Investments - Idea Sharing?

[ukjackthai]

Currency investment

USD/GBP

USD/EUR

Locking system to minimise risk, 24 hr market, 3-5% capital.. I like the quicker/simplier markets

[apetley]

I would stay well clear of SET until the result of the election is known.

If Taksins cronies should get in do you think the Generals will sit back and watch and what effect will that have on investment opps?

[sonicdragon]

I would stay well clear of SET until the result of the election is known.

If Taksins cronies should get in do you think the Generals will sit back and watch and what effect will that have on investment opps?

I agree.

Fletch, you are very bullish, mainly (from what I remember reading) due to thailand's recent underperformance vs it's peers along with decoupling theory. Don't you think that the political picture is more important than any of that ? Or do you think it's a sell the rumour / buy the news type of thing ? What do you see as the most likely election scenarios ? What Thailand needs, more than anything else, to get the economy motoring again is sensible long term economic policies that can only come from political stability. Personally I find the idea of political stability in the foreseeable future highly unlikely.

[up-country_sinclair]

sonic dragon,

thanks for your reply.

by commodities, i was referring to the rogers international commodities index ETN...RJI

yes, i am currently living in thailand. my wife and i are in our late 30s and have modest incomes, but are very fortunate to have our investment portfolio. of course we would like to have a large return on our investments, but are somewhat cautious because it's also our emergency fund. we'd be quite pleased with a 8-10% return annually---part of which we would use to supplement our income.

fletchthai68

thanks also to you, for your reply.

considering the responses by you and sonic dragon, i probably should re-classify my portfolio as "moderately conservative".....but with 55% in equities and another 15% in commodities (which scare the hel_l out of me) doesn't that put me at the famous 70/30?

as i said above, we're not really looking to make a killing, but rather keep it relatively safe while generating a bit of income.

i really appreciate both you taking the time to share your thoughts on this.

[sonicdragon]

I would also be pleased with an 8-10% return :-)

It's not clear from your post if you intend to remain in thailand - if you are in your 30's like me (just) then I guess you are not committed to it for the VERY long term.

Really what you need to think about is what currencies your expenditures are in and how you expect that to change over time. The first thing I would suggest is some matching of assets/income with liabilities/outgoings. With that in mind, you can then think about diversifying your "investment portfolio" with a suitable breakdown between asset types and currencies. The breakdown you mentioned in your OP doesn't seem unreasonable. I would add some CNY exposure to it.

[Firefan]

Sinclair; at a glance I think you have a great portfolio planned.

Yes, I read it as a 70/30% portfolio. Commodities (or rather; commodities futures) have low (sometimes negative) correlation with equities but same expected return (based on history) and volatility - so it will help you weather SOME swings better than if the full 70% was equities.

The next question is whether you WANT to take on that level of risk. maybe 30% equities, 10% commodities, 10% reits(Incl. International), 10% emerging mkt bonds, 10% developed(foreign) bonds, 10% mining stocks(GDX), 10% US TIPs, 10% US total bond market (AGG).

Reits have had a bad time lately, but historically have had equity like returns with medium correlation to equity markets. Mining stocks is another example of equity like returns but medium to low correlation with the general equity markets.

My point is: try to lower overall volatility by increasing asset classes with low correlation and equity like returns.

Cheers!

[fletchsmile]

I would stay well clear of SET until the result of the election is known.

If Taksins cronies should get in do you think the Generals will sit back and watch and what effect will that have on investment opps?

I agree.

Fletch, you are very bullish, mainly (from what I remember reading) due to thailand's recent underperformance vs it's peers along with decoupling theory. Don't you think that the political picture is more important than any of that ? Or do you think it's a sell the rumour / buy the news type of thing ? What do you see as the most likely election scenarios ? What Thailand needs, more than anything else, to get the economy motoring again is sensible long term economic policies that can only come from political stability. Personally I find the idea of political stability in the foreseeable future highly unlikely.

Good memory Yes bullish on Thailand for underperformance relative to peers, and for political situation. On another post I made, someone chipped in it doesn't make sense to say Thailand is being driven by the political situation at the moment. But I think the political situation is the most important factor now to Jan/Feb, and the story vs peers the second most important. I also think performance vs peers/undervalued limits downside, compared to other markets.

