A good long term portfolio w/ good expense rations

[ExpatJ]

Im putting together a portfolio of ETFs which i plan to leave for 15 years when i retire...(only rebalance 1-2 times per year by adding funds to those ETFs that have fallen in value )...Would appreciate peoples review/thoughts..

(All of these ETFs have expense rations of less than 0.5%- which should save 10,000s of $ over the long run..)

35% spread equally in:

US- S&P Index

US- small caps

US- 'sin' stock fund- fast food alcohol etc.(tends to go up in recessions)

10% in:

UK stock index fund-

EU stock index fund-

15% in

Emerging mkts

Frontier mkts

20% in

Property/REIT ETF- US

REIT ETF Inter

20% in

Bonds Junk

Bonds US blue chip

In addition to above i have similar amount invested in Thai stocks.. (hence the under weight in emerging markets above)

[Ludacris]

Here are some ideas for your ETF's. Looks like we have similar thoughts about a long-term portfolio by over-weighting in small caps and high yield bonds.

When selecting ETF's also look at the performance, not just the expense ratio. For example, RPV (138% 5-year, 0.35%) has out-performed SPY (97% 5-year, 0.09%) by over 40% in the past 5 years which is obviously worth the extra in fees.

International stocks have been going down the past few months and there's some decent buys. Developed markets have started correcting as well. Who knows where the bottom is but at least it's a better time to get in.

US Equity

PRF PowerShares US 1000 (Large Cap)

RPV Guggenheim S&P 500 Pure Value

VXF Vanguard Extended Market (Mid & Small Cap)

EZM WisdomTree Mid Cap Earnings

RZV Guggenheim Small Cap Pure Value

WMCR Guggenheim Wilshire Micro-Cap

International Equity

VXUS Vanguard Total International Stock

DLS WisdomTree Int. Dev. Small Cap (Europe, Japan, Aus)

DGS WisdomTree Int. Emg. Small Cap (Asia Dev&Emg, Latin Amer.)

DFE WisdomTree Europe Small-Cap Dividend

ASEA Global X ASEAN 40

GULF WisdomTree Middle East Dividend

FM iShares Frontier 100 Index

Bonds & Income

SPFF Global X SuperIncome Preferred

SDIV Global X SuperDividend

HYG iShares High Yield Corporate Bonds

FAX Aberdeen Asia-Pacific Income Fund

Real Estate

VNQ Vanguard REIT Index

KBWY PowerShares Premium Yield REIT

RWX SPDR International REIT

[fletchsmile]

What nationality are you? It's important to take into consideration tax on ETFs not just charges. A Brit for example may find it better to use a Luxumbourg domiciled US equity ETF rather than a US domiciled US equity ETF - even if the US domiciled ETF charges are slightly lower.

How are you planning to take income from your investments? Again be careful of tax, as well as being careful of having to dip into capital at inopportune movements.

How many years of cash liquidity have you set aside? What currencies?

Living in Thailand how are you going to manage your FX risk, given your returns from your portolio will be in a different currency to your expenses - particularly if based in Thailand? Your portfolio is particularly skewed to USD exposures compared to your expenses in THB. Aside from the 25% in EU/UK/EM/Frontier markets most of the remaining 75% would be USD.

You mentioned a similar amount in Thai equities. Not clear though similar to what? All of the above? So Thai equities is half and the above is the other half?

Why only US REITs? Singapore REITS denominated in SGD will have less currency risk vs THB, and are also more tax efficient

What about a little in gold ETF (<5%). Anything like 2007-8 hits again, you'll find that most of the assets you are proposing are much more correlated than you are assuming, .e won't be as diversified as you expect.

What are you going to do in a stress scenario or crisis year? What's your plan? 15 years is a reasonable time frame to assume one will happen, eg 1987/1997/2007-8 among others. Almost everything you've listed there tanked in 2007-8 for example

Cheers

Fletch

Edited December 16, 2014 by fletchsmile

[DogNo1]

Yeah. In 2008, everything turned out to be correlated. So much for diversification. It could be that just a portfolio of five Vanguard ETFs will give you what you need. If you search online, you will find literally thousands of sites recommending various portfolio allocations. I can't remember its name right now but there is a site which recommends various sets of five Vanguard ETFs for different objectives. I have a diversified portfolio of various income securities which yields about 6% per year since I want income over growth as I am retired. I thought having 15% of my portfolio devoted to various energy holdings was a good diversification strategy. Since I've lost about 65% of the value of those, it doesn't look like so hot an idea right now.

