I have been looking into Global Stock funds as opposed to a combo of Foriegn and Domestic funds. I am debating whether it makes sense to combine several of my Foriegn/International and Domestics funds into a World Stock fund (form of consolidation?).
Some of the WS funds I have come across have not been around a "full-cycle", obviously posing a bit of an analysis issue for me.
Among the WS funds that interest me are: MGGPX, PRGSX, ARTRX; they not only have very good returns but also metrics, including the US/DS Capture Ratio, Alpha, Sortino, DSDEV, etc.
In general, what are your thoughts on WS vs FOR + DOM? funds. In other words, is the use of funds geared towards specificity (FOR + DOM) better/prefered vs WS where the manager(s) is/are responsible for the whole kit-and-caboodle?
Specifically, what are your thoughts regarding the funds I mentioned and what other WS funds would you recommend I investigate?
Thanks for any and all thoughts, opinions and suggestions!!
Matt
FYI, also posted on M*
Comments
Regards,
Ted
M* Snapshot MSOPX:
http://www.morningstar.com/funds/xnas/msopx/quote.html
Are you concerned about the relative high volatility/risk rating? Relatively short existance?
I have VMVFX for a nearly 50-50 split world stock fund and like it -- owned it since inception due to its fees, composition, and allocation --- not b/c it's called a 'minimum volatility' fund.
For world stock exposure you could also look @ sector funds/companies that include large (30-50%) allocations to global stocks, such as some of the TRP funds.
Please keep the comments, suggestions and opinions coming!!!
Thx. Matt
- I'm not fond of using global in lieu of foreign + domestic
- The funds listed are all good but are all of one type; you might want expand your search
- VMVFX is rare, if not unique, for good or for bad
Companies that invest internationally pay foreign taxes. In most cases, including most global funds, they declare your net income after those taxes on your 1099, and so you pay taxes (in a taxable account) on your net earnings. But if over 50% of a fund is foreign and if it chooses to do so, it can declare your gross income (before paying those taxes) on your 1099, and give you a foreign tax credit.If you just deduct that amount, you're in the same place as if the fund itself had just declared your net income. However, you also have the option (in a taxable account) of getting a dollar for dollar credit - that's worth more. Many if not most global funds don't give you this option. Foreign funds do.
I prefer to invest in foreign funds (to control foreign exposure on the portfolio macro level) and domestic funds with a good slug of foreign companies (to enable fund managers to tweak my foreign exposure). That way I get the benefit (some would say drawback) of delegating tactical foreign/domestic allocation to fund managers, while maintaining control over the larger picture.
All three funds mentioned are off the (M*) chart on the growth side, and nearly off the chart in average company size (giant). Which explains their appeal to Ted. This part of the market has done so well for so long that it's easy to forget there are other companies out there.
Here's an article (with lots of numbers) on the Fidelity site that compares value and growth performance (domestic only) between 1990 and 2015 (26 years). If you don't want to read it, just look at Table 2 - it measures outperformance of growth or value (in basis points) in rolling five year periods. From 2005 on, growth "won" virtually all periods. Yet over the 26 year period, value came out better on average.
https://www.fidelity.com/learning-center/trading-investing/trading/value-investing-vs-growth-investing
On the value, and somewhat smaller cap, side, you might look at PGVFX. Exclude 2017 and its five year performance (2011-2016) matches that of MGGPX, with significant stretches of differing performance (sometimes better, sometimes worse). You can see that clearly from this chart. The point is that there's more to investing than giant cap ultra growth.
Some funds tend to drift from domestic to global over time. Some of the Mutual Series funds did that. MDISX renamed itself from Discovery to Global Discovery, MQIFX changed from Qualified (originally designed for tax-qualified accounts) to Quest. Both were originally domestic value funds. I'm not suggesting those.
Another fund, this one worth considering, that is following a similar arch is FLPSX. While M* still classifies it as a domestic fund, it may be the widest ranging fund you'll find. Which may be part of why one looks at global funds. Foreign stocks and domestic stocks each comprise 40%-50% of its portfolio (with more domestic). ARTRX has a very similar ratio, though its domestic allocation is a tad higher, just above 1/2. PRGSX is even more domestic, with 58% of its holdings onshore.
Finally, VMVFX is an oddity because it is a hedged fund. It launched as the dollar was rising smartly, so that hedging contributed significantly to its outperformance. This is not to say that it isn't a fine fund, but that one where the numbers must be scrutinized more closely when comparing with other funds.
You made many sensible and valid points that I did not take into account; appreciate your very informed and wise perspective. I will have to reevaluate and read the article you suggest before i decide to make any changes!
