Piling into emerging markets

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ducksauce9
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Piling into emerging markets

Post by ducksauce9 » Tue Aug 18, 2015 5:39 pm

Anyone else staying the course with their asset allocation by piling into emerging markets recently? I'm just maintaining my target percentages and enjoying the recent dip.

livesoft
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Re: Piling into emerging markets

Post by livesoft » Tue Aug 18, 2015 5:41 pm

Personally, I don't think capitulation has happened yet, so no, I am not rebalancing into EM yet.
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freebeer
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Re: Piling into emerging markets

Post by freebeer » Tue Aug 18, 2015 5:45 pm

livesoft wrote:Personally, I don't think capitulation has happened yet, so no, I am not rebalancing into EM yet.
livesoft, do you market time your rebalancing in general or is EM a special case?

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Re: Piling into emerging markets

Post by livesoft » Tue Aug 18, 2015 5:47 pm

Of course I market time rebalancing. I like to rebalance into any asset class at the lowest day of the year for that asset class. If one is using rebalancing bands like I do, then the chance that one hits a rebalancing band on the lowest day of the year for that asset class is actually quite high.
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Re: Piling into emerging markets

Post by z3r0c00l » Tue Aug 18, 2015 5:48 pm

Just got $1000 of total international today, trying to keep the AA balanced. Not loving the feel of any investment right now, but what can we do? It is a vote of confidence in the future. The Euro at $1.10 feels like a pretty good deal.

freebeer
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Re: Piling into emerging markets

Post by freebeer » Tue Aug 18, 2015 5:50 pm

livesoft wrote:...If one is using rebalancing bands like I do, then the chance that one hits a rebalancing band on the lowest day of the year for that asset class is actually quite high.
So could you explain the bands (or point to a post, I know you are prolific so probably I have missed explanations)? It would be nice to understand how this has operated for EM so far this year (presuming that your original comment wasn't intended to be facetious).

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Maynard F. Speer
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Re: Piling into emerging markets

Post by Maynard F. Speer » Tue Aug 18, 2015 5:58 pm

It's nice to know there's an asset class at the lower end of its historic valuations (considering so much in the developed world - stocks and bonds - are near the top)

I've been maintaining 10% .. Mostly topping up smaller companies, so moving towards more domestic exposure, particularly in India

I'm actually debating whether to top up again if my allocation falls to 9%, or wait till the price is at least above the 50-day moving average ... Generally I like to top up and rebalance frequently (as EM's volatility alone can be quite profitable), but unsure whether this might be a bit of a falling knife
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livesoft
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Re: Piling into emerging markets

Post by livesoft » Tue Aug 18, 2015 6:03 pm

The last time EM dropped more than 3% in one day was July 8, 2015. On that day, VEIEX also reached a low for 2015 (up to that date). Here is a chart from Morningstar:

Image

Note how quickly it recovered which I think was another rebalancing signal, too. Not shown in the chart are some other asset classes which also dropped on 7/8 and recovered, and then slowly trended downwards.

Here is an old thread which mentions VWO: viewtopic.php?t=153585

And another thread from early July: viewtopic.php?p=2549464#p2549464
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columbia
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Re: Piling into emerging markets

Post by columbia » Tue Aug 18, 2015 7:43 pm

IMHO, questions are what one should or shouldn't do about a particular sector are further support for holding balanced funds.

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iceport
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Re: Piling into emerging markets

Post by iceport » Tue Aug 18, 2015 8:36 pm

ducksauce9 wrote:Anyone else staying the course with their asset allocation by piling into emerging markets recently? I'm just maintaining my target percentages and enjoying the recent dip.
Yes. And no. Well, sort of.

Yes, I'm staying the course with my AA. I just made a purchase yesterday to top up my emerging markets allocation.

However, I hadn't quite reached my rebalancing band yet. Does that mean I didn't stay the course?

The other consideration was that I need to deploy a growing money market position, and this was a step in that direction. Since I hold VEMAX in a taxable account, I logged in the trade. Then I noticed the last time I bought any EM was on January 31, 2014. Must have been part of my annual rebalancing.

So, with a single purchase in over a year and a half, I wouldn't exactly call it "piling into" EM.