The one bit I would add, is that while I think Asian markets generally are in the process of decoupling, Thailand is one of the markets that is still most linked to the US in terms of trade. So overall I think there is a decoupling story for Asia, but not as much for Thailand - yet. i.e If something happens to US, Thailand will be impacted economically more than many other Asian countries, because of strong US ties. But on the other hand, I think the political and undervaluations outweigh this. Plus Thais know how to shift favour when it suits them.

As for the elections I think the political stability is on its way. I can't see Thaksin getting to come back, and I can't see the generals clinging on. I believe the elections will take place, but no one party will gain a majority and there'll have to be coalitions formed. That's the point that is hard to call: how long it takes and who?. I think Democrats might get the largest vote, but am not sure whether people will ally with them or not, even if they have the largest vote. Predicting who Thais will fall in bed with is very difficult. By nature they are masters in switching alliances, dating back from previous Kings managing indpendence, thru WW2 all the way up to present day.

I saw Aphisit speak at a dinner a few weeks back. First time I'd seen him live. Was impressed, clever guy, and international in outlook, but not sure he is politically astute enough (read maybe too nice) to gain power by ducking and diving. In contrast when I saw Thaksin live a few years back, I hardly believed a word he said - but we all know his success in gaining power without ethics. Then again as a foreigner it doesn't matter too much what I think in the politics circle, and I'm just an independent observer. The King's health would be another factor lurking in the background, so I'm wishing him well as always.

So while staying away until the elections clear is maybe safest. I think it's also an opportunity, as the upside isn't priced in yet. Playing a % game, I'm bullish. The other factor is that living here, if things go down and I follow that's OK, I've enough elsewhere to do relatively well. I wouldn't like not keeping up with the Macadangdangs tho, and missing out.

[sonicdragon]

I'm not much of a political analyst, but from what I have heard (mainly through my wife) it's likely that the next government will be once again a coalition. She seems to think that Aphisit is not strong enough individually to lead a coalition and alternative leaders (Samak for example) may not be tolerated by the military. And we know from past experience (and common sense) that coalitions tend to end up in stalemate at best and often completely break down leading to fresh elections around the corner; not what is needed from an economic viewpoint. Although this is normal in thai politics, you can hardly call it stable.....

[Mobaan]

I just came across this :

Looking at the Aberdeen Funds prospectus -I am shocked to see the kind of fees they are charging-all told 3 % plus.

That will seriously erode the principal . Also comparing the funds performance to the respective benchmarks ( as displayed in the prospectus) the all are lagging seriously behind . What is so great about these funds ?Is it because nobody cares when they make 20 % plus if the fund skims off 3-4 % -it is still good enough ???

There are true Index Funds -I am in SCB SET - that do not charge fees except o.1 % backend fee when sold. I know that is a bit of a different animal (they say 60 % of the Set Index owners are local daytraders) ,but still ,paying 3-4 % would hurt my feelings .

[fletchsmile]

I just came across this :

Looking at the Aberdeen Funds prospectus -I am shocked to see the kind of fees they are charging-all told 3 % plus.

That will seriously erode the principal . Also comparing the funds performance to the respective benchmarks ( as displayed in the prospectus) the all are lagging seriously behind . What is so great about these funds ?Is it because nobody cares when they make 20 % plus if the fund skims off 3-4 % -it is still good enough ???

There are true Index Funds -I am in SCB SET - that do not charge fees except o.1 % backend fee when sold. I know that is a bit of a different animal (they say 60 % of the Set Index owners are local daytraders) ,but still ,paying 3-4 % would hurt my feelings .

Got to say your post made me look further. I consider Aberdeen Thailand some of the jewels in my portfolio. So it's interesting to see your post, and someone challenge it, to make me reconsider for myself.

On charges:

I couldn't find my way thru the SCB website to find actual fund charges. In addition to the 0.1% back-end fee, there will be an annual management fee. I couldn't find this on their website tho'. The place it should have been seemed to come up with error mesages. There is no way the fund will charge only 0.1% on exit. They must incur fees every time units are created or redeemed, management expenses, transaction fees when composition of index changes etc. I would guess it would be between 0.5% to 1.5%(max). Probably 1%

For Aberdeen, I'm not sure where you got the 3-4% from. Perhaps that is the max allowed as pe the prospectus. If you mean Aberdeen Growth, it currently it is 0% initial, 1% exit, and annual management charge of 1.5%. With other expenses, trustees etc, giving a total annual expenses ratio of 1.83%. i.e that is 1% exit + 1.83% annual. If you hold for one yearit costs 2.83%. However, if you hold for 5 years for example, that annual cost comes down, because the exit fee is paid only once. For a long term investor the annual fee is more important

