"Safer" ETFs during volatile Rand

[aktor]

I put "safer" in quotes as there is really no such thing, but in terms of relativity....

I'm currently considering the following 3 ETF's for my portfolio:

DBXUS: 35% weight
DBDWD: 35% weight
STXDIV: 30% weight

Two questions..

1) Would a portfolio consisting of those 3 make you go "whaaat the hell are you doing?" or does it look theoretically sound? Low risk, medium return over at least 3 years (probably 5+) is what I'm aiming for.

2) Would this be more secure (due to DBXUS and DBXWD) during the fluctuations we can expect from the Rand with Gordhan going to court, and whatever the government thinks of breaking next? With a ratings downgrade being likely soon.

(Disclaimer: Dont worry, I won't take your advice as "official financial advice" so please don't be wary of giving your personal opinions). These investments aren't massive lump sums, but rather happen monthly, so if everything goes to hell it's possible to switch course without losing everything.

 

[NarrowBandFtw]

DBXUS: 35% weight
DBDWD: 35% weight
STXDIV: 30% weight

STXDIV is mostly (entirely?) local stocks so while it should generate some income, it will still be in a potentially less valued currency

There might be quite a bit of overlap in the companies held by DBXUS vs DBXWD, so it might not make that much sense to invest in both in an attempt to diversify.

But then one of my ZAR hedges is EUROSTOXX50 which has taken a proper beating with all the Deutsche Bank bs in the news, so don't take my advice

 

[aktor]

STXDIV is mostly (entirely?) local stocks so while it should generate some income, it will still be in a potentially less valued currency

There might be quite a bit of overlap in the companies held by DBXUS vs DBXWD, so it might not make that much sense to invest in both in an attempt to diversify.

But then one of my ZAR hedges is EUROSTOXX50 which has taken a proper beating with all the Deutsche Bank bs in the news, so don;t take my advice

I hear ya on STXDIV, it depends how the latest situation would influence it - it's mostly aimed at dividend payouts offsetting poor growth, so... not sure.

Agreed on DBXWD and DBXUS overlapping, but like you said, the EU one isn't performing great at the moment, so not sure where else to diversify offshore on a fund that's showing growth.

 

[NarrowBandFtw]

I hear ya on STXDIV, it depends how the latest situation would influence it - it's mostly aimed at dividend payouts offsetting poor growth, so... not sure.

Agreed on DBXWD and DBXUS overlapping, but like you said, the EU one isn't performing great at the moment, so not sure where else to diversify offshore on a fund that's showing growth.

I've started funneling small amounts here: https://www.goldmoney.com/
1: it is offshore so Zuma can't touch it
2: it is in a "currency" that is not so easily manipulated: gold

It's not for everyone though, some people want to see a profit from such a hedge and lose sight of the true intent which is simply to not lose purchasing power.

 

[HavocXphere]

Zar denominated products are of limited value for countering zar volatility.

 

[MrG]

Zar denominated products are of limited value for countering zar volatility.

Like DBDWD? Why do you say this?

 

[Thor]

Dbxwd, GLPROP, NFEMOM is my fck you zuma holding

 

[supersunbird]

Have a Satrix MSCI World Index unit trust that I have been contributing to since May last year... has grown nicely indeed.

 

[HavocXphere]

Like DBDWD? Why do you say this?

ah not sure how to explain in forum simple terms.

Ultimately if you want to get away from ZAR risk then you need to get away from anything ZAR related. A ZAR denominated ETF is a bad start on that front.

Taking this specific scenario (or your DBRWD):

On a theoretical level holding offshore underlyings (even ZAR denominated) should be a hedge on a longer range regardless of FX movement (meaning the loss in raw FX should approximate the increase in value of the underlying asset in zar terms).

So it's sound in a high level fundamental level, but I'd not trust it:
1) It compresses time ranges
2) It assumes the fundamental laws of finance hold - not a give if SA collapses (which really is what you're trying to hedge here)

 

[supersunbird]

ah not sure how to explain in forum simple terms.

Ultimately if you want to get away from ZAR risk then you need to get away from anything ZAR related. A ZAR denominated ETF is a bad start on that front.

Taking this specific scenario (or your DBRWD):

On a theoretical level holding offshore underlyings (even ZAR denominated) should be a hedge on a longer range regardless of FX movement (meaning the loss in raw FX should approximate the increase in value of the underlying asset in zar terms).

