Join Early Retirement Today
Reply
 
Thread Tools Display Modes
International Exposure, Part Deux
Old 05-28-2005, 12:28 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
International Exposure, Part Deux

I have rolled over a 401k that was basically invested in international equities (FDIVX, expensive, but not terrible) plus a littlre US fixed income. I am planning on using the funds to top up my commodities exposure (PCRDX), boost my unhedged non-US bond exposure (GIM), and toss the rest of it into international equities. I think the bulk of it will go into EFA for simplicity and low cost. What I am toying with is whether I want to bother with a small amount of emerging markets exposure. Looks like the default option is EEM, but it is expensive (75BP annually) and quite volatile, although I am thinking about an amount that is ~2.5% of the portfolio. Is it worth bothering with? The bulk (~65%) of my port is in US equities, mostly small cap value, so the non-US stock and bond, commodity, and other exposure is strictly for diversification purposes. Is there anything more attractive than EEM? Keep in mind that my accounts are at Schwab, so I effectively do not have access to Vanguard's funds.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: International Exposure, Part Deux
Old 05-28-2005, 12:45 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jun 2004
Location: No. California
Posts: 1,858
Re: International Exposure, Part Deux

Is there any reason why you don't roll it into Vanguard? Or part of it? I rolled a 401K into VG, but all of it. I don't know if you can split it up or not. Might be worth checking into if you want a VG fund.
KB is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 12:45 PM   #3
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,856
Re: International Exposure, Part Deux

I'd say that for the size of the investment, its expense, and its miniscule effect on your total portfolio return-- it's a lot of hassle.

EFA tempts me every time I look at Tweedy, Browne's 1.37% ER. *But how would EFA be affected over the next three-to-five years if the dollar flattened and then started getting stronger?
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 03:42 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Re: International Exposure, Part Deux

I could easily roll part or all into a Vanguard account, but I have zero interest in doing so. I deal with enough different financial institutions (5 banks, 1 credit union, 2 brokers) without adding any more to the list. In any case, Schwab has 99% of what I want and at reasonable prices and good service.

Obviously, a strong dollar would hurt unhedged foreign investments. However, I am doing all of this for diversification purposes, which includes currency diversification. Unhedged EAFE has low correlation (.3 to .5, depending on who you believe) with US stocks and bonds. Unhedged foreign bonds have low or negative (.1 to -.3) correlation with US stocks and bonds. Commodities have negative (-.5 or so) correlation with US stocks and bonds. This makes all of these asset classes VERY attractive as a diversifier to US equity-heavy portfolios. The fact that commodities and EAFE have roughly equal expected return to US equities is a major added boost.

1.37% ER? That's why I am glad to be rid of FDIVX.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 05:01 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Jul 2003
Location: Pasadena CA
Posts: 3,340
Re: International Exposure, Part Deux

Brewer, I have a question. Have you compared the returns of your AA to simpler ones? You have really detailed great sounding AA plan. I wouldn't know where to suggest something that I honestly thought could improve it. (Maybe change it to personal preferences, but not improve it.) But unless 1) You really like the financial business or 2) You have enough money that it justifies the time spent managing it I would just go for something simpler. I know how to calculate the returns on simmple AAs, it would take a lot more work on complicated ones and it would have to include issues like TIPS which don't have much history. I had a Quick & Riley trading account and did pretty well ( seems I colud figure out when to buy, figuring when to sell is another matter) but I closed it as the trading fees cut too far into my returns and it just wasn't worth my time and effort. Now if I had a large account it might be worth it but mayby the worry factor would go up.

Anyway, when I see complicated AAs and slice & dice approaches I just wonder, has it been worth it for you? Maybe when I retire in the next couple years and shift from the accumulation to the spending phase I will have the time and find it of interest to do more direct management. So far I have not found it to be worth it, for me, and I wonder if it has payed out for you or if you just find it mentally invigourating to keep so engaged?
__________________
T.S. Eliot:
Old men ought to be explorers
yakers is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 07:11 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Re: International Exposure, Part Deux

Quote:
Originally Posted by yakers
Brewer, I have a question. Have you compared the returns of your AA to simpler ones? You have really detailed great sounding AA plan. I wouldn't know where to suggest something that I honestly thought could improve it. (Maybe change it to personal preferences, but not improve it.) But unless 1) You really like the financial business or 2) You have enough money that it justifies the time spent managing it I would just go for something simpler. I know how to calculate the returns on simmple AAs, it would take a lot more work on complicated ones and it would have to include issues like TIPS which don't have much history. I had a Quick & Riley trading account and did pretty well ( seems I colud figure out when to buy, figuring when to sell is another matter) but I closed it as the trading fees cut too far into my returns and it just wasn't worth my time and effort. Now if I had a large account it might be worth it but mayby the worry factor would go up.

