Emerging Markets Tempting Anyone at these Valuations? (VWO)

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Cornflakey
Posts: 36
Joined: Wed Jan 25, 2017 11:24 am

Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by Cornflakey »

Vanguard Emerging Markets ETF (VWO) has not been this cheap since 2018 (excluding the Covid crash in March 2020). Fast rising rates in the US and other developed economies and the strong USD are no doubt taking their toll on an EM sector that has been languishing for more than a decade now.

Seems like a decent degree of upside to be obtained here if a long-term investor is willing to park cash and sit out the cycle. I usually shun international in favor of domestic, but the circumstances seem favorable for a side-tilt here.

Anyone else being tempted?
visualguy
Posts: 2645
Joined: Thu Jan 30, 2014 1:32 am

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by visualguy »

No. It has been languishing for good reasons. Do you really think the market has been mispricing it for so many years? Also, a third of it is China which is very risky, particularly for a US investor.
User avatar
Billy C
Posts: 108
Joined: Sat Apr 02, 2022 4:05 pm

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by Billy C »

No.

International investing, particularly in emerging markets, means accepting additional risks (currency, political instability, war, ect). If those extra risks aren’t offset by higher returns, as has been the case for decades, it seems like a poor investment and completely unnecessary as John Bogle said.

Of course at some point reversion to the mean is likely to occur but the extra risks don’t seem worth it.
“When there are multiple solutions to a problem, choose the simplest one.” ― John C. Bogle
atdharris
Posts: 1912
Joined: Wed Jan 02, 2019 3:18 pm

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by atdharris »

I wish I could give you my shares. The VWO I bought at the end of March 2020 is up 15% since then. Meanwhile, the VTI I bought is up 76%. International stocks have been cheap for over a decade and still have managed to fall more than US markets during drops.
TN_Boy
Posts: 3057
Joined: Sat Jan 17, 2009 12:51 pm

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by TN_Boy »

atdharris wrote: Wed Sep 21, 2022 10:25 am I wish I could give you my shares. The VWO I bought at the end of March 2020 is up 15% since then. Meanwhile, the VTI I bought is up 76%. International stocks have been cheap for over a decade and still have managed to fall more than US markets during drops.
I've been maintaining my holdings in emerging markets (and developed foreign markets as well) but these holdings have indeed cost me money. But ... that is how diversification works. I've had enough US equity to sooth the pain.

There are, of course, many threads on the pros and cons of international investing for one to search through.
UpperNwGuy
Posts: 8252
Joined: Sun Oct 08, 2017 7:16 pm

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by UpperNwGuy »

I am not tempted. I hold VXUS and IXUS, both of which contain a market share of emerging. That's as far as I'm willing to go with these high risk investments.
User avatar
David Jay
Posts: 12999
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by David Jay »

"Tempting Anyone at these Valuations?"
If you are being tempted by valuations, you are by definition timing the market. You need to write an IPS (investment policy statement) and stick with it in the face of constantly changing valuations.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
the_wiki
Posts: 380
Joined: Thu Jul 28, 2022 11:14 am

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by the_wiki »

I've got about 10% of my portfolio in EM, but I probably will not increase it.

China is about 1/3 of EM and there is a lot of risk there, from war, to real estate collapse, to delisting.

I think they have real potential to be the #1 economy in the world in 20 years, though, so not being invested in China also seems unwise.
DetroitRick
Posts: 1154
Joined: Wed Mar 23, 2016 9:28 am
Location: SE Michigan

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by DetroitRick »

Tempted enough to stay on top of my already-aggressive emerging market allocation (averages around 22% of my international across my portfolio). But not tempted enough to increase that allocation. Just as I have rebalanced out during stronger emerging market performance years (2017 and 19 for example).

Overall international for me is around 35% or so of equity, so 22% of that for emerging. That is my comfort point. My allocations are made on my own future expectations rather than my past performance. But having said that, international overall has paid off for me over the last few decades.

I fully understand all the risks, domestic (often downplayed) and international, and spent a good part of my career in international trade. People should invest based on their own needs and capacities. There is no definitive answer to the international investing question. I'm good where I stand, and would be comfortable with an international allocation anywhere between 25% and 50% (roughly), and emerging between 15% and 25% (again, roughly). To each their own.
asif408
Posts: 2530
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by asif408 »

Their valuations have looked attractive relative to the US since about 2016, and have gotten more attractive since then (i.e., continued underperformance). So the key words are "patient" and "long-term" investor. Most people give up on an asset class after just a few years or less of bad performance or simply underperformance.