So it's sound in a high level fundamental level, but I'd not trust it:
1) It compresses time ranges
2) It assumes the fundamental laws of finance hold - not a give if SA collapses (which really is what you're trying to hedge here)

MUCH cheaper and easier though.

One cannot try to propose foreign currency denominated investing, without raising my ire, unless they are willing explain step by step how to most cheaply and easily do that, how to get an account with IB or whomever and everything that you will need, because thats where I fall flat and give up, it's much more info that needs to be researched (so a time/effort cost) and that info not easily come by vs the extremely easy R denominated fund investing (hey easyequities, I want S&P500 this and DBthat, done, k thnxbai).

I love explaining such things, so I do ever get around to investing foreign currency denominated ETFs I'll make a nice long post on the practical steps (SSBs idiots guide to foreign currency denominated ETFs would be the thread title).

 

[Thor]

MUCH cheaper and easier though.

One cannot try to propose foreign currency denominated investing, without raising my ire, unless they are willing explain step by step how to most cheaply and easily do that, how to get an account with IB or whomever and everything that you will need, because thats where I fall flat and give up, it's much more info that needs to be researched (so a time/effort cost) and that info not easily come by vs the extremely easy R denominated fund investing (hey easyequities, I want S&P500 this and DBthat, done, k thnxbai).

I love explaining such things, so I do ever get around to investing foreign currency denominated ETFs I'll make a nice long post on the practical steps (SSBs idiots guide to foreign currency denominated ETFs would be the thread title).

(I'm busy writing another ebook, about this)

 

[bchip]

I put "safer" in quotes as there is really no such thing, but in terms of relativity....

I'm currently considering the following 3 ETF's for my portfolio:

DBXUS: 35% weight
DBDWD: 35% weight
STXDIV: 30% weight

Two questions..

1) Would a portfolio consisting of those 3 make you go "whaaat the hell are you doing?" or does it look theoretically sound? Low risk, medium return over at least 3 years (probably 5+) is what I'm aiming for.

I consider these 3 to be high risk.
They have fallen into the gamble section omho

However about 90% (100%?) of the forumites here disagree with me.

 

[JStrike]

2) It assumes the fundamental laws of finance hold - not a give if SA collapses (which really is what you're trying to hedge here)

He is not trying to hedge against South Africa collapsing. He is trying to hedge against Rand volatility. There is a very big difference.

If you believe South Africa is going to collapse, leave and take your money with your to whatever country you are going to.
If you believe the Rand is going to be volatile or depreciate more than the normal 4%, then Rand hedge stocks/ETF's are perfect

 

[JStrike]

I consider these 3 to be high risk.
They have fallen into the gamble section omho

However about 90% (100%?) of the forumites here disagree with me.

What basis do you have for believing that US economic growth is going to fall? Or world economic growth is to fall?

 

[bchip]

What basis do you have for believing that US economic growth is going to fall? Or world economic growth is to fall?

You mean besides the fact that the earnings are stretched beyond that of the IT bubble,
the fake financial engineering thats been going on, the CAPE ratio, the P/E ratio...
and then Trump is ruling...

Maybe I should start with what do you believe that it WONT actually fall?

 

[Thor]

You mean besides the fact that the earnings are stretched beyond that of the IT bubble,
the fake financial engineering thats been going on, the CAPE ratio, the P/E ratio...
and then Trump is ruling...

Maybe I should start with what do you believe that it WONT actually fall?

If dbxwd falls then bitcoin/etheruem is your only protection imo.

 

[JStrike]

If dbxwd falls then bitcoin/etheruem is your only protection imo.

If there is a worldwide recession, bitcoin/etheruem will be amongst the biggest fallers.
It's price is held up by speculators. If there is a worldwide recession, speculators pull out fast

 

[Thor]

If there is a worldwide recession, bitcoin/etheruem will be amongst the biggest fallers.
It's price is held up by speculators. If there is a worldwide recession, speculators pull out fast

And currencies are not?

Your gold bar is worth what I am willing to pay for it.

 

[JStrike]

And currencies are not?

Your gold bar is worth what I am willing to pay for it.

Sure. I think gold is pretty worthless too. However, there are still those that believe it is a safe haven, and due to that it will hold up.
Anything not backed up by a government or producing a predictable yield will fall.
In a worldwide recession, US Treasuries will be the go to safe haven

 

[NarrowBandFtw]

In a worldwide recession, US Treasuries will be the go to safe haven

Unless the worldwide recession is kicked off by a dollar crises, which is a possibility.