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7 Investments that you don't need
Old 12-15-2004, 07:52 AM   #1
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7 Investments that you don't need

The following Morningstar article is a pretty good review at this time of the year.

http://news.morningstar.com/doc/arti...hsection=Comm1

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Re: 7 Investments that you don't need
Old 12-15-2004, 08:29 AM   #2
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Re: 7 Investments that you don't need

She points out that we do not need long-term bond funds and stick with with a good-quality intermediate-term fund. Should we switch to an intermediate-term fund from a short-term bond fund?

Currently, all my bond holdings are short-term. The yields are fairly low in comparison to those of intermediate bonds. It seems prudent to switch since I have no need for cash until 5 or 6 years from now.

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Re: 7 Investments that you don't need
Old 12-15-2004, 08:39 AM   #3
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Re: 7 Investments that you don't need

good article, i've never thought about getting into any of those, but there are a lot of sheep that can be herded into high-cost low-return funds betting on single countries or industries. many of the people that will buy into these insturments will also have the audacity to telll you "i don't time the market" :
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Re: 7 Investments that you don't need
Old 12-15-2004, 08:41 AM   #4
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Re: 7 Investments that you don't need

Quote:
The following Morningstar article is a pretty good review at this time of the year.

http://news.morningstar.com/doc/arti...hsection=Comm1
Good article.

I still struggle with this question: When do you sell your holding of actively managed mutual funds if they have had gains?

Or do you just keep them forever, i.e. sell them only when you need the money.

I have a set of funds that have grown about 25% YTD from the time I got them in Sep 2003. My choices are:

I could just hold on to them (since I don't need the cash right now) but they may lose some or all or more of the gains that they have made so far.

Or I could cash them in now, lock in the 25% gains and reinvest the money somewhere else, maybe index funds?

Any thoughts?
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Re: 7 Investments that you don't need
Old 12-15-2004, 09:16 AM   #5
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Re: 7 Investments that you don't need

Dante, your last idea seems like a winner to me.

Cheers,

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Re: 7 Investments that you don't need
Old 12-15-2004, 10:51 AM   #6
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Re: 7 Investments that you don't need

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funds betting on single countries or industries. many of the people that will buy into these insturments will also have the audacity to telll you "i don't time the market" *:
You mean ones that track things like the S&P500 or Wilshire5000?

Unless you are world market weighted you are making some sort of bet whether that's on the US market, small caps, value stocks, or Chinese market.
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Re: 7 Investments that you don't need
Old 12-15-2004, 02:00 PM   #7
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Re: 7 Investments that you don't need

Hey Dante,

Quote:


I could just hold on to them (since I don't need the cash right now) but they may lose some or all or more of the gains that they have made so far.

Or I could cash them in now, lock in the 25% gains and reinvest the money somewhere else, maybe index funds?

Any thoughts? *
By your reply it sounds like you have not formulated an asset allocation (AA) for yourself. One benefit of an AA is that you should periodically (annually?) rebalance your accounts, selling off part of those that have done well and adding to those that have slipped.

There is a lot guidance on the net as well as a number of excellent books on the subject.


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Re: 7 Investments that you don't need
Old 12-15-2004, 04:55 PM   #8
 
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Re: 7 Investments that you don't need

I assume she's making an exception for US funds when she recommends against single country funds. I wonder if this is reasonable, most folks probably have too much exposure to the US markets compared with foreign.
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Re: 7 Investments that you don't need
Old 12-15-2004, 07:15 PM   #9
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Re: 7 Investments that you don't need

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I assume she's making an exception for US funds when she recommends against single country funds. *I wonder if this is reasonable, most folks probably have too much exposure to the US markets compared with foreign.
Another example of how invisibly seductive the home-country bias can be.
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Re: 7 Investments that you don't need
Old 12-15-2004, 07:42 PM   #10
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Re: 7 Investments that you don't need

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Another example of how invisibly seductive the home-country bias can be.
I'm not sure it's purely a home-country bias. The entire world is biased towards investing in the US. And, I'm not positive, but I believe the US market has the best long-term performance of any stock market. I think a lot of people are betting on a repeat historical performance.
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Re: 7 Investments that you don't need
Old 12-15-2004, 11:35 PM   #11
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Re: 7 Investments that you don't need

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I'm not sure it's purely a home-country bias. * The entire world is biased towards investing in the US. * And, I'm not positive, but I believe the US market has the best long-term performance of any stock market. * *I think a lot of people are betting on a repeat historical performance.
They're betting on the US rising from 3rd world emerging market status to world's largest GDP happening again? *At this point the more likely bet is that it won't happen again.

