Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Hmmm...M* data is more current than Fido's at 01/31/24? I guess pigs are flying today, too!
Note that the TRs I posted will all be different (and higher) in my comparisons as all the Fido data I previously posted was as of 01/31/24. My (very) bad!
So in effect, using more current MW and/or M* data, the relative performance of GQGPX is not any better!
Bottom Line_1: 2023 and 2024 may very well be the go-go years for EMs, or at least for GQGPX!
Bottom Line_2: Which of those funds would you have rather owned for those periods? Was venturing into a DEM worth your additional risk? Here's the biggie - Would you have stuck with GQGPX during its DOWN years?
Bottom Line_3: Was diversifying to a top-performing FLG or SCG fund a better option than diversifying to a top-performing DEM?
Bottom Line_4: It's SO HARD to consistently beat or at least track with the S&P but some funds do it. DEMs generally do not but GQGPX is worth a shot if so inclined to try.
Our Funds do not seek to invest in emerging markets but I am still a fan of India. The 10 yr Government bond is at 7%. But, you have to be wary of currency devaluation. THIS US NOT A RECOMMENDATION!
I returned to EM after shedding a number of EM funds during the crash. Funds like APYDX, MITEX, MIAPX, FSEAX, etc. exploded going into 2021 before they crashed back to earth. I didn’t sell quickly enough, but still banked a decent gain.
I now own FEDDX and FSEAX - and am adding on dips. EM Value is GMO’s big pick (and EM, generally) based on simple RTTM expectations. Note, GMO has been known to be wrong.
Lemme just leave it at this: I regard EM investing as an example of a term I am not fond of, try not to use, but believe applies here: Diworsification.
It doesn't fit the definition exactly, in that the investor is not adding similarly correlated exposures, but it does track with the process:
Diworsification is the process of adding investments to a portfolio in such a way that the risk-return tradeoff is worsened. (Investopedia)
When investor add EM exposure, they are increasing portfolio risk but are very unlikely to increase its return over extended periods of time. Yep, you can do well with them in the ST, but I joined many others in going down the EM rabbit hole and learned it ain't for me and ain't necessary in a retiree portfolio.
@Old_Joe ...yep. I do think though that the emerging market classification of a dozen years ago is very different than those of today...still with significant political risk, but they do have largely functioning economies. Past EM funds are more similar to the "Frontier" markets of today.
Am I inventing this idea, or does it correspond to reality? It seems to me that the world, particularly the EM world, is a huge dumpster fire these days. Africa. There, I've said it. Africa is a poster child for the dumpster-fire meme. Haiti. Mexico. Russia invades Ukraine. And where there are not "wars and rumours of war," there is political corruption and bribery and graft. Street gangs, rather than actual GOVERNMENTS are in charge in some countries. Remember the British tune played at the surrender of Cornwallis at Yorktown? "The World Turned Upside-down."
I don’t particularly like the arbitrariness of defining what is an emerging or a developed market. Wouldn’t it make more sense for money managers simply to go where they think the best opportunities are. But slicing and dicing is a fact of life, and is to some degree necessary. Owning all US equity, or avoiding EM, is indeed a “slice and dice” decision in itself.
Having said that, I think EM funds can be useful at certain times. Right now (as exemplified in this discussion) there is antipathy for EM investments. And yet, China has recently started up the world’s first Gen-IV nuclear reactor, and designed a battery that lasts 50 years. They also expect to launch a revolutionary space-based telescope next year to make discoveries concerning dark energy and dark matter, and they’ve invented a pair of eyeglasses that allows blind people to navigate their way around. Yeah I know about the political risks and communist party, but I still don’t think this is your grandparents’ China.
I also invest for opportunity...it's been awhile since the 2004-2008 EM Bull market but maybe another region/country takes off ? I'll always own some and see zero reason to comp the performance to the S&P 500. It's comparing Apples to Mandarins... one is entitled to their opionion and whether it's 9.36 or 10 %, still beats Bonds, Cash, CD's despite their inflated yields currently
FWIW, not that it's a valid comparison, but since such a comparison was mentioned, our CD ladder with its just below 4% APY, outperformed GQGPX with its 3.4% average annual return over the past 3-yr period. It currently has a 5+% APY, but it is not intended to compete with stock investments, rather with bonds.
