Vanguard Emerging markets at 10%

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DesertInvestor
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Vanguard Emerging markets at 10%

Post by DesertInvestor »

Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
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Re: Vanguard Emerging markets at 10%

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Re: Vanguard Emerging markets at 10%

Post by finite_difference »

If so, maybe shift 10% US to 10% emerging since US is more richly valued. Then again maybe it’s richly valued for a reason. ;)
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
EM stocks aren't that cheap relative to Developed International -- it's just that the US PE is really high.

Frontier markets, on the other hand, are about 23% cheaper than EM.
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Re: Vanguard Emerging markets at 10%

Post by tibbitts »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
I'm just guessing since I haven't read much from him lately but Jeremy Grantham's idea of what constitutes emerging market equities and yours might not coincide. Not that I'm saying it will necessarily matter but it's not as simple as saying, for example, "total U.S. market."
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Re: Vanguard Emerging markets at 10%

Post by JoMoney »

Mr. Bogle frequently recommended that if U.S. investors felt they needed an "international" allocation, they should limit it to 20%.
Interestingly he sometimes suggested that 20% be half in developed, and half in emerging markets.
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Re: Vanguard Emerging markets at 10%

Post by khram »

I dislike the name. It should be undeveloped markets because we don't know if they'll emerge or not. International as a chunk of my portfolio is good enough for me.
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

khram wrote: Wed May 05, 2021 9:09 pm I dislike the name. It should be undeveloped markets because we don't know if they'll emerge or not. International as a chunk of my portfolio is good enough for me.
"Developing Markets" is another term.
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Re: Vanguard Emerging markets at 10%

Post by UpperNwGuy »

Vanguard's Emerging Markets Stock Index Fund (VEMAX) has the following country allocations:
40.9% China
17.7% Taiwan
12.1% India
5.2% Brazil
4.4% South Africa
3.2% Saudi Arabia
2.8% Russia
13.7% Everybody else

If you're comfortable with tilting towards these countries, go for it. I am not.
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Re: Vanguard Emerging markets at 10%

Post by TropikThunder »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm (currently 70% US and 30% international with 10% small value tilt)
How much EM do you already have in that 30% Int'l? And do you mean 10% MORE or to bring it to a total of 10%.
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Re: Vanguard Emerging markets at 10%

Post by Huygens »

You may already be close to 10% in EM. If you use a Total International ETF like VXUS, 25.70% is allocated to EM. 30% x 25.70% = 7.7% of your total portfolio is in EM today. Will 2.3% make a difference?
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Re: Vanguard Emerging markets at 10%

Post by retired@50 »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
What are you using for the current 30% international?

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Re: Vanguard Emerging markets at 10%

Post by Metsfan91 »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
Emerging market is highly volatile. If you can tolerate volatility, 10% in emerging market could be rewarding...Emerging markets have higher growth potential.

Roughly half of my equities are in total international. Vanguard total international holds about 20% in emerging market. 20% of half is 10% of whole portfolio. I hold about 10% in emerging market...Not all my international eggs are in one basket. But, emerging holding is pretty much like what Vanguard holds in vanguard total international fund.

Edit: Vanguard total international used to hold about 20% in emerging market. Now it is holding about 26% as of 3/31/2021. Thus, my emerging market holding is more than 10% of the total portfolio.
Last edited by Metsfan91 on Thu May 06, 2021 8:35 pm, edited 1 time in total.
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Re: Vanguard Emerging markets at 10%

Post by absolute zero »

Not worth complicating your portfolio by splitting out EM, in my opinion, especially since it’s only 10%. If you are intent on making a change because you fear elevated US equity valuations, probably would be simpler to just bump your SCV position to 15 or 20%.

Or you could just do nothing and tune out the noise. That’s okay too, since 30% international / 10% SCV is a decently diversified portfolio as-is.
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Re: Vanguard Emerging markets at 10%

Post by Wannaretireearly »

watchnerd wrote: Wed May 05, 2021 8:57 pm
DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
EM stocks aren't that cheap relative to Developed International -- it's just that the US PE is really high.

