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World Stock Funds-Are they a viable alternative?

edited January 2018 in Fund Discussions
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*
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Comments

  • @mcmarasco: On 10/30/17 I purchased MSOPX to get more international exposure in Europe and Asia. I'm very pleased with it so far, returning 8.61% since purchase.
    Regards,
    Ted
    M* Snapshot MSOPX:
    http://www.morningstar.com/funds/xnas/msopx/quote.html
  • edited January 2018
    Ted, glad to hear you are pleased with the purchase! I am very interested in this fund; it is on my short list at this point.

    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.
  • ron
    edited January 2018
    My fav long term is MFS Global equity MWEFX
  • I still like SGENX; it won't outperform in the current market but should hold up better than most in a down market.
  • Thank you all for your input!!

    Please keep the comments, suggestions and opinions coming!!!

    Thx. Matt
  • Thoughts followed by explanations:
    • 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.
  • GREAT info, analysis and insight msf, thank you!!!

    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
  • I've always had a world stock fund as the core of my portfolio, SGENX was the first fund I bought when I sold my farm and thought it would be a good idea to start a retirement account before I blew it all. Jean Marie Evillard was the reason I bought this fund, but I have since gone with his successor, Abhay Deshponde at CETAX. Although SGENX is listed as an allocation fund, it held little in bonds, using cash and gold instead, to diversify. It also had a large cap bend that I have always sought to balance with a small or medium cap fund. EVGBX, GLFOX, Grandeur Peaks or HEOMX are some of the funds with managers I am or was willing to put money with in order to do this. And that is the crux of the matter, I started with the best manager and have always found managers in this sector I was willing to do business with. I prefer managing mangers to investing in an asset class.
  • You've had lots of great comments. I'll just add, I like owning a global fund to accent my International and EM funds. Not to take their place, Personally I wouldn't substitute the global fund for Int./EM.

    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.
  • edited January 2018
    Old_Skeet has three sleeves of funds with global orientation. In the growth & income area of my portfolio I have two sleeves. One is my global equity sleeve holding CWGIX, DEQAX & EADIX. The second is my global hybrid sleeve holding CAIBX, PMAIX & TIBAX. In the growth area of my portfolio I have my global growth sleeve which holds ANWPX, SMCWX & THOAX. The reason I favor funds with a global orientation over all foreign is that the fund manager(s) within certain ranges can throttle the allocation between domestic and foreign with respect to where they feel the better value and opportunity can be had. Thus far, I am pleased with how this has worked.

    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.
  • GREAT comments and thoughts everyone, THANK YOU!!!

    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
  • Ted said:

    @mcmarasco: On 10/30/17 I purchased MSOPX to get more international exposure in Europe and Asia. I'm very pleased with it so far, returning 8.61% since purchase.
    Regards,
    Ted
    M* Snapshot MSOPX:
    http://www.morningstar.com/funds/xnas/msopx/quote.html

    Large expense at 2%

  • Those are level load (C) shares. You can get the MGGPX share class mcmarsco originally named, without a load and with a much reduced 12b-1 fee (0.25% instead of 1.0%).
  • I am happy with my investment in MGGPX, but I am now debating whether to add "one" foreign LG to my mix. The only international exposure I have is through MGGPX (for the most part).

    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
  • HGGIX. Looking again, I see that it is very concentrated, with just 37 stock holdings. It is global, not foreign-only. But it is Large Growth. 36% is in the top 10 holdings. It's 54/44 in US/foreign. I'm putting money into it soon. One reason I like it is because the usual Amazon and Facebook and Apple do not prominently appear.
  • Thx Crash!
  • NL/NFee @ Schwab, $100 initial, $1.00 additional

    Net Expense Ratio after waivers/reductions 1.23%

    Historic Return High / Historic Risk Above Average
  • I hold MGGPX but actually have a larger position in MIOPX. Its a pure international fund with EM exposure. Also managed by Kristen. I think EM asia will continue to do well going forward. They are ahead of the entire world in managing the virus. Also you should consder both FSEAX and MATFX. Excellent funds
  • From what I can tell, MIOPX and MFAPX have a couple of differences in their portfolios. The former has about 11% in US stocks, the latter about 4%. MIOPX has a greater allocation to developing markets, approximately 37% vs. 22%. Heugh seems to be able to keep turnover low and to run concentrated portfolios. I am also an owner of MGGPX and I am leaning towards adding more international exposure. Right now I’m establishing a position in a brand new ETF, DSTX. This fund is not for everyone, but if value and international keep up their momentum, it might work. I agree with @MikeW that there’s $ to be made in emerging Asia.
  • Hey @BenWP. How are you doing? Always love to see your posts. DSTX is a new one for me. What do you like about it? By the way I have been trimming growth and adding to financials the last week. I expect value to outperform over next year.
  • somewhat OT, and you have get past the wack lede, but an interesting thing to know maybe for investing outside the US

    https://humbledollar.com/2021/01/lost-abroad/
  • edited January 16
    Global stock funds can be a viable alternative to a combination of discrete domestic and foreign stock funds.
    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.
  • edited January 16
    Thank you everyone for your thoughts and suggestions!

    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
  • Hi 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.
  • somewhat OT, and you have get past the wack lede, but an interesting thing to know maybe for investing outside the US

    https://humbledollar.com/2021/01/lost-abroad/

    Methinks he doth protest too much. Foreign tax credits can be carried back one year and forward ten years, so he may not have lost his tax credit as much as he would like you to believe he did. I've carried forward and later used foreign tax credits.

    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:
    Your foreign tax credit cannot be more than your total U.S. tax liability ... multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources.
    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.
  • I have invested in ARTRX for several years - a very consistent fund with a reasonable drawdown in 2020. The manager has been running the func since inception - quite remarkable. Covers all developed global markets without emerging market exposure. I use separate funds dedicated to emerging market. The same management team also have a newer global fund that has some EM but this fund adds another 0.30% to the expense ratio.
  • mcmarasco said:

    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?).

    Thanks for this post, I love, love, love it because I'm sort of in the same position, rebalancing for the quarter and sitting on cash reserves looking for a place to put them and not throw my allocations out of whack. One thing I've noticed with global funds is when I run a hypothetical fund spy on them is that it significantly increases my exposure to FAANG and other domestic large cap growth, and would force me to rebalance existing holdings yet again, and also put me heavy on Asia ex-Japan and underweight on Japan holdings. Especially in my TRP accounts, but I will probably put a percentage into PRGSX, RPEGX, and PRGTX which if I do it right will prevent having to adjust domestic large cap growth exposure.

    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


  • @MikeW: I tried to get a discussion going a couple of weeks ago about Distillate Capital, the company running DSTL and DSTX. Kiplinger's put me onto checking out this manager in its listing of the best ETFs for 2021. DSTL figures in the list and it had been a previous recommendation. You know I've been a fan of MOAT and CAPE (or the OEF strategy DSENX) for some time. I like relatively concentrated funds with a comprehensible (to me) strategies; the Distillate theory of free cash flow and how a security's value should be determined as well as the fact that DSTL has outperformed MOAT and CAPE since its inception pushed me to read the DC white papers on their website and to dip my toe in DSTL. DSTX uses the same value strategy as applied to international stocks and I am willing to put some bucks into it as a vehicle for testing my belief that international and value will do well in this climate. On the domestic SC side, I bought CSB to play the rise in SCV and that is working out. Check out Distillate Capital; their stuff is readable.
  • @BenWP ; Did your buy occur around 10/1/20 ? It was on a rocket after that ! To rich for my blood currently.
    Stay Safe, Derf
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