Again, more perspectives are very welcome and appreciated, please continue the conversation!
Matt
FWIW, I own SGENX (L cap) and GPGOX (S cap) in the global space, basically letting good management choose the weighting. But I still own FMIJX and SFGIX to have solid buy and hold Int./EM exposure.
Good luck with your decision.
A fourth sleeve found in the growth area of my portfolio is my specialty sleeve (which can hold most anything) and it currently has a global orientation holding the following funds LPEFX, NEWFX & PGUAX.
Within my overall portfolio I have over the past year noticed, according to Xray, a domestic/foreign equity allocation shift form about 70/30 to 60/40. This was done mostly by the fund managers not only in my global funds but my domestic fund managers as well seem to have added some foreign holdings to thier funds thus increasing my overall allocation to foreign stocks.
For me, and from what I have observed, this has made my portfolio more adaptive to the ever changing market climate as my fund managers continue to reconfigure their fund's positioning.
I truly value the feedback I get from members of this forum; there is an abundance of knowledgeable investors with varied insights that help me (and others) make better informed decisions! Again, thx!!
Any further comments, suggestions opinions VERY welcome!!
Matt
My current allocation to MGGPX is 12% of my PV. I'm not sure i want to up it.
I am looking for an average or lower "risk" FLG fund. I've come across a few, but one that continues to interest me is MFAPX (Morgan Stanley Inter. Adv). It is managed by the same manager as MGGPX, with what appears to be, not too much overlap in top ten holdings.
Does investing in MFAPX and MGGPX make any sense?
Are there better/other alternatives you can suggest i look into?
I've been badly burned in the past, investing in "foreign" and/or EM, so i have stayed away, except for MGGPX. Is it time to dip back into the foreign landscape? Am i too late?
Any thoughts, suggestions or opinions VERY welcome!
Thx,
Matt
Net Expense Ratio after waivers/reductions 1.23%
Historic Return High / Historic Risk Above Average
https://humbledollar.com/2021/01/lost-abroad/
An investor will need to determine if the foreign asset allocation (often approx. 50%) is appropriate for their particular situation.
I recently considered investing in a global equity fund (looked at ARTRX, RPGEX, others) to reduce the number of funds in my portfolio. I decided to retain discrete domestic and foreign equity funds since this will allow greater control of the asset allocation. Also, periodic rebalancing between domestic and foreign equity funds may provide additional returns.
There were many excellent points made, pro and con! I’m not sure I’m any closer to a decision.
Does anyone have any thoughts about owning two funds (MGGPX, MFAPX) with the same manager?
Matt
I think its fine but you should understand that there will be significant overlap. Also, both are very much growth oriented funds so you should consider that if the market is moving more towards value as it has since November. As I mentioned above I am most interested in adding emerging Asia this year. There are a number of good funds for doing that.
Basically, you can't take a credit now for foreign taxes paid at a higher rate than your current overall (not marginal) US rate. For example, suppose you owe $10K in taxes on $100K of taxable income (10%). If $20K of that income was foreign, and you paid $3000 in foreign taxes (15%), you could take a credit now for $2000 (10%) and carry over the remaining $1000 to use in future years.
The way the IRS describes it is different but amounts to the same thing: More important than his self pity ("It all seemed very personal") is whether your mutual fund passes through foreign taxes to you. The way funds generally work is that they pay for expenses (management fees and yes, taxes) out of earnings and pay you the net earnings as divs. The income you see on your 1040 is the usually the net income.
But sometimes, even though you're only getting net divs, the funds pretend that you got extra income and it was you, not the fund, that paid those foreign taxes with that extra income. So you might have $500 in "real" dividends, but on your 1099 you see $550 in divs and $50 in foreign taxes paid.
The question is: which funds pass through foreign taxes to you? A fund must make an election to pass through the taxes. They can't do so unless "more than 50 percent of the value ... of [the fund's] assets at the close of the taxable year consists of stock or securities in foreign corporations." 26 U.S. Code § 853(a)(1)
Generally, global funds don't make this election because they either typically have less than 50% invested abroad or because their portfolio could be near 50% and they want to be clear to investors. (Currently, M* shows 46/246 large cap world stock funds with over 50% non-US stocks.)
Somewhat surprisingly (to me) a number of international funds also decide not to pass through foreign taxes.
What you did and the amazing responses is causing more research into funds I haven't considered yet, in my major account, and I consider that part of what needs to be done. It's a lot more work, but well worth it because, well it's my money.
My thanks also to everyone that has responded to this, much respect for your thoughts and comments.
Regards,
MJP
Stay Safe, Derf