VWO: what a terrible performance!!

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
mojorisin
Posts: 138
Joined: Sun Nov 27, 2011 9:19 pm

VWO: what a terrible performance!!

Post by mojorisin » Tue Jan 05, 2016 4:27 pm

I have 2% of my portfolio in VWO Emerging Markets. $100 pre 2007, $50 early 2011, $31 early 2016. Gladly I'm only down about 5% or so overall. But geez... and everything I read just shows emerging markets to continue down. Its making it hard to continue to push new money into VWO to keep my allocation in line. Hopefully I'm "buying low" :D

Yes, I'm in it for the long term. Yes, I don't time the market. No need to hit me back on those points :P I'm just commenting on the poor performance of VWO and other INTL funds where the US Market has been only been going up during the recovery.

YttriumNitrate
Posts: 1062
Joined: Tue Mar 26, 2013 12:13 pm

Re: VWO: what a terrible performance!!

Post by YttriumNitrate » Tue Jan 05, 2016 4:41 pm

deleted.
Last edited by YttriumNitrate on Sat Mar 12, 2016 12:51 pm, edited 2 times in total.

traveler90
Posts: 206
Joined: Wed Nov 13, 2013 3:46 pm

Re: VWO: what a terrible performance!!

Post by traveler90 » Tue Jan 05, 2016 4:41 pm

I just bought more yesterday.

Valuethinker
Posts: 35051
Joined: Fri May 11, 2007 11:07 am

Re: VWO: what a terrible performance!!

Post by Valuethinker » Tue Jan 05, 2016 4:42 pm

mojorisin wrote:I have 2% of my portfolio in VWO Emerging Markets. $100 pre 2007, $50 early 2011, $31 early 2016. Gladly I'm only down about 5% or so overall. But geez... and everything I read just shows emerging markets to continue down. Its making it hard to continue to push new money into VWO to keep my allocation in line. Hopefully I'm "buying low" :D

Yes, I'm in it for the long term. Yes, I don't time the market. No need to hit me back on those points :P I'm just commenting on the poor performance of VWO and other INTL funds where the US Market has been only been going up during the recovery.
Part is currency and part is equity markets. A big chunk was China related.

Of the BRICs: Brazil is in bad shape, with presidential popularity down at 9%. Russia? We know-- oil prices. India has done relatively well. China is in bubble burst territory.

US stocks look overvalued compared to their international peers (to me). However, the US has a disproportionate share of the tech stocks that have been doing well. The so-called FANGS.

TheRightKost87
Posts: 279
Joined: Tue Aug 13, 2013 12:25 am
Location: Boston, MA

Re: VWO: what a terrible performance!!

Post by TheRightKost87 » Tue Jan 05, 2016 4:43 pm

It beat VTI and VXUS today....

I only recently started adding VWO to my portfolio, so I'm happy I'm getting it low, and hope to ride it back up!
"The problem with diversification is that it works, whether or not we want it to"

User avatar
Artsdoctor
Posts: 3364
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: VWO: what a terrible performance!!

Post by Artsdoctor » Tue Jan 05, 2016 5:49 pm

Mojorisin,

For the most part, anything under 5% of your portfolio is unlikely to make any substantial difference in your portfolio performance in the long run. I'm assuming that you're holding a diversified international fund that already has emerging markets in it. If this is so, then you're possibility over-weight EM. If you're not (for example, if you're holding a Developed Markets fund), then I'd consider either liquidating EM altogether, increasing it to 5%, or investing in an international fund that contains EM (such as Total International, or similar). If you're total EM exposure is only 2%, it's really not worth the effort (or, based on your post, the aggravation).

staythecourse
Posts: 5740
Joined: Mon Jan 03, 2011 9:40 am

Re: VWO: what a terrible performance!!

Post by staythecourse » Tue Jan 05, 2016 5:57 pm

These are the times it brings up a couple of my favorite lines from Dr. Bernstein from his books. Paraphrasing both lines:

1. Sometimes being diversified makes you feel like you are driving down the wrong way of a one way street.
2. Sometimes it feels like you are throwing money down a rat hole.

Personally, EM are doing exactly what they always have done. They are either the BEST or WORST performer. That is what volatility is all about. When volatility is on the positive side, i.e. return everyone rejoices and when it is on the negative side, i.e. losses everyone bemoans holding it. You can't get the upside without the downside. Investing is really that simple. What goes up must come down. That sounds familiar from science class, no?

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

User avatar
Rick Ferri
Posts: 8468
Joined: Mon Feb 26, 2007 11:40 am
Location: Austin, TX. Twitter: @Rick_Ferri
Contact:

Re: VWO: what a terrible performance!!

Post by Rick Ferri » Tue Jan 05, 2016 6:14 pm

Often when you feel this way and are about to give up the market near a bottom. :wink:
The Education of an Index Investor: flounders in darkness, finds enlightenment, overcomplicates strategy, embraces simplicity.

