World Economy - Anyone worried?

[joeea]

Not trying to time the market but I have recently started my investment in diversified ETF's in Canada. Time frame is still long term, say 10-15 yrs

But all this Canada and world economy situation is making me nervous? Anyone else in my shoes here? What are your thoughts?

I'm not sure what "world economy situation" you are referring to. What exactly makes you nervous?

 

[Sunset]

Thanks Spock. My investment are currently diversified as below
80% equities (44.2% International Equities, 19.7% Canadian Equities, 17.8% US equities)
rest debt.

Timeframe is still > 10 yrs so will wait few years to change my allocations again

That is a pretty high percentage for International.

 

[DrRoy]

Said Tommy Lee Jones to Will Smith in Men in Black: "There's always an Arquillian Battle Cruiser, or Corellian Death Ray, or an intergalactic plague that's about to wipe out all life on this miserable little planet."

And yet humanity chugs along anyway.

World economy turbulent? Squabbling over tariffs? Yield curve inversions?
Meh. We've survived worse.

+1

 

[target2019]

Thanks Spock. My investment are currently diversified as below
80% equities (44.2% International Equities, 19.7% Canadian Equities, 17.8% US equities)
rest debt.

Timeframe is still > 10 yrs so will wait few years to change my allocations again

That is a pretty high percentage for International.

Maybe lives in Ontario?
If I lived in Canada, I would probably have inverse of what I have now. It would be 2:1 ratio, Int'l to US.
Or I would possibly use equities ratio like 50:25:25 (Intl:Canada:US).

 

[OldShooter]

That is a pretty high percentage for International.

Actually not. Iirc the Canadian market cap is only about 8% of the world market cap so in theory to cover the entire world a Canadian investor would be 92% invested outside of Canada. it's different in the United States because our market cap is almost 50% of the world market cap so percentages of international funds to broaden a portfolio are much less.there is a good Kenneth French video on the subject but I am not where I can chase down the link right now but he actually addresses specifically the Canadian Market because his interviewer is Canadian.

 

[NW-Bound]

... Interestingly, about 60% of the Bakken formation is really in Canada, but the field is huge...

It's OK. With horizontal drilling, we can still get some of that oil north of the 49th parallel.

 

[6miths]

Actually not. Iirc the Canadian market cap is only about 8% of the world market cap so in theory to cover the entire world a Canadian investor would be 92% invested outside of Canada. it's different in the United States because our market cap is almost 50% of the world market cap so percentages of international funds to broaden a portfolio are much less.there is a good Kenneth French video on the subject but I am not where I can chase down the link right now but he actually addresses specifically the Canadian Market because his interviewer is Canadian.

+1

The Canadian market is both relatively small and also very heavily weighted to financials and resources so Canadians are wise to diversify to International or like many Americans get their exposure through US Multinationals (it is easy to do both now of course). Canada's stock market cap is only about 2 trillion (7th largest in the world) and like all other countries is dwarfed by the US's 42 trillion (NYSE 31 trillion and NASDAQ 11 trillion). Even China (10.5 trillion total including HK) and Japan (at 5.5 trillion) in second and third place are relatively small.

 

[ejman]

+1

The Canadian market is both relatively small and also very heavily weighted to financials and resources so Canadians are wise to diversify to International or like many Americans get their exposure through US Multinationals (it is easy to do both now of course). Canada's stock market cap is only about 2 billion (7th largest in the world) and like all other countries is dwarfed by the US's 42 billion (NYSE 31 bn and NASDAQ 11 bn). Even China (10.5 bn total including HK) and Japan (at 5.5 bn) in second and third place are relatively small.

Me thinks you meant trillions no?

 

[6miths]

Me thinks you meant trillions no?

Yes hopefully. Thanks for pointing it out. I would like to say that I was confused by the old British meaning of billion but it was just mental laziness of looking at a table that was labeled in 'billions' but then had figures that were in the thousands rather than trillions and 30.9, 11.9 and so on. I'll go fix it rather than having us all feel quite a bit poorer!!

 

[Clone]

It's OK. With horizontal drilling, we can still get some of that oil north of the 49th parallel.

North Dakota is not on the edge of nowhere, but we can drill horizontally from there and reach it!

 

[Sunset]

Maybe lives in Ontario?
If I lived in Canada, I would probably have inverse of what I have now. It would be 2:1 ratio, Int'l to US.
Or I would possibly use equities ratio like 50:25:25 (Intl:Canada:US).

But OP said: "44.2% International Equities, 19.7% Canadian Equities, 17.8% US equities"

So US equities seem under represented since it comprises about 50% of world market.

So it still seems high to me on International.
Which I would not say if it had been: 44.2% US, 19.7 CDN , and 17.8 International.

I just wondered if OP had a reason, example believes in reversion to the mean.

 

[OldShooter]

But OP said: "44.2% International Equities, 19.7% Canadian Equities, 17.8% US equities"

So US equities seem under represented since it comprises about 50% of world market.

