Emerging Market Fund... Should I sell off some?

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boxcarwilly
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Emerging Market Fund... Should I sell off some?

Post by boxcarwilly » Sat Mar 03, 2018 11:49 pm

Greetings everyone,

I'm new here, and have a question about the Emerging Markets Stock Fund (T Rowe Price, PRMSX). I bought 5000 dollars worth in my Roth a few years ago, and it's now run up 35% in the last year. I don't know much about emerging markets and was wondering what folks thought about where this sector might be headed. Seems like a big run and maybe I should sell some shares?

Thank you,

Willy

AlohaJoe
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Re: Emerging Market Fund... Should I sell off some?

Post by AlohaJoe » Sat Mar 03, 2018 11:54 pm

boxcarwilly wrote:
Sat Mar 03, 2018 11:49 pm
I'm new here, and have a question about the Emerging Markets Stock Fund (T Rowe Price, PRMSX). I bought 5000 dollars worth in my Roth a few years ago, and it's now run up 35% in the last year. I don't know much about emerging markets and was wondering what folks thought about where this sector might be headed. Seems like a big run and maybe I should sell some shares?
Everyone here will tell you to stick to the asset allocation in your Investment Policy Statement (IPS).

What does it tell you to do?

If you don't have an asset allocation or an IPS then the wiki includes several recommended books to help you get started: https://www.bogleheads.org/wiki/Boglehe ... art-up_kit

lazylarry
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Re: Emerging Market Fund... Should I sell off some?

Post by lazylarry » Sun Mar 04, 2018 1:00 pm

Unfortunately (or maybe fortunately) nobody knows the future. I used to invest in EM until I realized that I knew relatively nothing about it and did not have the knowledge or time to truly understand it. I would sell it, drop it from your IPS, and rebalance to your IPS.
My profile: https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=86026 | Virtua lBogleheads® Blog: https://virtualbogleheads.wordpress.com/

3funder
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Re: Emerging Market Fund... Should I sell off some?

Post by 3funder » Sun Mar 04, 2018 1:01 pm

What else do you have in your Roth?

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jhfenton
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Re: Emerging Market Fund... Should I sell off some?

Post by jhfenton » Sun Mar 04, 2018 1:26 pm

I have had an allocation allocation to emerging markets since we started investing in the 90's. At this point, the allocation is fixed at roughly 50% of our ex-US and about 25% of our equities overall. I have no idea how it will perform in the near-term.

But with that particular fund, I would count my blessings that I owned it during a period when growth outperformed value and move the money to an inexpensive, broad emerging markets index fund instead of an active fund that costs 1.26% per year.

Mors
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Re: Emerging Market Fund... Should I sell off some?

Post by Mors » Mon Mar 05, 2018 5:57 pm

I would sell it because it is too expensive.

If you wish to buy an em markets allocation, do it through a cheap index fund or etf. Vanguard and iShares have possible choices.

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onthecusp
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Re: Emerging Market Fund... Should I sell off some?

Post by onthecusp » Mon Mar 05, 2018 7:25 pm

I've had an EM fund in my asset allocation for about a year and a half. I've had to sell some every couple of months to re-balance. If you don't have an allocation you should set it in your IPS. Set it higher, lower, or at the current level. Any choice is market timing at this point if you didn't have a previous allocation set.

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arcticpineapplecorp.
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Re: Emerging Market Fund... Should I sell off some?

Post by arcticpineapplecorp. » Mon Mar 05, 2018 8:05 pm

boxcarwilly wrote:
Sat Mar 03, 2018 11:49 pm
Greetings everyone,

I'm new here, and have a question about the Emerging Markets Stock Fund (T Rowe Price, PRMSX). I bought 5000 dollars worth in my Roth a few years ago, and it's now run up 35% in the last year. I don't know much about emerging markets and was wondering what folks thought about where this sector might be headed. Seems like a big run and maybe I should sell some shares?

Thank you,

Willy
welcome to the group.

My first question to you is, "Why did you buy an emerging markets stock fund if you admit you "don't know much about emerging markets"?"

when you look at the patchwork quilt below what do you see?

