Why Diversification of Assets in a Portfolio is the Key

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US equity markets have performed poorly so far this year to say the least and are the edge of tuning into a bear market. Last week was especially brutal as retail and consumer staples sector were also thrashed. Sectors such as utilities and energy have offered shelter from the carnage but it remains to be seem if their strength will continue to hold as volatility increases even more in the coming days and weeks.

With that said, I have written many times before that one way to reduce risk and cushion a portfolio from the market’s wild gyrations is to diversify one’s assets. Diversification is the simplest and easiest option available for retail investors to avoid huge losses. The following chart shows the importance of diversification over various asset classes in terms of returns from 2000 to 2020:

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Source: MFS

For example, though US large cap stocks have had excellent returns in the past few years, during the Global Financial Crisis (GFC) bear market of 2007-08 they were the second worst performers with a decline of over 38% in 2008.

Though we have many months to go in 2022, it remains to be seen how much growth stocks plunge by the end of the year should the equity markets end up in bear market.

Related ETFs:

  • Vanguard Mid-Cap Growth ETF (VOT)
  • iShares Russell Midcap Growth Index Fund (IWP)
  • SPDR S&P 500 ETF (SPY)
  • Vanguard Total Bond Market ETF (BND)
  • iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)

Disclosure: No positions

The World’s Most and Least Corrupt Corrupt Countries: Charts

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Earlier this year, Transparency International released the 2021 Corruption Perception Index. According to the report, the least corrupt countries are Denmark, Finland and New Zealand. The most corrupt countries are South Sudan, Somalia and Syria.

The US was ranked 27th. Ukraine ranked 123 out of 180 countries and Russia came in at 136.

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Source: Where Corruption Is Rampant, Statista

Here is another take on the same data:

Source: Axios

Periodic Table of G-20 Countries Investment Returns 2000 to 2020: Chart

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The equity investment returns of the G-20 countries based on their benchmark index from 2000 to 2020 is shown in the chart below in the order of performance. The returns noted are in US dollars and do not include dividends and fees.

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Source: Quantalytica

Related EFTs:

  • PowerShares India (PIN)
  • SPDR S&P 500 ETF (SPY)
  • iShares MSCI Mexico Capped Investable Market (EWW)
  • iShares FTSE/Xinhua China 25 Index (FXI)
  • iShares MSCI South Korea ETF (EWY)
  • iShares MSCI Germany Index Fund (EWG)
  • iShares MSCI Canada Index Fund (EWC)
  • iShares MSCI Australia Index Fund (EWA)
  • iShares MSCI United Kingdom Index (EWU)

Disclosure: No positions

Reminder: Westpac ADR Conversion Deadline Nearing Soon

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Australia’s Westpac Banking Corporation’s ADR was delisted from the NYSE and last traded there on Jan 31, 2022. ADR holders have the option of converting them to ordinary shares trading on the US OTC market or on the domestic market in Australia. The deadline to surrender ADRs is June 2, 2022 – less than 2 weeks away.

If ADRs are not converted before June 2nd, then the depository will automatically sell the underlying shares after that date and you must surrender the shares to receive the sale proceeds less fees and any taxes.

Westpac ADRs can be converted to WEBNF on the OTC market or WBC.AX trading on the ASX.

Below is an excerpt from the termination notice:

As a result, the existing ADR facility will be terminated effective Monday, January 31, 2022 Under the terms of the Deposit Agreement, you have until at least June 2, 2022 to surrender your Westpac ADRs for  delivery of the underlying shares. If you surrender ADRs for delivery o f the underlying shares, you must pay a cable fee of $17.50, a cancellation fee of up to $0.05 per ADRs surrendered and any applicable U.S. or local taxes or governmental charges. Payment should be made payable to The Bank of New York Mellon.

Subsequent to June 2, 2022 under the terms of the Deposit Agreement, the Depositary may attempt to sell the underlying shares. If the Depositary has sold such shares, you must surrender your ADRs to obtain payment of the sale proceeds, net of the expenses of sale, any applicable U.S. or local taxes or government charges and a cancellation fee of up to $0.05 per ADRs.

To surrender your ADRs, the address of the Depositary is: The Bank of New York Mellon, 240 Greenwich Street, Depositary Receipts Division – 8th Floor, Attention: Cancellation Desk, New York, NY 10286. Registered or overnight mail is the suggested method of delivering DRs to the Depositary.

Source: BNY Mellon 

Related:

Disclosure: Long WEBNF

Russia’s Gazprom To Terminate ADR Program

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Russian energy giant Gazprom has decided to terminate its ADR program. According to the depository BNY Mellon the ADR program will be terminated June 16, 2022. Holders of the ADRs have the option to convert them to ordinary shares that trade on the domestic exchange in Russia or surrender the ADRs to receive payment of sale proceeds. Gazprom used to trade on the OTC markets under the ticker OGZPY.

Below is the termination notice from BNY Mellon:

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Source: BNY Mellon

Gazprom Related Useful Links:

  1. Gazprom Neft to end ADR program on June 16 – depositary, Interfax
  2. How to convert Gazprom ADRs and other Russian DRs to local shares, The Long Run Plan
  3. GAZPROM & CO: WHAT TO DO WITH RUSSIAN ADRS?, Undervalued Shares
  4. Gazprom – Realtime Stock Quote on Moscow Exchange, Reuters

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Disclosure: No positions