Portfolio activity, July-August 2011

With the cash built up from the delayed contribution in October 2010 and April 2011, I have finally made the purchase in July and August. The delay was because (1) I have been trying to get Saxo to offer two global bond ETFs in London Stock Exchange since October 2010, which Saxo finally added them in May 2011, and (2) I was evaluating and setting up Standard Chartered bank online trading in July 2011.

Following my asset allocation plan, I have bought the funds below (through the broker stated in brackets):

  1. iShares MSCI Europe ETF (Saxo)
  2. Lyxor Asia Pacific Ex Japan ETF (SCB)
  3. Lyxor Japan ETF (SCB)
  4. iShares Citigroup Global Government Bond ETF (Saxo)

On the other hand, I have taken the opportunity in the recent rise of bond price to sell Legg Mason Global Bond Trust, an actively managed unit trust fund. Following the sale, I do not have any actively managed fund in my portfolio, except UOB GrowPath 2040 in CPF SA. I will allocate the sale proceed to US equity, again, according to asset allocation plan.

7 responses to “Portfolio activity, July-August 2011

  1. Hi Choozm,
    Thanks for sharing. I noticed that you did not buy iShares Global Inflation-Linked Bond this round. Is there any particular technical reason for bypassing iShares Global Inflation-Linked Bond? Thanks.

  2. Hi zm
    A related question – isnt it a risk to buy the iShares Citigroup Global Government Bond (IGLO) right now particularly due to the ongoing debt crisis? Is it because yields have been pushed higher by the risk of default? But if default happens in Italy, wont bond holders have to take a haircut?
    Would be good to get your perspective

    The ETF invests in physical index securities. The Citigroup Group-of-Seven (G7) Index offers exposure to government bonds from G7 countries: Canada, France, Germany, Italy, Japan, United Kingdom and United States.
    Thks

  3. Hi choozm,

    You’re the perfect person to ask regarding currency risk (due to your portfolio). What’s your take on your (I would say) small allocation to SGD-denominated assets?

    Take DFA Canada for an example:
    http://www.dfaca.com/philosophy/diversification.html
    http://www.dfaca.com/philosophy/structure.html
    Their (hypothetical) portfolios have 30-40% of equity portfolio in Canadian stocks.

    And Larry Swedroe says that fixed income currency exposure is generally not recommended.

    So what say you? Thanks.
    momo

    • Hi momo,

      Thanks for your question because it reminds me of one of the books I have referred to construct the portfolio–The Intelligent Asset Allocator, by William Bernstein. Using historical data, William says that currency hedging for foreign stocks is negligible over long term but be aware of the short risk if you hedge. As for bonds, he says currency hedging helps. Of course, he warned, in the real world, things are never equal and we can’t predict in advance.

      And this reminds me that one criteria that I used to choose bond fund was currency hedging. When selling legg mason bond fund and replacing it with the ETF, I must have forgotten about this. So now I need to consider: active bond fund with currency hedging? Bond ETF without currency hedging? Reduce allocation of foreign bonds?

  4. Hi Francis, Ash,

    I had two choices for global bond: iShares Global Inflation-Linked Bond (IGLO) and iShares Global Inflation-Linked Bond (IGIL), but only enough fund to buy one of them in order to be cost effective on broker fee. But I didn’t have any foresight/insight to help me to choose. Incidentally, Larry Swedroe wrote shortly after the Europen debt crisis in Jul/Aug on what investor should do. Well, the answer is do nothing if you have a well thought plan. But if you must do something, then reduce Europe fixed income exposure. Following this guideline, I decided to use IGLO which, according to the fact sheet, has less European fixed income than IGIL. Otherwise, I would have just tossed a coin to help me to decide. 🙂

  5. Hi momo,

    Thanks for the link. Yup, I will enjoy my teh tarik! 🙂

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