Thursday, June 9, 2011

Investment Purchase: PCY

Here I talk about my first purchase for the model portfolio...




I've followed PCY for several years now and like it. When I bring it up in conversation and get to the part of which countries are in the fund, (Turkey, Qatar, Bulgaria, Columbia) a lot of people get turned off because that is "risky" and that U.S. bonds are so much safer. When I ask why they believe that they almost always seem to give a  "just because they are" reason.

That sort of thinking can be lethal to a trader and investor. Things change and common mentalities and theories on investing should be challenged and each investor should determine what is appropriate for themselves.

I have been talking in the past couple videos the idea of not shadowing and this brings up another reason. When shadowing someone you run the risk of falling into someone's line of thinking, without fully knowing why they think a certain way. You then start agreeing with something you don't fully understand and that spirals into other investment decisions you will make.

Here are the links to the various funds I mentioned in the video for those that want to research further...
PCY: Powershares
EMB: IShares
EBND: Spdrs
ELD: Wisdomtree

Here is a chart comparing several of the funds I talked about.

This is from finance.google.com and shows the % gains and losses of each one if they all started with the same purchase amount at the same time.
We can see that PCY (blue line) and EMB (green line) move pretty much the same way which makes sense being that they are the same asset class. However its always good to confirm it here. I use the S&P500 to represent the stock market. Here we see it has struggled to recover from its 2008 and early 2009 fall. TLT (yellow line) is a popular ETF for U.S. bonds. It rose while the others fell but it reverted back to 0% the quickest of them all.

Ok great so what does this tell us? To me at least, it says that U.S. bonds and emerging market bonds will move differently at times but then revert back to 0. Most bond investors will be focusing on the income they get and not share price appreciation. Bonds don't grow and expand like companies do.

One key thing to keep in mind... this chart only covers the past 3.5 years with 4 things. Its far from a conclusive review of how the stock and bond markets work especially in how these work over a 50 year period that I will be wanting to carry me to and through retirement. That will be another angle we can look at and will do so in the future. Its something to keep in mind and research before entering a position however that's a topic for another entry later on.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

2 comments:

  1. Great walk through on your thought process. Aloha. J.

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  2. Thanks HomeDefender. Its appreciated.

    ReplyDelete