Emerging markets as a percent of international

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Foresight2020
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Emerging markets as a percent of international

Post by Foresight2020 » Sat Feb 09, 2019 2:47 pm

Warm greetings, Bogleheads.

Any thoughts on what percentage of international equity should be allocated to emerging markets? In 2006 Vanguard was recommending 10-15% (this from a footnote in a Wiki). Vanguard Total International Stock Index (VTIAX) looks like it's now 22% emerging markets.

Thanks in advance for your thoughts!

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Vulcan
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Re: Emerging markets as a percent of international

Post by Vulcan » Sat Feb 09, 2019 2:51 pm

Foresight2020 wrote:
Sat Feb 09, 2019 2:47 pm
Warm greetings, Bogleheads.

Any thoughts on what percentage of international equity should be allocated to emerging markets? In 2006 Vanguard was recommending 10-15% (this from a footnote in a Wiki). Vanguard Total International Stock Index (VTIAX) looks like it's now 22% emerging markets.

Thanks in advance for your thoughts!
What does your IPS call for?
If it calls for market cap, then do what VTIAX does. Or just buy VTIAX. Or better yet, buy VTWAX for both domestic and international.

If your IPS calls for tilting, then... well... good luck
If you torture the data long enough, it will confess to anything. ~Ronald Coase

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Vulcan
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Re: Emerging markets as a percent of international

Post by Vulcan » Sat Feb 09, 2019 2:53 pm

...The problem is that these percentages constantly fluctuate, so if your IPS calls for market cap holdings, you can't have fixed allocations.

All of these questions are wonderfully quaint for those of us on the global market cap bandwagon.

VTWAX and done.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

MnD
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Re: Emerging markets as a percent of international

Post by MnD » Sat Feb 09, 2019 2:54 pm

Indexing places emerging markets at 21.8% of ex-US and 9.9% of total (global) equity and they will fluctuate.
If you think you are smarter than global market consensus and/or want to make bets you can pick other numbers and/or use fixed numbers.

DeadPoets
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Re: Emerging markets as a percent of international

Post by DeadPoets » Sat Feb 09, 2019 2:58 pm

I like EM better than ex-US.

I’d do 5-10%

sambb
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Re: Emerging markets as a percent of international

Post by sambb » Sat Feb 09, 2019 2:59 pm

i overweight.

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Foresight2020
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Re: Emerging markets as a percent of international

Post by Foresight2020 » Sat Feb 09, 2019 3:03 pm

Thanks for your reply, Vulcan.
What does your IPS call for?
Nothing yet. That's what I'm trying to figure out. :-?
If it calls for market cap, then do what VTIAX does.
By "market cap" do you mean the percentage of the total ex-US market that is emerging market? If so, yes, that makes sense to me.
Or just buy VTIAX.
Ah... wish it were so easy! Other holdings I'm balancing around. Maybe some day...

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Foresight2020
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Re: Emerging markets as a percent of international

Post by Foresight2020 » Sat Feb 09, 2019 3:14 pm

Indexing places emerging markets at 21.8% of ex-US and 9.9% of total (global) equity and they will fluctuate.
If you think you are smarter than global market consensus and/or want to make bets you can pick other numbers and/or use fixed numbers.
This is the gist of my question: Any reason I'm not aware of not to aim at 21.8%, other than the fluctuating nature of the percentage?

Of course all market cap percentages fluctuate, so nothing special about EM on that count. I have some immovable "lighthouses" in my portfolio, and some limited options in some accounts, so must allocate around these.

averagedude
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Re: Emerging markets as a percent of international

Post by averagedude » Sat Feb 09, 2019 3:17 pm

Around 20% in international is neutral. If you are close to or in retirement i would recommend this. If you are young, anywhere between 10%-50% in international is reasonable if you can stay the course with your decision. Emerging markets have wild swings in returns, and alot of investor's have trouble staying the course when they perform poorly. Keep in mind, if you overweight or underweight Emerging markets, you are taking the risk of under performing the market. I have about 33% of my international holdings in Emerging markets. I am placing a small bet that i will get compensated for taking additional risk and viotility, but i could be on the losing side of this decision and will be comfortable with this decision if i happen to be wrong.

