According to Dow Theory - Bear Market

[kimchi]

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Investing in The US for foreigners over the last 5 years has been about taking on the risk without the return. As you can see, UK investors would have been better off leaving their money in high-interest savings accounts for 5 years than investing in the US despite recent market highs.


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Yeah unless you happened to choose RIMM, GOOG or 100's of other stocks up from 100% to over 200% in the last 12 months. I think these generalizations are useless, after all, who has all their money in an index fund?

Jimbo

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That was a slightly strange post. I think my 'generalisations' are very telling when comparing investing in the US compared to overseas. If I were picking stocks, I'd much rather be doing it in a market and currency doubling every few years than one bobbing around amongst the high-interest savings rates leagues. Are you saying it's useless to know whether the market you are picking stocks from is struggling to keep up with CDs or doubling every few years?

Anyway, how many people can successfully pick stocks? Without getting into the old Index fund yarn, they are the +EV way to invest for 95-99% of people.

Most investors (US and non US) who have had most of their money in US stocks over the last 5 years have had a seriously underperforming portfolio.

[Jimbo]

Ok then I supposed I should have said such comparisons are useless when you specifically tailor your investment vehicles to those that best reflect your preconceived notion. Better? You do understand that multinational companies based in the USA have outperformed multinationals based in countries with currencies that are appreciating?

Besides there is a near zero probability that 95% of the worlds investors are invested in index funds.

Jimbo

[kimchi]

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Yeah unless you happened to choose RIMM, GOOG or 100's of other stocks up from 100% to over 200% in the last 12 months

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Anyone could quote some stocks from any market that would have been 10-baggers or more if they "happened to" choose them.

I'm not discussing anything radical here. I just replied to someone who was assuming that the US market has been a good place to invest for foreigners except over the last few months.

The quick data I quoted suggests that other markets would have given far superior returns over the last few years. I'm talking about the broad market and not a few cherry-picked examples of out-performance.

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Besides there is a near zero probability that 95% of the worlds investors are invested in index funds.

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I never suggested they were, but I still believe that 95%+ of investors would be better off of they were.

The data I quoted was from index funds since they give a fair representation of the opportunities available. Most investors can't invest in "the market" but in a fund with additional currency exposure which has been a real drag for foreigners investing in The US.

I think you keep spinning my points to mean something else.

[Phone Booth]

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Ok then I supposed I should have said such comparisons are useless when you specifically tailor your investment vehicles to those that best reflect your preconceived notion. Better? You do understand that multinational companies based in the USA have outperformed multinationals based in countries with currencies that are appreciating?

Besides there is a near zero probability that 95% of the worlds investors are invested in index funds.

Jimbo

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True, but their combined or average returns are reflected by indices. For some stocks in indices to outperform, others must underperform. For one to say that the US was a good place to invest in the past few years, one must be talking about some sort of average - otherwise the generalization "US" is meaningless.

[Jimbo]

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For some stocks in indices to outperform, others must underperform.

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Not true at all, as has been proven it is not a zero sum market. All the stocks in an indice can outperform compared to something else.

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otherwise the generalization "US" is meaningless.

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My point exactly.

One must assume that an index fund is reflective of all investors which is simply not reflective of reality, therefore a comparison to them is meaningless. This doesn't even account for stocks that are addded/removed from said index funds. Nor does it account for dividends. Those facts make saying "blah blah country" was better to invest in than another "blah blah country" unprovable without analyzing all the stocks by market cap and including dividend payments over the same period of time.

Now if one were to say they lost money due to differences in currency transaction values from one country to another in a common investment vehicle then that is easily provable.

I am not saying that investing in the US vs some other random country was better or worse, just that one cannot simply use index fund values over a specified period of time without considering all the other pertinent factors as proof.




Jimbo

[Phone Booth]

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For some stocks in indices to outperform, others must underperform.

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Not true at all, as has been proven it is not a zero sum market. All the stocks in an indice can outperform compared to something else.

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I meant of course to outperform the said indices. In short, indices may not tell you how everyone did, but they are very good measures of how the average investor (dollar-weighted, of course) did.