Frontier markets, on the other hand, are about 23% cheaper than EM.
How would you recommend investing in frontier markets? Guessing this wouldn't be thru a vanguard fund/etf
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Re: Vanguard Emerging markets at 10%

Post by Huygens »

Wannaretireearly wrote: Wed May 05, 2021 11:29 pm
watchnerd wrote: Wed May 05, 2021 8:57 pm
DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
EM stocks aren't that cheap relative to Developed International -- it's just that the US PE is really high.

Frontier markets, on the other hand, are about 23% cheaper than EM.
How would you recommend investing in frontier markets? Guessing this wouldn't be thru a vanguard fund/etf
As far as I can tell, there is only one frontier markets ETF: https://www.etf.com/FM. (Invesco's frontier markets ETF was closed last year.) I suppose you could also consider something like EMFM, which combines emerging and frontier markets: https://www.etf.com/EMFM.
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Re: Vanguard Emerging markets at 10%

Post by Thesaints »

10% EM is just about the capitalization weighted allocation.
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Re: Vanguard Emerging markets at 10%

Post by ivgrivchuck »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
Your current EM exposure is: 30% * 25% = 7.5%

If you go for 70%/20%/10%, it will be 20% * 25% + 10% = 15%.

Currently you are underweighting emerging (relative to market caps) by 2.5%. After the change you would overweighting it by 5%.

Effectively overweighting EM is betting on China.

How that will turn out... nobody knows. Potential is huge, but there are many kind of risks (including political).
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Re: Vanguard Emerging markets at 10%

Post by shess »

Huygens wrote: Wed May 05, 2021 11:34 pm As far as I can tell, there is only one frontier markets ETF: https://www.etf.com/FM. (Invesco's frontier markets ETF was closed last year.) I suppose you could also consider something like EMFM, which combines emerging and frontier markets: https://www.etf.com/EMFM.
52% financials? I think that's a pass for me, as that seems too ripe for dubious activity. Even if I grant that bringing financial services to the unbanked is potentially lucrative, I somehow don't think that National Bank of Kuwait is where I'd focus my dollars! I guess it could be telling me that there simply is no reasonable float to invest in a broader base of sectors?
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Re: Vanguard Emerging markets at 10%

Post by GregG3 »

Who knows, maybe one day VWO will overtake its 2007 level?
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Re: Vanguard Emerging markets at 10%

Post by stimulacra »

Yep, I have emerging markets at 10% as well. I guess the question is at which point does China cease being a (large) part of EM?
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Re: Vanguard Emerging markets at 10%

Post by nisiprius »

1) What are you holding now as your 30%? The Vanguard Total International Stock Market Index Fund is currently 25% emerging markets, so you are already at 7.5% emerging markets.

2) Your stated reason is that the idea "just makes me feel a little better." "

Time is your friend, impulse is your enemy"--John C. Bogle. Why are you doing this now? Why not long ago?

Did you read something by Grantham and feel an impulse to change your plan? Why didn't you do it long ago, since Grantham began making rosy forecasts for emerging markets long ago?

3) "Based on Jeremy Grantham"... Have you checked the accuracy of GMO's previous forecasts?

Copying from this posting,

Image

we see that in 2010 GMO forecasted that
  • Emerging markets would be the best-performing stock category and would average 7.6% annualized
  • US large caps would be the second worst and would average only 2.7%.
Over the time period of the forecast, what really happend was that
  • US large caps were the best-performing stock category, averaging 13.2%
  • Emerging markets were the worst, returning 0.7%
Tune out the noise.