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Re: Emerging markets as a percent of international

Post by tibbitts » Sat Feb 09, 2019 3:18 pm

Foresight2020 wrote:
Sat Feb 09, 2019 3:14 pm
Indexing places emerging markets at 21.8% of ex-US and 9.9% of total (global) equity and they will fluctuate.
If you think you are smarter than global market consensus and/or want to make bets you can pick other numbers and/or use fixed numbers.
This is the gist of my question: Any reason I'm not aware of not to aim at 21.8%, other than the fluctuating nature of the percentage?

Of course all market cap percentages fluctuate, so nothing special about EM on that count. I have some immovable "lighthouses" in my portfolio, and some limited options in some accounts, so must allocate around these.
If you were looking for reasons to deviate from market weight you probably came to the wrong place.

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Re: Emerging markets as a percent of international

Post by nisiprius » Sat Feb 09, 2019 3:21 pm

Keep in mind that the definition of "emerging market" is a matter of judgement and opinion. Its somewhat arbitrary. Wikipedia show nine different lists from nine different authorities. Is Pakistan an emerging market? Five authorities think so, four do not (they think it's too small). Is South Korea an emerging market? Three authorities think so, six do not (the think it's too big).

If you invest in a cap-weighted total international or total world market index, you don't need to know or care what FTSE or Dow Jones thinks. South Korea is 3.5% of the total of all ex-US stock markets, so you hold it as 3.5% of your ex-US holdings. You don't need to ask whether it's a developed market or an emerging market, 3.5% is 3.5%, whichever way.
Last edited by nisiprius on Sat Feb 09, 2019 3:22 pm, edited 1 time in total.
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Foresight2020
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Re: Emerging markets as a percent of international

Post by Foresight2020 » Sat Feb 09, 2019 3:22 pm

Around 20% in international is neutral.
Do you meaning 20% of international in emerging markets is neutral, averagedude?

Thanks!

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Foresight2020
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Re: Emerging markets as a percent of international

Post by Foresight2020 » Sat Feb 09, 2019 3:31 pm

Keep in mind that the definition of "emerging market" is a matter of judgement and opinion.
True.
If you invest in a cap-weighted total international or total world market index, you don't need to know or care what FTSE or Dow Jones thinks.
Hmmm... not sure I agree with you. The EM designation involves more than market cap: regional geopolitical factors, access to markets, access to capital... Almost as though the game being played in EMs is slightly different than the one played in the US, or in Europe. Of course, the game in Europe has slightly different rules than the one played in the US -- think EU. Which is why we diversity beyond the US, no?

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Foresight2020
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Re: Emerging markets as a percent of international

Post by Foresight2020 » Sat Feb 09, 2019 3:33 pm

If you were looking for reasons to deviate from market weight you probably came to the wrong place.
Good point, tibbitts! :D

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Re: Emerging markets as a percent of international

Post by 305pelusa » Sat Feb 09, 2019 3:35 pm

MnD wrote:
Sat Feb 09, 2019 2:54 pm
If you think you are smarter than global market consensus and/or want to make bets you can pick other numbers and/or use fixed numbers.
I don't think people tilt because they think they're smarter than the market or trying to place bets. The market cap represents the best risk-adjusted return at the risk level that the entire global population, on average, wants to take. If you want to take more risk than that, in order to get higher returns over the global market cap, then you tilt to things that are riskier.

Similarly, if you feel like a global market cap is too risky, then you'd tilt more conservatively (less Emerging market/more US large growth stocks for instance).

I'm not sure that either strategy means someone thinks it's better than the market cap. It's just a tilt for less returns/risk and/or more returns/risk than the market cap. I think that means the tilted portfolio is less efficient (worse risk-adjusted return) but some don't necessarily want the best risk-adjusted returns possible. We want a certain level of risk and then whatever is the best return at that risk level. And that might be market cap weight (ideal) but it might not be (in which case you'd tilt)

At least that's how I think about it although I could certainly be wrong :)

Typ997S
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Re: Emerging markets as a percent of international

Post by Typ997S » Sat Feb 09, 2019 3:43 pm

I'm at 33% of International in EM myself, and since I'm 30% of my Equity in International, and 75% of my portfolio is in Equity, I'm at 7% of my overall portfolio in EM. This is an allocation percentage I set a long time ago, and I've stuck to it. The reason for the overweight (vs. market cap) to EM was that since EM is more volatile/risky, it should return more. Also, since I'm a frequent rebalancer, I should be selling high and buying low as it cycles up and down.