So it still seems high to me on International.
Which I would not say if it had been: 44.2% US, 19.7 CDN , and 17.8 International.

I just wondered if OP had a reason, example believes in reversion to the mean.

Agreed. I was at an airport using voice-to-speech, which makes using numbers a PITA. A market-cap-balanced portfolio (for anyone, not just Canadians) would be roughly 45% US equities, 4% Canadian equities, and 51% International outside those two countries. (My 8% memory of the Canadian % of world market cap was incorrect.)

(Note though that these percentages are constantly changing as markets around the world rise and fall. Rather than figuring out the complex rebalancing, I just go with VTWSX or VT.)

Here is the link to Kenneth French discussing the issue of home country bias: https://famafrench.dimensional.com/videos/home-bias.aspx

 

[retireby45]

Agreed. I was at an airport using voice-to-speech, which makes using numbers a PITA. A market-cap-balanced portfolio (for anyone, not just Canadians) would be roughly 45% US equities, 4% Canadian equities, and 51% International outside those two countries. (My 8% memory of the Canadian % of world market cap was incorrect.)

(Note though that these percentages are constantly changing as markets around the world rise and fall. Rather than figuring out the complex rebalancing, I just go with VTWSX or VT.)

Here is the link to Kenneth French discussing the issue of home country bias: https://famafrench.dimensional.com/videos/home-bias.aspx

This is where I need your advise. I am not that savvy with what proportion to invest and in which sector. Know that keeping 10+ yrs investment, it should mostly in start be in equities.

Do you know any Fidelity fund that behaves like VTWSX or VT? idea is same to make sure my proportion automatically tracks with how market behaves.

 

[retireby45]

But OP said: "44.2% International Equities, 19.7% Canadian Equities, 17.8% US equities"

So US equities seem under represented since it comprises about 50% of world market.

So it still seems high to me on International.
Which I would not say if it had been: 44.2% US, 19.7 CDN , and 17.8 International.

I just wondered if OP had a reason, example believes in reversion to the mean.

I am not that Savvy with investing in market. Thats why choose index funds. Just thought it makes sense to go most in equities keeping 10+ yrs time frame in mind

Any fidelity fund you can refer which i can consider with good mix of equities? I just get confused to understand how to distribute my equity investment (i mean how much against US, Intl, Canadian market)

Silly question i know but i cant figure it out

 

[retireby45]

Maybe lives in Ontario?
If I lived in Canada, I would probably have inverse of what I have now. It would be 2:1 ratio, Int'l to US.
Or I would possibly use equities ratio like 50:25:25 (Intl:Canada:US).

I am in Canada. and really confused if I am doing the right mix. Seeing you reply, you think it looks ok?

 

[target2019]

I am in Canada. and really confused if I am doing the right mix. Seeing you reply, you think it looks ok?

If you provide the fund symbols to all, some will comment, I'm sure.

 

[OldShooter]

This is where I need your advise. I am not that savvy with what proportion to invest and in which sector.

Well, @retireby45, there is bad news and good news.

The bad news is that no one can predict the future. Or at least if there is anyone who can predict the future they are using their skill to make themselves rich; they are not giving this information away for free on the internet. The consequence of this is that any recommendations you get for specific proportions and sectors are nothing but guesses and worth only the (zero) price you pay for them.

The good news is that the only proven winning strategy is passive investing -- buy everything and ride the wave of international productivity increases expecting a long term average growth of your (equity) investments at maybe 5-8% per year. This is an almost hands-off strategy. My wife and I look seriously at our portfolio only once a year and then we often make no adjustments.

So then the question becomes "What is 'everything?' " Most US investors have significant home country bias in their portfolios, as Kenneth French discusses. This has actually been advantageous over the last 10 years or so as the US market has outperformed the ROW (rest of the world) markets. But no one could have predicted this and no one knows whether it will continue. There is a concept called "Reversion to the Mean" that argues that it will not: https://en.wikipedia.org/wiki/Mean_reversion_(finance) For my wife and I, "everything" really means "everything" as in VTWSX and VT. I think this is a somewhat unusual position, however, even though the statistical data IMO supports it.

So, more bad news: You will have to determine for yourself how much, if any, home country bias you want to have. Watch that Kenneth French video carefully and repeatedly; that will hellp. Note too, that right at the end, French admits to some home country bias in his personal portfolio even though he has just spent his time arguing against it.

Know that keeping 10+ yrs investment, it should mostly in start be in equities.

Yes, but you must plan to be absolutely stalwart in holding your equities regardless of market gyrations. If you panic and start trying to time the market, history says you will lose big time.

Do you know any Fidelity fund that behaves like VTWSX or VT? idea is same to make sure my proportion automatically tracks with how market behaves.

I am not a Fido expert but last time I checked they did not have a world stock fund. You can get very close, however, with a 45% position in a US total market fund and 55% position in an international total market fund. If you're fastidious, you might want to adjust the proportion once a year or so to reflect market action.

(Note: Funds like an S&P 500 fund or an EAFE fund are not "total market.")