[craigt3365]

Yeah. In 2008, everything turned out to be correlated. So much for diversification. It could be that just a portfolio of five Vanguard ETFs will give you what you need. If you search online, you will find literally thousands of sites recommending various portfolio allocations. I can't remember its name right now but there is a site which recommends various sets of five Vanguard ETFs for different objectives. I have a diversified portfolio of various income securities which yields about 6% per year since I want income over growth as I am retired. I thought having 15% of my portfolio devoted to various energy holdings was a good diversification strategy. Since I've lost about 65% of the value of those, it doesn't look like so hot an idea right now.

A 6% yield is pretty good these days.

[AyG]

Without knowing your nationality (I'm guessing American) and where you plan to retire it's difficult to be specific. However, a few points:

(1) It seems odd to put 55% of your money into American equities and bonds. There are plenty of other economies and stock markets that have performed better over the last few decades and will continue to outperform the US.

(2) By using passive investments you're ignoring the fact that in many markets active management will consistently outperform (even after the higher costs). This is particularly true for small/microcap stocks, emerging and frontier markets. The best fund managers can pretty consistently outperform in developed markets, too (possibly excluding US large caps). However, it takes a significant amount of time and effort to identify them and to keep monitoring their performance.

(3) What's the point in holding US blue chip bonds? The upside is very limited. Over a 15 year timescale it's unlikely you'll even match inflation.

(4) Index-linked bonds are probably the best hedge against future inflation - and given the economic mismanagement in the USA over the last few years I think that stimulating inflation is the only way the government can dig itself out of the massive debt hole it's created. As well as US inflation-linked bonds, I'd also consider Singapore Dollar inflation linked bonds.

(5) One asset class you've missed is Emerging Markets bonds. Worth a look. More equity-like in returns than conventional bonds. I certainly prefer them over junk bonds and US treasuries.

(6) Make sure that all ETFs you buy are physically backed.

[vaultdweller0013]

When you do your rebalance each year, you should shift a little bit towards less risky assets. Right now, you are at 80-90% "high" risk (and higher expected return). This is fine for now, since you don't need the money for 15 years. But as you get closer to retirement, this isn't OK; you will probably want to be closer to 80% "low" risk (unless you have another source of guarenteed income for retirement and this is just bonus money). Take 2007-8 as the example, if someone had 80% in stocks and real estate/20% low risk bonds, their portfolio would have lost about 40% of value. If they had 80% in low risk bonds, their portfolio would have lost 10% value (assuming a rough 50% drop in equities). Today, 5 or 6 years down the road, the stock heavy portfolio would have recovered, but if they wanted to retire in 2009, they would have a big drop in income (or need to keep working longer). So, in 5 or 10 years you should be looking to include things like US/UK/German treasuries, depending on your home country, as well as short term bonds, or even bank deposits once your under 5 years left to go.

On high fees and "superstar" managers: Bill Miller -- 15 years of outperforming the S&P 500 (mostly luck by his own admission), followed by 3 years of heavy losses (all prior to 2007 when markets were doing well), then a few years with up and down performance relative to the index. Also note that some fund companies will play games. For example, they will start up 10 new funds in a year. After 5 years, they will drop the poor performers and promote the good ones pointing out that they beat their benchmarks. So, you might find some good high fee funds, I will agree they exist, but they won't consistently perform miracles, and you can only know if they are good after the fact.

[ExpatJ]

Very interesting replies. Thanks.

I am going to sit down today and try and pick some funds. I think this might be a good time to buy given the global dip.

[AyG]

When you do your rebalance each year, you should shift a little bit towards less risky assets. Right now, you are at 80-90% "high" risk (and higher expected return). This is fine for now, since you don't need the money for 15 years. But as you get closer to retirement, this isn't OK; you will probably want to be closer to 80% "low" risk (unless you have another source of guaranteed income for retirement and this is just bonus money).

This sort of advice used to be good a long time ago when people didn't live very long in retirement. These days where someone at age 65 can look forward to (on average) 20 years of retirement - and possibly 40 years or more - it would be a mistake to move wholesale into lower risk/lower return investments*.