Will this work? Dunno, as I realize that higher risk doesn't always produce higher return. The good news/bad news is that at 7% of my portfolio, I'm not going to go broke due to EM exposure, nor will I get rich! :sharebeer

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Re: Emerging markets as a percent of international

Post by asset_chaos » Sat Feb 09, 2019 4:23 pm

Foresight2020 wrote:
Sat Feb 09, 2019 3:31 pm
If you invest in a cap-weighted total international or total world market index, you don't need to know or care what FTSE or Dow Jones thinks.
Hmmm... not sure I agree with you. The EM designation involves more than market cap: regional geopolitical factors, access to markets, access to capital...
There are two different things going on here. If someone starts an emerging market index, then they decide first what countries are emerging markets, and indeed index providers do use the criteria you mention (and more) in deciding what is an emerging market country. As pointed out by nisiprius, different providers come to different conclusions on some countries. Then they put companies from those countries into the index at their market weight of the total market cap of the countries designated emerging markets.

However, an index like the global all cap that the total world fund follows does it differently. Here the index provider first asks only what percentage of the global market cap is this company and puts it in at that weight. The companies are put in first at their market weight without recourse to any other criteria (I mildly simplify; there's free float but that's not relevant to this point), then after the fact one can look at where companies already in the index are headquartered and say, well the world market has this much in emerging markets, again using what ever criteria you want to define what an emerging market is.

An example. In the first way to look at it, the index first says, Mexico is an emerging market, therefor I'll put Cemex in the index fund because it's headquartered in Mexico. The other way first says Cemex, the global cement company with operations worldwide, is 0.06% of the global market cap, therefore its in the index at market weight. Later for reporting purposes I'll notice that Cemex is a Mexican company, and since I've designated elsewhere that Mexico is an emerging market, I'll report that so much of the index is in emerging markets. But the latter is just reporting window dressing; it's not essential to how the total market index is constructed. Total market type funds don't care where a company is headquartered, they only care about each company's market value.
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Re: Emerging markets as a percent of international

Post by bluquark » Sat Feb 09, 2019 4:59 pm

It's worth actually looking at what you get when you're holding an EM index fund. Before looking, I would've said it's mostly China and India because those countries have huge population and GDP. Nope. China is mostly closed to outside investors and India's economy is mostly private, so only 10% of the index is in each (when it contains Fhina at all).

So it's really mostly an index of small south-east Asian countries. In that light 10% of my equity there seems about right, and it seems weird to go significantly higher like some EM bulls like to recommend. Like I never hear any of these folks talk about the bullish case for Taiwan, but you're heavily overweight in it?

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Re: Emerging markets as a percent of international

Post by Foresight2020 » Sat Feb 09, 2019 5:03 pm

There are two different things going on here. If someone starts an emerging market index, then they decide first what countries are emerging markets, and indeed index providers do use the criteria you mention (and more) in deciding what is an emerging market country. As pointed out by nisiprius, different providers come to different conclusions on some countries. Then they put companies from those countries into the index at their market weight of the total market cap of the countries designated emerging markets.

However, an index like the global all cap that the total world fund follows does it differently. Here the index provider first asks only what percentage of the global market cap is this company and puts it in at that weight. The companies are put in first at their market weight without recourse to any other criteria (I mildly simplify; there's free float but that's not relevant to this point), then after the fact one can look at where companies already in the index are headquartered and say, well the world market has this much in emerging markets, again using what ever criteria you want to define what an emerging market is.