And the GMO forecasts are noise.
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

Wannaretireearly wrote: Wed May 05, 2021 11:29 pm
How would you recommend investing in frontier markets? Guessing this wouldn't be thru a vanguard fund/etf
I use the iShares FM ETF.
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Re: Vanguard Emerging markets at 10%

Post by Jon Luskin »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
When clients ask me about portfolio changes, I'm less concerned about the particular proposed allocation change as I am about the act of changing a portfolio.

If they green light this portfolio now, what about future portfolio changes? If, next week, they feel that inflation is a factor for your fixed income return, will they decide to increase your position to TIPS? What about the week after that, when they feel that real estate is overvalued and want to decrease exposure to REITs?

Much more important than a particular allocation is sticking with a particular allocation.

Consider, does it really make sense to make this change? Is this change really going to make a difference in long-term investing experience?

More importantly, what system or guidelines do they have in place to keep them committed to their existing allocation? Do they have an investment policy statement? If so, it may make sense to review it now. If not, it probably makes sense to create one.

I hope that helps. :-)

EDIT: For clarity.
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Re: Vanguard Emerging markets at 10%

Post by Huygens »

shess wrote: Thu May 06, 2021 1:40 am
Huygens wrote: Wed May 05, 2021 11:34 pm As far as I can tell, there is only one frontier markets ETF: https://www.etf.com/FM. (Invesco's frontier markets ETF was closed last year.) I suppose you could also consider something like EMFM, which combines emerging and frontier markets: https://www.etf.com/EMFM.
52% financials? I think that's a pass for me, as that seems too ripe for dubious activity. Even if I grant that bringing financial services to the unbanked is potentially lucrative, I somehow don't think that National Bank of Kuwait is where I'd focus my dollars! I guess it could be telling me that there simply is no reasonable float to invest in a broader base of sectors?
I agree. As I've said earlier, I was surprised by the concentration of the fund and relatively small country exposure.
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

Huygens wrote: Thu May 06, 2021 9:52 am

I agree. As I've said earlier, I was surprised by the concentration of the fund and relatively small country exposure.
Well, in the MSCI world, Frontier Markets are only 0.4% of the global stock market cap.

So a pretty small group.

I hold FM at about market weight.
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

stimulacra wrote: Thu May 06, 2021 2:03 am Yep, I have emerging markets at 10% as well. I guess the question is at which point does China cease being a (large) part of EM?
They'd have to relax capital controls.
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Re: Vanguard Emerging markets at 10%

Post by Anon9001 »

I think if you are investing in index funds you should not look at domicile as majority (70-80%) of index invests in large cap companies which tend to be multi-nationals. Seeing the revenue exposure of MSCI ACWI there is 42% exposure to Emerging Economies. This is much bigger than the proposed 10% allocation to EM stocks of 30% International that you want to do ie 3% allocation to EM stocks. If you want this exposure to Emerging Economies than buy VT. For comparison MSCI North America has 14% exposure to Emerging Economies.
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

Anon9001 wrote: Thu May 06, 2021 10:03 am I think if you are investing in index funds you should not look at domicile as majority (70-80%) of index invests in large cap companies which tend to be multi-nationals. Seeing the revenue exposure of MSCI ACWI there is 42% exposure to Emerging Economies. This is much bigger than the proposed 10% allocation to EM stocks of 30% International that you want to do ie 3% allocation to EM stocks. If you want this exposure to Emerging Economies than buy VT. For comparison MSCI North America has 14% exposure to Emerging Economies.
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I just hold global market caps in stocks.

Then I don't have to worry about these ratios.
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Re: Vanguard Emerging markets at 10%

Post by pkcrafter »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
Are you sure your desire to increase emerging markets isn't just based on recent performance?


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Re: Vanguard Emerging markets at 10%

Post by TropikThunder »

GregG3 wrote: Thu May 06, 2021 1:47 am Who knows, maybe one day VWO will overtake its 2007 level?
Why are you only looking at price? According to Portfolio Visualizer, $10,000 invested in VWO on Jan 1, 2007, has grown to $19,750 as of Apr 30. That’s +97.5% for a CAGR of 4.85% with dividends reinvested. That’s not as good as US, but it’s not the zero return you imply.