The enjoyment wasn't there for me, either; you never know how low it will go. (Sure enough, it went even lower again today. :annoyed )

I just noticed over the weekend that EM was down quite a bit, and the price was about as low as it's been in five years, so I placed an order on Sunday. So I sort of jumped the gun.

Now I have no idea if this was the kind of thing the OP was looking for. :?
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k66
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Re: Piling into emerging markets

Post by k66 » Tue Aug 18, 2015 9:06 pm

ducksauce9 wrote:Anyone else staying the course with their asset allocation by piling into emerging markets recently? I'm just maintaining my target percentages and enjoying the recent dip.
I am following my ISP, which states that I will use accumulated cash to purchase the most under-represented fund in the portfolio at the time (which is defined as being once I have accumulated a set dollar amount), even if it means that it then becomes the most over-represented fund in the portfolio as a result.

If EM happens to be my down-the-most fund at that time, then I will buy it. I also don't split the purchase (say between multiple low funds), I just buy one. A few months later, after accumulating sufficient dividend and interest cash again, I repeat the process.
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oneleaf
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Re: Piling into emerging markets

Post by oneleaf » Tue Aug 18, 2015 9:22 pm

Yep, this year I have been accumulating mining and EM stocks. I have had quite a bit of new money to put into the market, so not exactly rebalancing but certainly putting it into the weakest asset classes.

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Re: Piling into emerging markets

Post by abyan » Tue Aug 18, 2015 9:28 pm

I put a portion of each paycheck into my mutual funds at VG. And use that to rebalance each time. That's been meaning a lot of EM of late. Which feels strange, but at the same time, that's what rebalancing is all about. I'm not thrilled about buying EM several months ago, but love that I bought some yesterday! Maybe it's a falling knife, maybe it's a historic chance to buy cheap. I dunno. I did up my international a bit this year overall -- was 30% of my equities, and my goal is to get it up to 33% or so (which I know isn't that big a diff). But it's been difficult to achieve because of EM falling so much, so often.

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tainted-meat
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Re: Piling into emerging markets

Post by tainted-meat » Tue Aug 18, 2015 9:31 pm

Piling as much as possible. Tilted towards it pretty heavily at this time.

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Re: Piling into emerging markets

Post by GoldenFinch » Tue Aug 18, 2015 9:53 pm

I really don't like EM, but I will rebalance soon and probably buy more. Sticking to my written plan.

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tarheel
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Re: Piling into emerging markets

Post by tarheel » Wed Aug 19, 2015 5:30 am

Changing future contributions to EM for the time being......waiting to hit the rebalancing band before making a move (which costs $49.95 for me). :annoyed

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siamond
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Re: Piling into emerging markets

Post by siamond » Wed Aug 19, 2015 7:06 am

Sticking to my AA, and consequently buying some EM. And it's also a great TLH opportunity...

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Re: Piling into emerging markets

Post by garlandwhizzer » Wed Aug 19, 2015 12:12 pm

Wow, I'm impressed by the fortitude of some of you who are piling into or rebalancing into beaten up EM now. As for EM my personal allocation is 20% of equity, same as DM, and I've been shoveling money into that black hole for years. My shoulders are now so sore from all that shoveling that I've set down my shovel and am now merely watching. I'm not going to sell but neither am I going to buy more than my already overweight position. I am still hopeful that in time EM will reach its potential but like PME, its extreme volatility requires large doses of Alka Seltzer and Tums, not to mention Valium, along the way.

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GoldenFinch
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Re: Piling into emerging markets

Post by GoldenFinch » Wed Aug 19, 2015 12:20 pm

garlandwhizzer wrote:Wow, I'm impressed by the fortitude of some of you who are piling into or rebalancing into beaten up EM now. As for EM my personal allocation is 20% of equity, same as DM, and I've been shoveling money into that black hole for years. My shoulders are now so sore from all that shoveling that I've set down my shovel and am now merely watching. I'm not going to sell but neither am I going to buy more than my already overweight position. I am still hopeful that in time EM will reach its potential but like PME, its extreme volatility requires large doses of Alka Seltzer and Tums, not to mention Valium, along the way.