ND Fan 1
Posts: 287
Joined: Fri Oct 30, 2015 12:29 pm

Re: VWO: what a terrible performance!!

Post by ND Fan 1 » Tue Jan 05, 2016 6:39 pm

Artsdoctor wrote:Mojorisin,

For the most part, anything under 5% of your portfolio is unlikely to make any substantial difference in your portfolio performance in the long run. I'm assuming that you're holding a diversified international fund that already has emerging markets in it. If this is so, then you're possibility over-weight EM. If you're not (for example, if you're holding a Developed Markets fund), then I'd consider either liquidating EM altogether, increasing it to 5%, or investing in an international fund that contains EM (such as Total International, or similar). If you're total EM exposure is only 2%, it's really not worth the effort (or, based on your post, the aggravation).
I'm in the process of setting up my asset allocation and plan on having Total International as 30% of my equities and of that international portion, 15% in WVO. So overall Total International is 24% of my overall portfolio and VWO is 4%. Is that worth it? I already owned VWO in my IRA at Wealthfront so when I rolled it over to Vanguard, I decided to just keep the VWO since it has been down so much. I may just let it be and ride it out, without contributing to it, but that wouldn't be true to my asset allocation. I guess I just have to decide to do a EM tilt or liquidate and just roll with Total International.

User avatar
Artsdoctor
Posts: 3364
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: VWO: what a terrible performance!!

Post by Artsdoctor » Tue Jan 05, 2016 6:44 pm

ND,

You'd be just fine using Total International alone. It's a market cap fund and if you want to overweight EM, think about why and then stick with the plan.

It wasn't entirely clear if the OP had other emerging market exposure. If he was using VWO as his sole EM exposure and it made up 2% of the entire portfolio, it'd hardly be worth the effort.

Total International's EM allocation will vary over time, sometimes considerably.

User avatar
warowits
Posts: 354
Joined: Tue Sep 29, 2015 2:38 am

Re: VWO: what a terrible performance!!

Post by warowits » Tue Jan 05, 2016 6:51 pm

Bought more VWO yesterday. We will see how it goes.
There are an army of people whose pay checks depend on convincing people to invest in ways that are against their self interest. This forum is the volunteer army that fights back!

User avatar
in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: VWO: what a terrible performance!!

Post by in_reality » Tue Jan 05, 2016 9:01 pm

ND Fan 1 wrote: I guess I just have to decide to do a EM tilt or liquidate and just roll with Total International.
Keep in mind too that VWO holdings and the EM portion of Total International are not the same.

Vanguard changed the index in VWO to include Chinese A shares which aren't in Total international. So VWO has an increasing allocation to China that will reach around 50% when it finally gets finished.

That's all fine from a theoretical point of view, but practically it's been said the recent Chinese drop was due to concern over the freeze in A-shares for large stock holders was about to be lifted. If China wants to freeze selling I guess they can, but I don't see why an index is buying into markets where selling is frozen.

I don't pretend to know how A-shares will perform. I don't like the fact that the index Vanguard has chosen is buying in when the major shareholders can't sell out. Seems weird and not what I expect from a "market".
Last edited by in_reality on Tue Jan 05, 2016 9:18 pm, edited 1 time in total.

User avatar
InvestorNewb
Posts: 1583
Joined: Mon Sep 03, 2012 11:27 am

Re: VWO: what a terrible performance!!

Post by InvestorNewb » Tue Jan 05, 2016 9:08 pm

It's called emerging markets for a reason, and is probably one of Vanguard's highest risk funds along with precious metals.

I'm fine with holding VXUS for my international allocation and not over-weighting EM.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

Sidney
Posts: 6686
Joined: Thu Mar 08, 2007 6:06 pm

Re: VWO: what a terrible performance!!

Post by Sidney » Tue Jan 05, 2016 9:13 pm

If you could identify the 2% of the Total US Stock Market that performed the worst over the same period, how would that compare?
I always wanted to be a procrastinator.

patrick
Posts: 1567
Joined: Fri Sep 04, 2009 3:39 am
Location: Mega-City One

Re: VWO: what a terrible performance!!

Post by patrick » Tue Jan 05, 2016 9:25 pm

According to Vanguard's site at https://personal.vanguard.com/us/insigh ... ion-112015, A-shares should now be a very small portion of VWO. Even when the transition period is complete, A-shares will still be a small portion of the fund because the index is adjusted for the foreign investment limits. Note also that if the A-shares market is opened further in the future then A-shares can be included in the regular index, and thus in Total International.

That page also indicates another difference between VWO and the emerging market portion of total international -- VWO previously didn't include small caps all, and now is in the process of phasing them in.

TradingPlaces
Posts: 1245
Joined: Sun Nov 09, 2014 1:19 pm
Location: 30.286029, -97.530011

Re: VWO: what a terrible performance!!

Post by TradingPlaces » Tue Jan 05, 2016 9:46 pm

I would argue that VWO is not diversified enough.