To protect against crashes it's important to have enough readily available cash to tide one over until the markets pick up. And if one's relying on the natural dividend income of one's investments, there's less of a concern since the dividends will continue to flow. Only if one is dependent upon eating into one's capital to support one's lifestyle is there really a significant concern.

* One exception to this would be if a person were to buy an index-linked annuity in the currency of one's retirement expenditure - not available as far as I know for Thai Baht.

[Lefty]

Vanguard has you covered and you will not find ETF funds with a cheaper expense ratios.

Lefty

[el jefe]

I agree with your slight overweight to US stocks, especially if you are American

However you have 11.67% allocated to US sin stocks. Those stocks may perform well in a recession but most of them are multinationals. With a strong dollar and a worldwide recession, their foreign divisions will underperform.

I'm overweight in emerging markets but 7.5% in frontier markets is pretty high.

finally, the spread between low risk bonds and junk bonds is historically low. If US interest rates rise, as they are expected to, or if you are expecting a recession as you say with regards to your "sin stock" allocation, then junk bonds will be hard hit.

[fletchsmile]

Vanguard has you covered and you will not find ETF funds with a cheaper expense ratios.

Lefty

..... if you are American and using US domiciled ETFs.

For a non- American if using US domiciled ETFs, what you save on charges you may lose on tax and more. Not to mention the admin hassles you give yourself.

Vanguard isn't necessarily cheapest outside US.

Plus cheaper isn't always better either outside of US/developed markets

Total risk adjusted net return after tax is more important than cheap fees

Cheers

Fletch

Edited December 17, 2014 by fletchsmile

[ExpatJ]

Fletch. The difference between 0.07% fee etf and a 2-5% (typical Asian/aberdeen fees) is 10,000s of £/$ over 10 years in the amounts I- and I suspect- many of us here are investing. It makes a huge difference.

[DogNo1]

Annuities are not recommended due to their high sales commission (which the buyer is not usually aware of) and high overhead fees. Knowledgeable investors have other, better options. Regarding cash, I always keep about 7-8% of my portfolio in cash so that I don't have to sell any securities at a disadvantageous time. If you are American, I recommend keeping your holdings with an American brokerage since most will provide you with a Schedule D and an 8949 which will greatly simplify your tax reporting at the end of the year. If you are American, you have to report all of your earnings both foreign and domestic so owning everything through an American brokerage makes paying your taxes easier. Although I use a different brokerage, Interactive Brokers is said to be good with some of the lowest fees around. For Americans, owning securities outside of America can make for a tax-reporting nightmare. I suppose that you are aware of the FATCA and FBAR reports that must be filed.

[ExpatJ]

Annuities are not recommended due to their high sales commission (which the buyer is not usually aware of) and high overhead fees. Knowledgeable investors have other, better options. Regarding cash, I always keep about 7-8% of my portfolio in cash so that I don't have to sell any securities at a disadvantageous time. If you are American, I recommend keeping your holdings with an American brokerage since most will provide you with a Schedule D and an 8949 which will greatly simplify your tax reporting at the end of the year. If you are American, you have to report all of your earnings both foreign and domestic so owning everything through an American brokerage makes paying your taxes easier. Although I use a different brokerage, Interactive Brokers is said to be good with some of the lowest fees around. For Americans, owning securities outside of America can make for a tax-reporting nightmare. I suppose that you are aware of the FATCA and FBAR reports that must be filed.

I am a brit but use etrade account in singapore which has all US stocks and most of the etfs.

[AyG]

Annuities are not recommended due to their high sales commission (which the buyer is not usually aware of) and high overhead fees.

I don't know about the American market, but in the UK there is 0% sales commission on annuity purchase. In fact, it's prohibited by law. In the past, when it was permitted, it was typically 1-1.5% of the annuity value. Not exorbitant.

Knowledgeable investors have other, better options.

I'd love to know what. I can't at the moment think of any other investment that will guarantee a steady, inflation linked income for life.

For risk-averse pensioners an annuity for all, or part, of their pension can be an excellent investment.

If you are American, I recommend keeping your holdings with an American brokerage

And if you are American I recommend renouncing your American citizenship. It's fairly pricey to do initially, but the long term advantages of being able to live tax free more than make up for it.