Garland Whizzer
Yep. I pretty much really don't like EM. Feel the same way you do. I might buy a little bit more if it tanks a bit more, but really it has been my most miserable regrettable investment (aside from SunMicro back in the day).

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oneleaf
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Re: Piling into emerging markets

Post by oneleaf » Wed Aug 19, 2015 12:32 pm

garlandwhizzer wrote:Wow, I'm impressed by the fortitude of some of you who are piling into or rebalancing into beaten up EM now. As for EM my personal allocation is 20% of equity, same as DM, and I've been shoveling money into that black hole for years. My shoulders are now so sore from all that shoveling that I've set down my shovel and am now merely watching. I'm not going to sell but neither am I going to buy more than my already overweight position. I am still hopeful that in time EM will reach its potential but like PME, its extreme volatility requires large doses of Alka Seltzer and Tums, not to mention Valium, along the way.

Garland Whizzer
I have been shoveling money into EMV and PME for awhile now. I see it as a warmup exercise to full-blown crisis/bear market investing.

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Maynard F. Speer
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Re: Piling into emerging markets

Post by Maynard F. Speer » Wed Aug 19, 2015 12:46 pm

EM's not far off 30% of my equities, but I love investing in cheap regions and have to stop my allocation creeping higher .. Although EM may be out of favour indefinitely, I've still got bigger reservations about the developed world

As usual, I spread exposure a bit - small, active, value, and a bit of an overweight in infrastructure .. I almost hope they fall another 50% so I can buy up more India and Russia (without going over my allocation)

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oneleaf
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Re: Piling into emerging markets

Post by oneleaf » Wed Aug 19, 2015 12:55 pm

I'm curious if anyone who has a substantial overweight (say 25% to 33% of equities) in EM staying the course? I am at around 42% US/ 38% Developed / 20% EM. Luckily I also have a low equity allocation (50%) in a Larry-esque portfolio of small-value tilted funds.

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Re: Piling into emerging markets

Post by Bracket » Wed Aug 19, 2015 12:56 pm

ducksauce9 wrote:Anyone else staying the course with their asset allocation by piling into emerging markets recently? I'm just maintaining my target percentages and enjoying the recent dip.
Yes I always direct new contributions towards whatever is down so I put this month's contribution into VWO, and I still have an open order to buy more if it ever hits 30. Here's hoping!

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ray.james
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Re: Piling into emerging markets

Post by ray.james » Wed Aug 19, 2015 1:09 pm

Yes 15% of equities and an additional 8% play money.

Also, even though VWO dropped ~30% since last year, 10% of the drop is currency fluctuation. So if emerging markets were really having a recession/down day, it has further lot to go if the dollar keeps strengthening. This ride is not going to be pretty. I buy them in retirement accounts. So no TLH but I am much more disciplined and sleep better with losses in 401k as against roth /taxable.
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Spekus
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Re: Piling into emerging markets

Post by Spekus » Wed Aug 19, 2015 1:11 pm

I am with 50 EM/50 developed mix of asset allocation, no bonds. I feel excited with this drop. I have re-balanced on the day of Chinese yuan devaluation when EIMI was about 25 percent down from the top.I am Considering using small leverage if we will have a catastrophe and it drops by 50 percent. I am only 22 years old so my additional contributions help to offset even big moves down. I also really want to buy russia/brasil/nigeria etfs to produce greater tilt towards value but boglelhead principals so far are keeping me away from executing the idea.

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Re: Piling into emerging markets

Post by Caduceus » Wed Aug 19, 2015 1:58 pm

I was taking a look at my spreadsheets and realized that it seems like a big drop only because people are talking about it so much?

My average cost basis over the last three years was 39, and the price is about 35.6 ... so a drop of 3.40 is a drop of about 8.7% (dividends not included).

That's not good, but it's not particularly scary either.

EM has fallen more than European markets in the last few months, so to keep my allocation at where it was supposed to be, I bought more today 8-)

I think it will be harder to keep my emotions out of the equation if it drops by another 20%, because I might start second-guessing the plan. This is where the Bogleheads come in, to tell me to stay the course!!