An example. In the first way to look at it, the index first says, Mexico is an emerging market, therefor I'll put Cemex in the index fund because it's headquartered in Mexico. The other way first says Cemex, the global cement company with operations worldwide, is 0.06% of the global market cap, therefore its in the index at market weight. Later for reporting purposes I'll notice that Cemex is a Mexican company, and since I've designated elsewhere that Mexico is an emerging market, I'll report that so much of the index is in emerging markets. But the latter is just reporting window dressing; it's not essential to how the total market index is constructed. Total market type funds don't care where a company is headquartered, they only care about each company's market value.
Right, so VTIAX tells us what percentage of international market cap (ex-US) comes from emerging markets and what percentage comes from developed markets, however they define those. That's what I'm looking for -- an indication of how much of my international equity should be in these emerging markets if I want to own the world (ex-US).

I currently own iShares Core MSCI EAFE ETF (IEFA) and Vanguard FTSE Developed Markets ETF (VEA), both of which are only developed markets. I need to either trade some of this first for an EM index, or see if I can trade both for a total international equity fund/ETF. VEA is in a taxable account, so I was thinking to leave it alone and diversity out of the IEFA which is in a Roth IRA.

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Re: Emerging markets as a percent of international

Post by Valuethinker » Sat Feb 09, 2019 5:10 pm

bluquark wrote:
Sat Feb 09, 2019 4:59 pm
It's worth actually looking at what you get when you're holding an EM index fund. Before looking, I would've said it's mostly China and India because those countries have huge population and GDP. Nope. China is mostly closed to outside investors and India's economy is mostly private, so only 10% of the index is in each (when it contains Fhina at all).

So it's really mostly an index of small south-east Asian countries. In that light 10% of my equity there seems about right, and it seems weird to go significantly higher like some EM bulls like to recommend. Like I never hear any of these folks talk about the bullish case for Taiwan, but you're heavily overweight in it?
Last I checked my EM fund was c 35 per cent China.

That worried me. The PE ratings on some of those Chinese tech stocks were American ish levels.

Taiwan? Taiwan Semiconductor was 25 per cent of the index. I think of it as another Samsung or a cheap Intel. Generally lots of good entrepreneurial companies and a low PE.

I could not find an Emerging Market Value ETF (Vanguard Europe appears now to do one but my stockbroking account died not seem to let me buy it) so I bought an EM dividend income Etf
Alas the expense ratio is 0.6%.

At some point I mean to query my broker about the lack of the fund even though there is a ticker quote listingetc.

The EM fund I do have is loaded down with lovely Russian Brasilian and other companies. Just gruesome places, where the stocks pay a 5 per cent yield

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Re: Emerging markets as a percent of international

Post by pdavi21 » Sat Feb 09, 2019 5:26 pm

It's going to rise as more China gets included.

Currently about 22% of ex-US and 10% global.

I think I'm about 23.3 and 9.3%.

While I don't do it (I only really tilt to size and some light US bias), I strongly advocate tilting EM. I would tilt to EM before value/small value, but I'd rather just stick to my plan for eternity.
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Re: Emerging markets as a percent of international

Post by tooluser » Sat Feb 09, 2019 5:30 pm

Scott Burns' "classic" 10-speed portfolio:

1/10—Vanguard Inflation-Protected Securities (VIPSX)
1/10—Vanguard Total Stock Market Index (VTSMX)
1/10—Vanguard Total Intl Stock Index (VGTSX)
1/10—SPDR Lehman International Treasury Index (BWX)
1/10—Vanguard REIT Index (VGSIX)
1/10—Vanguard Energy (VGENX)
1/10—Vanguard Value Index (VIVAX)
1/10—Vanguard Small Cap Value Index (VISVX)
1/10—Vanguard Emerging Markets Stock (VEIEX)
1/10—Vanguard International Value (VTRIX)

Emerging markets are 10% of the overall portfolio, 25% of the international allocation, and 33 1/3% of the international stock allocation.

