Emerging markets fund: DFEMX vs DFEVX vs FPMAX

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need403bhelp
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Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by need403bhelp » Mon Jun 12, 2017 1:23 pm

Dear All:

Thank you so much for your help!

I started a new thread as this is a pretty compartmental & separate question from my prior questions. If this is not appropriate, I am happy to delete/merge it- please let me know.

I just realized, after some careful examination and discussion with Fidelity rep, that I actually have access to (at least) 3 emerging market funds in my retirement accounts (approximately ~9% of my overall allocation is to emerging markets in order to make a total international allocation when combined with with FSIVX+/-TCIEX):

1. DFEMX through Fidelity 403b (net ER 0.48) - this is the one I was planning to use although I didn't realize it was different fund from #2 until 30 minutes ago
2. DFEVX through TIAA-CREF 457 (net ER 0.56) - seems like it has a value tilt; previously, I had just assumed both plans had the same fund (reading too quickly over the M vs V)
3. FPMAX through Fidelity Brokeragelink in my 403b, apparently I can allocate any discrete percentage of my 403b funds to brokeragelink (net ER 0.14%) - lower ER but slightly higher hassle factor due to having to use brokeragelink and not sure if there are any advantages to go this route

The easiest thing is to just use DFEMX, which, if I understand correctly, would best approximate ALL emerging markets.

Next easiest thing (pretty much just as easy, just a slightly higher ER) is to use DFEVX, which I understand to have a value tilt. Again, I'm not trying to tilt my emerging markets portfolio specifically, but not sure if there is some great reason why I should use this fund instead of DFEMX (I am in the accumulation phase and have a large way to go, so maybe just higher rewards/higher risk).

Apparently, I can also do brokeragelink for the 403b, and could invest in FPMAX or really any Fidelity mutual fund (no ETFs for brokeragelink in 403b).

Any thoughts? Specifically, any reason NOT to go with DFEMX?

Thank you again!

Theoretical
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Re: Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by Theoretical » Mon Jun 12, 2017 2:04 pm

Actually, the DFA funds have far less turnover than the Fidelity index - 4-6% vs 25%.

The value fund is the most diversified in terms of number of companies and is the only one to get you Small Cap EM exposure (all Value).

need403bhelp
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Re: Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by need403bhelp » Mon Jun 12, 2017 2:08 pm

Theoretical wrote:Actually, the DFA funds have far less turnover than the Fidelity index - 4-6% vs 25%.

The value fund is the most diversified in terms of number of companies and is the only one to get you Small Cap EM exposure (all Value).
Got it, thank you so much.

So do I understand correctly that I would have broader exposure in terms of including small cap emerging markets if I invest in DFEVX (net ER 0.56)? And, thus, it would be best to use this fund for my emerging markets allocation?

Thank you so much!!!

Theoretical
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Re: Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by Theoretical » Mon Jun 12, 2017 5:10 pm

Well there's a downside to it. EM Value is a rough ride, even by EM standards.

need403bhelp
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Re: Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by need403bhelp » Mon Jun 12, 2017 5:34 pm

Theoretical wrote:Well there's a downside to it. EM Value is a rough ride, even by EM standards.
Got it, thank you so much.

To be fair, my overall exposure would be low. Looking at international only (75% TCIEX/FSIVX plus 25% emerging markets fund), for DFEMX I have:

0% for all 3 of small value, core, and growth

For DFEVX I have:

2% for small value, 1% for small core, and 0% for small growth

So seems like I get slightly better exposure and approximation of entire international market, no?

For comparison, VGTSX has 2% small value, 1% small core, and 1% small growth.

palaheel
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Re: Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by palaheel » Mon Jun 12, 2017 6:17 pm

DFEVX has a Morningstar style box of

45 20 05
14 03 01
09 02 00

That's certainly a value tilt.

