NZ/overseas equities

[Tim]

With NZ equities coninuing to perform so well are the days gone when one should have at least 50% overseas. We now seem to have quality companies.
I remember not too long ago when Gareth Morgan said you should have no shares in Australia or NZ.
Your thoughts appreciated.

[blackcap]

quote:Originally posted by Tim

With NZ equities coninuing to perform so well are the days gone when one should have at least 50% overseas. We now seem to have quality companies.
I remember not too long ago when Gareth Morgan said you should have no shares in Australia or NZ.
Your thoughts appreciated.


Tim, yes NZ has performed well over the last few years, but if you wish to delve back 20 odd years or so you will note that NZ has been a huge underperformer. So the smart thing as an investor is to realise that NZ is such a small percentage of the market and weight ones portfolio accordingly. Using examples like over the last 2 years etc dont cut mustard, as there will be times when NZ outperforms the MSCI but overall and looking at the big picture NZ has and will lag behind the rest of the world.
Its picking the years that NZ will outperform that is the difficult task and its a lot easier in hindsight.

(Have a look at the NZse40 from say 1990 - 2000 and compare that with the DOW. Then you will see why it can be beneficial to have some cash overseas. Especially if you can get your money overseas on a good exchange rate)

[zyreon]

I think it comes down to your strategy. If you are an investor (as opposed to a trader) then you should have an asset allocation strategy... based on your investment policy (which is based on your goals, risk profile etc).
your asset allocation strategy should dictate how much % of your portfolio should be in which markets. And Only change if you change your policy statement changes.
probably depends quite a bit on portfolio size too... especially if your direct investing.
Personally I have the overwhelming majority of my portfolio in the NZ markets, due largely, if not solely to convenience.
{note: some of the above was sorta paraphrasing a chapter I read in a text book a couple of weeks ago)

[zyreon]

Incidentally one major downside to the NZ markets is the pitiful liquidity...

[blackcap]

quote:Originally posted by zyreon

Incidentally one major downside to the NZ markets is the pitiful liquidity...


Zyreon, from an earlier posting you made I deduced that you too the paper offered by Massey University, 110.313. Also I am presuming you took it extramurally. What I want to know is, how did you find the paper without the guidance of lecturers, tutors etc? I have taken that paper too, and without lecturers, tutors, etc feel that the concept of consolidations would be hard to grasp. Please ignore this post if I have the wrong end of the stick but otherwise comment welcomed.

[zyreon]

I'm currently doing 125.342 "Investment Planning"
Extramurally. The course relies more or less soley on the text book "Investment Analysis & Portfolio Management - FK Reilly, KC Brown". Which means to learn instead of just sitting and staring at a lecturer for an hour or 2 you have to read. Though I'm finding the reading quite interesting so far.

As far as consolidations go, I did a financial accounting paper for the diploma in business, I was able to pick up consolidations quite easily... though that's probably due to the relative simplicity (e.g. assuming subsidiaries are wholey owned etc). Though I can imagine self learning via textbook would be quite mind numbing as the lectures almost put me to sleep!

My one word of advice to anyone who studies or plans to study via extramural/correspondence is that it is essential to be interested in the subject (or to force yourself to become interested).

[troyvdh]

Blackcap , are you a fund manager perhaps ?.Have you had your VERY OWN dosh in the NZ mkt ? May I suggest that the period you mentioned (2 yrs) is a little light ?.Have you spoken to those folk who listened to those "financial experts" years ago and DID go overseas?May I suggest that those who did, including those little lambs that were trully slaughtered butchered etc who invested in managed funds,are still licking there wounds.In my experience losses of 30-40 % are common.

[blackcap]

quote:Originally posted by troyvdh

Blackcap , are you a fund manager perhaps ?.Have you had your VERY OWN dosh in the NZ mkt ? May I suggest that the period you mentioned (2 yrs) is a little light ?.Have you spoken to those folk who listened to those "financial experts" years ago and DID go overseas?May I suggest that those who did, including those little lambs that were trully slaughtered butchered etc who invested in managed funds,are still licking there wounds.In my experience losses of 30-40 % are common.


Troyvdh

Fund Manager - No far from it. The fees are a bit exorbitant at times. (Do like WIN though for small NZ investors wishing foreign exposure)
Very Own Dosh - To a certain extent.
Not spoken to folk who went overseas years ago. (with funds)

The point I was trying to make was that NZ is small fry compared to the rest of the world, and we can all crap on about look at the last 2 years in the NZ market, and criticise those that have advocated some foreign exposure. I am not a proponent of the Capital Asset Pricing Model, yet can see some sense in the Markowitz Portfolio Theory if one takes a long term view. THe fact remains that the DOW has outperfomed the NZSE so far. The reason being? I could haphazard a few guesses but I will let others figure it out.