Anyway, when I see complicated AAs and slice & dice approaches I just wonder, has it been worth it for you? Maybe when I retire in the next couple years and shift from the accumulation to the spending phase I will have the time and find it of interest to do more direct management. So far I have not found it to be worth it, for me, and I wonder if it has payed out for you or if you just find it mentally invigourating to keep so engaged?
Good question, yakers. I am, as they say, "in the business". I work in the asset management industry and have years of related education, etc. By inclination and long years of training, I will be pursuing a more sophisticated approach.

Is it worth it? I would say yes, based on my own personal experience as well as decades of academic research and institutional investment management empirical studies. But I think there is an important caveat here: if you cannot do the more sophisticated stuff yourself, an individual is not likely to come out ahead if they have to pay someone else to do it for them. That is, by the time you finish ponying up for services (assuming you even got someone who was any good), you probably would have been better off with a balanced fund like Wellington plus some international exposure.

As I have observed before, the critical factors for ER do not really include getting the highest investment returns. Learning to live cheaply and socking away a high percentage of one's income are far more important than getting a couple of extra points in your portfolio. My diversification efforts are actually part of an effort to stop shooting the moon, which is what I tend to do if left to my own devices.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 07:30 PM   #7
Full time employment: Posting here.
sailor's Avatar
 
Join Date: May 2005
Location: Atlanta suburbs
Posts: 898
Re: International Exposure, Part Deux

Quote:
Originally Posted by brewer12345
I am planning on using the funds to top up my commodities exposure (PCRDX)
brewer,
I'm curious why PCRDX and not PCRIX?
Is it because you don't want to go to Vanguard or TD Waterhouse?
sailor is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 07:54 PM   #8
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
Re: International Exposure, Part Deux

Quote:
Originally Posted by sailor
brewer,
I'm curious why PCRDX and not PCRIX?
Is it because you don't want to go to Vanguard or TD Waterhouse?
I prefer PCRIX because its lower expense ratio. However, my brokerage account is with Etrade that does not offer PCRIX but PCRDX. I am considering opening an account with Vanguard since I also have a regular (non brokerage) account with them.

Spanky
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 08:17 PM   #9
Thinks s/he gets paid by the post
wildcat's Avatar
 
Join Date: Feb 2005
Location: Lou-evil
Posts: 2,025
Re: International Exposure, Part Deux

He is not with Vanguard hence no PCRIX
__________________
"These walls are kind of funny. First you hate 'em, then you get used to 'em. Enough time passes, gets so you depend on them"
wildcat is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 08:25 PM   #10
Full time employment: Posting here.
sailor's Avatar
 
Join Date: May 2005
Location: Atlanta suburbs
Posts: 898
Re: International Exposure, Part Deux

Quote:
Originally Posted by wildcat
He is not with Vanguard hence no PCRIX
But he is with Schwab and they do offer PCRIX.
Only their minimum is $1M

sailor is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-28-2005, 08:32 PM   #11
Thinks s/he gets paid by the post
wildcat's Avatar
 
Join Date: Feb 2005
Location: Lou-evil
Posts: 2,025
Re: International Exposure, Part Deux

Ahhh well I know Brewer can fit the bill
__________________
"These walls are kind of funny. First you hate 'em, then you get used to 'em. Enough time passes, gets so you depend on them"
wildcat is offline   Reply With Quote
Re: International Exposure, Part Deux
Old 05-29-2005, 09:14 AM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Mar 2003
Posts: 18,085
Re: International Exposure, Part Deux

Quote:
Originally Posted by wildcat
Ahhh well I know Brewer can fit the bill
Hahahahahahah!!! I wish. Yeah, I can't meet the minimum for PCRIX at Scwab, and considering it us ~8% of my portfolio, its not worth the 50BP to go elsewhere.
__________________
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
What do you use for International Exposure? Hamlet FIRE and Money 23 12-30-2006 10:28 AM
The Profile, part deux cute fuzzy bunny Other topics 16 02-23-2006 11:26 AM
Re: The Profile, part deux, with TH & JG sidebar Nords Other topics 8 02-19-2006 01:20 PM
And big brother part deux cute fuzzy bunny Other topics 0 06-17-2005 02:43 PM
International Exposure in Investing arrete FIRE and Money 21 04-03-2003 09:54 AM

» Quick Links

 
All times are GMT -6. The time now is 08:45 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.