Sorry, no magic bullets. HTH

 

[retireby45]

Thanks All. I have started my investment in below fund: Fidelity ClearPath 2035 Port Series B (FID735)

My idea was to make sure that I start with something and doesnt just get stuck in analysis paralysis. Keeping 10+ yrs time frame, hopefully things turns out to be ok.

 

[retireby45]

If you provide the fund symbols to all, some will comment, I'm sure.

Thanks. Its Fidelity ClearPath 2035 Port Series B (FID735)

 

[retireby45]

Well, @harpreethwalia, there is bad news and good news.

The bad news is that no one can predict the future. Or at least if there is anyone who can predict the future they are using their skill to make themselves rich; they are not giving this information away for free on the internet. The consequence of this is that any recommendations you get for specific proportions and sectors are nothing but guesses and worth only the (zero) price you pay for them.

The good news is that the only proven winning strategy is passive investing -- buy everything and ride the wave of international productivity increases expecting a long term average growth of your (equity) investments at maybe 5-8% per year. This is an almost hands-off strategy. My wife and I look seriously at our portfolio only once a year and then we often make no adjustments.

So then the question becomes "What is 'everything?' " Most US investors have significant home country bias in their portfolios, as Kenneth French discusses. This has actually been advantageous over the last 10 years or so as the US market has outperformed the ROW (rest of the world) markets. But no one could have predicted this and no one knows whether it will continue. There is a concept called "Reversion to the Mean" that argues that it will not: https://en.wikipedia.org/wiki/Mean_reversion_(finance) For my wife and I, "everything" really means "everything" as in VTWSX and VT. I think this is a somewhat unusual position, however, even though the statistical data IMO supports it.

So, more bad news: You will have to determine for yourself how much, if any, home country bias you want to have. Watch that Kenneth French video carefully and repeatedly; that will hellp. Note too, that right at the end, French admits to some home country bias in his personal portfolio even though he has just spent his time arguing against it.

Yes, but you must plan to be absolutely stalwart in holding your equities regardless of market gyrations. If you panic and start trying to time the market, history says you will lose big time.

I am not a Fido expert but last time I checked they did not have a world stock fund. You can get very close, however, with a 45% position in a US total market fund and 55% position in an international total market fund. If you're fastidious, you might want to adjust the proportion once a year or so to reflect market action.

(Note: Funds like an S&P 500 fund or an EAFE fund are not "total market.")

Sorry, no magic bullets. HTH

Thanks for detailed comment and your time
How much you would say, just your opinion, one should have their equities intl versus US/Canada?

 

[target2019]

Thanks. Its Fidelity ClearPath 2035 Port Series B (FID735)

Found at this page.
https://www.fidelity.ca/fidca/en/products/cp35

It is a fund that is made up of 15 other Fidelity funds. The ratios are as you said. THe management expense ratio is much greater than I'd expect.

My knowledge of Canadian funds offered by Fidelity CA is on the next line. (Hint: it's a blank line).

 

[OldShooter]

Thanks. Its Fidelity ClearPath 2035 Port Series B (FID735)

Target date funds are good choices for many people, but I will tell you why I do not like them:

When fixed income and equity investments are mixed in one fund, it is impossible to benchmark the fund's performance. Poor equity performance might be masked by good fixed income performance or vice-versa. If you want the managed glide path of a target date fund I'd suggest that you buy one fixed income fund and one equity fund in the same ratio as the target date fund currently holds. Then, every year, you can examine your results. You can also check the target date's fixed/equity ratio for the year and adjust your portfolio to match. It's a little more work (not much!) but you will have a clear idea of whether your funds are performing or not.

 

[retireby45]

Target date funds are good choices for many people, but I will tell you why I do not like them:

When fixed income and equity investments are mixed in one fund, it is impossible to benchmark the fund's performance. Poor equity performance might be masked by good fixed income performance or vice-versa. If you want the managed glide path of a target date fund I'd suggest that you buy one fixed income fund and one equity fund in the same ratio as the target date fund currently holds. Then, every year, you can examine your results. You can also check the target date's fixed/equity ratio for the year and adjust your portfolio to match. It's a little more work (not much!) but you will have a clear idea of whether your funds are performing or not.

I understand. Guess the reason i went for this is because I didnt wanted to keep checking my portfolio for a while (atleast thats how I saw it as passive) but i understand that I need to see how my fund performs.

Whats your take on fund's mix of equities/debt in intl/us/cad market?

 

[davebarnes]

The tailwinds over the last 20 years are still on pace for the next 20 years

Some who are not worried.
HNN - Hotel CEOs take longer view on troubles facing industry
Hotel CEOs take longer view on troubles facing industry
'Offering some perspective, he noted that “over the last 20 years, the middle class grew from 2 billion to 3 billion.”
“Over the next 20 years, it will grow from 3 billion to 5 billion. … On top of that, the upper class is going to grow another half a billion.'

 

[street]

I'm not sure what "world economy situation" you are referring to. What exactly makes you nervous?

Go do some research then come back and ask some questions, when you may know something about the subject. LOL