Don't you think that those "excess" gains over other developed markets are due to just that - rising from emerging market to largest market? How would you have guessed in advance that it would happen? How can you tell in advance that from now on out it's going to be similar to Britain in 1880 or so and the real place to put your investment money is China (or not)?
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Re: 7 Investments that you don't need
Old 12-16-2004, 05:54 AM   #12
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Re: 7 Investments that you don't need

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They're betting on the US rising from 3rd world emerging market status to world's largest GDP happening again? *At this point the more likely bet is that it won't happen again.
I interpreted Wab's comment as refererring more to the post-WWII boom and its continued existence well into this century. After all, isn't it Pax Britannia Americana?

Quote:
Don't you think that those "excess" gains over other developed markets are due to just that - rising from emerging market to largest market? How would you have guessed in advance that it would happen? How can you tell in advance that from now on out it's going to be similar to Britain in 1880 or so and the real place to put your investment money is China (or not)?
It'd be interesting to see some studies attempting to sort out the contributing factors. For example, despite its recent drop and the euro's rise, I believe the dollar is still the world's most widely-held & widely-counterfeited currency. (No doubt buried in mattresses the world over, and imitation is still the sincerest form of flattery.) I also suspect that the U.S. stock market has more legislative disclosure controls (burdens?) than the next-biggest three countries combined. I'm sure Reg FD would be a big hit in the new "emerging markets" like Russia, Japan, & China. (And we thought that the U.S. govt was manipulating the CPI & GDP numbers!) Perhaps people investing in America are just seeking more opportunity, stability, and a more level playing field than is currently available in their home country. (Don't take it personally, Hyper, no offense implied or intended.)

Maybe the European common market is heading for the next hegemony. Surely the French & Germans couldn't screw up that juggernaut with socialist policies, right?
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Re: 7 Investments that you don't need
Old 12-16-2004, 10:48 AM   #13
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Re: 7 Investments that you don't need

I'm not ready to bet against the US yet, but I'm also not willing to bet that our unprecedented growth will continue at anything like its historical pace. * Our own government tells us that our demographic trends alone will probably knock 2 points off our forward GDP growth rate.

And that doesn't factor in any of the nasty trends like the fall of the dollar, the depletion of our energy resources, the change from a manufacturing economy to a service economy, and our burgeoning debt.

So, I spread my bets around, but that's just me. * *There are still plenty of people putting their money on the US, and that's a trend I don't want to fight too hard.
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Re: 7 Investments that you don't need
Old 12-16-2004, 03:21 PM   #14
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Re: 7 Investments that you don't need

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I interpreted Wab's comment as refererring more to the post-WWII boom and its continued existence well into this century. *After all, isn't it Pax Britannia Americana?
Again, some probably special circumstances. *Do you see the destruction of large industrial/commercial economies that need rebuilding happening to keep the US output consumed? *Even if it happened would the US be manufacturing the goods that are required or would that be China?

I suppose that George might be sending the occupation forces out again but will they generate enough destruction and the right kind of it to require more US produced goods and services? *Can you keep the economy afloat on producing new armoured HummVees and Presidential Medals of Failure? http://www.washingtonpost.com/wp-dyn...2004Dec15.html

Quote:
It'd be interesting to see some studies attempting to sort out the contributing factors.
Actually, so would I. *I'll have to keep my eyes open for it but I'm soon to be taking a break for the holidays. *I am dragging along Bernstein's The Birth of Plenty to fill in odd blocks of time so perhaps he's got something to say about it or perhaps one of the entries in the bibliography might.

Quote:
For example, despite its recent drop and the euro's rise, I believe the dollar is still the world's most widely-held & widely-counterfeited currency. *(No doubt buried in mattresses the world over, and imitation is still the sincerest form of flattery.)
I wonder for how many years after the US GDP had passed that of Britain were pounds sterling in the same position? *In 1910 I imagine that what you state above was probably true for the pound. *That would have been approximately 30 years after the US GDP passed that of Britain. *There's a lot of inertia in human systems and they don't generally change linearly.

Quote:
I also suspect that the U.S. stock market has more legislative disclosure controls (burdens?) than the next-biggest three countries combined.
I think that shows more of lack of understanding on your part than any lack of market oversight in other countries. *The oversight in the majority of the OECD countries is very similar though the exact rules do differ. *I would suggest that the rules in play in places like China and other emerging markets are no worse than those in play in the US up until the Great Depression. *Those returns from 1870-1930 under little to no oversight seem to be used in a quite popular retirement calculation tool.

Quote:
new "emerging markets" like Russia, Japan, & China.
If you honestly think that Japan is an "emerging market" then you must also not be considering any other market as "developed" since the GNP per capita for it is higher than any other country other than Switzerland (don't worry the US is somewhere in the top 20). *Or do you mean that Switzerland is the only non-emerging market?