Is the small tilt significant? It's >3x the amount of small cap of the corresponding indexes, but still only 11%. I'm unclear when a tilt becomes significant.
Markets crash. Markets recover. Inflation takes your money FOREVER.

need403bhelp
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Re: Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by need403bhelp » Mon Jun 12, 2017 6:25 pm

palaheel wrote:DFEVX has a Morningstar style box of

45 20 05
14 03 01
09 02 00

That's certainly a value tilt.

Is the small tilt significant? It's >3x the amount of small cap of the corresponding indexes, but still only 11%. I'm unclear when a tilt becomes significant.
Thank you for your thoughts. Just so that you know what I am talking about in the previous post, here is the Morningstar style box of 75% FSIVX (in reality, I am using both combo of FSIVX and TCIEX, but this is close enough) and 25% DFEVX:

37 28 22
05 03 01
02 01 00

On the other hand, here is 75% FSIVX and 25% DFEMX:

34 30 27
04 03 02
00 00 00

Really, I am using these combinations to mimic 100% VGTSX, which has:

30 26 24
06 06 05
02 01 01

Comparing absolute differences between FSIVX&DFEVX to VGTSX, I get:

07 02 -2
-1 -3 -4
00 00 -1

Comparing absolute differences between FSIVX&DFEMX to VGTSX, I get:

04 04 03
-2 -3 -3
-2 -1 -1

Based on these numbers, FSIVX&DFEVX approximates VGTSX better percentage-wise EXCEPT large-cap value and medium-cap growth.

Hence, it seems that DFEVX is better for me. Or am I missing something?

P.S. To be fair, sum of squared residuals for each example has only a ~3% difference between the two options, so they are likely equally good. Then again, as FSIVX has 0's for all 3 small-cap types (value, core, and growth), those are likely real 0's in the mixture and not just rounded down from a small percentage. It seems better to have something invested in the small-cap international market segment than nothing.

EDIT: Actually, thinking more, I'm probably just going to go with DFEMX, as it results in the best "world regions" match in combination with EITHER FSIVX or TCIEX as opposed to DFEVX. World regions match was my initial criterion so I'll stick to it. Plus, 4% allocation to small caps in international would not be a huge part of my portfolio, so I probably won't lose much. Thank you all!

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whodidntante
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Re: Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by whodidntante » Mon Jun 12, 2017 10:25 pm

I overweight EM and almost all of it is in DFEVX. Value works well for EM and DFEVX has significant small exposure as well. DFEVX has a cap on single country exposure which mainly serves to limit your exposure to China. DFA also uses a negative momentum filter and patient trading. Overall, I think the fund generates alpha after expenses so that's why I hold it.

I will say this, however. The swings of DFEVX are impressive and the trend was basically flat for a long while. It was a test of conviction. There is a thread here no less frequently than once a month where someone argues in favor of home country bias. If you are the sort of person who will make behavioral mistakes based on what others think, you probably won't make much money from EM value. Be sure you have conviction before buying this fund.

need403bhelp
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Re: Emerging markets fund: DFEMX vs DFEVX vs FPMAX

Post by need403bhelp » Tue Jun 13, 2017 9:12 am

whodidntante wrote:I overweight EM and almost all of it is in DFEVX. Value works well for EM and DFEVX has significant small exposure as well. DFEVX has a cap on single country exposure which mainly serves to limit your exposure to China. DFA also uses a negative momentum filter and patient trading. Overall, I think the fund generates alpha after expenses so that's why I hold it.

I will say this, however. The swings of DFEVX are impressive and the trend was basically flat for a long while. It was a test of conviction. There is a thread here no less frequently than once a month where someone argues in favor of home country bias. If you are the sort of person who will make behavioral mistakes based on what others think, you probably won't make much money from EM value. Be sure you have conviction before buying this fund.
Thank you so much for your helpful advice re your allocations, the advantages of DFEVX and DFA, and the market swings/volatility of DFEVX.

As I am not trying to tilt and just trying to mimic the market, I will go with DFEMX instead of DFEVX for now.

I will miss out on ex-US small cap and Canada, but I can live with that for now.

Thank you all again!

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