It is a primarily a China / Southeast Asian index.

China is trading at very high PEs, so I don't understand how VWO has a PE of 12.

I would not be surprized if China index drops another 30-40% to have valuation that's in line with the rest of the world.
Also, don't forget that the E in PE is earnings, and E can also go down. Chinese strike me as a type of government that could be helping fudge the E, and their growth is turning negative.

Don't forget the currency exposure.

Let's look at other countries:
- Brazil -> could go the way of Argentina,
- Russia -> Rogue
- Malaysia -> ouch

There are possibly 3 good economies in that list: India, South Africa, and Mexico, but they comprise a total of 27%.

Country Region VWO Benchmark +/- Weight
China Emerging Markets 28.8% 28.2% 0.6%
Taiwan Emerging Markets 14.3% 14.3% 0.0%
India Emerging Markets 12.8% 12.8% 0.0%
South Africa Emerging Markets 8.9% 9.2% – 0.3%
Brazil Emerging Markets 6.9% 7.0% – 0.1%
Mexico Emerging Markets 5.6% 5.6% 0.0%
Russia Emerging Markets 4.5% 4.6% – 0.1%
Malaysia Emerging Markets 4.2% 4.2% 0.0%
Thailand Emerging Markets 2.7% 2.6% 0.1%
Indonesia Emerging Markets 2.4% 2.4% 0.0%
Top 10 equals 91.1% of stock

I honestly don't see how VWO can have any reasonable performance, or add to any portfolio, in the next few years.

User avatar
in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: VWO: what a terrible performance!!

Post by in_reality » Tue Jan 05, 2016 10:12 pm

patrick wrote:According to Vanguard's site at https://personal.vanguard.com/us/insigh ... ion-112015, A-shares should now be a very small portion of VWO. Even when the transition period is complete, A-shares will still be a small portion of the fund because the index is adjusted for the foreign investment limits.
OK, you say "small portion".

“The initial weighting of China A Shares in the FTSE Emerging inclusion indexes will be approximately 5%. This is expected to increase to 32% (at 31-March 2015 market values) when China A Shares are fully available to international investors, and hence resulting in Chinese stocks (including B-Share, H-Share, P Chips and Red Chips) to make up 50% of FTSE Emerging Index,” said FTSE Russell in a statement.

I say the 32% (at 31-March 2015 market values) of A-shares isn't small.

User avatar
siamond
Posts: 3983
Joined: Mon May 28, 2012 5:50 am

Re: VWO: what a terrible performance!!

Post by siamond » Tue Jan 05, 2016 10:35 pm

mojorisin wrote:Yes, I'm in it for the long term. Yes, I don't time the market. No need to hit me back on those points :P I'm just commenting on the poor performance of VWO and other INTL funds where the US Market has been only been going up during the recovery.
Well, before the recovery, the US stocks didn't do so well either, so be careful to recency bias... I would advise that you read more about the history of emerging markets (the Credit Suisse 2014 Yearbook, see link below, has the best data I know of). And yes, this is quite the roller-coaster to say the least. But a roller-coaster can go quite high too, including on average over the long-term. Quite a ride though, that's for sure.

https://publications.credit-suisse.com/ ... B5D14A7818

PS. Check the Simba thread, I just posted a (draft) update to the Bogleheads spreadsheet with historical returns, and guess which fund had the best return since 1972, *even* with the dismal 2015 numbers? VEIEX, the mutual fund version of VWO.

patrick
Posts: 1567
Joined: Fri Sep 04, 2009 3:39 am
Location: Mega-City One

Re: VWO: what a terrible performance!!

Post by patrick » Tue Jan 05, 2016 10:48 pm

in_reality wrote:OK, you say "small portion".

“The initial weighting of China A Shares in the FTSE Emerging inclusion indexes will be approximately 5%. This is expected to increase to 32% (at 31-March 2015 market values) when China A Shares are fully available to international investors, and hence resulting in Chinese stocks (including B-Share, H-Share, P Chips and Red Chips) to make up 50% of FTSE Emerging Index,” said FTSE Russell in a statement.

I say the 32% (at 31-March 2015 market values) of A-shares isn't small.
What I was trying to indicate is that VWO is not even at 5% China A right now. It is currently early in the process of transitioning to the index that has 5% in China A, so it is well below 5% now. The transition to 5% China A in VWO should finish in November. Anything beyond that requires the index to increase their share, which would only happen if China opens up its markets more, which may not happen for a long time (if ever).

red5
Posts: 777
Joined: Sun Apr 01, 2012 4:42 pm

Re: VWO: what a terrible performance!!

Post by red5 » Wed Jan 06, 2016 5:09 am

I also bought some VWO on Monday as it was my biggest loser of 2015. By far.

This is what it feels like to buy low. It is hard.

Good luck.

User avatar
stemikger
Posts: 4833
Joined: Thu Apr 08, 2010 5:02 am

Re: VWO: what a terrible performance!!

