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My entire portfolio has done reasonably well as the overall stock market has done well so far in 2013, however LZOEX (Lazard Emerging Markets fund) has done poorly, down .20% for the year.
The fund makes up ~15% of my equities portfolio/11% of entire portfolio (including bonds). Is this too high a percentage to have in EM, or is this considered reasonable?
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I have no idea why they are doing so poorly, if that is what you call a 20 basis point drop. I only own emerging markets in the Total Stock Market Index Fund, but I don't think your allocation is unreasonable. I for one don't what all the assets in my portfolio to always rise together in unity.
Showing up at the donut shop at 5 am to get them hot out of the oil is an example of successful market timing.
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You're probably hoping for an explanation that probably exists and that someone probably knows. (Not me.) Sometimes the majority of market gains occur over the course of a few days out of the year. And for the benefit of newbies and lurkers on this site, I'll also say the following:
I don't know why they're doing poorly in 2013. Shoot, I don't know why they've done poorly (or well) in any given year. I merely expect
that they will do very poorly and very well (and sometimes in-between) from year to year. Here's a link to see what I mean.Callan Periodic Table of Investment Returns
Part of the benefit of investing in emerging markets stocks comes not only from holding on, despite years of terrible-to-mediocre performance (higher returns and higher risk go hand in hand), but from continuing to purchase and rebalance into EM when
they are doing lousy.
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MSCI Emerging Markets Index is up 300% over the last 10 years. Not too shabby. If you believe in reversion to the mean, this 10 year performance might provide a clue.
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Everybody has a theory, from the Beijing smog to fracking's threat to Gazprom. On a really slow news day (or week), the theories get even weirder.
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This is why we diversify. Who knows which part of the market is going to be up or down?
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Perhaps with US markets performing quite well a lot of money is chasing performance there (here).
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It's called diversification, which I believe is one of the reasons that people invest in emerging markets - or at least I thought that's how it works.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Two reasons why EM is doing poorly: one, the dollar is getting stronger,two, Emerging Market economies are generally heavily dependent on commodities, and they have been weak of late.
My advice: buy whatever is doing worst in your portfolio. It's called re balancing.
Trident D-5 SLBM- "When you care enough to send the very best."
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Two and a half months isn't a very long timeframe to worry about why a particular index or fund is doing well or doing poorly. When you diversify, some of your investments will appreciate at certain times and some will depreciate. This is to be expected, and since one of the reasons to diversify is to invest in classes that are not so closely correlated that they appreciate and depreciate at the same time, I'd argue that it is to be welcomed.
So in a diverse portfolio, you should pretty much always expect any particular class to be "doing well" or "doing poorly."
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They're stock markets. They're doing what stock markets do.
I don't know that there's any other answer to be had, doubly so for such a small change over such a short period of time.
Phineas J. Whoopee
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maybe because they've been doing better than other markets for awhile and they're due for a breather. i always considered them to be more volatile than other markets. that's part of the reason i use veiex as the fund to contribute to my IRA on a bi-weekly basis.
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One reason could be that this is an actively managed fund rather than an index. LZOEX trumpeted their returns for 2012, but they have the same problems of all actively managed funds, can they continue to outperform an index (most don't) and higher cost. I don't know what your overall international percentage is but 15% for EM seems high. Generally people do 20-30% total international of their equity holding. So 15% EM doesn't leave you room for developed markets. Hope this helps.
Robert C F
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Vanguard (and/or FTSE) says the emerging markets currently make up about 10% of global stock market capitalization (graph on this page https://personal.vanguard.com/us/funds/snapshot?FundId=0628&FundIntExt=INT#tab=2
). So while 15% is not unreasonable, you are nearly 50% overweight emerging compared to its global market weight. Did you mean to overweight emerging, understanding the extra risk and how that fit into your overall portfolio design? Or did the 15% just happen because emerging has done particularly well over the last couple of years vis-a-vis other market sectors? If it's planned, I suggest stick to your plan. If unplanned, I suggest making a plan and to consider rebalancing to an emerging markets allocation somewhat more in line with global market weight.
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