If you go down to 9-speed (drop International Value), then it's 11 1/9% of the overall portfolio, 33 1/3% of the international allocation, and 50% of the international stock allocation.
Last edited by tooluser on Sat Feb 09, 2019 5:37 pm, edited 1 time in total.
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Re: Emerging markets as a percent of international

Post by bluquark » Sat Feb 09, 2019 5:36 pm

Valuethinker wrote:
Sat Feb 09, 2019 5:10 pm
bluquark wrote:
Sat Feb 09, 2019 4:59 pm
It's worth actually looking at what you get when you're holding an EM index fund. Before looking, I would've said it's mostly China and India because those countries have huge population and GDP. Nope. China is mostly closed to outside investors and India's economy is mostly private, so only 10% of the index is in each (when it contains Fhina at all).

So it's really mostly an index of small south-east Asian countries. In that light 10% of my equity there seems about right, and it seems weird to go significantly higher like some EM bulls like to recommend. Like I never hear any of these folks talk about the bullish case for Taiwan, but you're heavily overweight in it?
Last I checked my EM fund was c 35 per cent China.
Some summaries say 35% China, others break it down to 10% China A-shares and 25% Hong Kong. Hong Kong seems special in that it's the stock market for a lot of nearby countries without a stock market of their own, and if I look at the top 10 holdings many of them have little business in mainland China. So I meant specifically 10% China A-shares which I think better matches what most people think of as "China".

Nahtanoj
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Re: Emerging markets as a percent of international

Post by Nahtanoj » Sat Feb 09, 2019 5:54 pm

About 20 years ago, Burton Malkiel published a book on emerging market investing. My recollection is that he indicated the minimum volatility international stock portfolio had been about 2/3 developed markets and 1/3 emerging markets, and I used that 2:1 ratio as a guideline for a long time. (Of course, things may have changed since then.)

For investors seeking a value tilt in emerging markets without owning a lot of Russian natural resource companies, there is a recently launched multifactor ETF managed by DFA that includes a modest value tilt. (Expense ratio is 0.55 and symbol is JHEM.) For a heavier value tilt, T. Rowe Price now has an emerging markets value fund that also shows a smaller average market cap than the usual indices.

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Re: Emerging markets as a percent of international

Post by averagedude » Sat Feb 09, 2019 7:22 pm

Foresight2020 wrote:
Sat Feb 09, 2019 3:22 pm
Around 20% in international is neutral.
Do you meaning 20% of international in emerging markets is neutral, averagedude?

Thanks!
20% as neutral s a matter of opinion and there is different geography percentages by different index originators. Around 20% is what Vanguard says, which is what i tend to adhere to. Of course Vanguard has their own opinions just like morningstar and others. I would suggest if you are wanting neutral, just buy the the total international fund from Vanguard. This would also follow the boglehead philosophy. Keep on mind that neutral fluctuates daily, and what is neutral today will be different in the future.

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Re: Emerging markets as a percent of international

Post by Blueskies123 » Sat Feb 09, 2019 7:53 pm

IXUS will do this for you. Index of all international including EM.

https://www.ishares.com/us/products/244 ... -stock-etf

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Re: Emerging markets as a percent of international

Post by garlandwhizzer » Sat Feb 09, 2019 9:05 pm

There is a wide range of opinions on this question. Many do not want INTL at all and that has worked out quite well for them over the last decade. The next decade may well be different. Many who choose INTL do it with a market weight like VXUS. Others break up international into separate DM and EM funds in the percentages they're comfortable with. Some are most comfortable with 0 EM, others with 50 EM/50 DM, etc.. EM are expected to be more volatile, more risky, but to have higher expected long term returns according to most than DM. What is expected may not be what actually happens over a specific individual's time frame. Both offer diversification relative to US equity, likely EM and SC INTL more so than LC DM which acts more like US LC. The right mix for someone doesn't necessarily come out of an investment book but depends more than anything IMO on the beliefs, risk tolerance, and financial goals of the person who chooses it. Align the choice with yourself.

Garland Whizzer

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Re: Emerging markets as a percent of international

Post by Trader Joe » Sat Feb 09, 2019 9:07 pm

Foresight2020 wrote:
Sat Feb 09, 2019 2:47 pm
Warm greetings, Bogleheads.

Any thoughts on what percentage of international equity should be allocated to emerging markets? In 2006 Vanguard was recommending 10-15% (this from a footnote in a Wiki). Vanguard Total International Stock Index (VTIAX) looks like it's now 22% emerging markets.