Image

source: https://www.callan.com/wp-content/uploa ... d_2018.pdf

Hopefully you see that in many (if not most) years the emerging markets index was either the BEST or the WORST performer of all asset classes. I'm not saying that's necessarily good or bad, but something you want to be aware of. Are you interested in that level of volatility in your Roth (not sure what else you have in there...you didn't say)?

It still has a cheaper P/E and Price to Book than the total stock market index fund, but a smidge higher P/E but the same price to book as the total international stock market index fund:

https://personal.vanguard.com/us/funds/ ... true#tab=2
https://personal.vanguard.com/us/FundsS ... true#tab=2
https://personal.vanguard.com/us/funds/ ... true#tab=2

My second question to you is, "If you sell it, what will you exchange it for?"
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

ThePrince
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Re: Emerging Market Fund... Should I sell off some?

Post by ThePrince » Mon Mar 05, 2018 8:24 pm

Mors wrote:
Mon Mar 05, 2018 5:57 pm
I would sell it because it is too expensive.

If you wish to buy an em markets allocation, do it through a cheap index fund or etf. Vanguard and iShares have possible choices.
I own PRMSX; it has beaten VWO and EEM over the past 10 years.

TheFlats
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Re: Emerging Market Fund... Should I sell off some?

Post by TheFlats » Mon Mar 05, 2018 10:19 pm

It's impossible to determine what EM, or any other asset class for that matter is going to do this year or in the near future. The periodic table referenced above is a great tool for gaining insights into trends in asset class returns but cannot predict the future. I'd say if having emerging markets exposure at a percentage of your portfolio is consistent with your IPS then the question becomes does there exists a different fund that provides the same exposure and comparable performance with lower fees. For example if 10% of your desired allocation is for emerging markets then re balance so that you have reach that percentage again.

Actively managed funds focused on EM generally have higher fees, this one is actually below the average for this category and returns appear to beat benchmarks

Mors
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Re: Emerging Market Fund... Should I sell off some?

Post by Mors » Mon Mar 05, 2018 10:48 pm

ThePrince wrote:
Mon Mar 05, 2018 8:24 pm
Mors wrote:
Mon Mar 05, 2018 5:57 pm
I would sell it because it is too expensive.

If you wish to buy an em markets allocation, do it through a cheap index fund or etf. Vanguard and iShares have possible choices.
I own PRMSX; it has beaten VWO and EEM over the past 10 years.
Before or after fees?

Even if it did after fees, it is too expensive to expect it to consistently overperform the index in the future. I do not believe that it is realistic to expect them to beat by more than 1,23%-0,14% (vanguard em fund admiral shares) annually the index, and if they do not then you are losing money compared to an index fund.

drk
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Re: Emerging Market Fund... Should I sell off some?

Post by drk » Mon Mar 05, 2018 10:58 pm

ThePrince wrote:
Mon Mar 05, 2018 8:24 pm
Mors wrote:
Mon Mar 05, 2018 5:57 pm
I would sell it because it is too expensive.

If you wish to buy an em markets allocation, do it through a cheap index fund or etf. Vanguard and iShares have possible choices.
I own PRMSX; it has beaten VWO and EEM over the past 10 years.
Did it really?

ThePrince
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Re: Emerging Market Fund... Should I sell off some?

Post by ThePrince » Mon Mar 05, 2018 11:06 pm

drk wrote:
Mon Mar 05, 2018 10:58 pm
ThePrince wrote:
Mon Mar 05, 2018 8:24 pm
Mors wrote:
Mon Mar 05, 2018 5:57 pm
I would sell it because it is too expensive.

If you wish to buy an em markets allocation, do it through a cheap index fund or etf. Vanguard and iShares have possible choices.
I own PRMSX; it has beaten VWO and EEM over the past 10 years.
Did it really?
Looks like it did to me. What do you see? Hit the “maximum” time period button on the chart.

drk
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Location: Seattle

Re: Emerging Market Fund... Should I sell off some?

Post by drk » Mon Mar 05, 2018 11:14 pm

ThePrince wrote:
Mon Mar 05, 2018 11:06 pm
drk wrote:
Mon Mar 05, 2018 10:58 pm
ThePrince wrote:
Mon Mar 05, 2018 8:24 pm
Mors wrote:
Mon Mar 05, 2018 5:57 pm
I would sell it because it is too expensive.