Post by stemikger » Wed Jan 06, 2016 5:18 am

Buying low is a good thing, but if you are not sure about investing in emerging markets just take Jack Bogle's advice and avoid international altogether. I did and I'm glad I listened.

http://www.bloomberg.com/news/2014-12-0 ... -u-s-.html
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

Valuethinker
Posts: 35051
Joined: Fri May 11, 2007 11:07 am

Re: VWO: what a terrible performance!!

Post by Valuethinker » Wed Jan 06, 2016 5:41 am

TradingPlaces wrote:I w

There are possibly 3 good economies in that list: India, South Africa, and Mexico, but they comprise a total of 27%.

I honestly don't see how VWO can have any reasonable performance, or add to any portfolio, in the next few years.
Of those 3, I would not put South Africa in the safe camp:

- look at recent political finagle-- Zuma fires Finance Minister, then has to change FM again market reacts so badly

- plunging commodity prices placing huge risks on government budget and political system

- militant trade unionism at a time when mining companies are desperate to cut costs -- look at Anglo-United or Lonmin

- general decline/ stagnation of industrial base against eg Chinese competition

- decaying infrastructure (although very good by African standards, not by Chinese or even some other Asian countries)

- rise of extremist groups within the ANC

On the plus side:

- "Anglo Saxon" corporate governance with a focus on shareholder returns

- SA companies tend to be internationally diversified, and some have been very successful in the Southern African tier- -the old frontline states like Mozambique, Zimbabwe etc. It's a very entrepreneurial society

User avatar
iceport
Posts: 3761
Joined: Sat Apr 07, 2007 4:29 pm

Re: VWO: what a terrible performance!!

Post by iceport » Wed Jan 06, 2016 6:11 am

stemikger wrote:Buying low is a good thing, but if you are not sure about investing in emerging markets just take Jack Bogle's advice and avoid international altogether. I did and I'm glad I listened.

http://www.bloomberg.com/news/2014-12-0 ... -u-s-.html
Or, you could take Jack Bogle's advice and plunk a full 50% of your international holdings into emerging markets.

TV Interview: Market Turmoil (See at about 5:30.)

I use a more modest EM overweight. And I am glad to have an opportunity to buy low.
"Discipline matters more than allocation.” ─William Bernstein

User avatar
Bounca
Posts: 896
Joined: Mon Feb 26, 2007 7:48 am

Re: VWO: what a terrible performance!!

Post by Bounca » Wed Jan 06, 2016 6:54 am

What bothers me about my 5% holding in VWO is that it hasn't been with DLS.

Years back when I made my slice and dice portfolio I was so tossed up between my emerging market stance with VWO or DLS.

heyyou
Posts: 3039
Joined: Tue Feb 20, 2007 4:58 pm

Re: VWO: what a terrible performance!!

Post by heyyou » Wed Jan 06, 2016 7:00 am

The Callan Periodic Table for the past 20 years shows that EM often is either tops or worst annually, relative to the other equity sub-asset classes. This time is not much different from many other times.
"Those who haven't studied history are doomed to repeat it," attributed to Carlos Santayana.

User avatar
stemikger
Posts: 4833
Joined: Thu Apr 08, 2010 5:02 am

Re: VWO: what a terrible performance!!

Post by stemikger » Wed Jan 06, 2016 7:30 am

iceport wrote:
stemikger wrote:Buying low is a good thing, but if you are not sure about investing in emerging markets just take Jack Bogle's advice and avoid international altogether. I did and I'm glad I listened.

http://www.bloomberg.com/news/2014-12-0 ... -u-s-.html
Or, you could take Jack Bogle's advice and plunk a full 50% of your international holdings into emerging markets.

TV Interview: Market Turmoil (See at about 5:30.)

I use a more modest EM overweight. And I am glad to have an opportunity to buy low.
Thanks for the video. This is the first time I heard him actually recommend international. This is from 2011. He usually does not, but always adds he could be wrong and if you must no more than 20%. Either way, for over 21 years, I have been staying the course with my all U.S. stock and bond portfolio, I don't see me changing now. I just feel it is a riskier asset that I don't feel comfortable owning. So far not adding it has served me well. If it benefits investors in the future, it will not make me feel bad and I think by holding the total stock and total bond market I will do good enough.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

IlliniDave
Posts: 2281
Joined: Fri May 17, 2013 7:09 am

Re: VWO: what a terrible performance!!

Post by IlliniDave » Wed Jan 06, 2016 8:45 am

I don't have any VWO, but I'll be buying a little Oppenheimer Developing Markets in my 401k again tomorrow. It slightly underperformed the MCSI index last year, but usually does a couple percent better. Time will tell if this pans out in the long term.
Don't do something. Just stand there!

MnD
Posts: 3510
Joined: Mon Jan 14, 2008 12:41 pm

Re: VWO: what a terrible performance!!

