International or Emerging market

[Arif]

Recently looked at my asset allocation minus RE holdings and realized that I don't have any international or em investments inside my portfolio. The ETF or fund will be held in my ROTH and won't be touched for about 20 years so I'm not concerned with the recent run up over the years or the decline a few months ago. I'm primarily looking to balance my portfolio. Any have a recommendation on both EM and international ETFs that I should use to fill this void?

 

[LOL!]

I use several international funds, but one I like best is DODFX. I also own EEM.
DODFX has been relatively tax efficient, so good for outside a Roth. Maybe PID inside a Roth?

 

[Ed_The_Gypsy]

I got tired of fiddlling with many funds and bought VGTSX, Vanguard's Total International Stock Market Index. It tracks a composite of the MSCI Europe Index, the MSCI Pacific Index, and the Select Emerging Markets Index. I have MACSX, Matthews Asian G&I Fund, to play on China's growth. Since Japan is recovering, I don't shun it anymore, and I found that my emerging market fund was tracking energy, which I already have. So, will try this for a few years.

I am getting closer to set-it-and-forget-it.

Ed

 

[Spanky]

Vanguard Total International

 

[HFWR]

In my case, VWO. Cheaper than VEIEX, and I lump-summed in.

 

[REWahoo]

I use several international funds, but one I like best is DODFX. I also own EEM.
DODFX has been relatively tax efficient, so good for outside a Roth. Maybe PID inside a Roth?

I also like DODFX...and so do a lot of other investors:

"A whopping $6 billion has flowed into the Dodge & Cox International Stock fund —— in 2006. That's the fourth-largest gain among all funds, according to FRC. Like most international funds, this fund, which is up 30.55% annualized over the last three years, has benefited from weakness in the U.S. dollar and strong economies abroad.

The fund uses a variety of metrics to build a broad portfolio of "temporarily undervalued" foreign stocks with growth potential. Turnover is an exceptionally low 7%, which should assuage the fears of investors who still think foreign markets are for gamblers only. That said, the fund is not immune to dips. Like most of its peers, the fund lost ground in the spring and early summer, losing about 5% from May through July. And about 15% of assets are invested in emerging-markets equities, about three times the average international fund's stake in that ever-volatile segment of the market."

http://www.smartmoney.com/fundscreen/index.cfm?story=20060804

 

[Arif]

Thanks all. I think I am going to go with DODFX. They offer a meaningful amount of emerging market and international stocks in one complete package. BTW- This is the first mutual fund I've owned in 13 years. I've been investing in individual stock screens with good success but without an international allocation. I'll build on this position until it becomes a meaningful (15-20%) percentage of my portfolio.

 

[brewer12345]

Hmmm, allow me to issue a dissenting view. Dodge & Cox is a shop I greatly respect, but they look an awful lot like they may have a serious asset bloat problem. I would probably choose an ETF or VAnguard offering instead.

 

[Arif]

Brewer,
Are there any ETFs that contain a sizable chuck of EM along with international exposure?

 

[brewer12345]

Brewer,
Are there any ETFs that contain a sizable chuck of EM along with international exposure?

Not that I am aware. You would have to roll your own with EFA and EEM, or similar. There is also the Vanguard total international fund, but you'd have to open an account there.

 

[Nords]

Are there any ETFs that contain a sizable chuck of EM along with international exposure?

I'm not Brewer but I've spent a bit of time digging around for a Tweedy, Browne replacement. All the international mutual funds have "suffered" from serious runups and IMO they're all bloated. I notice that as they've quintupled in size that somehow they haven't gotten around to reducing their expense ratios, either...

Try PID for large-cap dividend payers. The theory is that the typical international lack of transparency is more than made up for by a company's ability to pay/raise dividends for long enough to have credibility with Mergent's international index. It's possible that one or two of the companies in their index are from emerging markets.

But I'm not sure that emerging markets are any better than hot growth stocks. Take a look at Bernstein's "Thick as a BRIC" article and see if it's worth chasing a tiny, illiquid market being chased by everyone else. (The Jethro Tull quotes from a neurosurgeon/economist like Bernstein? Priceless.) I think EEM could be of value if there's a severe outbreak of pandemic influenza or a currency devaluation, but otherwise it seems like more hot money to me.

But if you think emerging markets are worth it then try EEM... one commission, a low ETF expense ratio, and decades of dollar depreciation compounding.

 

[brewer12345]

FWIW< I have decided to forgo EM exposure for now. Like Nords says, too much hot money. I'll buy after the inevitable crash.

 

[Arif]

Yeah I know EM has been hot latetly but I'm not chasing returns. Just looking to somewhat balance my asset allocation. Most folks would think I am crazy if they saw my AA.
So to be more balanced (and hopefully a consistent return) I am willing to jump in and take my lumps as they come assuming that in 20 years I will have done OK.