Quote:
Perhaps people investing in America are just seeking more opportunity, stability, and a more level playing field than is currently available in their home country.
Perhaps they are or perhaps they like a rational investor are diversifying across national markets. *I'm not betting against the US but I'm also not overweighting my bet for it either. *Why do some people (including apparently Nords) take it as "anti-American" to be suggesting that diversifying across national markets is a prudent thing? *Is it just nationalism or patriotism? ("Patriotism is your conviction that this country is superior to all other countries because you were born in it."* ~George Bernard Shaw)

Quote:
(Don't take it personally, Hyper, no offense implied or intended.)
Interesting that you would use such a backhanded personal comment trying to pass itself off as a non-personal comment. *Are you really wanting to discuss issues or are you wanting to score "points" in some internet discussion board pissing contest?
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Re: 7 Investments that you don't need
Old 12-16-2004, 03:56 PM   #15
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Re: 7 Investments that you don't need

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I think that shows more of lack of understanding on your part...

Interesting that you would use such a backhanded personal comment trying to pass itself off as a non-personal comment. *Are you really wanting to discuss issues or are you wanting to score "points" in some internet discussion board pissing contest?
Tactful as ever, Hyper.

And, no, it's not about you at all. Good talking with ya, and you have a nice life now.

(Hmmm, where's that "Ignore" button?)
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Re: 7 Investments that you don't need
Old 12-17-2004, 07:43 AM   #16
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Re: 7 Investments that you don't need

Hyperborea:
Quote:
I think that shows more of lack of understanding on your part than any lack of market oversight in other countries.
Quote:
Tactful as ever, Hyper.
*
Actually, yes it was. *There are a number of things that one could have said after such comments and "a lack of understanding" was the mildest. *It could also have been ignorance (or worse), being blinded by nationalism, or perhaps trolling. *I chose to assume the least worst because in general you have shown yourself to be a reasonable person.

Quote:
And, no, it's not about you at all.
Well, if I misinterpreted your post then I apologize.

Quote:
Good talking with ya, and you have a nice life now.
You too Nords. *Merry Chrismahannakwanzaka.

P.S. In a quick look through it appears that Bernstein may have something to say on the "excees gains" question in his book The Birth of Plenty. I'll put up some sort of summary on it when I get back from XMas holidays.
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Re: 7 Investments that you don't need
Old 12-17-2004, 08:23 AM   #17
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Re: 7 Investments that you don't need

Hyper - have a good holiday and read the book.

Section three - still has me scratching my head.

Looking forward to your book report.
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Re: 7 Investments that you don't need
Old 12-17-2004, 01:35 PM   #18
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Re: 7 Investments that you don't need

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I'm not sure it's purely a home-country bias. * The entire world is biased towards investing in the US.
Wab,
If I'm thinking this through properly, the actual market weights today (which I think in equities are about 40% US and 60% Rest of World) already in fact precisely reflect that bias or preference for investing in the US that you refer to. So any additional bias beyond that percent allocation (which I admit, I have also in my portfolio) would be a bias above and beyond what the whole world already affords us.

I am about 40% overseas equities now.

Some home bias is warranted just to have your assets in your base currency, but I'm not sure how much. 4% a year is all you really need to be sure you can get in dollars.



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Re: 7 Investments that you don't need
Old 12-17-2004, 07:20 PM   #19
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Re: 7 Investments that you don't need

ESRBob, I've seen many different posts over the years on other boards on how much bias one should have in their home country currency. The truth of the matter is that it really is dependent on one's comfort zone and how quickly you might need to access money from a foreign currency location (the shorter that time frame, the more bias you want to your home country). From everything I've read, I'd pick your 60USA/40other allocation if I was an American because I could wait 10 yrs or more to access foreign currency investments (currency valuations often run in 10-15 year cycles).

As a Canadian, I tend to have my portfolio about 1/3rd each based in Canada, USA and rest of world. Most foreign investors, myself included, are cutting back on USA based investments slightly for the next 2-4 years due to the huge budget deficits being run up by George. The US$ will remain under pressure vis-a-vis other major currencies with additional decreases yet to come due to that ill thought out fiscal policy.
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Re: 7 Investments that you don't need
Old 12-17-2004, 07:39 PM   #20
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Re: 7 Investments that you don't need

AltaRed;
I'd like your allocation, too, if I were Canadian, and it seems like a good model generally for any non-US-based investor. *(Which, lest we forget, is most of the world!)

I am of the impression that my 60% US/ 40% Overseas is still fairly unusual for an American, though, even an indexer.

That is why I rabbit on about it -- trying to win converts here among the American contingent.

Don't know what will happen to the dollar etc -- when 'everybody knows' the dollar is going down, (and certainly I buy all the arguments for it!), my curmudgeon lights star blinking and I start thinking that we could be in for some good dollar strength... if only in the next 6 months or so.

It will be fun to find out what happens. *But I don't think I'll change anything to try to capture it one way or another. *I am finding this asset allocate and rebalance annually thing frees up so much time that I used to spend trying to time and position my investments in the markets! *If nothing else it saves commissions.

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