If you wish to buy an em markets allocation, do it through a cheap index fund or etf. Vanguard and iShares have possible choices.
I own PRMSX; it has beaten VWO and EEM over the past 10 years.
Did it really?
Looks like it did to me. What do you see? Hit the “maximum” time period button on the chart.
If I squint, I can see a difference in performance over the last ten years, but I can't find an answer as to whether Morningstar considers fees in those charts.

ThePrince
Posts: 338
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Location: U.S.A.

Re: Emerging Market Fund... Should I sell off some?

Post by ThePrince » Mon Mar 05, 2018 11:17 pm

drk wrote:
Mon Mar 05, 2018 11:14 pm
ThePrince wrote:
Mon Mar 05, 2018 11:06 pm
drk wrote:
Mon Mar 05, 2018 10:58 pm
ThePrince wrote:
Mon Mar 05, 2018 8:24 pm
Mors wrote:
Mon Mar 05, 2018 5:57 pm
I would sell it because it is too expensive.

If you wish to buy an em markets allocation, do it through a cheap index fund or etf. Vanguard and iShares have possible choices.
I own PRMSX; it has beaten VWO and EEM over the past 10 years.
Did it really?
Looks like it did to me. What do you see? Hit the “maximum” time period button on the chart.
If I squint, I can see a difference in performance over the last ten years, but I can't find an answer as to whether Morningstar considers fees in those charts.
What about after hitting the “maximum” button on the chart? How about the 5-yr.?

billy269
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Re: Emerging Market Fund... Should I sell off some?

Post by billy269 » Mon Mar 05, 2018 11:57 pm

drk wrote:
Mon Mar 05, 2018 11:14 pm
ThePrince wrote:
Mon Mar 05, 2018 11:06 pm
drk wrote:
Mon Mar 05, 2018 10:58 pm
ThePrince wrote:
Mon Mar 05, 2018 8:24 pm
Mors wrote:
Mon Mar 05, 2018 5:57 pm
I would sell it because it is too expensive.

If you wish to buy an em markets allocation, do it through a cheap index fund or etf. Vanguard and iShares have possible choices.
I own PRMSX; it has beaten VWO and EEM over the past 10 years.
Did it really?
Looks like it did to me. What do you see? Hit the “maximum” time period button on the chart.
If I squint, I can see a difference in performance over the last ten years, but I can't find an answer as to whether Morningstar considers fees in those charts.
Yes, fees are included.

boxcarwilly
Posts: 6
Joined: Fri Feb 23, 2018 6:18 am

Re: Emerging Market Fund... Should I sell off some?

Post by boxcarwilly » Sat Mar 10, 2018 7:09 am

Thanks for the replies.. I guess I'm still trying to educate myself on the strategies employed here but I was sort of concerned about this category's recent run up and was thinking of selling it back down to a reasonable percentage of my portfolio while I learn more (before it possibly goes down). Now that I realize you guys don't "try to time" the market, I guess my question is pretty dumb in hindsight.
Basically, I have followed the allocation model recommended by Financial Engines service which is a free advice service offered through my company's 401k with Vanguard. This EM fund is in my roth, which is with T Rowe. My plan is to get rid of the T Rowe Roth and roll it into Vanguard with all my other assets to simplify things very soon. I'm going to stick with the service's advice until I'm more educated on the skills employed here and have my own model to follow.

Thank you
Willy

rkhusky
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Re: Emerging Market Fund... Should I sell off some?

Post by rkhusky » Sat Mar 10, 2018 7:46 am

boxcarwilly wrote:
Sat Mar 10, 2018 7:09 am
Thanks for the replies.. I guess I'm still trying to educate myself on the strategies employed here but I was sort of concerned about this category's recent run up and was thinking of selling it back down to a reasonable percentage of my portfolio while I learn more (before it possibly goes down). Now that I realize you guys don't "try to time" the market, I guess my question is pretty dumb in hindsight.
Basically, I have followed the allocation model recommended by Financial Engines service which is a free advice service offered through my company's 401k with Vanguard. This EM fund is in my roth, which is with T Rowe. My plan is to get rid of the T Rowe Roth and roll it into Vanguard with all my other assets to simplify things very soon. I'm going to stick with the service's advice until I'm more educated on the skills employed here and have my own model to follow.