Post by MnD » Wed Jan 06, 2016 9:31 am

Or take his advice that the Total Bond Market Index is broken and that one should substitute 50% corporate bond index for TBM.
It cracks me up how the "Jack Bogle says" crowd only comes out with their "call to authority" logical fallacy when a particular sector has a bad year or a few. For less sophisticated investors that sort of rhetoric encourages selling at the bottom.
iceport wrote:
stemikger wrote:Buying low is a good thing, but if you are not sure about investing in emerging markets just take Jack Bogle's advice and avoid international altogether. I did and I'm glad I listened.

http://www.bloomberg.com/news/2014-12-0 ... -u-s-.html
Or, you could take Jack Bogle's advice and plunk a full 50% of your international holdings into emerging markets.

TV Interview: Market Turmoil (See at about 5:30.)

selters
Posts: 567
Joined: Thu Feb 27, 2014 9:26 am

Re: VWO: what a terrible performance!!

Post by selters » Wed Jan 06, 2016 9:44 am

in_reality wrote:
ND Fan 1 wrote: I guess I just have to decide to do a EM tilt or liquidate and just roll with Total International.
it's been said the recent Chinese drop was due to concern over the freeze in A-shares for large stock holders was about to be lifted. If China wants to freeze selling I guess they can, but I don't see why an index is buying into markets where selling is frozen.

I don't pretend to know how A-shares will perform. I don't like the fact that the index Vanguard has chosen is buying in when the major shareholders can't sell out. Seems weird and not what I expect from a "market".
Are Vanguard and VWO considered major shareholders? If so, what happens to VWO if the owners of VWO decide that they want to sell 50% of their shares?

User avatar
stemikger
Posts: 4833
Joined: Thu Apr 08, 2010 5:02 am

Re: VWO: what a terrible performance!!

Post by stemikger » Wed Jan 06, 2016 9:58 am

MnD wrote:Or take his advice that the Total Bond Market Index is broken and that one should substitute 50% corporate bond index for TBM.
It cracks me up how the "Jack Bogle says" crowd only comes out with their "call to authority" logical fallacy when a particular sector has a bad year or a few. For less sophisticated investors that sort of rhetoric encourages selling at the bottom.
iceport wrote:
stemikger wrote:Buying low is a good thing, but if you are not sure about investing in emerging markets just take Jack Bogle's advice and avoid international altogether. I did and I'm glad I listened.

http://www.bloomberg.com/news/2014-12-0 ... -u-s-.html
Or, you could take Jack Bogle's advice and plunk a full 50% of your international holdings into emerging markets.

TV Interview: Market Turmoil (See at about 5:30.)
I have never held international and I have been investing for 21 years. I do believe international did good during some of those times and I still did not feel it was necessary for me but more importantly, I didn't feel comfortable holding it. After reading Common Sense on Mutual Funds that made me realize I was on the right track.

I personally would not add corporate bonds to my Total Bond Market Index because I rather get less returns and keep bonds for a smoother and hopefully safer ride.

Jack does buy the Vanguard Balanced Index Fund for his Grandchildren which replicates the Total Bond Market along with the Total Stock Market. My plan is when I retire I will roll everything over to Vanguard and put it in the Balanced Index and hold for a long time if not forever.
Last edited by stemikger on Wed Jan 06, 2016 10:11 am, edited 2 times in total.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

Elysium
Posts: 1027
Joined: Mon Apr 02, 2007 6:22 pm

Re: VWO: what a terrible performance!!

Post by Elysium » Wed Jan 06, 2016 10:00 am

I've been invested in EM since 2005, and when I checked overall performance at end of 2015 I had an annualized return of -0.16% for the entire period, but when I break it down into two halves, the first half had average annualized returns of 19% and the second half had -8% (rounded figures).

EM is volatile, it is not like investing in S&P 500, but when US Total Stock index returned 0% for an entire decade starting from 2000 I don't recall many people questioning investing in US markets is worth it at all.

EM will have its day sometime again in future, no one knows when, this is why we have to stay invested, in order to get those average annualized returns we see on the reports. Most investors cannot, so their returns under perform the actual fund returns. In my case, I have done slightly better than fund returns mostly because I was able to hold my nose and buy at the 15% down or 20% down intervals.

MnD
Posts: 3510
Joined: Mon Jan 14, 2008 12:41 pm

Re: VWO: what a terrible performance!!

Post by MnD » Wed Jan 06, 2016 10:18 am

stemikger wrote: I'm definitely not one of those people. Search my posts and you will see this. I have never held international and I have been saving for retirement for over 21 years. As far as the Total Bond Market Index Fund being broken, I hold bonds for safety and this may be where I will not follow Jack. I believe like Vanguard the Total Bond Market Index is all you need.
Exactly. You are being selective on your advice using the call to authority logic fallacy when it suits you, as do many others.
Stocks have a bad year, one could argue that Target date glidepaths are too aggressive because Jack says hold age in bonds.
Treasuries have a bad year? - well Jack said the TBM index is broken and one should swap in 50% Corporates.
International have a bad year? Jack says not necessary - dump it. EM has a bad year - same reason -= dump it.
I'm sure we can find a "Jacks says" international bonds are not necessary so dump that Vanguard Target Date or all-in-one "allocation" Fund when international bonds do poorly because they contain international bonds.