On performance:

I knew the answer already to this one. However, I checked Siam's website to confirm. I was shocked by hat I saw. A very different reason. Let's just say, as someone who has a strong sense of ethics, I would never quote figures in this way. It gave another perspective which I think would cause a big issue in a mature market. I wasn't expecting that.

http://www.scbam.com/investor/funds.asp

On 26 Nov 2007 their data used for comparison of active vs pasive fund focuses on the 1990's! Partcularly 1998-1999. It also justifies the SET as being a "low risk" investment if one adopts a 10 to 20 years time horizon. Most of the data is up to 1996! Conveniently omitting 1997's crash. It also says "during the period 1993 to 1999, the perfomance of the SET has outperfomed many listed stocks!"

NONE OF THE DATA IS BASED ON 2000 onwards.

My view and the facts:

Firstly I should say I hold Aberdeen Growth (AG). I have done for just over 7 years. I have no financial interest whatsoever tho' in Aberdeen fund managers, if someone buys or sells the fund, it makes absolutely no difference to me. The real story on performance.

This year, for the first year in a long time it has underperformed the SET index. You'll find a couple of threads elsewhere on this. This is in line what I was expecting to find (as at 26 Oct):

- YTD: SET up 31.59%, AG up 19.58%

- 6 mths: SET up 28.69%, AG up 15.84%

- 1yr: SET up 23.26%, AG up 19.2%

Most of the underperformance occurred around 6 months ago. I believe part of it is due to the fact it is limited to how much it can invest in PTT. THe fund sets limits on individual stockswhich is prudent. The SET however, has no limits, and PTT therefore has a higher weighting. PTT has outperformed, and had a good run. I would also note that ING had the same problem. My wife received a letter asking her to vote to amend fund rules, as the fund protection rules limited investments in single stocks similar to Aberdeen. ING have lifted the limits. ie somewhat of an unusual situation.

But look a little further back:

- 3yr: SET up 42.41%, AG up 84.72%!!!

- since inception: SET up 36.92% AG up 366.35%!!!

(Note inception includes the Oct 97 crash)

All the above are stats from Aberdeen as a source.

From my own records:

- 5yrs: AG up 204%

- 7 yrs: AG up 441% as at late Nov

For SET I don' have the Nov 2002 and Nov 2000 data. I do have Dec 2000 and Dec 2002. These were 269.19 and 356.48. This would be

4 yrs 11 months SET up 131%

6 yrs 11 months SET up 206%

So on performance: 1 year and under AG has underperformed. Mainly due to unusual factors. (Note if PTT starts to underperform this wil reverse). Over a longer time frame AG has significantly outperformed.

Hence while you pay a little more in charges > the performance is well worth it.

Why I will pay extra?

In mature markets the argument for passive(index) vs active funds is stronger, as many funds in UK, US etc struggle to outperform the index. In Thailand, as it's a smaller market, I believe it's easier to exclude the dogs, and they are more widely known. There is less depth in quality. Remember index funds are obliged to hold dogs as well as superstars. Normaly index funds are therefore less flexible but cheaper. By a strange blip, because of PTT we've actually hit an unusual situation of ING, Aberdeen managed funds having less flexibitlity because of protective limits. If PTT suffers the opposite will kick in. Given stocks behave cyclically, this is a matter of time.

Hence I believe active funds are better here. AG bears that out over longer periods. So I pay a little extra.

Since I've held AG (I bought a year or two after the crash) it has returned an annualised 24%+. I'm happy to pay 1.83%pa for this and 1% if I ever decide to exit. BTW I don't think 24% pa is sustainable long term. Maybe next year, but longer term I'd be happy with 10%.

Anyway interesting point you raised. Hope this gives some further info. Index funds have their place. I'm not saying AG will continue to outperform, tho' I personally prefer it. I will be monitring tho' to see if it continues to underperform, tho consider it a blip.

The SCB website is something else in its choice of data. I will leave it to people to form their own opinion. As we're in Thailand, I assume it's within the rules. One reason I like ING and Aberdeen is that they hold temselves to international standards. I can never imagine them using the stats SCB have used. Fund managers often tinker with stats, but this is the first time I've ever seen anyone use data from 10 years back to justify today, completely omitting anything to do with the last 10 years tl now.