Personally I, quite legally, pay zero income tax and zero capital gains tax by holding all my taxable investments offshore or in a UK tax-privileged account (ISA).

[ExpatJ]

Annuities are not recommended due to their high sales commission (which the buyer is not usually aware of) and high overhead fees.

I don't know about the American market, but in the UK there is 0% sales commission on annuity purchase. In fact, it's prohibited by law. In the past, when it was permitted, it was typically 1-1.5% of the annuity value. Not exorbitant.

Knowledgeable investors have other, better options.

I'd love to know what. I can't at the moment think of any other investment that will guarantee a steady, inflation linked income for life.

For risk-averse pensioners an annuity for all, or part, of their pension can be an excellent investment.

If you are American, I recommend keeping your holdings with an American brokerage

And if you are American I recommend renouncing your American citizenship. It's fairly pricey to do initially, but the long term advantages of being able to live tax free more than make up for it.

Personally I, quite legally, pay zero income tax and zero capital gains tax by holding all my taxable investments offshore or in a UK tax-privileged account (ISA).

I agree. The peace of mind that an annuity brings far out weighs any reduction in return for many people. As part of my retirement portfolio I plan to put enough in annuities to get 2,000 US$ per month. That guaranteed payment together with my company guaranteed monthly pension will form the core, secure, stress free part of my pension.

[AyG]

The difference between 0.07% fee etf and a 2-5% (typical Asian/aberdeen fees) is 10,000s of £/$ over 10 years in the amounts I- and I suspect- many of us here are investing. It makes a huge difference.

But, when you look at the performance, active management more than makes up the difference in many markets.

This chart compares the performance of Aberdeen Emerging Markets (the red line) against four emerging markets ETFs (Vanguard, State Street, iShares and DB X-Trackers).

The chart isn't ideal since it's based upon the UK version of the fund and UK ETFs (this was quickest and easiest for me), but I hope it's sufficient to prove a point.

The chart is only for 5 years' performance, but when you look at the 10 year performance against the only ETF with that long a UK track record (iShares), iShares returned 158.7% (total return), Aberdeen 264.9%. I know which I'd have preferred to buy.

[ExpatJ]

The difference between 0.07% fee etf and a 2-5% (typical Asian/aberdeen fees) is 10,000s of £/$ over 10 years in the amounts I- and I suspect- many of us here are investing. It makes a huge difference.

But, when you look at the performance, active management more than makes up the difference in many markets.

This chart compares the performance of Aberdeen Emerging Markets (the red line) against four emerging markets ETFs (Vanguard, State Street, iShares and DB X-Trackers).

performance.png

The chart isn't ideal since it's based upon the UK version of the fund and UK ETFs (this was quickest and easiest for me), but I hope it's sufficient to prove a point.

The chart is only for 5 years' performance, but when you look at the 10 year performance against the only ETF with that long a UK track record (iShares), iShares returned 158.7% (total return), Aberdeen 264.9%. I know which I'd have preferred to buy.

The performance of passive etfs far outperforms managed funds over time consistently if you look at them all. It's like betting money on the Faroe Islands football team because once they beat Greece- you need to look at the overall picture.

(We can spend all day retrospectively picking well performing passive and actively managed funds.

[AyG]

The performance of passive etfs far outperforms managed funds over time consistently if you look at them all. It's like betting money on the Faroe Islands football team because once they beat Greece- you need to look at the overall picture.

(We can spend all day retrospectively picking well performing passive and actively managed funds.

Simply lumping together actively managed funds in a particular sector and comparing that with an equivalent ETF isn't a fair comparison. Funds vary greatly from the closet trackers (far too many of those) to the contrarian, to the index-agnostic stock picker, etc., etc..

For active investment, one needs to choose the fund manager, not the fund, and though past performance is one factor, it is only one. It helps to see how his/her approach works over different parts of the economic cycle and how it works in the case of major market discontinuities. One also needs to understand what the approach actually is and why it does (or does not) work. This can take some time, but the rewards are well worth it.

It seems to me a no-brainer that a fund where an expert picks the stocks that are most likely to outperform over a period and avoids the dogs is going to do better than an ETF where (typically) the weighting is heaviest for the larger cap stocks (i.e. large, older companies where the time of fastest growth is probably behind them, or over-hyped businesses with inflated valuations) and the dogs come as part of the parcel.