If we worked at it I bet we could come up with a dozen or more "Jack says" call to authority reasons to alter ones asset allocation when a particular area of the market underperforms other areas. For new investors especially that's not helpful. Even for Vanguard funds, actual investor performance lags reported returns because people get out at exactly the wrong times. Chiming in with the "Jack says" warnings when a sector has a down period contributes to that.

User avatar
tainted-meat
Posts: 714
Joined: Tue Dec 20, 2011 9:35 pm
Location: Kentucky

Re: VWO: what a terrible performance!!

Post by tainted-meat » Wed Jan 06, 2016 10:22 am

Time to back up the truck on EM stock :moneybag

dkturner
Posts: 1348
Joined: Sun Feb 25, 2007 7:58 pm

Re: VWO: what a terrible performance!!

Post by dkturner » Wed Jan 06, 2016 10:38 am

The Vanguard Emerging Markets Stock fund has been a disappointment for the last 15 years. It's performance over the last 5 years (versus the average emerging market fund) has truly been an embarrassment. I can't imagine why a rational investor would want to put money at risk by tracking an index that overwhelmingly allocates its weighting to the most kleptocratic segments of the market. I would much prefer something closer to equal weighting in this volatile area.

User avatar
in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: VWO: what a terrible performance!!

Post by in_reality » Wed Jan 06, 2016 11:25 am

selters wrote:
in_reality wrote:
ND Fan 1 wrote: I guess I just have to decide to do a EM tilt or liquidate and just roll with Total International.
it's been said the recent Chinese drop was due to concern over the freeze in A-shares for large stock holders was about to be lifted. If China wants to freeze selling I guess they can, but I don't see why an index is buying into markets where selling is frozen.

I don't pretend to know how A-shares will perform. I don't like the fact that the index Vanguard has chosen is buying in when the major shareholders can't sell out. Seems weird and not what I expect from a "market".
Are Vanguard and VWO considered major shareholders? If so, what happens to VWO if the owners of VWO decide that they want to sell 50% of their shares?
No, they are not. They'd have to own something like 5%.

If Vanguard Total International starts holding 50% of it's EM in China, then it might reach that threshold. For instance, Vanguard owns more than 5% of Apple and General Mills and a host of others I imagine.

In that case, under current freeze rules Vanguard would be prohibited for six months on selling any shares, so I don't know what would happen if a stock holder wanted to sell. Maybe Vanguard would credit their account for all but the Chinese holdings and say we owe you once we can figure out what we can sell it at, or maybe it would be like the recent high yield bond fund that couldn't sell less liquid holdings on demand but had to give redemptions at NAV which obviously was wrong so those who sold out got a better deal than those holding till the actual sale was made (as the fund finally closed).

It truly the wild, wild west on this I believe.

Someone should ask Vanguard but I doubt anyone there knows what would happen either and could only say well we don't own 5% now.

User avatar
siamond
Posts: 3983
Joined: Mon May 28, 2012 5:50 am

Re: VWO: what a terrible performance!!

Post by siamond » Wed Jan 06, 2016 11:42 am

dkturner wrote:The Vanguard Emerging Markets Stock fund has been a disappointment for the last 15 years. It's performance over the last 5 years (versus the average emerging market fund) has truly been an embarrassment.
Hm. Not quite sure why you say that. I did a quick check, using a total-return chart, and I don't see that VWO is such an embarrassment. Sure, DFA did better, but once you remove their fees, and use VEMAX (the admiral fund) instead of VWO, the advantage isn't that huge. As to Schwab SCHE, it tends to be worse, and S&P GMM is very close to VWO. iShare IEMG doesn't have enough history to compare.

http://stockcharts.com/freecharts/perf. ... 1000&B=VWO

http://stockcharts.com/freecharts/perf. ... 00&B=VEMAX

Were you thinking to some other fund?

lack_ey
Posts: 6579
Joined: Wed Nov 19, 2014 11:55 pm

Re: VWO: what a terrible performance!!

Post by lack_ey » Wed Jan 06, 2016 11:52 am

15-year performance:
Image

5-year performance relative to peers:
Image

I'm not seeing it either.

gkaplan
Posts: 7034
Joined: Sat Mar 03, 2007 8:34 pm
Location: Portland, Oregon

Re: VWO: what a terrible performance!!