Edited November 26, 2007 by fletchthai68

[jetjock]

The majority of my cash is in US dollars and I was planning on transferring a portion of my cash to an FDIC insured bank called Everbank here in the US where you can open interest bearing 3 month or 6 month deposit accounts in any major foreign currency or basket of currencies. I have not previously done any investing or trading in any foreign currencies other than keeping a nice size foreign account in Australia (which i was lucky enough to get when the exchange rate was .50 for the AUD) so I am open to advice. I would be interested in hearing thoughts and opinions on which currencies they think would be perform best and why, assuming that the US dollar continues to fall.

It appears to me that the US will probably have to cut interest rates again next year due to a combination of the mortgage meltdown and the fact that it looks like we are most likely heading into a recession. This is my reasoning for thinking I might be wise to get more involved in foreign currencies not so much as a way to make money but merely as a way to protect my purchasing power expecially when I am spending time abroad. I would appreciate any advice that some of the more knowledgeable forum member might have on my reasoning. Thanks in advance for anyadvice

[cmsally]

The majority of my cash is in US dollars and I was planning on transferring a portion of my cash to an FDIC insured bank called Everbank here in the US where you can open interest bearing 3 month or 6 month deposit accounts in any major foreign currency or basket of currencies. I have not previously done any investing or trading in any foreign currencies other than keeping a nice size foreign account in Australia (which i was lucky enough to get when the exchange rate was .50 for the AUD) so I am open to advice. I would be interested in hearing thoughts and opinions on which currencies they think would be perform best and why, assuming that the US dollar continues to fall.

It appears to me that the US will probably have to cut interest rates again next year due to a combination of the mortgage meltdown and the fact that it looks like we are most likely heading into a recession. This is my reasoning for thinking I might be wise to get more involved in foreign currencies not so much as a way to make money but merely as a way to protect my purchasing power expecially when I am spending time abroad. I would appreciate any advice that some of the more knowledgeable forum member might have on my reasoning. Thanks in advance for anyadvice

This was one I looked into, as it seemed to be the only one offering accounts in Icelandic currency which has very high interest rates. Unfortunately I needed to be a US citizen to open an acct , so I didn't do any further research.

[fletchsmile]

I would also be pleased with an 8-10% return :-)

It's not clear from your post if you intend to remain in thailand - if you are in your 30's like me (just) then I guess you are not committed to it for the VERY long term.

Really what you need to think about is what currencies your expenditures are in and how you expect that to change over time. The first thing I would suggest is some matching of assets/income with liabilities/outgoings. With that in mind, you can then think about diversifying your "investment portfolio" with a suitable breakdown between asset types and currencies. The breakdown you mentioned in your OP doesn't seem unreasonable. I would add some CNY exposure to it.

Pretty much agree with the above.

For returns, I use 7% for planning, budgeting, forecasting etc. But my target/aim is to exceed 10% p.a.

I'm also in late 30's, but am committed to Thailand for a long time. We've just bought a condo, and I have a family here. All my expenditure is in THB. Hence that's why I am overweight in THB compared to most. While I have the equity risk on my 20-25% of portfolio in THB investments, I don't have currency risk on them. THB cash rates are very poor. The THB equity investments have being yielding over 20% for me for last 7 years or so. I expect 20%+ next year, but then to come down in 2009.

Diversification as you say is key. Though the first building blocks for assets and currencies, should usually be as you say in your income/expenditure currencies. Also have 15% in UK, in case at some point we go back and/or send our daughter for education. etc

Edited November 29, 2007 by fletchsmile

[goatfarmer]

Consider the new SET 50 ETF, trading as DTEX. I just did a post on it but it disappeared. Maybe the admin thinks I own it.

Fees are 0.4% per annum. Beats any mutual fund. And brokerage fee is 0.1%. It just came out a month or two ago. Full diversification in the largest 50 stocks on the SET.

And for the record: I don't own any YET!!!!

Edited November 30, 2007 by goatfarmer

[goatfarmer]

Consider the new SET 50 ETF, trading as DTEX. I just did a post on it but it disappeared. Maybe the admin thinks I own it.

Fees are 0.4% per annum. Beats any mutual fund. And brokerage fee is 0.1%. It just came out a month or two ago. Full diversification in the largest 50 stocks on the SET.

And for the record: I don't own any YET!!!!