Thank you
Willy
For what it's worth, Vanguard's Total International fund has about 20% in what it considers emerging markets, i.e. it's asset allocation is 80/20 between Developed International Markets/Emerging Markets. It's target date funds have about 40% of equities in international stocks, i.e. an AA of 60/40 between US and International. Combining those together you get about 60/32/8 for US/Developed Int'l/Emerging Int'l. You could rebalance the stock portion of your portfolio to match those numbers if you wanted to follow Vanguard's recommended ratios for both their LifeStrategy funds and their Target Retirement funds.

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BeBH65
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Re: Emerging Market Fund... Should I sell off some?

Post by BeBH65 » Sat Mar 10, 2018 8:53 am

boxcarwilly wrote:
Sat Mar 10, 2018 7:09 am
Thanks for the replies.. I guess I'm still trying to educate myself on the strategies employed here but I was sort of concerned about this category's recent run up and was thinking of selling it back down to a reasonable percentage of my portfolio while I learn more (before it possibly goes down). Now that I realize you guys don't "try to time" the market, I guess my question is pretty dumb in hindsight.
Basically, I have followed the allocation model recommended by Financial Engines service which is a free advice service offered through my company's 401k with Vanguard. This EM fund is in my roth, which is with T Rowe. My plan is to get rid of the T Rowe Roth and roll it into Vanguard with all my other assets to simplify things very soon. I'm going to stick with the service's advice until I'm more educated on the skills employed here and have my own model to follow.

Thank you
Willy
Hello Willy,

Many on this forum beleive in an asset allocation (AA) that matches the risk profile of the investor; his need, ability and willingness to take risk.
Your asset allocation will determine your resutls for 80-90%. That is investors with the same AA will tend to have similar results.
There will be one AA that is the best between now and the time that you will need the money. We will know this only at the end; no-one knows at this day what would be the AA which will be best for you for that period.

It is important the stay the course with your AA. Over time different assets will grow differentky. It is important to keep to the risk profile that you choose and hence you might need to rebalance from time to time.

Concretely;
if you choose that EM would be 10% of your portfolio and it now is 20% of your portfolio then it is time to rebalance.
You would sell the asset that are now overweight and buy the assets that are lowly prices/underweight in your AA.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

boxcarwilly
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Joined: Fri Feb 23, 2018 6:18 am

Re: Emerging Market Fund... Should I sell off some?

Post by boxcarwilly » Tue Mar 13, 2018 1:24 am

BeBH65 wrote:
Sat Mar 10, 2018 8:53 am
boxcarwilly wrote:
Sat Mar 10, 2018 7:09 am
Thanks for the replies.. I guess I'm still trying to educate myself on the strategies employed here but I was sort of concerned about this category's recent run up and was thinking of selling it back down to a reasonable percentage of my portfolio while I learn more (before it possibly goes down). Now that I realize you guys don't "try to time" the market, I guess my question is pretty dumb in hindsight.
Basically, I have followed the allocation model recommended by Financial Engines service which is a free advice service offered through my company's 401k with Vanguard. This EM fund is in my roth, which is with T Rowe. My plan is to get rid of the T Rowe Roth and roll it into Vanguard with all my other assets to simplify things very soon. I'm going to stick with the service's advice until I'm more educated on the skills employed here and have my own model to follow.

Thank you
Willy
Hello Willy,

Many on this forum beleive in an asset allocation (AA) that matches the risk profile of the investor; his need, ability and willingness to take risk.
Your asset allocation will determine your resutls for 80-90%. That is investors with the same AA will tend to have similar results.
There will be one AA that is the best between now and the time that you will need the money. We will know this only at the end; no-one knows at this day what would be the AA which will be best for you for that period.

It is important the stay the course with your AA. Over time different assets will grow differentky. It is important to keep to the risk profile that you choose and hence you might need to rebalance from time to time.

Concretely;
if you choose that EM would be 10% of your portfolio and it now is 20% of your portfolio then it is time to rebalance.
You would sell the asset that are now overweight and buy the assets that are lowly prices/underweight in your AA.
Thank you. I think I will rebalance since I seem to be top heavy with the EM.

Willy

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