I believe what happens sometimes is that investor need to make some investments anyways. So when long term investors look at Indian market, they believe NIFTY 50 would be 50,000 at some point (today it’s 26000) , it could be in 5 years (15% CAGR) or 7 years (10% CAGR) or 10 years (7% CAGR) but it would get there
So if it’s 5 years, the investor has better than market returns. If it’s 10 years then it’s lower than world average because of currency devaluation. But in the end it’s about spreading your risks and making some educated plan.
I invest in India simply because I am Indian. But I also invest in CH because I live here. It doesn’t matter if these two countries outperform the world, they just don’t need to incur a loss.
In very very long term, everything is balanced anyways
I invest in India because it is included in MSCI Emerging Markets. I invest in Switzerland because my pension fund has like 30% allocation to Swiss stocks. So I don’t really see much point in some recent discussion.
I think it’s not about investing in CH or IN. They are already part of VT. The discussion started from topic of overweighting India.
In reality everyone whoever is invested in VT or VWRL is already invested in every company and every country of the world which people know about or heard of.
Most of the discussion on forum, when about a specific company (NVDA, LEU etc) or country (like US, China, IN or CH) is always about specifically those companies or countries and most likely about overweight
Thanks, but yeah, sorry, my question was too fuzzy:
It’s super easy to drop securities from an index (like the FTSE index provider), you literally just remove them from the table in your spreadsheet …
… but how did the ETFs/funds – like VT or VWRL – replicating the index and using it as a benchmark deal with those nilled securities? Those Russian securities became illiquid from the moment they were dropped from the index.*
Do the funds still hold those securities and internally treat them at zero value, and they just don’t include them in the holdings list they publish … or something else?
* Or perhaps even a little ahead of that as trading was suspended for Russian securities even ahead of the index deletions, IIRC.
I’ll try to ask my equity portfolio manager (PM) colleague – who manages an EM fund at work – about this when they return from vacation. If I get an insightful answer I’ll update here.
The more I think about it the more I believe that the Russian equities are still sitting illiquid on the books, treated as having zero value, and not listed as a holding in the fund … because in the asset manager’s cynical view all the PM cares about is not lagging the benchmark!
Net asset value just went down because Russian assets illiquid/treated as zero valuer? No problemo, the index treats them as zero as well, hence the EM fund hugging some EM benchmark will not lag the benchmark. Magic!
Ok, too bad investors have less money now, but the PM’s performance is measured in beating or at least following the benchmark, not in the fund’s absolute performance …
By the way, slightly related, I just looked up Taiwan’s weight in the FTSE Global All Cap Index – VT’s benchmark – and it’s at a mere 2.02%.
Though … my prediction would be that VT – well, the markets in general – would tank a little more than 2.02% if China made a move on Taiwan …
Edit:
Unlikely, as all securities traded in the West are cleared via clearinghouses connected to the SWIFT network, and Russia was disconnected, and Russian ADRs listed in the West were frozen, i.e. can’t trade anymore.
The only thing a bank, dealer-broker, issuer of VT or related funds owning Russian securities could do, is move them internally on their book from the VT ETF ownership to some other internal client willing to buy them – certainly at a steep discount – to the internal client’s account.
Maybe some of that took place … but this would be in muddy waters, and I’m sure you’ll be in hot waters if the US takes notice …
If China invaded Taiwan, it would be disastrous for tech industry and everyone who depends on tech industry. I think it would be very significant impact given the fact 72% of global foundary capacity is inside Taiwan and China.
Not just the tech industry. Pretty much everything from washing machines to cars need ICs. I doubt China will do anything, esp. after seeing what happened in Ukraine unless something extreme happens e.g. Taiwan declares independence.
That’s how some EM funds it, depending on the size some funds built so called side-pockets and move all the Russian securities into this side pocket that is separate from the liquid portfolio.
With or without side-pocket, the securities are still in their portfolio and valued at 0.
Btw. Russia had a super low shiller PE. Unfortunately that also lured me in to have some single stocks years ago.
So to chip in on the discussion about India: thats only one indicator and maybe you do not want to base your entire investment decision on just this aspect.
That’s a bit tricky, I know that some funds keep a list of shareholders and their share of the fund at the point the assets get valued at 0. Others probably don’t care.
Oh man, talk about the risk of a second wave of inflation in the US…
The East Coast port workers are on strike. No ship in can quickly affect other businesses. Importantly, it could directly affect truckers, which could reduce the supply of them, which would make it more difficult for the situation to quickly resorb itself once the ports become operational again…
All just before the elections. That union sure knows how to use leverage.
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