Indexor

Why I'm Exiting Canada, Brazil and Australia ETFs

jse17:

If Sir John Templeton had not passed away one year ago, his portfolio would most likely be down substantially, similar to John Bogle, Warren Buffet and so many other fundamental analysis investors who are always trotted out as examples of "investors to emulate" who also profess fundamental buy-and-hold philosophies.

It is my belief that Sir John Templeton likely knew very few investors who even utilized technical analysis, either in Nassau, the U.S. or abroad. While foreign investing was his forte, and he was very successful in his endeavors, I believe he could have become even more successful had he also combined technical analysis with his fundamental approach.

Many who use technical analysis are very happy they were able to sidestep the brutal downdrafts in most assets classes, not only in 2008, but also in 2000, and 1987, and 1973, etc. Rather than dismissing the technical approach entirely, based upon Sir John Templeton's statement, it might prove beneficial to explore the benefits of incorporating some simple technical methodologies along with your current strategies, if only to reduce your risk exposure.

Tuesday Outlook: Commodities, Global Markets

Dave:

I always appreciate your work. In your chart of WIP you noted: "Are WIPs better than TIPs? Some must think so." There is a big tax difference between the two. Phantom income.

The drawback to holding TIPs in a taxable account is that they generate "phanton income." The principal value is adjusted annually to reflect inflation, and you're forced to pay taxes on the increase - even though you don't actually receive the money until you sell the bond or it matures. iShares will send you a 1099 that calculates your phantom income each year but TIP remains best for QUALIFIED ACCOUNTS only.

WIPs are somewhat different. The monthly distributions made by WIP include the coupon interest accrual and the CPI adjustment on the principal. The fund is able to pay this out by selling a very small
portion of the portfolio every month that there is a positive CPI
adjustment. Since the CPI adjustment is paid out every month, from a tax standpoint, there is no "phantom income" realized by the shareholder.

Hope this helps.