Edit: The positions I'm taking in EM and international are very small (combined 5% of port.) and I'll add to them later after I rebalance at the end of this year. Hopefully there'll be more buying oportunities.

 

[Nords]

Yeah I know EM has been hot latetly but I'm not chasing returns. Just looking to somewhat balance my asset allocation. Most folks would think I am crazy if they saw my AA.
So to be more balanced (and hopefully a consistent return) I am willing to jump in and take my lumps as they come assuming that in 20 years I will have done OK.

If you're willing to wait for 20 years of returns, will it hurt too much to wait another 12 months for an entry point? Or to DCA into it?

 

[Arif]

Edit: The positions I'm taking in EM and international are very small (combined 5% of port.) and I'll add to them later after I rebalance at the end of this year. Hopefully there'll be more buying oportunities.

If you're willing to wait for 20 years of returns, will it hurt too much to wait another 12 months for an entry point? Or to DCA into it?

You're right. I think DCA makes sense in this environment of asset bloat. See the edited post above.

 

[LOL!]

I've been investing in individual stock screens with good success but without an international allocation.

I'm surprised that you have not bought any foreign stocks then.    Certainly there are ADRs that are easy to purchase.  Over the years, I have owned a few ADRs.  I currently own ING which has doubled in the last two years.  (I'm not recommending it at its current price.)

For large cap international, though I own DODFX, I think that ETFs are fine (EFA, EFV, EEM, EWJ).  For small cap international, I own MIDAX and FSCOX.  Many of the best small cap international funds are closed to new investors.

 

[AltaRed]

I'd give it at least a year, perhaps more, to consider EM. You have to just take a look at the 90's experience to get a taste of a very large highs and very large lows. A financial crisis somewhere in Latin Ameria or SE Asia would provide an excellent entry point. Patience is key.

 

[saluki9]

Considering the streaky nature of EM, I would suggest you keep it in a separate position from your basic international exposure. That way, when valuations get totally out of whack you can trim back your EM exposure without effecting your international core position

 

[Shredder]

Vanguard international growth and international value, I know they are not index funds but they are vanguard with relatively low cost and I've been happy with them. They fit into my coffee house like port very well. I think/hope that their stock picking international funds may have some benefits. All the rest of my stock funds are vanguard index funds....Duane

 

[Nords]

WisdomTree has been kicking around for a few months and has been mentioned on other threads, but they're just getting onto my radar screen.

One of their newer ETFs is the International Smallcap Dividend Fund (DLS). I haven't done my own due diligence yet but I'm intrigued just as I was by PID-- a combination of "transparency" implied by the ability to pay dividends, plus the possibility of a smallcap risk premium.

Of course there's also the near certainty of getting whipsawed by an "index" that's 25% industrials, 25% financials, and 17% consumer cyclicals. Not for the faint of volatility, although reinvesting dividends will be Siegel's own reward with compounding...

 

[LOL!]

One of their newer ETFs is the International Smallcap Dividend Fund (DLS).

I must say that I am invested in PID because of this forum and your comments (after my own DD; PID has done quite well for me). Thanks for the comment about DLS -- although the name is a bit oxymoronic.

 

[Delawaredave]

I've found below chart interesting - PE's etc for various markets, developed and emerging:

http://www.globalindices.standardandpoors.com/sandp/Fundamental?index=BMI

There's not much of a spread between PEs of emerging and developed markets - a year ago there was a much bigger delta (which there should to compensate for the risk).

I've got about 50% of my equities portion in international - stuff I bought 5-10 years ago when I couldn't sleep with US valuations. The country and currency diversification helps me sleep better at night.........

 

[Arif]

Thanks for all the good information, it definately got me thinking about how each peice of the port. fits in with each other. I decided to go with EEM and EFA instead of Dodge Cox so that I can better control the asset allocation. When I get truly lazy retired I'll move to one fund that provides EM and int'l in one fund. For now I have enough energy and interest to track them both.

 

[ESRBob]

Arif,
Sounds like you've got your funds/ETFs picked-- FWIW, here are the ones I use personally:

Asset Class: Int'l Small
VG Intl Explorer
DFISX
DISVX

Asset Class: Int'l Large
DFIVX
VG Pacific Index
VG Europe index
VG Health (a portion of this fund is International)

Asset Class: Emerging Mkts
VEIEX
DEMSX
DFEVX
DFEMX


Now over to check out William Bernstein's Jethro Tull quotes...

 

[LOL!]

FWIW, here are the ones I use personally:

Asset Class: Int'l Small
VG Intl Explorer
DFISX
DISVX

That's a nice set of smallcap international funds that mere mortals cannot invest in.