Full disclosure: half of my portfolio is in EM value.
nyclon
Posts: 511
Joined: Fri Oct 02, 2015 5:30 pm

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by nyclon »

Cornflakey wrote: Wed Sep 21, 2022 9:10 am Vanguard Emerging Markets ETF (VWO) has not been this cheap since 2018 (excluding the Covid crash in March 2020). Fast rising rates in the US and other developed economies and the strong USD are no doubt taking their toll on an EM sector that has been languishing for more than a decade now.

Seems like a decent degree of upside to be obtained here if a long-term investor is willing to park cash and sit out the cycle. I usually shun international in favor of domestic, but the circumstances seem favorable for a side-tilt here.

Anyone else being tempted?
Yes. I am waiting for DXY (dollar index) to stabilize a bit and let a few weeks go by to see if recessionary talk starts in some countries before buying more VEA and VWO. They appear very attractive due to the strong dollar, which should weaken over time, and if so will boost returns for USD buyers.
If you look at the index charts in local currency of some of the constituent countries these levels are very attractive.

To put things in perspective, in 1997 the US was 30% of global public equity market cap. It is now 60%.
Topic Author
Cornflakey
Posts: 36
Joined: Wed Jan 25, 2017 11:24 am

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by Cornflakey »

Thank you all. The boglehead verdict is near unanimous: more VTSAX! I have plenty already, but there is always room for more!

Sincerest thanks again for the sanity check. You people are very good.
Topic Author
Cornflakey
Posts: 36
Joined: Wed Jan 25, 2017 11:24 am

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by Cornflakey »

Thank you all. The boglehead verdict is near unanimous: more VTSAX! I have plenty already, but there is always room for more!

Sincerest thanks again for the sanity check. You people are very good.
OldSport
Posts: 788
Joined: Tue Jul 25, 2017 7:01 pm

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by OldSport »

Cornflakey wrote: Thu Sep 22, 2022 7:06 pm Thank you all. The boglehead verdict is near unanimous: more VTSAX! I have plenty already, but there is always room for more!

Sincerest thanks again for the sanity check. You people are very good.
I started out with 10% VWO, but it's underperformance relative to the mix has it at 6.5%. I'll plan to stay the course at 6.5% VWO. My current IPS allows it to be 5-10%, so no plans to throw good $$ after bad unless it drops below 5% AA. I really don't see it doing that unless there is an EM black swan.

Why has EM been so bad? Well most International has done poorly due to stronger US Dollar amount other items.

Given all the risks of EM (government risk, corruption, not putting investors first), really think well managed actively managed EM in tax advantaged account would be the way to go as EM does NOT seem efficient like the developed and domestic markets.
todaysBob
Posts: 130
Joined: Mon Mar 02, 2020 6:39 pm

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by todaysBob »

28% of my portfolio is emerging markets, I have been tempted to buy more VWO but decided to let it be.
All new contributions go equally between vti:vxus which means I am still adding 13% of all new money to emerging markets.

I only started investing properly from 2/19/2020, so hasn't been long but already invested a huge chunk($1.9M). Giving international another 15 years, if it doesn't show any life by 2037 I will stop putting any new money into it but will still hold onto older shares and stop reinvesting dividends.
Wannaretireearly
Posts: 2848
Joined: Wed Mar 31, 2010 4:39 pm

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by Wannaretireearly »

I’ve been tempted. Was close to TLHing into EM today, but just bought a bit of exUS small and large cap. I’m nothing if not patient! Lol
Death and taxes. Only one is under your control!
User avatar
ruralavalon
Posts: 23794
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Emerging Markets Tempting Anyone at these Valuations? (VWO)

Post by ruralavalon »

Cornflakey wrote: Wed Sep 21, 2022 9:10 am Vanguard Emerging Markets ETF (VWO) has not been this cheap since 2018 (excluding the Covid crash in March 2020). Fast rising rates in the US and other developed economies and the strong USD are no doubt taking their toll on an EM sector that has been languishing for more than a decade now.

Seems like a decent degree of upside to be obtained here if a long-term investor is willing to park cash and sit out the cycle. I usually shun international in favor of domestic, but the circumstances seem favorable for a side-tilt here.

Anyone else being tempted?
Not I.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Post Reply