The Best Way to Travel: Musings from Asia

Key Points

  • There was keen interest in Schwab’s philosophy around long-term strategic and global asset allocation.

  • But Asians’ more trading-oriented approach to investing also meant a heightened focus on the FAANG stocks.

  • Tariffs, buybacks and the spread between “soft” and “hard” economic data in the United States rounded out the topics of most interest.

I spent last week in Asia—two days in Hong Kong, one day in Shanghai, and two days in Singapore—visiting our clients. It was a fascinating trip in some of my favorite cities in the world … well, in the case of Singapore, a city, island, and country all in one. I always find the Q&A sessions following my more formal presentations to be enlightening, no matter where I’m visiting; all the more so at times when I venture outside the United States. Today’s report will address the top-five questions or topics most on the minds of our Asian investors.

Time in the market …

The first topic, which was animatedly discussed—especially in Hong Kong—was around strategic asset allocation and the merits of broad global and strategic asset class diversification. I must admit that this discussion may not have happened at all were it not for one of the first visuals I showed at each of the eight formal presentations I did.

The well-known “investing quilt chart” below is less-well known outside of the United States. Some version of this is used by countless U.S. investment and money management firms to highlight the volatile nature of asset class rankings year-to-year, as well as the related merits of diversification. But as Asian investors are generally more trading-oriented, they tend to be less familiar with this type of analysis.

“Patternless” Investing Quilt Chart

Source: Schwab Center for Financial Research with data provided by Morningstar, Inc. *Data thru October 31, 2018. Asset class performance represented by annual total returns for the following indexes: S&P 500® Index (US Lg Cap), Russell 2000® Index (US Sm Cap), MSCI EAFE® Net of Taxes (Int’l Dev), MSCI Emerging Markets IndexSM (EM), MSCI US REIT Index (REITs), S&P GSCI® (Comm.), Bloomberg Barclays U.S. Treasury Inflation-Linked Bond Index (TIPS), Bloomberg Barclays U.S. Aggregate Bond Index (Core US Bonds), Bloomberg Barclays U.S. High Yield Bond Index (High Yield Bonds), Bloomberg Barclays Global Aggregate Ex-USD TR Index (Int’l Dev Bonds), Bloomberg Barclays Emerging Markets USD Bond TR Index (EM Bonds), Citigroup U.S. 3-Month T-Bill Index (T-Bills). Moderate Diversified allocation based on total return with taxable bonds model allocation (24% U.S. stocks, 21% int’l stocks, 25% core bonds, 1% U.S. inflation protected securities, 5% int’l developed country bonds, 10% U.S. corporate high yield bonds, 5% int’l emerging markets bonds, 4% commodities, 5% cash). Past results are not an indication or guarantee of future performance. Returns assume reinvestment of dividends, interest, and capital gains. Indexes are unmanaged, do not incur fees or expenses, and cannot be invested in directly.