Using the football team metaphor, a top-notch fund can be like a team where the manager has hand picked who he considers to be the finest players, whilst an ETF is a team made up of good, middling and mediocre players picked by drawing players' names out of a hat. If I were a betting man, I know which team I'd place my stake on in a match.

[ExpatJ]

The performance of passive etfs far outperforms managed funds over time consistently if you look at them all. It's like betting money on the Faroe Islands football team because once they beat Greece- you need to look at the overall picture.

(We can spend all day retrospectively picking well performing passive and actively managed funds.

Simply lumping together actively managed funds in a particular sector and comparing that with an equivalent ETF isn't a fair comparison. Funds vary greatly from the closet trackers (far too many of those) to the contrarian, to the index-agnostic stock picker, etc., etc..

For active investment, one needs to choose the fund manager, not the fund, and though past performance is one factor, it is only one. It helps to see how his/her approach works over different parts of the economic cycle and how it works in the case of major market discontinuities. One also needs to understand what the approach actually is and why it does (or does not) work. This can take some time, but the rewards are well worth it.

It seems to me a no-brainer that a fund where an expert picks the stocks that are most likely to outperform over a period and avoids the dogs is going to do better than an ETF where (typically) the weighting is heaviest for the larger cap stocks (i.e. large, older companies where the time of fastest growth is probably behind them, or over-hyped businesses with inflated valuations) and the dogs come as part of the parcel.

Using the football team metaphor, a top-notch fund can be like a team where the manager has hand picked who he considers to be the finest players, whilst an ETF is a team made up of good, middling and mediocre players picked by drawing players' names out of a hat. If I were a betting man, I know which team I'd place my stake on in a match.

But the fact remains that passive funds out for managed funds consistently (it does seem counter intuitive, which is good I guess for the funds managers who make a very good living charging high fees for their actively. Managed funds! ).

[AyG]

The performance of passive etfs far outperforms managed funds over time consistently if you look at them all. It's like betting money on the Faroe Islands football team because once they beat Greece- you need to look at the overall picture.

(We can spend all day retrospectively picking well performing passive and actively managed funds.

Simply lumping together actively managed funds in a particular sector and comparing that with an equivalent ETF isn't a fair comparison. Funds vary greatly from the closet trackers (far too many of those) to the contrarian, to the index-agnostic stock picker, etc., etc..

For active investment, one needs to choose the fund manager, not the fund, and though past performance is one factor, it is only one. It helps to see how his/her approach works over different parts of the economic cycle and how it works in the case of major market discontinuities. One also needs to understand what the approach actually is and why it does (or does not) work. This can take some time, but the rewards are well worth it.

It seems to me a no-brainer that a fund where an expert picks the stocks that are most likely to outperform over a period and avoids the dogs is going to do better than an ETF where (typically) the weighting is heaviest for the larger cap stocks (i.e. large, older companies where the time of fastest growth is probably behind them, or over-hyped businesses with inflated valuations) and the dogs come as part of the parcel.

Using the football team metaphor, a top-notch fund can be like a team where the manager has hand picked who he considers to be the finest players, whilst an ETF is a team made up of good, middling and mediocre players picked by drawing players' names out of a hat. If I were a betting man, I know which team I'd place my stake on in a match.

But the fact remains that passive funds out for managed funds consistently (it does seem counter intuitive, which is good I guess for the funds managers who make a very good living charging high fees for their actively. Managed funds! ).

No, the fact remains that passive funds outperform some managed funds - not all - and not consistently. If you don't want the middling performance produced by ETFs, then it can be well worth one's time researching fund managers to identify the ones that can consistently outperform across the full market cycle. They do exist. In the UK I would consider the likes of Adrian Frost, Neil Woodford, Angus Tulloch, Nigel Thomas and the Asian Equities team at Aberdeen to fit in that category. They all have a 15+ year track record of out performance. I'm sure managers of similar calibre exist in the US and other countries.

The sad fact, however, is that most fund managers are pretty mediocre and not particularly bright. I base that upon my experience of having worked with groups of them at a Saudi Arabian bank in London (which managed the investments of the Saudi government and large oil companies) and a retail-focussed asset management operation for a few years. I certainly wouldn't want to trust them with my money. And even some of the bright ones become closet index trackers because they're afraid to lose their jobs if they make bold calls which eventually come bad. The exceptional managers can be hard to find - but it's well worth the effort in my opinion.