You’re also ignoring the 2:1 split it did in 2008.
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Re: Vanguard Emerging markets at 10%

Post by DesertInvestor »

UpperNwGuy wrote: Wed May 05, 2021 9:59 pm Vanguard's Emerging Markets Stock Index Fund (VEMAX) has the following country allocations:
40.9% China
17.7% Taiwan
12.1% India
5.2% Brazil
4.4% South Africa
3.2% Saudi Arabia
2.8% Russia
13.7% Everybody else

If you're comfortable with tilting towards these countries, go for it. I am not.
Now that you show it like that, makes me ever more likely to split, maybe even half. How does China and Taiwan not look like a good long term investment? Brazil, India?
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Re: Vanguard Emerging markets at 10%

Post by DesertInvestor »

TropikThunder wrote: Wed May 05, 2021 10:52 pm
DesertInvestor wrote: Wed May 05, 2021 8:44 pm (currently 70% US and 30% international with 10% small value tilt)
How much EM do you already have in that 30% Int'l? And do you mean 10% MORE or to bring it to a total of 10%.
Good question, I assume emerging markets is about 20% of total international or so. So that would be 6% as it stands today. Correct me if I am wrong please.
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Re: Vanguard Emerging markets at 10%

Post by DesertInvestor »

Huygens wrote: Wed May 05, 2021 11:21 pm You may already be close to 10% in EM. If you use a Total International ETF like VXUS, 25.70% is allocated to EM. 30% x 25.70% = 7.7% of your total portfolio is in EM today. Will 2.3% make a difference?
Its in the total international vanguard mutual fund. Should be the same, no?
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Re: Vanguard Emerging markets at 10%

Post by DesertInvestor »

ivgrivchuck wrote: Thu May 06, 2021 1:38 am
DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
Your current EM exposure is: 30% * 25% = 7.5%

If you go for 70%/20%/10%, it will be 20% * 25% + 10% = 15%.

Currently you are underweighting emerging (relative to market caps) by 2.5%. After the change you would overweighting it by 5%.

Effectively overweighting EM is betting on China.

How that will turn out... nobody knows. Potential is huge, but there are many kind of risks (including political).
Very good summary! I noticed all you fixed income is EE and ibonds, is this due to avoidance of interest rate risk?
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Re: Vanguard Emerging markets at 10%

Post by DesertInvestor »

nisiprius wrote: Thu May 06, 2021 7:00 am 1) What are you holding now as your 30%? The Vanguard Total International Stock Market Index Fund is currently 25% emerging markets, so you are already at 7.5% emerging markets.

2) Your stated reason is that the idea "just makes me feel a little better." "

Time is your friend, impulse is your enemy"--John C. Bogle. Why are you doing this now? Why not long ago?

Did you read something by Grantham and feel an impulse to change your plan? Why didn't you do it long ago, since Grantham began making rosy forecasts for emerging markets long ago?

3) "Based on Jeremy Grantham"... Have you checked the accuracy of GMO's previous forecasts?

Copying from this posting,

Image

we see that in 2010 GMO forecasted that
  • Emerging markets would be the best-performing stock category and would average 7.6% annualized
  • US large caps would be the second worst and would average only 2.7%.
Over the time period of the forecast, what really happend was that
  • US large caps were the best-performing stock category, averaging 13.2%
  • Emerging markets were the worst, returning 0.7%
Tune out the noise.

And the GMO forecasts are noise.


Good advice! I just looked, actually closer to 26% emerging markets in tot int index fund (VTIAX).
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Re: Vanguard Emerging markets at 10%

Post by DesertInvestor »

JonL wrote: Thu May 06, 2021 9:02 am
DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
When clients ask me about portfolio changes, I'm less concerned about the particular proposed allocation change as I am about the act of changing a portfolio.

