Saturday, August 30, 2014 6:43:30 AM
Re: Mexican Peso/US $ peg question
http://www.oanda.com/currency/iso-currency-codes/MXN indicates that the Mexican Peso isn't pegged to USD
I don't have a Mexican stock trading account and I'd like to extend holdings to include one or two Mexican stocks. One route to achieve that is to buy via the US stock market and buy a Mexican stock American depositary receipt.
Unlike other Latin America regions, Mexico appears to be relatively tax friendly, exempting capital gains from stocks (???). As US dividend (from the ADR - that it receives from holding the underline Mexican stock) would have US withholding taxes applied (being a UK investor) ideally I want a low/no dividend stock and one such candidate is GMK
i.e. looking to reduce taxation/costs for a UK investor holding a US ADR that holds a Latin American stock.
Looking at how closely the ADR tracked the actual Mexican Stock however highlights that there appears to have been little in the way of Peso/US$ currency fluctuations. Is there some kind of opaque currency pegging between the Mexican Peso and US$? I would have expected to see a higher level of currency fluctuations.
TIA
To put some more meat on the bone as to why I'm asking - my thinking behind this is that I have accumulate enough wealth that I don't need to take on unnecessary risk. I own my own homes and therefore have a roof over our heads and in effect have the rent paid for the next 30+ years. As house prices generally pace inflation over the longer term the house price (inflation) plus imputed rent is a stock like reward. Assuming a third in such 'land' value and another third in inflation bonds with the intent to draw that down over 30 years (income - which will probably outlive me), combined with human capital (wages/inflation linked pension) and as UK gilts (treasury bonds/TIPS equivalent) have the inflation element exempt from taxation that leaves a third for growth/accumulation. i.e. if the growth of a initial third doubles in real terms over 30 years whilst the initial third allocation to bond drawdown draws down to zero then you end the 30 years with the same amount in inflation adjusted terms as at the start (inheritance). That's in the worst historic case (at least for that tables date range), in the average case the growth component might average 6.7% real (as indicated in that table) and grow a initial third allocation seven-fold (and leave a even larger inheritance or permit some periodic top-slicing/profit taking to supplement income (periodic 'bonus')).
For the growth/accumulation component, this article indicates that a equal weighted global choice of stocks can be one of the safer choices over 30 year periods (second row of data values)
http://patrickoshag.tumblr.com/post/93207823244/the-dangers-of-portfolio-patriotism
i.e. for 30 year periods the worst case real (inflation adjusted) gain for a global equal weighted portfolio was > 100% gain (double-up). The author also notes that that was similar for local returns (so not just for the US alone).
Accordingly 30 AIM's of a diverse range of global low/no dividend paying stocks (to reduce interim (withholding)taxes/costs) might be appropriate (3.3% risk per individual stock/AIM). I know that some say that growth stocks relatively lag other stocks (value, dividend paying etc.) but as both Steve's AIM's (which are comprised of many non dividend paying growth stocks) and Kenneth French's zero dividend data (since 1920's) show that lagging is more a case when cap weighting is used. For more equal weighted holdings the lag isn't evident.
For the AIM settings I believe that simply individually AIMing each stock, with the initial stock = how much would have been invested in buy and hold (3.3% each) combined with a '25% cash reserve' (more virtual than actual) i.e. AIM-HI settings is an appropriate choice. Together with some periodic movement of funds from one AIM to another as and when one AIM becomes more heavily weighted than another (i.e. looking to maintain a degree of equal weight as stock prices/currencies deviate over time). i.e. some AIM's might accumulate cash, others might deploy cash into buying more shares (periodic steering towards equal weighting (rebalancing) performing the transfer of cash from one AIM to another).
I already have access to around 15 different stock markets and currencies, but Latin America isn't included in that and hence this posting.
http://www.oanda.com/currency/iso-currency-codes/MXN indicates that the Mexican Peso isn't pegged to USD
I don't have a Mexican stock trading account and I'd like to extend holdings to include one or two Mexican stocks. One route to achieve that is to buy via the US stock market and buy a Mexican stock American depositary receipt.
Unlike other Latin America regions, Mexico appears to be relatively tax friendly, exempting capital gains from stocks (???). As US dividend (from the ADR - that it receives from holding the underline Mexican stock) would have US withholding taxes applied (being a UK investor) ideally I want a low/no dividend stock and one such candidate is GMK
i.e. looking to reduce taxation/costs for a UK investor holding a US ADR that holds a Latin American stock.
Looking at how closely the ADR tracked the actual Mexican Stock however highlights that there appears to have been little in the way of Peso/US$ currency fluctuations. Is there some kind of opaque currency pegging between the Mexican Peso and US$? I would have expected to see a higher level of currency fluctuations.
TIA
To put some more meat on the bone as to why I'm asking - my thinking behind this is that I have accumulate enough wealth that I don't need to take on unnecessary risk. I own my own homes and therefore have a roof over our heads and in effect have the rent paid for the next 30+ years. As house prices generally pace inflation over the longer term the house price (inflation) plus imputed rent is a stock like reward. Assuming a third in such 'land' value and another third in inflation bonds with the intent to draw that down over 30 years (income - which will probably outlive me), combined with human capital (wages/inflation linked pension) and as UK gilts (treasury bonds/TIPS equivalent) have the inflation element exempt from taxation that leaves a third for growth/accumulation. i.e. if the growth of a initial third doubles in real terms over 30 years whilst the initial third allocation to bond drawdown draws down to zero then you end the 30 years with the same amount in inflation adjusted terms as at the start (inheritance). That's in the worst historic case (at least for that tables date range), in the average case the growth component might average 6.7% real (as indicated in that table) and grow a initial third allocation seven-fold (and leave a even larger inheritance or permit some periodic top-slicing/profit taking to supplement income (periodic 'bonus')).
For the growth/accumulation component, this article indicates that a equal weighted global choice of stocks can be one of the safer choices over 30 year periods (second row of data values)
http://patrickoshag.tumblr.com/post/93207823244/the-dangers-of-portfolio-patriotism
i.e. for 30 year periods the worst case real (inflation adjusted) gain for a global equal weighted portfolio was > 100% gain (double-up). The author also notes that that was similar for local returns (so not just for the US alone).
Accordingly 30 AIM's of a diverse range of global low/no dividend paying stocks (to reduce interim (withholding)taxes/costs) might be appropriate (3.3% risk per individual stock/AIM). I know that some say that growth stocks relatively lag other stocks (value, dividend paying etc.) but as both Steve's AIM's (which are comprised of many non dividend paying growth stocks) and Kenneth French's zero dividend data (since 1920's) show that lagging is more a case when cap weighting is used. For more equal weighted holdings the lag isn't evident.
For the AIM settings I believe that simply individually AIMing each stock, with the initial stock = how much would have been invested in buy and hold (3.3% each) combined with a '25% cash reserve' (more virtual than actual) i.e. AIM-HI settings is an appropriate choice. Together with some periodic movement of funds from one AIM to another as and when one AIM becomes more heavily weighted than another (i.e. looking to maintain a degree of equal weight as stock prices/currencies deviate over time). i.e. some AIM's might accumulate cash, others might deploy cash into buying more shares (periodic steering towards equal weighting (rebalancing) performing the transfer of cash from one AIM to another).
I already have access to around 15 different stock markets and currencies, but Latin America isn't included in that and hence this posting.
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