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Asett Allocation - China ??
Old 08-26-2007, 06:30 PM   #1
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Asett Allocation - China ??

I am reviewing my asset allocation and noticed that I seem overweight in China. I am wondering what others are doing.

I have the following rough allocation.

Guessing 5 years to ER.

stocks 55% bonds 25% cash 20% - target move stocks to 60%.

foreign - 35% of stocks

asia (ex japan, including china) 13% of stocks
china 7.5% of stocks

I am thinking that I might be better off reducing china to 5% ofr stocks and maybe reducing asia to 10% of stocks.

Any thought are appreciated.

BTW - I just finished reading this book and liked it very much.

Amazon.com: The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us: Books: Robyn Meredith

Thanks for the help.
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Old 08-26-2007, 07:09 PM   #2
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Allocation percentages seem to be chosen pretty randomly, even by the experts.

China's population is 22% of the world's.

China's economy is the 4th largest in the world, but their GDP is 20% of US GDP, and per capita is well below ours. Their govt apparently plans to pass us in terms of GDP by the end of the century.

Invest accordingly.
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cliff notes for the book
Old 08-26-2007, 10:02 PM   #3
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cliff notes for the book

A couple points from the book.

China has a huge polution problem.

China is running out of clean water.

China needs a lot of oil, putting it in competition with USA. This could lead to military conflict or more likely economic conflict - especially is USA puts pressure such as tarrifs or trade restrictions.

Most of rural China has been left out of the wealth. If they do not figure out how to include this group there could be political issues.

Things are likely to come to a head by 2015.

There is a good chance of something bad happening between now and then.

IMHO - general public might discover China funds after watching the olympics next year.

IMHO - companies that are going to help China deal ith the polution problem or sell the stuff to use cleaning up might be a really good investment.

IMHO - the china (fund) boom is likely to continue for a while but medium term you need to be on the lookout for problems starting.
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Old 08-26-2007, 10:12 PM   #4
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All my international holding (20%) is VEU, which has 2.3% allocated to China.
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Old 08-27-2007, 04:14 AM   #5
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I intend to increase my international exposure. I will do so when I rebalance the portfolio. My target for the foreign stock portion of the allocation is 20 to 25% of the 60% stock or 12 to 15% of the overall portfolio.

Of that, I am targeting 4 to 5% in emerging markets (index).

Some would say that international exposure should be higher... perhaps 1/3 of the portfolio.

Any thoughts?
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Old 08-27-2007, 06:47 AM   #6
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Quote:
Originally Posted by chinaco View Post
I intend to increase my international exposure. I will do so when I rebalance the portfolio. My target for the foreign stock portion of the allocation is 20 to 25% of the 60% stock or 12 to 15% of the overall portfolio.

Of that, I am targeting 4 to 5% in emerging markets (index).

Some would say that international exposure should be higher... perhaps 1/3 of the portfolio.

Any thoughts?
I am no investment expert, but I have been happy with 23% international in my TSP for quite some time. A lot of this decision has to do with risk tolerance. International has certainly been doing well in recent years. Maybe you could go for something in between, like 28%?
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Old 08-27-2007, 06:56 AM   #7
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The percentage of allocation is international is strictly personal. Since international equity represents approximately about 55% of the world's equity market, allocating 50% to it is reasonable.
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Old 08-27-2007, 11:38 AM   #8
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Another challenge China faces is an aging population. Imagine how much larger our aging population problems would be if the US restricted the number of children women were allowed to have. Although they might not have the same SS or Medicare problems there is an implied cultural requirement to care for their elders.
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Old 08-27-2007, 11:50 AM   #9
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Yes, every country has their problems. Remember the US in the 1960's? Our rivers used to catch fire. China probably has more than most, but that's why they're *emerging* and have lots of growth potential. Like the US in our wild west days.

Anyway, the DOW is down right now, and FXI is up another 5%. I'll start worrying after the Olympics.
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