Statements about how ETFs consistently outperform actively managed funds (a) are usually based upon US data and ( are made by representatives of the ETF industry who have an axe to grind. Unfortunately, it's become taken as gospel by people who don't like (for whatever reason) fund managers. The reality is much more complicated.

[ExpatJ]

The performance of passive etfs far outperforms managed funds over time consistently if you look at them all. It's like betting money on the Faroe Islands football team because once they beat Greece- you need to look at the overall picture.

(We can spend all day retrospectively picking well performing passive and actively managed funds.

Simply lumping together actively managed funds in a particular sector and comparing that with an equivalent ETF isn't a fair comparison. Funds vary greatly from the closet trackers (far too many of those) to the contrarian, to the index-agnostic stock picker, etc., etc..

For active investment, one needs to choose the fund manager, not the fund, and though past performance is one factor, it is only one. It helps to see how his/her approach works over different parts of the economic cycle and how it works in the case of major market discontinuities. One also needs to understand what the approach actually is and why it does (or does not) work. This can take some time, but the rewards are well worth it.

It seems to me a no-brainer that a fund where an expert picks the stocks that are most likely to outperform over a period and avoids the dogs is going to do better than an ETF where (typically) the weighting is heaviest for the larger cap stocks (i.e. large, older companies where the time of fastest growth is probably behind them, or over-hyped businesses with inflated valuations) and the dogs come as part of the parcel.

Using the football team metaphor, a top-notch fund can be like a team where the manager has hand picked who he considers to be the finest players, whilst an ETF is a team made up of good, middling and mediocre players picked by drawing players' names out of a hat. If I were a betting man, I know which team I'd place my stake on in a match.

But the fact remains that passive funds out for managed funds consistently (it does seem counter intuitive, which is good I guess for the funds managers who make a very good living charging high fees for their actively. Managed funds! ).

No, the fact remains that passive funds outperform some managed funds - not all - and not consistently. If you don't want the middling performance produced by ETFs, then it can be well worth one's time researching fund managers to identify the ones that can consistently outperform across the full market cycle. They do exist. In the UK I would consider the likes of Adrian Frost, Neil Woodford, Angus Tulloch, Nigel Thomas and the Asian Equities team at Aberdeen to fit in that category. They all have a 15+ year track record of out performance. I'm sure managers of similar calibre exist in the US and other countries.

The sad fact, however, is that most fund managers are pretty mediocre and not particularly bright. I base that upon my experience of having worked with groups of them at a Saudi Arabian bank in London (which managed the investments of the Saudi government and large oil companies) and a retail-focussed asset management operation for a few years. I certainly wouldn't want to trust them with my money. And even some of the bright ones become closet index trackers because they're afraid to lose their jobs if they make bold calls which eventually come bad. The exceptional managers can be hard to find - but it's well worth the effort in my opinion.

Statements about how ETFs consistently outperform actively managed funds (a) are usually based upon US data and ( are made by representatives of the ETF industry who have an axe to grind. Unfortunately, it's become taken as gospel by people who don't like (for whatever reason) fund managers. The reality is much more complicated.

Average all etfs and all managed funds. And etfs outperform. But sure some managed funds do well, of course, as you say.

[fletchsmile]

Fletch. The difference between 0.07% fee etf and a 2-5% (typical Asian/aberdeen fees) is 10,000s of £/$ over 10 years in the amounts I- and I suspect- many of us here are investing. It makes a huge difference.

I wasn't going to touch on Aberdeen or passive/ETF vs active for what you were interested in for your portfolio

Largely for most of what you are looking for they are not the answer. I was simply saying look at risk adjusted returns after tax, and be mindful of cross border/fund domicile/residence tax issues as well as admin.

