2021 switch to value and emerging markets

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
bpkasl
Posts: 24
Joined: Fri Jul 31, 2020 6:55 am

2021 switch to value and emerging markets

Post by bpkasl »

After reading several articles over the past few weeks on the 2021 economic outlook Worldwide, it seems the overall theme is focus on value and emerging markets over growth, especially US growth.
In particular the UK, Australia, China, Korea and Russia were singled out as emerging markets that have lagged.
So as a recent retiree, we have established a balanced 50/50 split, but now are rethinking funds that would incorporate the above strategies, so probably Vanguard total value funds if it exists and adding World Value index, if it exists.
Any help appreciated
inverter
Posts: 444
Joined: Mon Jul 27, 2015 1:40 pm

Re: 2021 switch to value and emerging markets

Post by inverter »

I would stick with your existing asset allocation, which should always include some international for diversification.
typical.investor
Posts: 2400
Joined: Mon Jun 11, 2018 3:17 am

Re: 2021 switch to value and emerging markets

Post by typical.investor »

bpkasl wrote: Wed Jan 13, 2021 8:33 am In particular the UK, Australia, China, Korea and Russia were singled out as emerging markets that have lagged.
The UK is an emerging market now. Seems about right I guess now that they are out of the EU. :wink: Australia though?
bpkasl wrote: Wed Jan 13, 2021 8:33 am So as a recent retiree, we have established a balanced 50/50 split, but now are rethinking funds that would incorporate the above strategies, so probably Vanguard total value funds if it exists and adding World Value index, if it exists.
Value often drops more in a crisis, so sequence of returns is more of a risk.
User avatar
nisiprius
Advisory Board
Posts: 42544
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: 2021 switch to value and emerging markets

Post by nisiprius »

Stay the course. Don't try to time the market. Tune out the noise.

You will always be "reading articles" and if you look you will always be able to find other articles that say the opposite of whatever you are reading. Opinions can spread like jokes or fashion trends. It often seems as if "everyone" is saying or that "the general consensus is" thus-and-such, but it doesn't mean much.

Also, there are always people trying to sell stuff, and whenever there is legitimate news about how numbers have trended or drifted or something new that has happened, everyone will try to use that as a sales hook and reason why you should buy what they are selling.

The commonest such trick is this. If something is up, people let the results speak for themselves or point out that it is "trending" upward, with the implication that knowledgeable people expect "trends" to continue. But if it is down, they will say that it is "cheap" and "due for" an upturn. People usually do not like to buy things that are down, so the people selling these products are likely to be trying to making this "it's cheap" pitch.

Finally, advisors have a self-interest in keeping you engaged and feeling that you are getting value for your money by getting fresh ideas and suggestions, so they have a reason to encourage tinkering. In some cases, they may even have a direct financial self-interest in doing that.

Vanguard says on one of their web pages:
What we think about stock investing
  • Broad diversification across all segments of the domestic stock market helps reduce volatility.
  • Large-, mid-, and small-capitalization stocks should be held in proportions roughly similar to that of the overall U.S. stock market.
  • Investors should hold both growth and value stocks in similar proportions.
  • Investing between 30% and 50% of your stock portfolio in international stocks can help you diversify.
That isn't necessarily gospel, they may say other things on other web pages, and it's still just one opinion, but it shows that it is not crazy just to "hold growth and value in similar proportions." In their all-in-one target date and LifeStrategy funds, Vanguard practices what they preach. They've done various kinds of tinkering, but they have never changed the proportion of growth and value, and they have never changed the proportion of emerging markets (more precisely, they've never underweighted it or overweight it; they've just let it drift according to whatever it has naturally been as a percentage of cap weight).

Maybe it's possible to do better by market timing growth and value, or by market timing emerging markets, but Vanguard is willing to stake its business success on not doing either.
Last edited by nisiprius on Wed Jan 13, 2021 9:00 am, edited 5 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
sunnywindy
Posts: 492
Joined: Sat Jan 18, 2014 4:42 pm
Location: Wilmington, NC

Re: 2021 switch to value and emerging markets

Post by sunnywindy »

Ask yourself, can I predict the future? I know I can't, so it's logical neither can they (or any human). Stick with your asset allocation plan and then enjoy your retirement.
Powered by chocolate!
Topic Author
bpkasl
Posts: 24
Joined: Fri Jul 31, 2020 6:55 am

Re: 2021 switch to value and emerging markets

Post by bpkasl »

Thanks for info
I look at our holdings with VTSMX and VFWAX, along with several laddered bond and cash classes and not sure if any value is included, emerging markets may be in the FTSE All World
User avatar
nisiprius
Advisory Board
Posts: 42544
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: 2021 switch to value and emerging markets

Post by nisiprius »

bpkasl wrote: Wed Jan 13, 2021 8:59 am...emerging markets may be in the FTSE All World
They are, about a quarter of the fund's portfolio.

VFWAX portfolio

Image
Last edited by nisiprius on Wed Jan 13, 2021 9:06 am, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Topic Author
bpkasl
Posts: 24
Joined: Fri Jul 31, 2020 6:55 am

Re: 2021 switch to value and emerging markets

Post by bpkasl »

Thanks
User avatar
nisiprius
Advisory Board
Posts: 42544
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: 2021 switch to value and emerging markets

Post by nisiprius »

bpkasl wrote: Wed Jan 13, 2021 8:59 am...I look at our holdings with VTSMX and VFWAX, along with several laddered bond and cash classes and not sure if any value is included...
I had to go to Morningstar to get the numbers, which aren't really necessary but I thought would illustrate the point. For either VTSMX or VTSAX (Admiral shares), 15 + 5 + 2 = 22% of the fund is invested in stocks which Morningstar classifies as "value" stocks.

Image

Of course the question people argue about is not whether a portfolio contains value stocks, but what the balance is between value and growth. Total stock market index funds, and S&P 500 index funds, contain both growth and value and are basically not tilted toward either. Currently, depending on exactly how these factors are defined and measured, some would say that they have a small tilt toward growth. Morningstar charts it this way, and what you can see is that although the blue dot is off center, it is still inside the "large blend" box, and Morningstar considers this to be a "large blend" fund, neither a "growth" or a "value" fund.

Image
Last edited by nisiprius on Wed Jan 13, 2021 9:15 am, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Topic Author
bpkasl
Posts: 24
Joined: Fri Jul 31, 2020 6:55 am

Re: 2021 switch to value and emerging markets

Post by bpkasl »

Another thank you
User avatar
nisiprius
Advisory Board
Posts: 42544
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: 2021 switch to value and emerging markets

Post by nisiprius »

Try spending a little time clicking and poking around Vanguard's website. They really give you a lot of information about each of their funds and it doesn't take long to get the hang of it.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
JoeRetire
Posts: 6573
Joined: Tue Jan 16, 2018 2:44 pm

Re: 2021 switch to value and emerging markets

Post by JoeRetire »

bpkasl wrote: Wed Jan 13, 2021 8:33 am After reading several articles over the past few weeks on the 2021 economic outlook Worldwide, it seems the overall theme is focus on value and emerging markets over growth, especially US growth.

So as a recent retiree, we have established a balanced 50/50 split, but now are rethinking funds that would incorporate the above strategies, so probably Vanguard total value funds if it exists and adding World Value index, if it exists.
Don't change your investing strategy based on a "theme" you happened to see in several articles.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
Post Reply