Thanks in advance for your thoughts!
Yes, I allocate 0% to emerging markets and I am very happy with my results.

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Re: Emerging markets as a percent of international

Post by fennewaldaj » Sat Feb 09, 2019 10:59 pm

tooluser wrote:
Sat Feb 09, 2019 5:30 pm
Scott Burns' "classic" 10-speed portfolio:

1/10—Vanguard Inflation-Protected Securities (VIPSX)
1/10—Vanguard Total Stock Market Index (VTSMX)
1/10—Vanguard Total Intl Stock Index (VGTSX)
1/10—SPDR Lehman International Treasury Index (BWX)
1/10—Vanguard REIT Index (VGSIX)
1/10—Vanguard Energy (VGENX)
1/10—Vanguard Value Index (VIVAX)
1/10—Vanguard Small Cap Value Index (VISVX)
1/10—Vanguard Emerging Markets Stock (VEIEX)
1/10—Vanguard International Value (VTRIX)

Emerging markets are 10% of the overall portfolio, 25% of the international allocation, and 33 1/3% of the international stock allocation.

If you go down to 9-speed (drop International Value), then it's 11 1/9% of the overall portfolio, 33 1/3% of the international allocation, and 50% of the international stock allocation.
Its actually more than 25% as Vanguard total international and Vanguard international value have some EM.

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Re: Emerging markets as a percent of international

Post by klaus14 » Sun Feb 10, 2019 1:27 am

i have 25% of my investments in EM.
50% Stocks (IEMG) / 25% USD Bond (VEGBX) / 25% Local Currency Bonds (EMLC).
This achieves better country diversity compared to stocks alone.

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Re: Emerging markets as a percent of international

Post by ohai » Sun Feb 10, 2019 2:14 am

I'd say 10-15% is the most aggressive I could be in EM. There was a huge equity boom when this asset class became available to Western investors, but for the past 15-20 years, it does not seem that the returns have justified the cyclicality and volatility of those markets. If you are looking to EM for economic growth, much of that has already been priced in with relatively high assumptions. Furthermore, most SPX stocks are already exposed to global growth, but their management and accounting standards are far better than what you'd find in China or Brazil.

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Re: Emerging markets as a percent of international

Post by DB2 » Sun Feb 10, 2019 1:19 pm

ohai wrote:
Sun Feb 10, 2019 2:14 am
I'd say 10-15% is the most aggressive I could be in EM. There was a huge equity boom when this asset class became available to Western investors, but for the past 15-20 years, it does not seem that the returns have justified the cyclicality and volatility of those markets. If you are looking to EM for economic growth, much of that has already been priced in with relatively high assumptions. Furthermore, most SPX stocks are already exposed to global growth, but their management and accounting standards are far better than what you'd find in China or Brazil.
Yeah, I agree. 15% would be my max. Some on the Bloomberg network have been saying lately how EM is currently undervalued and how there is good potential this year especially as they got hammered in the market last year. However, with the trade/tariff talks I don't believe are going to be resolved anytime soon and this will weigh them down as would any dollar strengthening this year (although if anything, I see a dollar weakening throughout the year so this would be a plus for EM).

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Re: Emerging markets as a percent of international

Post by ukbogler » Tue Oct 08, 2019 3:48 am

Vulcan wrote:
Sat Feb 09, 2019 2:53 pm
...The problem is that these percentages constantly fluctuate, so if your IPS calls for market cap holdings, you can't have fixed allocations.

All of these questions are wonderfully quaint for those of us on the global market cap bandwagon.

VTWAX and done.
related question... I can't buy VTWAX within my platform; is it equivalent to VWRL?

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Re: Emerging markets as a percent of international

Post by AlohaJoe » Tue Oct 08, 2019 3:57 am

ukbogler wrote:
Tue Oct 08, 2019 3:48 am
Vulcan wrote:
Sat Feb 09, 2019 2:53 pm
...The problem is that these percentages constantly fluctuate, so if your IPS calls for market cap holdings, you can't have fixed allocations.

All of these questions are wonderfully quaint for those of us on the global market cap bandwagon.