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Re: Piling into emerging markets

Post by small_index » Wed Aug 19, 2015 4:50 pm

I've kept 10% VWO in my equity portion, and I'm happy with it despite -14% overall losses in the past year. The thing is, sometimes during the past year Europe was in even worse shape, so rebalacing had me selling VWO to buy VEU. I've sold at a couple high points not because I tried to time anything, but because VWO did better than other funds.

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Re: Piling into emerging markets

Post by FillorKill » Wed Aug 19, 2015 5:01 pm

I'm north of my equity band and my international band, so, no. If I were below each I'd be buying more. Maybe I'll buy a CD.

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ray.james
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Re: Piling into emerging markets

Post by ray.james » Wed Aug 19, 2015 5:12 pm

Caduceus wrote:I was taking a look at my spreadsheets and realized that it seems like a big drop only because people are talking about it so much?

My average cost basis over the last three years was 39, and the price is about 35.6 ... so a drop of 3.40 is a drop of about 8.7% (dividends not included).

That's not good, but it's not particularly scary either.

EM has fallen more than European markets in the last few months, so to keep my allocation at where it was supposed to be, I bought more today 8-)

I think it will be harder to keep my emotions out of the equation if it drops by another 20%, because I might start second-guessing the plan. This is where the Bogleheads come in, to tell me to stay the course!!
It is not just the fall, but lack of growth in EM for past 5 years. It went on to value scale during the time as it went from 17 p/E to 12 right now. However, the correlation was expected to be inline around 0.7 against total stock market based on "historical data". Very good demonstration of risk taking and especially when some bogleheads mention, it may take 10 years to recover.
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Caduceus
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Re: Piling into emerging markets

Post by Caduceus » Wed Aug 19, 2015 5:39 pm

ray.james wrote:
It is not just the fall, but lack of growth in EM for past 5 years. It went on to value scale during the time as it went from 17 p/E to 12 right now. However, the correlation was expected to be inline around 0.7 against total stock market based on "historical data". Very good demonstration of risk taking and especially when some bogleheads mention, it may take 10 years to recover.
May I ask where you get your P/E figures from? Vanguard's webpage for VWO says that it was trading at 16.5x earnings as of July 31, so that would cause the P/E to be around 15x as of market close today, nowhere near 12x P/E.

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Re: Piling into emerging markets

Post by MKP » Wed Aug 19, 2015 7:32 pm

Caduceus wrote:
ray.james wrote:
It is not just the fall, but lack of growth in EM for past 5 years. It went on to value scale during the time as it went from 17 p/E to 12 right now. However, the correlation was expected to be inline around 0.7 against total stock market based on "historical data". Very good demonstration of risk taking and especially when some bogleheads mention, it may take 10 years to recover.
May I ask where you get your P/E figures from? Vanguard's webpage for VWO says that it was trading at 16.5x earnings as of July 31, so that would cause the P/E to be around 15x as of market close today, nowhere near 12x P/E.
One is forward looking earnings, the other is past p/e.

Forward is around 13.

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Re: Piling into emerging markets

Post by MindBogler » Wed Aug 19, 2015 8:58 pm

oneleaf wrote:I'm curious if anyone who has a substantial overweight (say 25% to 33% of equities) in EM staying the course? I am at around 42% US/ 38% Developed / 20% EM. Luckily I also have a low equity allocation (50%) in a Larry-esque portfolio of small-value tilted funds.
My stocks are split into quarters with 25% in long bonds. So each sector is 18.75% of my total portfolio.

25% EM
25% EAFE
25% S&P 500
25% SCV

I am staying the course. EM has always been all over the place. I think valuations point towards it being one of the best places to put your money right now. If you're making payroll contributions I would be putting my money there first -- which is exactly what I'm doing.

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tainted-meat
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Re: Piling into emerging markets

Post by tainted-meat » Wed Aug 19, 2015 9:17 pm

I really like that allocation. Simple yet value-y.
MindBogler wrote:
oneleaf wrote:I'm curious if anyone who has a substantial overweight (say 25% to 33% of equities) in EM staying the course? I am at around 42% US/ 38% Developed / 20% EM. Luckily I also have a low equity allocation (50%) in a Larry-esque portfolio of small-value tilted funds.
My stocks are split into quarters with 25% in long bonds. So each sector is 18.75% of my total portfolio.