[Major von Tempsky]

Who cares if NZ is small fry compared to the rest of the world?
You are investing for your own profit and unless your own personal stake is so large it affects the returns you can get from the NZ market then that should not be a factor in going overseas.
Surely profit is the name of the game and the more you diversify the more you lower your average return.
Besides which NZ has the highest reliable gross dividend returns including the tax imputation you don't get from overseas and tax free capital gains if you play it right.
And also, staying in NZ avoids overseas exchange movement risks (currently the pundits seem to think the NZ dollar is going to go up to 70 cents US again in the medium term).
Frankly anyone going overseas is somewhat soft in the head in my view.

[zyreon]

playing stock splits, as one pundit would have you believe, would be one reason. Especially if we look to hindsight for the example of microsoft. people think bill gates got rich because of microsofts monopoly, thats only half the tale, he got rich because he split his stock so many times.

regardless, if you are of the targeted portfolio cabal, and a laud'er of buffet then the market's locale would matter not as you would scour the earth to find perhaps the 3 best stocks of the world and compile your portfolio accordingly

[zyreon]

incidentally, [please note: not that I care at all where you invest{as I must assure you I do not}] that if currency fluctuation is your argument then just do some hedging

but as for tax, well thats a headache we could indeed do without.

[blackcap]

Major, then what are you doing in France?

No but seriously, look at the market in NZ and see what choice one has. Then look overseas and see the choice. There are industries that you can invest in overseas that are not available in NZ.
So by keeping all your money in NZ you are excluding those industries/sectors from your choice of stocks.

The movement in the dollar is irrelevant as this can be hedged against. To to say that it will go back to 70 cents is just bonkers. No one can accurately predict always the way the NZ dollar will move, if they could they would be immensly rich.

[troyvdh]

Blackcap,my apologies if I appear to be slagging you off but in all honesty you do appear to be familiar with things "academic".A wee thing I heard long ago was that "professional beings" were the most proficient at loosing dosh.A sweeping generalisation you say !
You say "hedge".To me I would stand a better chance of speaking Swaili (?) than hedging any off my investments.

[thereslifeafter87]

quote:Originally posted by zyreon

playing stock splits, as one pundit would have you believe, would be one reason. Especially if we look to hindsight for the example of microsoft. people think bill gates got rich because of microsofts monopoly, thats only half the tale, he got rich because he split his stock so many times.



Zyreon, that is absolute BullSh*t.
Do you really think Microsofts market capitalisation would be significantly different if the stock had not split?
The mind boggles at the stupidity of people who do not realise that a stock split changes absolutely nothing about a company except the number of shares on issue.

[whiteheron]

For me , i have been investing for just over two years

[Lawso]

I agree with the points made in support of investing in the NZ market, especially by that military fellow from Germany. Well reasoned. There is one other consideration that leads me to prefer NZ. In a small market and a small business community it's much easier to get to know, or know a lot about, directors, CEOs, what the companies do, their relative market positions and prospects. You can phone them up or eyeball them at agms.
How on earth can you really know anything about, say, US or UK companies, other than what they choose to report? Managed funds are an option but returns have been mostly unimpressive. And I hate paying fees to people I don't respect. Like I would hate having to pay capital gains tax (Never have.).

[Capitalist]

You should stick to the markets you know and are comfortable with, to be sure.

The NZ market is so small that one can create a run on a stock almost single-handedly, even by posting on fora such as this. That isn't a positive IMO.

[whiteheron]

OOPS!!!!
Something went wrong with my post and it got submitted part way through

When i started investing almost all of my investments were in NZ, but as time has gone on i now find most in Aussie as i have found there to be many more opportunities over there ---i particularly like the resources sector , although it can be pretty volatile and you need to do your homework and use "stop losses " to limit the downside on those that dont perform
Watch exchange rates when transferring money and dont transfer back and forth as it will cost you heaps

There are good companies in NZ , but many more in Aussie

I dont invest in other than NZ and Aussie as one can only cope with so much-----my world wide investments are managed via Platinum Asset Management, they have performed pretty well so far

[Tim]

Thanks for your replies. I am still confused as to how much should be overseas for a long term investor. NZ represents only .3% of world market, how overweight should one be. Australia and NZ should be treated as one market