If your goal is to measure manager’s skill, then benchmark is perhaps relevant, but managers change job!

#2 My old favorite yardstick is “longest trough” in history. Here’s the definition — If I start anywhere on the NAV curve and measure how many days either to present-day or to return to starting NAV, then half the times answer is 0 since price moved up next day. For the other half, let’s record the trough length. Get the longest in history. 

Picking a fund involves risk to capital i.e. “trough”. Out of the universe of thousands of funds, some have longest trough of just a few months (Perhaps the money market funds?) but 99% of funds have troughs lasting 1Y or more.

http://www.fundsupermart.com/main/research/viewHTML.tpl?articleNo=6229

#5 My other old favorite is a negative correlation with the majority of equity funds. If a fund shows good negative correlation, then it’s very rare and a great grab. I feel country-specific funds on a small country may offer that. How about a sector-specific fund?

# Another criteria is sales charge. You could exit and reenter freely.

# monthly dividend (from income not capital) would be nice. It means the components generate healthy dividend.

# minimum commitment. I like $250 funds and shun $5000 funds.

fund – japan – EWJ beats DXJ

Posted on by tiger40490

japan DXJ – currency hedged for US investors, implicitly short JPY (long USD)

japan EWJ – currency unhedged, implicitly long JPY. Diversify away from USD positions. Given the inherent correlation among all geographical equity markets, I like the improved negative-correlation (?)

Suggestion — $3000 with $15 comm

pick the most volatile funds@@

Posted on by tiger40490

It’s easier to bump into a fund that can drop fast, but how about its climb? I don’t mind a jumping jack.

I feel many regional markets tend to fall deeper than SPX and recover more slowly. It’s hard to find any inversely/negatively correlated equity fund.

ETF ^ Unit trust

Posted on by tiger40490

k_ETF_assetClass

Roger maintains that active mgmt could beat passive.

He admits that climb-speed wise (tanko’s observation)

1) single stock
2) index
3) mutual funds

I hypothesized that an active mgr could take actions to control the risk (falling speed). The same actions could reduce the rising speed. Roger didn’t confirm.

I only care about return, not about cherri picking methodology.

letter to Simin

Posted on by tiger40490

Given about 30% of the eq inv decisions fail, let’s avoid having 10k locked up. Therefore total Eq (see other post) amount – below 30k

—-
Based on past personal experience, my equity investments often plummet and struggle but eventually fail to recover to my entry price within 3 years (fail to delivery even 0% return). I hate it so much that I tend to cut my losses by selling out completely. Of course I am not so impulsive. I cut loss only if I don’t foresee breakeven in another 2 years (total 5 year below 0% return)

In my experience, less than half of my equity investment decisions (am not counting the dollar amounts) fail that miserably. Less than half, but more than a quarter. Therefore I assume any future equity investment might fail in the same way. (Am kinda agnostic and not a believer of economic forecasting.). Therefore, I don’t allow myself to invest more than $20,000 into equity funds.

[15]poor ROTI @learn`2invest

Posted on by tiger40490

I often feel I’m spending too much time trying to learn to invest.

There’s substantial literature, b/c many organizations, pensions, and families have a real need for preservation, and protection against inflation, but that’s all in theory. Let’s focus on the practical justifications for spending precious time…

A: I need to spend time experimenting to find the right mix that fits my risk appetite.

Q: Am I spending too much time given I invest merely ~20k?
%%A: i will invest more but only if I get confident.

Q: Am I spending too much time given I’m not improving as an investor?
%%A: my inv performance is not improving, but I have to feel more confident about it before I can lift more money out of time deposits.

Q: so many retail investors win then “give back” their /winnings/, and end up with no better performance than the index, so why bother and why spend the precious time?
%%A: i think many of them lose 30% of principal but learn something and then make 23% (or 61% or whatever) if you blindly look at end-to-end return over a few years. Note this is possible only with eq
%%A: It’s not fair to dismiss “retail investors” as a whole. Some do better.

Q: maybe just keep money in time deposits. Why bother investing?
%%A: there’s good chance (80%) that prudent and careful personal investment would grow your family savings by a steady rate of 4% or (much) more, while controlling the risk. It takes quite a bit of practice.

I need to learn to use limit orders…

— This is serious, grave matter —
By default, without enough sense of confidence, I would keep everything in bank accounts. Remember this 250k is my entire family savings. It will make (and feel like) a big difference when we lose it. It’s the basis for a lot of planning in the family. Many say you make this much a year, so 250k is no big deal, but in reality it probably takes 5-10 years to accumulate this much. Also, your income may drop – non-zero risk.

GS stock dividend, according to computershare

Posted on by tiger40490

The unpaid dividend checks can be reissued in one combined check (around $29) but can’t be directly deposited.

It’s conceivable to ask a friend in the US to receive the check and deposit into my US bank acct, but i’d say the total amount is so small that we don’t want to go through the trouble. Plan 0 is to leave the money there unpaid, earning no interest.

Use the special computershare hotline +1 (732) 512-3172

alpha^beta: insurer,eqMufu..

Posted on by tiger40490

These two terms can be used more in this blog.

In linear regression between asset return vs market benchmark return, beta is the slope and alpha is the y-intercept.  However, in the next period, alpha could easily jump, and the slop can also change.

— Beta is systemic risk or “overall-market risk”, risk related to the broader market. Beta as a statistic measures the strength of (past) correlation with the (volatile) market index.

Many websites say beta as a number measures realized volatility i.e. how volatile an asset is relative to the index, but I think that misses the point. If the benchmark index is steady, then high beta doesn’t mean high volatility.

Compared to alpha, “beta is relatively easy to find on investment research websites”, and IMO easier to estimate/gauge.

— Alpha is excess return, uncorrelated to the market index.

Let’s look at some important institutional investors.

Note expRatio eats into alpha (the y-intercept) and should not affect beta.

— insurers .. probably zero alpha and beta below 1.0. Insurers probably have low risk appetite since they must be very stable, resilient. I think they invest some 10-20% in eq, the rest in bonds.

ExpRatio .. high due to insurance claims and underwriting costs.
— mutual funds .. probably low alpha, since they target the less sophisticated retail investors.

ExpRatio!
— hedge funds (and some aggressive mutual funds) .. alpha-seeking
— Temasek .. seem to be a very long-term investor, often in unlisted securities.
Logically, I would expect to see some alpha, but hey, alpha is a statistic on historical data. The data may not show any alpha.