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Learning, Sharing, and Teaching => Investor Alley => Topic started by: tsukuba on March 24, 2017, 02:10:15 AM

Title: conundrum
Post by: tsukuba on March 24, 2017, 02:10:15 AM
Index investing is good, but MSCI EAFE stinks. 
https://finance.yahoo.com/quote/EFA?p=EFA
What gives?
Title: conundrum
Post by: pbkmaine on March 24, 2017, 02:55:53 AM
What are you comparing it to? US markets have done better than other developed markets over the past few years, but that says nothing about future returns. And if you want to invest internationally, you might want to look for a broader index fund based on the FTSE All World ex US or the MSCI ACWI ex US.
Title: Re: conundrum
Post by: Heckler on March 24, 2017, 06:12:34 AM
It all depends on when yiu bought it and in which currency.  What does not stink is that EAFE will perform differently than USA or Fixed Income.  Diversify.

https://www.callan.com/wp-content/uploads/2017/01/Callan-PeriodicTbl_KeyInd_2017.pdf

Did it stink in 2004-2007?
Title: Re: conundrum
Post by: MustacheAndaHalf on March 24, 2017, 10:01:09 AM
"This year's top-performing mutual funds aren't necessarily going to be next year's best performers. Itís not uncommon for a fund to have better-than-average performance one year and mediocre or below-average performance the following year. That's why the SEC requires funds to tell investors that a fund's past performance does not necessarily predict future results."
https://www.sec.gov/answers/mperf.htm
Title: Re: conundrum
Post by: tsukuba on March 25, 2017, 02:49:55 PM
What are you comparing it to? US markets have done better than other developed markets over the past few years, but that says nothing about future returns. And if you want to invest internationally, you might want to look for a broader index fund based on the FTSE All World ex US or the MSCI ACWI ex US.

Thank you for your comment.  I was more looking at absolute performance over the last 10 y: <1% annual return.  I suppose there are a few stretches like that in US stock market history as well.  More brightly, the life of EFA returns 6.5% annually over the life.  EFA, holding developed country markets outside of north america should be fairly diversified enough, but it is true that if you want to hold newer asian market, those other indexes would fit the bill.

you wrote:
>says nothing about future returns.
I think most people here do look at the long term performance of the S&P to figure such things as if they can go FIRE with a ~4% annual pull in the future. 

So what criteria would one instead use to figure which index funds to go into?

Thanks-
Title: Re: conundrum
Post by: tsukuba on March 25, 2017, 03:09:31 PM
It all depends on when yiu bought it and in which currency.  What does not stink is that EAFE will perform differently than USA or Fixed Income.  Diversify.

https://www.callan.com/wp-content/uploads/2017/01/Callan-PeriodicTbl_KeyInd_2017.pdf

Did it stink in 2004-2007?

Thank you for your comments.  I think with index funds, the philosophy is that issues like, when you bought it, macro issues, etc, should not matter too much in the long term.  If you have to think about these things, then you are doing things like timing the market, etc.  What I am saying is looking at the 10,15 year stretch which is a fairly long term, EAFE has been a dud. 

I cannot argue with diversification.
Title: Re: conundrum
Post by: pbkmaine on March 25, 2017, 03:10:37 PM
The number one thing I look at in portfolio construction is correlation. I want asset classes that are as uncorrelated as possible.
Title: Re: conundrum
Post by: pbkmaine on March 25, 2017, 03:44:56 PM
https://www.portfoliovisualizer.com/asset-class-correlations
Title: Re: conundrum
Post by: tsukuba on March 25, 2017, 06:15:08 PM
pbkmaine,
Thanks!
Title: Re: conundrum
Post by: Heckler on March 25, 2017, 07:50:15 PM
My three year old $C EAFE is +16.99% with a 1.4% dividend. Not a dud in my eyes.  But its mostly returns due to exchange rate changes. Still not a dud - not corelated.
Title: Re: conundrum
Post by: tsukuba on March 25, 2017, 11:36:46 PM
Greetings, Heckler -
I'm glad it is working out for you.  May it continue!