Bear in mind also all ETFs are not created equal, nor managed in the same way, nor are they always tracker style/ index funds. If you like Vanguard and like ETFs, have a read of some of Dan Wiener's stuff, he also publishes info on the worst Vanguard funds, and which ones to avoid. Cheapest will not necessarily be best even among ETFs

As you've raised it, though, let me clarify a few things, and to help give a more balanced view of the bigger picture:

1) No-one should be paying 2% - 5% up front or p.a. fees on a fund. That's poor value go elsewhere. In Thailand 0-1% up front and around 1% - 1.7% per annum is common and not unreasonable, given the various convenience, admin savings, and potential tax benefits (again depending on your nationality). If in UK use a discount broker and you'll likely get zero % initial charge and often funds with a net annual charge under 1% after rebates. I can't remember the last time I paid 5% for a fund - probably 30+ years ago

2) It's horses for courses. Know your funds and know your markets. In certain markets active funds are more suitable in others ETFs/ passive funds. You're looking for mainly US investments. Aberdeen Thailand fund manager are not suitable and their US fund regularly under performs its sector and markets. Aberdeen EM/Asia and Thailand = yes, Aberdeen US = no! That you raise them highlights you don't look into these things, but don't muddy the waters for others Fair enough - I appreciate not your style of investing

3) On the other hand for For emerging markets and Thailand, pick the right fund and you will likely be better off than an ETF tracker.

If you want a reminder and for anyone else sharing your views, re 2) and 3) re-read this thread post #46 and #47

http://www.thaivisa.com/forum/topic/756518-how-to-start-a-mutual-fund-for-absolute-beginners/page-2

That will remind you that on a THB 1mio investment I made, yes you're right you would have saved THB 240k in fees. On the other hand by picking the right fund:

- I achieved a total of over THB 10 million return on a 15 year-ish time frame by knowing my markets and funds.

- Your simple low cost cheapest ETF/index tracker approach returned, THB 3.5mio, or THB 7mio less after fees, not to mention convenience and tax savings. A classic example of the case for active managed funds

I'm guessing you're American, given your focus on costs and disregard for tax differences - as you can't escape taxes, and uncle Sam follows you everywhere. That's not the same for others

ETFs have their place. Particularly in certain developed markets like the US and/or for people who aren't sure what they are doing and/or don't know their funds and markets and/or simply don't want to be bothered investing time and energy into things, and/or are happy with average performance with lowest cost.

For most of what you're looking for you can probably accomplish with ETFs... Given your investing style and to keep things simple I wasn't going to argue

Cheers

Fletch

Edited December 18, 2014 by fletchsmile

[ExpatJ]

Fletch. The difference between 0.07% fee etf and a 2-5% (typical Asian/aberdeen fees) is 10,000s of £/$ over 10 years in the amounts I- and I suspect- many of us here are investing. It makes a huge difference.

I wasn't going to touch on Aberdeen or passive/ETF vs active for what you were interested in for your portfolio

Largely for most of what you are looking for they are not the answer. I was simply saying look at risk adjusted returns after tax, and be mindful of cross border/fund domicile/residence tax issues as well as admin.

Bear in mind also all ETFs are not created equal, nor managed in the same way, nor are they always tracker style/ index funds. If you like Vanguard and like ETFs, have a read of some of Dan Wiener's stuff, he also publishes info on the worst Vanguard funds, and which ones to avoid. Cheapest will not necessarily be best even among ETFs

As you've raised it, though, let me clarify a few things, and to help give a more balanced view of the bigger picture:

1) You shouldn't be paying 2% - 5% up front or p.a. fees on a fund. That's poor value go elsewhere. In Thailand 0-1% up front and around 1% - 1.7% per annum is common and not unreasonable, given the various convenience, admin savings, and potential tax benefits (again depending on your nationality). If in UK use a discount broker and you'll likely get zero % initial charge and often funds with a net annual charge under 1% after rebates. I can't remember the last time I paid 5% for a fund - probably 30+ years ago

2) It's horses for courses. Know your funds and know your markets. In certain markets active funds are more suitable in others ETFs/ passive funds. You're looking for mainly US investments. Aberdeen Thailand fund manager are not suitable and their US fund regularly under performs its sector and markets. Aberdeen EM/Asia and Thailand = yes, Aberdeen US = no! That you raise them highlights you don't look into these things, but don't muddy the waters for others Fair enough - I appreciate not your style of investing

3) On the other hand for For emerging markets and Thailand, pick the right fund and you will likely be better off than an ETF tracker.

