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International Funds
Old 10-08-2011, 08:31 AM   #1
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International Funds

Being a 50/50 investor I have found my comfort zone. Have recently lowered my SWR to 2.5%. I like the 50/50 approach because I feel I am comfortable with 50% of the market losses and of course only 50% of market gains. I feel with my core index funds and a couple of managed funds that I am fairly diversified. 30% of my stock funds are diversified international with RERFX and VGTSX. Since the recent downturn both of these funds are down around 20%. I am getting to the point where I could rebalance or just sit tight and not try to catch a falling knife at this time. Any ideas anyone?
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Old 10-08-2011, 09:58 AM   #2
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One trigger point that had some study support was a +/-20% imbalance. So if your target for cash was 50% and you now have 60% it's time to rebalance. That's 20% relative to your portfolio target percentage, not just a 20% change in price. I use that trigger for individual funds, so when a 5% target reaches 6% of the portfolio I rebalance that fund back to 5%.

However, I fequently cheat and go with half that amount when I feel like "doing something". Probably not a significant difference in performance compared to the full 20% trigger if your costs are small.

If you catch a falling knife it's OK to rebalance again (with mutual funds, not necessarily with individual stocks). You only added a small additional loss by rebalancing early, these aren't big money moves. You're just working around the edges. But maybe it will go up instead. You never know.
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Old 10-08-2011, 10:05 AM   #3
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I have 10% rebalancing bands. Desired allocation is 60/40, with 30% of stocks foreign. So for example if my domestic equities stray 4% from the 42% target I rebalance.

Much better to have an investment policy statement that spells out when you rebalance (annually, trigger bands, etc) then you don't have to wonder what to do. Takes the emotion out of it - I am not "catching a falling knife", I am executing my strategy.
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Old 10-08-2011, 10:05 AM   #4
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Tax-loss harvest and make your neighbors help pay for your losses.
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Old 10-08-2011, 10:19 AM   #5
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You could sell RERFX and VGTSX, gather your tax loss and replace with the ETF--EFA.
If you have a FIDO account, the transaction is free.
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Old 10-08-2011, 10:28 AM   #6
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This is a timing decision and we know how difficult that sort of thing is. Personally I'd go the other way and move internationals to US equities. The dollar could surge against other currencies if this crisis intensifies. I'm a chicken right now.
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Old 10-08-2011, 10:58 AM   #7
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Quote:
Originally Posted by JPatrick View Post
You could sell RERFX and VGTSX, gather your tax loss and replace with the ETF--EFA.
If you have a FIDO account, the transaction is free.
You are already super diversified -- so you are in the land of rules of thumbs and truly abstract guidelines. Not a bad investment strategy, but you are in a world where personal analysis and opinions have no place. Stray from the established ratios and your a betting against the odds.

I like the idea of taking your tax losses - assuming you are in a high tax bracket. That's money in you pocket and you can always re-establish a preferred position at any time.

Just an SOS. I live in SE Asia and travel frequently in the area. I read the local rag at McDonalds in the am and strange things are happening. Real Estate in booming (and bubbling?) Unemployment is very low: the "coolie" workforce is drying up. Wages are getting higher and workers don't want to work in factories.. Google "middle income trap" for a taste of what I am talking about. Diversified foreign stock funds are not the same as they were 5 years ago.
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Old 10-08-2011, 11:15 AM   #8
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Just an SOS. I live in SE Asia and travel frequently in the area. I read the local rag at McDonalds in the am and strange things are happening. Real Estate in booming (and bubbling?) Unemployment is very low: the "coolie" workforce is drying up. Wages are getting higher and workers don't want to work in factories.. Google "middle income trap" for a taste of what I am talking about. Diversified foreign stock funds are not the same as they were 5 years ago.
Yeah, shocking that these people would spoil our cheap stuff because they want to live better..
Looking like Mexico and Vietnam could be the replacements.
Heck , even that obscure place called the USA could seize some opportunites if the desire was there...Unlikely
Appreciate your ground level perspective Hobo..
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