If they green light this portfolio now, what about future portfolio changes? If, next week, they feel that inflation is a factor for your fixed income return, will they decide to increase your position to TIPS? What about the week after that, when they feel that real estate is overvalued and want to decrease exposure to REITs?

Much more important than a particular allocation is sticking with a particular allocation.

Consider, does it really make sense to make this change? Is this change really going to make a difference in long-term investing experience?

More importantly, what system or guidelines do they have in place to keep them committed to their existing allocation? Do they have an investment policy statement? If so, it may make sense to review it now. If not, it probably makes sense to create one.

I hope that helps. :-)

EDIT: For clarity.
Excellent advice!!! I do have a IPS, says I wait 3 months to change investment. So as i wait figured I would ask. Great advice all around!
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Re: Vanguard Emerging markets at 10%

Post by nisiprius »

Here's fact to be aware of... not to see patterns in and try to extrapolate them, but to be aware of.

It doesn't point in any particular direction. But it's a thing to know. It's a thing to know particularly when people are talking about emerging markets performance and not explaining their choice of starting point.

Over the lifetime of Vanguard Emerging Market Index Fund, we can roughly summarize it as including three periods:

1994-2003, emerging markets was roughly flat
2003-2008, emerging markets had a spectacular burst of growth, far outperforming US stocks
2008-present, emerging markets was roughly flat

A bad period, a good period, and a bad period. Three periods.

What you see for past performance basically depends on which periods it included. If your time period includes two bad and one good, you'll see emerging markets as having underperformed. If it includes one of each, it it's about the same as the US. But if you only look at 2003-2008, emerging markets was stunning.

2003-2008 was so stunning that if two investors started on 3/2008, one in EM and one in US stocks, the EM investor would have pulled so far ahead that fifteen years later the US investor would still not have caught up.

Source

Since inception of the Vanguard Emerging Markets Index Fund--Emerging Markets, blue; US, orange:

Image

Since 3/1/2003:

Image

Since start of 2010:

Image
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Re: Vanguard Emerging markets at 10%

Post by GregG3 »

TropikThunder wrote: Thu May 06, 2021 1:37 pm
GregG3 wrote: Thu May 06, 2021 1:47 am Who knows, maybe one day VWO will overtake its 2007 level?
Why are you only looking at price? According to Portfolio Visualizer, $10,000 invested in VWO on Jan 1, 2007, has grown to $19,750 as of Apr 30. That’s +97.5% for a CAGR of 4.85% with dividends reinvested. That’s not as good as US, but it’s not the zero return you imply.

You’re also ignoring the 2:1 split it did in 2008.
I made a mistake and was in EM (around 35%) during the 'lost decade '. Although, I benefitted from my allocation between 2005-2007,I learned to be more cautious about those markets.
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Re: Vanguard Emerging markets at 10%

Post by ivgrivchuck »

DesertInvestor wrote: Thu May 06, 2021 4:49 pm
Very good summary! I noticed all you fixed income is EE and ibonds, is this due to avoidance of interest rate risk?
Best rates with the least risk. An easy choice.
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
Northern Flicker
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Re: Vanguard Emerging markets at 10%

Post by Northern Flicker »

watchnerd wrote: Wed May 05, 2021 8:57 pm
DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
EM stocks aren't that cheap relative to Developed International -- it's just that the US PE is really high.

Frontier markets, on the other hand, are about 23% cheaper than EM.
Valuations also reflect a risk premium discounted in. How do you distinguish FM being cheaper from FM being priced to reflect its greater risk?
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Re: Vanguard Emerging markets at 10%

Post by Northern Flicker »

DesertInvestor wrote: Wed May 05, 2021 8:44 pm Hi,

Based on Jermey Grantham and current emerging market PE compared to US ect thinking about shifting 10% of international to emerging markets (currently 70% US and 30% international with 10% small value tilt). Slightly more complicated portfolio, but just makes me feel a little better continuing to contribute. Wondering how people feel about this?
Jeremy Grantham's predictions and recommendations are not input parameters to my investing strategy.
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

Northern Flicker wrote: Thu May 06, 2021 11:23 pm
Valuations also reflect a risk premium discounted in. How do you distinguish FM being cheaper from FM being priced to reflect its greater risk?
Under EMH, I don't need to have an opinion on this.

