Emerging Markets - Hold or Move?

[stephenson]

Hi All,

Well, I am in strategy/planning stages for final phase of megacorp working time

Below are my allocations for both 401K and non-qualified plans. I recognize 34% is way over allocation for EM fund, but I entered the fund at the right time (around 2010) so had a couple of good years, a bad year and then now a recovering year ...however, large and small cap US did a bit better over the same period.

Granted, then, I need to reallocate both for new contributions and for current holdings ... megacorp has few funds, but they are very low cost - so low cost they are competitive with Vanguard. Given the reallocation need, and adding in another complexity (I am over 59 1/2 so can transfer any or all of the 401K to Vanguard without restriction), what are some strategies that would reallocate, enhance, etc. I enjoy my job so will hang on for a few more years. I am retired military, own home and cars, own a couple of small, rental properties generating about $800 a month each), wife doesn't work outside home, kids are out of college and working.

I would very much appreciate your thoughts on overall strategy at this stage, appropriate allocation, specific thoughts on where Emerging Markets are going to go, etc if you think supports faster or more aggressive moves.

Thanks to All!
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Megacorp 401K allocation (tracking well to their respective indicies:
Stable Value (fixed income, 3-4 yrs) - 11%
Bond (A or better, 8-10 yrs) - 15%
Large US Equity - 36%
Small US Equity - 4%
Emerging Markets - 34%

Megacorp Non-Qualified allocation (about 60% size of 401K)
Stable Value (fixed income, 3-4 yrs) - 2%
Bond (A or better, 8-10 yrs) - 33%
Large US Equity - 38%
International Equity - 8%
Emerging Markets - 19%

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Specifics on the Emerging Markets Fund
Tracks - Morgan Stanley Capital International Emerging Markets NDR Index
Investing in
Latin America - 17%
Europe/Middle East/Africa - 20%
SE Asia - 16%
Far East Asia - 47%
Fee - 0.55%
Number of Securities 847
P/E Ratio of 13.6

 

[Midpack]

I'd be wary of any reply stating "where Emerging Markets are going to go," but it's your portfolio. If you want to propose a new AA for yourself, I am sure members might have meaningful comments.

My equity allocation is 2/3rds US, 1/3rd International. Of the International, 1/3rd of it is in an Emerging Market Index. My AA may change some over the next 30 years but it doesn't change in the short term, I don't time, I rebalance. YMMV

 

[eta2020]

My equity allocation is 2/3rds US, 1/3rd International. Of the International, 1/3rd of it is in an Emerging Market Index. My AA may change some over the next 30 years but it doesn't change in the short term, I don't time, I rebalance. YMMV

This AA looks more reasonable. BTW Fees of 0.55% look excessive. VWO is not identical to your index but it has fees of 0.15%.

 

[stephenson]

eta and Midpack - agree with both ... the EM fund at megacorp is higher than Vanguard comparable ...the others are pretty close higher or pretty close lower ... was planning on shift to Vanguard, but seemed like a good time to reallocate the 401K funds, at least. The non-qual has to stay with megacorp, but it needs reallocating, as well.

eta - yeah, understand your point re where things are going ... but, there are indicators - that was the discussion re EM i wanted to generate.

Thanks!

 

[eta2020]

I think having some money in EM is very important. But do I need more then 10%? Is it advisable to own something like KO and PM to get EM exposure? How much of that do I already have?

Go to Mexico...they all drink Coke/Fanta and smoke Marlboros

 

[eta2020]

What I am saying.... I have no idea where EM will go. I don't time markets. Having 10% in EM is good thing. Owning high quality US companies like KO, PM, CAT, CL is good because they sell lot of stuff all other world.

 

[pb4uski]

I'd be wary of any reply stating "where Emerging Markets are going to go," but it's your portfolio. If you want to propose a new AA for yourself, I am sure members might have meaningful comments.

My equity allocation is 2/3rds US, 1/3rd International. Of the International, 1/3rd of it is in an Emerging Market Index. My AA may change some over the next 30 years but it doesn't change in the short term, I don't time, I rebalance. YMMV

I'm similar. My targets are 70/30 domestic/international but in my case only 10% of international is EM (3% of total is EM). However, EM is new to me this year based on a thread I read earlier this year and thought was a good idea and decided to dip my toe in the EM waters. It is currently a bit above target and I may consider letting the EM ride and see how it goes.

 

[UnrealizedPotential]

I sold my EM fund in May of this year.The risk was much greater than the reward IMO.The fund I was in was greatly exposed to Russia.I had enough and wanted out.I do not regret selling it for a minute.I am sure there are places in the World other than USA that has return potential when it comes to investing,but I prefer the USA.Why?I know more about the USA than anyplace,and next to nothing about markets abroad.When you look at it this way,it's an easy choice.

 

[Texas Proud]

I have some in EM and have for years.... not even close to your %.... maybe about 2%....

Since I have so little, I just do not touch it... let it ride...

 

[LOL!]

I have about the market weight of EM. I would not overweight it at this point in time, but I would not underweight it either.

I always post my trades in Emerging Markets in the "LOL!'s Market Timing Newsletter" thread. For instance, http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-9.html#post1412589

If you look at the http://www.callan.com/research/download/?file=periodic/free/757.pdf you will immediately see that Emerging Markets likes to live at the top and bottom of the table. EM is typically either the best performing asset class or the worst performing asset class. This means you need to SELL/underweight when it is at the top and only buy back in again when it is at the bottom. If you cannot BUY/overweight when it has tanked big-time, then you should not own it separately, but hide it inside a Total International Stock Market index fund.

Earlier in 2014, EM was up about 20% from the lows of 2014, so it was a sell then.