25% EM
25% EAFE
25% S&P 500
25% SCV

I am staying the course. EM has always been all over the place. I think valuations point towards it being one of the best places to put your money right now. If you're making payroll contributions I would be putting my money there first -- which is exactly what I'm doing.

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tainted-meat
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Re: Piling into emerging markets

Post by tainted-meat » Wed Aug 19, 2015 9:41 pm

Hang Seng is down big again today. I wish I could get more but I am already all-in. Might have to sell some more domestic. :beer

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Re: Piling into emerging markets

Post by zotty » Thu Aug 20, 2015 7:32 am

I remember throwing fresh money into domestic stocks in july 2008 and cheering myself for buying-low. In hindsight, and over years, not bad, but certainly not as optimal as my initial glee.

I've been an incremental buyer of emerging markets for a week. downdrafts usually don't turn into full blown crises, but sometimes they do. EM is not cheerworthy if we are about to have a financial crisis similar to 1997. If we get to that point, the 2009 lows (for EM) may be tested.

These prices won't last, but nobody knows which direction we are going.
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Re: Piling into emerging markets

Post by rkhusky » Thu Aug 20, 2015 8:14 am

ray.james wrote: It is not just the fall, but lack of growth in EM for past 5 years. It went on to value scale during the time as it went from 17 p/E to 12 right now. However, the correlation was expected to be inline around 0.7 against total stock market based on "historical data". Very good demonstration of risk taking and especially when some bogleheads mention, it may take 10 years to recover.
The peak for Vanguard's EM fund was 8+ years ago, including dividends. A demonstration that a market can go down and stay down for a while.

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Average Investor
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Re: Piling into emerging markets

Post by Average Investor » Thu Aug 20, 2015 10:01 am

I've been buying EM in modest chunks for about a week as well. My first experience trying to catch a falling knife!
Tomorrow never knows.

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Maynard F. Speer
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Re: Piling into emerging markets

Post by Maynard F. Speer » Thu Aug 20, 2015 10:58 am

You see moving averages can be a simple way to reduce the tendency to catch falling knives

I'd consider the point where price sits somewhere between the SMA 20 and 50 as a reasonable rebalancing point .. and perhaps it will fall again, and you'd repeat .. If it makes you more patient, it probably improves your odds

Image

Just to gloat over one of my better investing decisions this year .. Around March I started moving almost 40% of my equities into local micro-caps and start-ups .. Higher risk, but less swayed by global issues, and part of the market that's perhaps been less inflated by central banks

Image
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caklim00
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Re: Piling into emerging markets

Post by caklim00 » Thu Aug 20, 2015 11:38 am

Maynard F. Speer wrote:You see moving averages can be a simple way to reduce the tendency to catch falling knives

I'd consider the point where price sits somewhere between the SMA 20 and 50 as a reasonable rebalancing point .. and perhaps it will fall again, and you'd repeat .. If it makes you more patient, it probably improves your odds

Image
What tool are you using for that?

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Maynard F. Speer
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Re: Piling into emerging markets

Post by Maynard F. Speer » Thu Aug 20, 2015 1:44 pm

caklim00 wrote:
Maynard F. Speer wrote:You see moving averages can be a simple way to reduce the tendency to catch falling knives

I'd consider the point where price sits somewhere between the SMA 20 and 50 as a reasonable rebalancing point .. and perhaps it will fall again, and you'd repeat .. If it makes you more patient, it probably improves your odds

Image
What tool are you using for that?
That's just the shares section on one of my fund platforms - and then you can add Simple Moving Averages under the Upper Indicators tab .. and Relative Strength (under Lower Indicators) is another one that can be quite useful

There might be better out there, but I've always liked the design on this one (changed it to USD too)

http://www.hl.co.uk/shares/shares-searc ... are-charts
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RNJ
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Re: Piling into emerging markets

Post by RNJ » Thu Aug 20, 2015 2:02 pm

EM target: 20% of Int., 12.5% of equities, 8% of portfolio. Maintained fairly consistent allocation for several years, mostly with new contributions. No plans to change beyond gradually reducing equity exposure over next few years.

However, in an effort to make the best of things, I've completed several TLHs
(VWO<->IEMG).