Valuations are lower in FM than EM because the market thinks they should be, for whatever reason.

I do not invest in FM because I think it will outperform.

I don't expect any region to outperform.

I invest in FM because it's part of the total global market, and so I hold it at market weight.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
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Re: Vanguard Emerging markets at 10%

Post by Windylotus »

watchnerd wrote: Wed May 05, 2021 8:57 pm Frontier markets, on the other hand, are about 23% cheaper than EM.
What is considered Frontier markets? Thanks
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

Windylotus wrote: Fri May 07, 2021 6:13 am
watchnerd wrote: Wed May 05, 2021 8:57 pm Frontier markets, on the other hand, are about 23% cheaper than EM.
What is considered Frontier markets? Thanks
The countries in the MSCI Frontier Markets index.

https://www.msci.com/documents/10199/f9 ... 0848afe026
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Re: Vanguard Emerging markets at 10%

Post by absolute zero »

watchnerd wrote: Fri May 07, 2021 6:03 am
I invest in FM because it's part of the total global market, and so I hold it at market weight.
If your FM holding is less than 1% of your portfolio, I suspect you invest in FM for fun more than anything else.
:wink:
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Re: Vanguard Emerging markets at 10%

Post by watchnerd »

absolute zero wrote: Fri May 07, 2021 6:45 am
watchnerd wrote: Fri May 07, 2021 6:03 am
I invest in FM because it's part of the total global market, and so I hold it at market weight.
If your FM holding is less than 1% of your portfolio, I suspect you invest in FM for fun more than anything else.
:wink:
It makes me feel philosophically satisfied.
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Re: Vanguard Emerging markets at 10%

Post by nisiprius »

Windylotus wrote: Fri May 07, 2021 6:13 am
watchnerd wrote: Wed May 05, 2021 8:57 pm Frontier markets, on the other hand, are about 23% cheaper than EM.
What is considered Frontier markets? Thanks
It's a euphemism. Other commonly used terms that are euphemisms are "emerging markets," "high-yield bonds."

"Emerging markets" means "economically less developed countries." Instead of saying these are countries with less-developed economies, the term suggests that they are all "emerging," on the way up, and destined to become developed markets.

"Frontier markets" means countries whose markets are not even "emerging." Wikipedia says they are sometimes called "pre-emerging markets," but are so far from being developed that they are not likely to be come developed markets any time soon.

I don't know what the justification for the term "frontier" is. Perhaps it means that it is on the extreme outer limits of exploration by bold pioneering investors.

Note that calculating total market size from MSCI indexes, the total cap weight

for MSCI Frontier Markets, 79 constituents x $997.4 million average market cap per constitution = $0.079 trillion.

For emerging markets, 1,391 x 5,292.32 / 85% = $8.7 trillion

For the MSCI ACWI total world, 2,974 x 21,677.67 / 85% = $76 trillion

So frontier markets represent about 0.1% of the total of all global stock markets, and not having them in one's portfolio is not a serious omission. The way they are mentioned in the same breath... developed markets, emerging markets, frontier markets... gives them a mental weight out of proportion to their financial weight.
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Re: Vanguard Emerging markets at 10%

Post by 3funder »

finite_difference wrote: Wed May 05, 2021 8:55 pm If so, maybe shift 10% US to 10% emerging since US is more richly valued. Then again maybe it’s richly valued for a reason. ;)
+1
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Re: Vanguard Emerging markets at 10%

Post by hnd »

I use VXUS and AVEM to tilt EM to get to 10%.

not because of that looney grantham though.
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