One disadvantage of the ETF is the fact that it is heavily weighted to the energy sector, more than 40%, in fact. One would question whether one wants to put one's money in a basket where 40% of the eggs are linked to a speculative commodity, namely 'oil'. This is one of the flaws of an index based on market capitalization. They tend to get distorted by bubbles as the market cap is linked to the price.

[fletchsmile]

Consider the new SET 50 ETF, trading as DTEX. I just did a post on it but it disappeared. Maybe the admin thinks I own it.

Fees are 0.4% per annum. Beats any mutual fund. And brokerage fee is 0.1%. It just came out a month or two ago. Full diversification in the largest 50 stocks on the SET.

And for the record: I don't own any YET!!!!

One disadvantage of the ETF is the fact that it is heavily weighted to the energy sector, more than 40%, in fact. One would question whether one wants to put one's money in a basket where 40% of the eggs are linked to a speculative commodity, namely 'oil'. This is one of the flaws of an index based on market capitalization. They tend to get distorted by bubbles as the market cap is linked to the price.

The other main disadvantage is then when the market is falling or certain stocks doing/ expect to do badly, an index fund is obliged to still hold the stocks. This is a key reason why longer term managed funds in Thailand seem to outperform index funds. 30 stocks or 50 stocks in an index fund is very limited. Some single stocks, eg PTT accounts for around 15% of SET30, so probably over 10% of SET50 as well. That's a large exposure to be stuck with in bad times.

As examples: Both ING Good Governance Fund, and ING Thai Equity are up over 70% over 3 years (as at Oct), compared to only 42% for SET Index.

Still it may be a reasonable way for someone to dip their toes in, with low charges. Personally normally I'd rather pay a little more for extra long term performance. But shorter timeframes it may have its place, eg taking a punt over the elections.

BTW Who is it done thru? Locally in Thailand?

[fletchsmile]

...

So any suggestions: a better alternative than USD cash fixed deposits? Time frame up to 3 years, and can change throughout that time. Prepared to take risk.?

Not sure what other people are doing with their USD cash these days, but:

About a month back, I moved a little into AUD and a little into NZD, which I'll hold for a while, just for a little more diversification.

Then today I just put a fair chunk of the remainder into a Thailand country mutual fund. Denominated in USD and held in Singapore. I don't intend to hold it long term, but it'll be interesting to see what happens over the elections.

Edited December 7, 2007 by fletchsmile

[fletchsmile]

....

Then today I just put a fair chunk of the remainder into a Thailand country mutual fund. Denominated in USD and held in Singapore. I don't intend to hold it long term, but it'll be interesting to see what happens over the elections.

Quite like this idea. The SET has been going in the wrong direction, but the strengthening THB has offset losses a little in USD terms. Just need the SET to turn round, for a nice double gain.

The chartists suggest that's not going to happen though short term on the SET

http://datacenter.poems.in.th/pdf/Englishshort.pdf

View on this link: Short term sell, medium term maintain equities at 70% of portfolio. BUT they say if SET falls below 800, then reduce exposure to only 25%. BTW Fell below 800 this morning

That looks drastic to me. I'm also not convinced charting will be that accurate over the next couple of weeks, with political events and sentiment being stronger than technical charting in my view. I'll be holding

[sleepyjohn]

The other main disadvantage is then when the market is falling or certain stocks doing/ expect to do badly, an index fund is obliged to still hold the stocks. This is a key reason why longer term managed funds in Thailand seem to outperform index funds. 30 stocks or 50 stocks in an index fund is very limited. Some single stocks, eg PTT accounts for around 15% of SET30, so probably over 10% of SET50 as well. That's a large exposure to be stuck with in bad times.

Aren't most managed funds also obliged by charter to "stay in", usually to be 95% invested?

There are exceptions of course. Another way to avoid the lockin we were discussing recently is to be in a fund family where it's free to swap inside the family and one of the funds is a cash fund

[fletchsmile]

Aren't most managed funds also obliged by charter to "stay in", usually to be 95% invested?

There are exceptions of course. Another way to avoid the lockin we were discussing recently is to be in a fund family where it's free to swap inside the family and one of the funds is a cash fund

These days it is much less common to have such high minimum levels of investment as 95%. For Aberdeen and ING Thailand equity only funds, they usually need to have a minimum 65% of their NAV in equities. Besides cash, perhaps the more important factor is that in a falling market, managed funds can more easily switch to defensive stocks, whereas Index funds/ETFs are more restricted, having to stick more closely to index weightings. This is important in a narrow market like Thailand.