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grap0013
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Re: Piling into emerging markets

Post by grap0013 » Fri Aug 21, 2015 7:33 am

oneleaf wrote:I'm curious if anyone who has a substantial overweight (say 25% to 33% of equities) in EM staying the course? I am at around 42% US/ 38% Developed / 20% EM. Luckily I also have a low equity allocation (50%) in a Larry-esque portfolio of small-value tilted funds.
EM is 25% of my equities and 22.5% of total portfolio. I have been dumping 100% of my 403B contributions ~25K per year for the past several years into EM. I have not hit an upper band.

BTW, EM one year returns are now -20%+ and I think it makes it an official bear market for this asset class. Which is different than the past few years of simply being flat or mildly down.

I do think we'll get a 2003-2007 type of performance from EM again, but it is going to take discipline to reap those returns. Stay the course!
There are no guarantees, only probabilities.

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kramer
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Re: Piling into emerging markets

Post by kramer » Fri Aug 21, 2015 7:53 am

I really don't like that only 37% of VWO (Vanguard Emerging Markets ETF) dividends were qualified dividends in 2014.

VWO paid about 10% of dividends in foreign taxes, so if your overall tax rate is 10% or higher (or if you fall under the $300/$600 total foreign taxes paid threshold), you will probably get all that money back in foreign tax credit.

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Re: Piling into emerging markets

Post by Grt2bOutdoors » Fri Aug 21, 2015 7:59 am

z3r0c00l wrote:Just got $1000 of total international today, trying to keep the AA balanced. Not loving the feel of any investment right now, but what can we do? It is a vote of confidence in the future. The Euro at $1.10 feels like a pretty good deal.
Get ready, it's going to $1.00. Just a matter of time.
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Re: Piling into emerging markets

Post by Grt2bOutdoors » Fri Aug 21, 2015 8:06 am

oneleaf wrote:Yep, this year I have been accumulating mining and EM stocks. I have had quite a bit of new money to put into the market, so not exactly rebalancing but certainly putting it into the weakest asset classes.
I've been accumulating major integrated energy and EM, catching the falling knife has been fun, fun, fun. Thankfully, I only play with what I can afford to lose, though I don't plan on losing over the long haul. The vast majority of my portfolio are in well diversified funds.
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ajacobs6
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Re: Piling into emerging markets

Post by ajacobs6 » Fri Aug 21, 2015 11:15 am

Here's mine:

US Stocks - 27%
Developed Markets - 14%
Emerging Markets - 12%
Real Estate (US) - 5%
Natural Resources - 5%
Bonds - 37%

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sperry8
Posts: 1573
Joined: Sat Mar 29, 2008 9:25 pm
Location: Miami FL

Re: Piling into emerging markets

Post by sperry8 » Fri Aug 21, 2015 11:37 am

I bought some VWO a few days ago at ~$36.75. Already at $34 today... wild ride down. I will buy more although likely EEMS to get some small cap EM exposure to go along with my VWO shares. Haven't decided on price yet - but it's a falling knife right now. Not going to try to catch it.
Humbling BH contest results: 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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LiveSimple
Posts: 1065
Joined: Thu Jan 03, 2013 7:55 am

Re: Piling into emerging markets

Post by LiveSimple » Fri Aug 21, 2015 1:07 pm

Anyone able to estimate what the fund value (price) is going to be in a day and react to rebalanced that day.

Alternative, rebalanced the next working day, after the price change and hit a re balancing band.

hafius500
Posts: 217
Joined: Sat Sep 10, 2011 4:31 pm

Re: Piling into emerging markets

Post by hafius500 » Fri Aug 21, 2015 1:39 pm

It seems I'm the only one who adds EM stocks and EM (LC) bonds (target: 10% of the bond/cash portfolio)
prior username: hafis50

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grap0013
Posts: 1884
Joined: Thu Mar 18, 2010 1:24 pm

Re: Piling into emerging markets

Post by grap0013 » Fri Aug 21, 2015 3:21 pm

Average Investor wrote:I've been buying EM in modest chunks for about a week as well. My first experience trying to catch a falling knife!
A week is nothing. You guys need to try 5 years! :sharebeer
There are no guarantees, only probabilities.

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