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Going Global
Old 09-09-2008, 02:05 PM   #1
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Going Global

Yesterday's edition of the Wall Street Journal had an interesting article titled: "Going Global: How Do You Get There from Here?" I'm not sure whether it's available online and, if it is, whether you need to be a subscriber to access it. But it got me thinking about our portfolio. Our current allocation is a little over 20% foreign stock.

This is a quote from the article: "For the typical mutual-fund investor, who holds 12% to 15% in foreign stocks - or half that in a 401(k) - holding 55% in foreign stocks would seem like a massive overweighting toward overseas markets. But in fact, mirroring the world markets is a neutral position on the markets because it places no bets on either domestic or foreign stocks, says Peter Bernstein, a Wall Street risk expert."

I'll see if I can get a link to the article, but in the meantime...any thoughts?
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Old 09-09-2008, 02:11 PM   #2
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Here's a link. Hope it works!

Going Global: How Do You Get There from Here? - WSJ.com
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Old 09-09-2008, 02:33 PM   #3
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i would not agree that mirroring the world's markets is a neutral position. investing outside of one's own country of residence itself assumes risks which are not present with domestic investment, and the us equity market is much more transparent, liquid, and less prone to manipulation than most. i'm at 25% non-us, and would be uncomfortable with a significantly higher weighting.
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Old 09-09-2008, 10:19 PM   #4
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I'm currently 33.8% Intl ex-EM and 9% EM. AA is 30 and 10.

I've been putting money into EM over the summer, in the face of a falling market, of course. More to put there and I'll continue - gritting my teeth .

I've been thinking of going up to 40% Intl and 10% EM based on the same rationale that's in the article. The biggest growth is clearly going to be ex-US so I want to be in the game to get some of that.


Quote:
David Darst, Morgan Stanley's chief investment officer, notes that matching the world's market capitalization skews a portfolio toward the troubled financial sector and away from health-care stocks, which are a defensive play. "The U.S. market currently has 16% financial stocks, while Europe and emerging markets have 22% to 24%," he says.
"We believe that longer term you do want to gradually increase the weighting [in your stock portfolio] to about 40% or more [foreign stocks], but there isn't any rush to buy into these markets, because you still have some rockiness and uncertainty ahead," he says. He wants to see earnings estimates begin to improve and inflationary pressures ease in foreign markets before expanding exposure to them
Sounds good, but it's also market timing. Who knows if he'll be right. But hey, he gets paid pretty good money to come up with that sage advice, right?

Quote:
Still, if you want to increase your foreign-stock allocation, financial advisers say not to spend too much time worrying about the timing. "This shouldn't be a tactical decision if you're going to hold your portfolio for 10 or 20 years," says Matt McGrath, an investment adviser at Evensky & Katz, of Coral Gables, Fla. By trickling money into a larger foreign-stock allocation, "today is as good a day as any to get in for the long term."
Good man!
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Old 09-09-2008, 11:24 PM   #5
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Quote:
I've been thinking of going up to 40% Intl and 10% EM based on the same rationale that's in the article. The biggest growth is clearly going to be ex-US so I want to be in the game to get some of that.
You are in luck since the EM and international markets are taking some big hits.
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Old 09-10-2008, 12:56 PM   #6
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In "Stocks for the Long Run", Jeremy Seigel shows that (in the past), long term stock returns in fast growing economies, were lower than those in slower growing economies. IIRC, it was because stock prices tended to mirror optimistic growth expectations too far into the future.

I don't have a personal stand on this statement - just sharing something I read. I have 25% of my portfolio in foreign equities.
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