Another Brexit question

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JD2775
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Another Brexit question

Post by JD2775 » Thu Jun 23, 2016 11:28 pm

Hypothetically, let's say you are 40 years old (approx 20-25 years from retirement). You have a 5-fund 401k portfolio consisting of Lg Cap, Mid Cap, Sm Cap, International and Bond (all low cost Index Funds). Your International allocation is currently 17% of the portfolio...

Would you....

A. Drop that %
B. Increase that %
C. Do nothing

Sorry if this post comes off as stupid, but I honestly don't know what action to take, if any.

jjface
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Re: Another Brexit question

Post by jjface » Thu Jun 23, 2016 11:30 pm

It will probably be less than 17% come the morning. If you reach your rebalancing band then buy some to get back to it. Otherwise stay the course.

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LAlearning
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Re: Another Brexit question

Post by LAlearning » Thu Jun 23, 2016 11:34 pm

It is...that word.

And they are out!
I know nothing!

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Fudgie
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Re: Another Brexit question

Post by Fudgie » Thu Jun 23, 2016 11:36 pm

:oops:
Last edited by Fudgie on Fri Dec 08, 2017 7:43 am, edited 1 time in total.
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young-ish
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Re: Another Brexit question

Post by young-ish » Thu Jun 23, 2016 11:45 pm

jjface wrote:It will probably be less than 17% come the morning. If you reach your rebalancing band then buy some to get back to it. Otherwise stay the course.


Yes, exactly. Stick with your asset allocation plan.

On a side note, IMHO 17% Ex-U.S. equities is a little low. Even Vanguard Target Retirement funds hold 40% Intl/60% U.S.

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peterinjapan
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Re: Another Brexit question

Post by peterinjapan » Fri Jun 24, 2016 12:14 am

I'll be nibbling tomorrow. If some companies I really love drop more than 2-3% I'll pick them up, and might add to my ETFs depend on what goes down too far. Maybe IEUR if it really tanks.

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saltycaper
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Re: Another Brexit question

Post by saltycaper » Fri Jun 24, 2016 12:33 am

young-ish wrote:
jjface wrote:It will probably be less than 17% come the morning. If you reach your rebalancing band then buy some to get back to it. Otherwise stay the course.


Yes, exactly. Stick with your asset allocation plan.

On a side note, IMHO 17% Ex-U.S. equities is a little low. Even Vanguard Target Retirement funds hold 40% Intl/60% U.S.


Agreed.
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Valuethinker
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Re: Another Brexit question

Post by Valuethinker » Fri Jun 24, 2016 4:49 am

Stick to your plan.

This is unlikely to be another Lehman-- the Central Banks were ready, liquidity and physical cash pumped into system.

But knock on effects in EU (Dutch faction wants a referendum now, too, and Sweden almost certain I think) could be severe.

carolinaman
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Re: Another Brexit question

Post by carolinaman » Fri Jun 24, 2016 5:48 am

It is difficult to say what the impact will be and how long it may last. Brexit is a big blow to the Europeans and the fallout may last a long time. They already have a fragile economy and this can send them into a recession. Another risk is the possible departure of other countries.

I think those jumping in to buy international funds over the next few days may be buying falling knives. It is a good time to be a "buy and hold" investor.

avalpert
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Re: Another Brexit question

Post by avalpert » Fri Jun 24, 2016 8:44 am

The answer, as it usually is, is C. Unless you had a specific course of action decided for this event, then don't do anything. Ignore the news, ignore the posters insisting that stocks are 'on sale' and those (if they show up) who say this is the beginning of the end - they are both equally wrong and engaging in exactly the sort of behavior that the advice which this forum is based on is designed to combat.

lostdog
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Re: Another Brexit question

Post by lostdog » Fri Jun 24, 2016 9:52 am

avalpert wrote:The answer, as it usually is, is C. Unless you had a specific course of action decided for this event, then don't do anything. Ignore the news, ignore the posters insisting that stocks are 'on sale' and those (if they show up) who say this is the beginning of the end - they are both equally wrong and engaging in exactly the sort of behavior that the advice which this forum is based on is designed to combat.


+1
Financial Independence is the best revenge. | "Our life is frittered away by detail. Simplify, simplify." -Thoreau

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jwillis77373
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Re: Another Brexit question

Post by jwillis77373 » Fri Jun 24, 2016 6:50 pm

As for how it will effect US investors.. not much. Uexit really isn't on the table. Trade wars and tarrifs are kind of a thing of the distant past.

I suppose if your heavily vested in the EU or UK there are some ramifications.. but if its only 10% of your holdings.. that's a reasonable predictable drop in the market that bounces back. You could look upon it as a total loss or hold out for the 'Lost decade' with the UK.. eventually economic normalizations will return in some format.. only the profits for that lost generation will be lost. -- if your all US markets then its just another blip in the long run.

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sometimesinvestor
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Re: Another Brexit question

Post by sometimesinvestor » Fri Jun 24, 2016 7:06 pm

The US is probablya better place to invest at this time but probably does not mean certainly. I would do nothing for two weeks and then decide if you are comfortable with the then asset allocation. If not I would suggest an additional investment in US stocks using bonds as a fund source. If you are not sure what to do wait .more time before you do anything

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Re: Another Brexit question

Post by Fallible » Fri Jun 24, 2016 7:10 pm

Review your IPS, if you have one, for why you decided on this investment in the first place. If your decision did not properly take Brexit -type risks into account, you might be justified in dropping to an allocation you're more comfortable with. But if the reasons for your investment are still sound, try to hold.

If you don't have an IPS, begin one now. Times like these can prove their worth.
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kolea
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Re: Another Brexit question

Post by kolea » Sat Jun 25, 2016 9:52 am

To me, the interesting question is not the short term one (should I buy more VXUS while it is cheap?), it is the long term effects Brexit will have on International equities.

Clearly, Brexit is a huge repudiation of globalization. If that repudiation spreads further, and it may well extend to the US, there will definitely be a change in International markets. Globalization has been the trend for 20+ years now and is one big driver for emerging markets. If the brakes are put on globalization I would expect EM to suffer. On the other side, the developed markets, I would not expect a lot of change once the dust settles from Brexit, but I think the tendency for US equities to correlate with ex-US equities will decrease since our economies will be less co-dependent in a less globalized world. Upshot is International DM equities might be more attractive but EM equities less so.

Thoughts?
Kolea (pron. ko-lay-uh). Golden plover.

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SimpleGift
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Re: Another Brexit question

Post by SimpleGift » Sat Jun 25, 2016 10:43 am

kolea wrote:Clearly, Brexit is a huge repudiation of globalization. If that repudiation spreads further, and it may well extend to the US, there will definitely be a change in International markets. Globalization has been the trend for 20+ years now and is one big driver for emerging markets. If the brakes are put on globalization I would expect EM to suffer.

Possibly. Heightened nationalism and protectionism won’t be good for the global economy, for either the U.S., developed or emerging markets. But it’s not clear that emerging economies would suffer the most, since that’s where the bulk of future consumer demand is expected, due to their expanding and wealthier middle classes. If emerging market consumers increasingly look to their domestic products and services, at the expense of globalized brands, this would certainly impact the revenues of developed market companies.

Best to stay widely diversified and own a small portion of all the global companies, in my view — in the U.S., developed and emerging markets alike — in whatever allocation suits.
Cordially, Todd

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