If you want a reminder and for anyone else sharing your views, re 2) and 3) re-read this thread post #46 and #47

http://www.thaivisa.com/forum/topic/756518-how-to-start-a-mutual-fund-for-absolute-beginners/page-2

That will remind you that on a THB 1mio investment I made, yes you're right you would have saved THB 240k in fees. On the other hand by picking the right fund:

- I achieved a total of over THB 10 million return on a 15 year-ish time frame by knowing my markets and funds.

- Your simple low cost cheapest ETF approach returned, THB 3.5mio, or THB 7mio less after fees, not to mention convenience and tax savings. A classic example of the case for active managed funds

I'm guessing you're American, given your focus on costs and disregard for tax differences - as you can't escape taxes, and uncle Sam follows you everywhere. That's not the same for others

ETFs have their place. Particularly in certain developed markets like the US and/or for people who aren't sure what they are doing and/or don't know their funds and markets and/or simply don't want to be bothered investing time and energy into things, and/or are happy with average performance with lowest cost.

For most of what you're looking for you can probably accomplish with ETFs... Given your investing style and to keep things simple I wasn't going to argue

Cheers

Fletch

Fletch. At the end of the day we have all of us invested in funds which over charge in their fees ( 2%+) and have felt a bit foolish and loath to acknowledge it. Luckily some of the managed funds do pay off even if alot of money is wasted on fees, a tidy profit is still made- so well done for picking that Aberdeen winner :-) .

[fletchsmile]

Fletch. At the end of the day we have all of us invested in funds which over charge in their fees ( 2%+) and have felt a bit foolish and loath to acknowledge it. Luckily some of the managed funds do pay off even if alot of money is wasted on fees, a tidy profit is still made- so well done for picking that Aberdeen winner :-) .

The last time I felt foolish about the fees on one of my own investments buying a fund was about 30 years ago. Since then I go in with eyes open on fees. It's a calculated risk for better returns vs lower fees, and when you put the time and effort in, educate yourself and get it right, it dwarfs any fee saving. In the example above getting it right once paid for 30+ times of fee savings on other investments:) No one gets it right all the time but the more you educate yourself and the harder you work, the "luckier" you get.

Sometimes when you weigh up it's worth taking the risk, and sometimes not

Another key point is it's not luck

Not luck picking Aberdeen Thailand. Not luck not picking Aberdeen's US fund. Not luck picking UOB Thailand funds. Not luck picking Krungrsi Thailand funds. Not luck picking First State Global Emerging Market Funds. Not luck following Anthony Bolton for a couple of decades, not luck following Neil Woodford for couple of decades....

Luck is what the marketing departments of passive funds/index trackers ETFs would like you to believe.

Chelsea play Muang Thong at football. 2 teams. According to them you have an equal chance of picking the winner.... True if you know nothing about football. True if you shut your eyes and pick a team at random...

Cheers

Fletch

Edited December 18, 2014 by fletchsmile

[AyG]

Annuities are not recommended due to their high sales commission (which the buyer is not usually aware of) and high overhead fees.

Interesting article covering the increasing popularity of annuities with US pensioners:

http://www.morningstar.co.uk/uk/news/132136/us-pensioners-opt-for-income-security-as-uk-scraps-annuities.aspx

[Naam]

Annuities are not recommended due to their high sales commission (which the buyer is not usually aware of) and high overhead fees.

Interesting article covering the increasing popularity of annuities with US pensioners:

http://www.morningstar.co.uk/uk/news/132136/us-pensioners-opt-for-income-security-as-uk-scraps-annuities.aspx

only a totally financial ignorant would buy an annuity during the present extremely low interest rate period.

[AyG]

only a totally financial ignorant would buy an annuity during the present extremely low interest rate period.

Really? Current UK annuity rates are 4.75% at age 55, rising to 7.95% at age 75 (level payment, no guarantee, single life). With an impaired life the rates are a bit higher. That doesn't seem too bad to me for someone who wants a secure, reliable income and doesn't want to leave the money to someone else.

[ExpatJ]

only a totally financial ignorant would buy an annuity during the present extremely low interest rate period.

Really? Current UK annuity rates are 4.75% at age 55, rising to 7.95% at age 75 (level payment, no guarantee, single life). With an impaired life the rates are a bit higher. That doesn't seem too bad to me for someone who wants a secure, reliable income and doesn't want to leave the money to someone else.

Those annuity rates are great! If someone can afford it i highly recommend buying as a portion of a pension .