Post by gkaplan » Wed Jan 06, 2016 12:06 pm

MnD wrote:
stemikger wrote: I'm definitely not one of those people. Search my posts and you will see this. I have never held international and I have been saving for retirement for over 21 years. As far as the Total Bond Market Index Fund being broken, I hold bonds for safety and this may be where I will not follow Jack. I believe like Vanguard the Total Bond Market Index is all you need.
Exactly. You are being selective on your advice using the call to authority logic fallacy when it suits you, as do many others.
Stocks have a bad year, one could argue that Target date glidepaths are too aggressive because Jack says hold age in bonds.
Treasuries have a bad year? - well Jack said the TBM index is broken and one should swap in 50% Corporates.
International have a bad year? Jack says not necessary - dump it. EM has a bad year - same reason -= dump it.
I'm sure we can find a "Jacks says" international bonds are not necessary so dump that Vanguard Target Date or all-in-one "allocation" Fund when international bonds do poorly because they contain international bonds.

If we worked at it I bet we could come up with a dozen or more "Jack says" call to authority reasons to alter ones asset allocation when a particular area of the market underperforms other areas. For new investors especially that's not helpful. Even for Vanguard funds, actual investor performance lags reported returns because people get out at exactly the wrong times. Chiming in with the "Jack says" warnings when a sector has a down period contributes to that.

Quite so.
Gordon

User avatar
Toons
Posts: 12791
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: VWO: what a terrible performance!!

Post by Toons » Wed Jan 06, 2016 12:15 pm

The "market" has an uncanny way of forcing investors out right before it heads North again.
That is how successful,patient,disciplined investors create wealth.
They ignore and keep investing when others throw in the towel. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

IPer
Posts: 1639
Joined: Sun Jul 28, 2013 8:51 pm

Re: VWO: what a terrible performance!!

Post by IPer » Wed Jan 06, 2016 12:20 pm

Ok, I'll buy some more now, thanks for the post!
Read the Wiki Wiki !

rgs92
Posts: 1992
Joined: Mon Mar 02, 2009 8:00 pm

Re: VWO: what a terrible performance!!

Post by rgs92 » Wed Jan 06, 2016 12:55 pm

The only observations I have now is the the P/E is 7.78 and the yield is 3.4%. Maybe this qualifies it as a value, since, conceivably, even if the stock never went up there's a good chance you would collect that decent yield ongoing. (I'm not qualified to determine if the dividends are safe for the long term. I'll let others comment on this.)

Also, EM has been hurt by the oil downturn, and that is not its fault. Oil is conceivably oversold at this point, at an 11 year low I just saw on TV.
Here's a nice value portfolio for you now: VWO (vanguard emerging markets), XLE (energy etf), AAPL (Apple), and CMG (Chipotle).
I guess that is how I would create a hedge fund now with other people's money now, lol.

The current issue of Money magazine has a nice article on emerging markets. FWIW they recommend the the Fidelity EM fund (1% expense ratio).
(Not my idea; 'just wanted to let people know about the article. The article might make the OP feel better with some thoughtful perspective.)

dkturner
Posts: 1348
Joined: Sun Feb 25, 2007 7:58 pm

Re: VWO: what a terrible performance!!

Post by dkturner » Wed Jan 06, 2016 2:03 pm

siamond wrote:
dkturner wrote:The Vanguard Emerging Markets Stock fund has been a disappointment for the last 15 years. It's performance over the last 5 years (versus the average emerging market fund) has truly been an embarrassment.
Hm. Not quite sure why you say that. I did a quick check, using a total-return chart, and I don't see that VWO is such an embarrassment. Sure, DFA did better, but once you remove their fees, and use VEMAX (the admiral fund) instead of VWO, the advantage isn't that huge. As to Schwab SCHE, it tends to be worse, and S&P GMM is very close to VWO. iShare IEMG doesn't have enough history to compare.

http://stockcharts.com/freecharts/perf. ... 1000&B=VWO

http://stockcharts.com/freecharts/perf. ... 00&B=VEMAX

Were you thinking to some other fund?
I went to the Morningstar website and looked up VEIEX. M* shows VEIEX trailing its category (diversified emerging markets) by 63 basis points per year for the last 5 years and 153 basis points per year for the last 3 years. The average emerging market fund has an expense ratio that is at least 120 basis points higher than VEIEX. Now, if that lousy comparative performance isn't an embarrassment for posters who believe that indexing is the secret to superior performance I don't know what it takes to embarrass a fundamantalist Boglehead.

MnD
Posts: 3510
Joined: Mon Jan 14, 2008 12:41 pm

Re: VWO: what a terrible performance!!

Post by MnD » Wed Jan 06, 2016 3:02 pm

I don't really see a problem here with VWO. The investor share counterpart (with higher expenses than VWO) seems to have done OK.
12 year period selected since EEM, the granddaddy of EM ETF's was launched in mid-2003.
If one is looking for a shot at "big out-performance", index funds might not be your thing.

Growth of $10K 01/06/2004-01/05/2016
VEIEX: Vanguard Emerging Markets investor shares $21,236.46
EEM: iShares MSCI Emerging Markets $20,401.54
Diversified Emerging Mkts: Category average $20,822.56

saurabh
Posts: 319
Joined: Thu Aug 20, 2015 11:56 am

Re: VWO: what a terrible performance!!