VTWAX and done.
related question... I can't buy VTWAX within my platform; is it equivalent to VWRL?
You can check for yourself. Go to Vanguard's website and see what index VWRL tracks. Then see that index VTWAX tracks. Are they the same? If they are different, what are the differences?

ukbogler
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Re: Emerging markets as a percent of international

Post by ukbogler » Tue Oct 08, 2019 4:07 am

AlohaJoe wrote:
Tue Oct 08, 2019 3:57 am
ukbogler wrote:
Tue Oct 08, 2019 3:48 am
Vulcan wrote:
Sat Feb 09, 2019 2:53 pm
...The problem is that these percentages constantly fluctuate, so if your IPS calls for market cap holdings, you can't have fixed allocations.

All of these questions are wonderfully quaint for those of us on the global market cap bandwagon.

VTWAX and done.
related question... I can't buy VTWAX within my platform; is it equivalent to VWRL?
You can check for yourself. Go to Vanguard's website and see what index VWRL tracks. Then see that index VTWAX tracks. Are they the same? If they are different, what are the differences?
I just wondered if he already knew. No point reinventing the wheel. Still, your generous and helpful response has spurred me on to do this:- Image so I guess they are close enough. Irritating the VWRL etf charges 0.25% though.

cheezit
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Joined: Sat Jul 14, 2018 7:28 pm

Re: Emerging markets as a percent of international

Post by cheezit » Tue Oct 08, 2019 8:18 am

nisiprius wrote:
Sat Feb 09, 2019 3:21 pm
If you invest in a cap-weighted total international or total world market index, you don't need to know or care what FTSE or Dow Jones thinks. South Korea is 3.5% of the total of all ex-US stock markets, so you hold it as 3.5% of your ex-US holdings. You don't need to ask whether it's a developed market or an emerging market, 3.5% is 3.5%, whichever way.
You are already aware of this, nisi, but it is important to note that this is an oversimplification. When it comes to China (and some other countries iirc), different index providers disagree on what the weights should be. FTSE and MCSI are both easing China up to their ostensible market cap weight over periods of years, at different rates and with different final targets based on different estimates of the fraction of state ownership. Though the difference in the weight allotted to China by different "total market" indices is not very large as of yet, it still isn't the case that there is some single canonical list of cap weights for countries that everyone goes by.

MotoTrojan
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Re: Emerging markets as a percent of international

Post by MotoTrojan » Tue Oct 08, 2019 8:24 am

Foresight2020 wrote:
Sat Feb 09, 2019 3:14 pm
Indexing places emerging markets at 21.8% of ex-US and 9.9% of total (global) equity and they will fluctuate.
If you think you are smarter than global market consensus and/or want to make bets you can pick other numbers and/or use fixed numbers.
This is the gist of my question: Any reason I'm not aware of not to aim at 21.8%, other than the fluctuating nature of the percentage?

Of course all market cap percentages fluctuate, so nothing special about EM on that count. I have some immovable "lighthouses" in my portfolio, and some limited options in some accounts, so must allocate around these.
Because it is the market weight it actually shouldn’t fluctuate too much once you buy in; if it goes from 21.8% to 25% then so should your holding’s allocation.

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goingup
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Re: Emerging markets as a percent of international

Post by goingup » Tue Oct 08, 2019 8:50 am

Foresight2020 wrote:
Sat Feb 09, 2019 5:03 pm
Right, so VTIAX tells us what percentage of international market cap (ex-US) comes from emerging markets and what percentage comes from developed markets, however they define those. That's what I'm looking for -- an indication of how much of my international equity should be in these emerging markets if I want to own the world (ex-US).
Portfolio composition of VTIAX
Region allocation
as of 08/31/2019
21.80% Emerging Markets
41.50% Europe
28.70% Pacific
0.40% Middle East
7.00% North America
0.60% Other

So...about 20% of your International holdings should be Emerging Markets. So if you want 30% of your total portfolio to be International it looks like this:
$100,000 total portfolio
$30K is International. 20% of that $30K is Emerging Markets, which is $6K.

Is this the answer you're looking for?

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