Post by saurabh » Wed Jan 06, 2016 3:11 pm

Valuethinker wrote: US stocks look overvalued compared to their international peers (to me). However, the US has a disproportionate share of the tech stocks that have been doing well. The so-called FANGS.
I keep hearing about how over-priced the US market is, but I am not sure how Europe is any cheaper. From the Vanguard website, the P/E of its holdings in the European stock index fund is 22.0x vs. 20.9x for the US. US stocks have higher ROE and earnings growth rates too. Whenever I have looked at European blue chips, I can usually find an equivalent American blue chip that is cheaper on a P/E basis. If the US crashes, I fully expect European stocks to crash just as hard. Also in some respects the IFRS accounting in Europe exaggerates the earnings of European stocks. For example American companies have to expense R&D fully while European companies are allowed to capitalize R&D expenses (software companies in the US are an exception but GAAP generally requires almost all other US companies to expense R&D fully).

MnD
Posts: 3510
Joined: Mon Jan 14, 2008 12:41 pm

Re: VWO: what a terrible performance!!

Post by MnD » Wed Jan 06, 2016 3:16 pm

Trading VWO back and forth with SCHE for tax losses while selling EEM for corresponding tax gains since the great recession and more recently during the EM-specific downturn had enabled me to sell 90% of my highly appreciated EEM shares with no tax liability and without altering my allocation to EM.

When the world serves up lemons, make some lemonade! :beer

User avatar
nedsaid
Posts: 9700
Joined: Fri Nov 23, 2012 12:33 pm

Re: VWO: what a terrible performance!!

Post by nedsaid » Wed Jan 06, 2016 3:17 pm

It shouldn't be too surprising with the slowdown in China and the bear market in commodities. We have found out that trees don't grow to the sky and neither does the Chinese economy. At some point, some other engine will drive the emerging market economies. I think we have seen peak China.
A fool and his money are good for business.

TMQ206
Posts: 16
Joined: Wed Jan 15, 2014 6:59 pm

Re: VWO: what a terrible performance!!

Post by TMQ206 » Wed Jan 06, 2016 3:23 pm

Although VWO has lagged non-EM funds following other markets the past few years, it's probably important to compare apples to apples when making EM fund comparisons as mentioned above. IIRC, VWO doesn't contain Korean holdings, and I think S.Korea makes up about 1/6 of the MSCI EM index, whereas FTSE considers Korea developed. Not sure what Morningstar used for their developing index, but this could make a significant difference when considering relative performance of EM funds.

VEMAX is on the menu in our house in 2016.

User avatar
siamond
Posts: 3983
Joined: Mon May 28, 2012 5:50 am

Re: VWO: what a terrible performance!!

Post by siamond » Wed Jan 06, 2016 3:25 pm

dkturner wrote:I went to the Morningstar website and looked up VEIEX. M* shows VEIEX trailing its category (diversified emerging markets) by 63 basis points per year for the last 5 years and 153 basis points per year for the last 3 years. The average emerging market fund has an expense ratio that is at least 120 basis points higher than VEIEX. Now, if that lousy comparative performance isn't an embarrassment for posters who believe that indexing is the secret to superior performance I don't know what it takes to embarrass a fundamantalist Boglehead.
Ok, I better understand where you are coming from now, thank you. Still, there are always numerous funds which go ahead for a couple of years, and then falter. Do you have a specific EM fund in mind, which consistently over-performed VWO/VEIEX (besides the DFA funds)?

Caduceus
Posts: 1639
Joined: Mon Sep 17, 2012 1:47 am

Re: VWO: what a terrible performance!!

Post by Caduceus » Wed Jan 06, 2016 3:35 pm

saurabh wrote: I keep hearing about how over-priced the US market is, but I am not sure how Europe is any cheaper. From the Vanguard website, the P/E of its holdings in the European stock index fund is 22.0x vs. 20.9x for the US. US stocks have higher ROE and earnings growth rates too.
Yes, I am not sure where people are getting some of the P/E ratios for VWO and other counterparts. Vanguard's P/E ratio for VWO is certainly not 7.78! Maybe that's a forward P/E taken from somewhere else?

What about normalized earnings though? I haven't looked at the numbers recently, but given that oil companies and materials companies make up a significant portion of the European index, my (uneducated) guess is that E < E10 for the European stock index and E > E10 for the US index.

As for VWO, I've been buying as much as I can.

User avatar
saltycaper
Posts: 2650
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: VWO: what a terrible performance!!

Post by saltycaper » Wed Jan 06, 2016 3:50 pm

Been hitting the buy button for 5 months now, including today. Can't help but feel as though I'm walking into something that's about to get even more unpleasant, but such is the nature of buying when everyone else is selling.
Quod vitae sectabor iter?

Post Reply