...see zero reason to comp (EM) the performance to the S&P 500. It's comparing Apples to Mandarins... one is entitled to their opinion and whether it's 9.36 or 10 %, still beats Bonds, Cash, CD's despite their inflated yields currently
I agree with you @KHaw24. Comparing every stock sector, geographical area and cap-space investment to the SP500 is just, well, silly. With that reasoning, why diversify? All those different style investments are supposed to be different and excel at different times and blend together long term.
All that said, at the ripe old age of 70, I now see no reason to hold specific EM funds myself. But that's just my comfort zone and opinion.
Thing to remember is that MPT stats alpha, beta, R^2, r depend on the benchmark used.
But SD is independent of the benchmark. So, it may be used to compare volatility of things that are different, i.e. different asset classes.
A ratio of SD can be found using the SD of a benchmark that could be SP500, EAFE, MSCI EM, etc.
Even so,
SD/SDbenchmark = beta/r,
or, SD = (beta/r)*SDbenchmark.
It is rather remarkable that the 3 quantities in the right-hand side depend on the benchmark used, but the left-hand side, SD, is independent of the benchmark.
FWIW, not that it's a valid comparison, but since such a comparison was mentioned, our CD ladder with its just below 4% APY, outperformed GQGPX with its 3.4% average annual return over the past 3-yr period.
It’s good you limited the GQGPX vs CD ladder comparison to 3 years, since at 5 years you’d be facing an 10.68% annualized bogey for GQGPX. So yes, it’s not a valid comparison.
Adding to Pressup's comment: The adulation for CDs is turning into lost opportunity cost in hindsight. Not the once in a lifetime proclaimed by some. Take a MFO favorite RSIVX bond fund for example: up +9.3% the past year. 3.4% in the past 3 months. Even the very conservative RPHYX (discussed as a cash alternative) is up 5.7% 1y and 1.6% 3mo.
No emerging markets or International for me. My US stocks/MF's give me enough International exposure. Been there done that with OARIX, MAPTX, TEDMX and others. All high flyers in their day.
Never invest in countries that do not respect property rights. The best long term performance has been in anglo Saxon countries such as UK, USA, Australia,etc. We can debate the reasons why but one major common theme is they all respect property rights. I have zero direct investment in emerging markets and have zero interest in doing so.
Couldn't care less how cheap etc etc. no, not for me
Adding to Pressup's comment: The adulation for CDs is turning into lost opportunity cost in hindsight. Not the once in a lifetime proclaimed by some. Take a MFO favorite RSIVX bond fund for example: up +9.3% the past year. 3.4% in the past 3 months. Even the very conservative RPHYX (discussed as a cash alternative) is up 5.7% 1y and 1.6% 3mo.
@MikeM, seems to me that depends on how comfortable you are with where you want to be. Some folks might feel the need to accumulate more. Some folks might be fine with where they are. Everyone has their own mode of travel.
Everyone should check their arithmetic periodically.
I have heard why not EM....this time for about 15 years, and usually diversification is mentioned too . In the last 15 years, it has been one of the easiest time to make money since the easiest most common category, US LC, has been at the top, but that didn't stop the background noice for Value, SC, international, utilities, gold, the market is overvalued. It's amazing how much effort investors making to be in the wrong categories year after year.
Even if I was interested in EM at this time I'm fairly certain that I would not hold a position large enough to affect my bottom line. I don't have any inclination to hold segments of this or that for the purpose of feeling diversified.
Agree @WABAC. I was just pointing out the chatter that CD's were called once in a lifetime investments that you would be crazy to miss out on and that bond funds could never return those CD numbers. Maybe you don't remember those posts, but I do. Bond funds have been the place to be since the start of 2023. But given that, I totally agree that risk free returns were definitely a great choice for many.
Agree @WABAC. I was just pointing out the chatter that CD's were called once in a lifetime investments that you would be crazy to miss out on and that bond funds could never return those CD numbers. Maybe you don't remember those posts, but I do. Bond funds have been the place to be since the start of 2023. But given that, I totally agree that risk free returns were definitely a great choice for many.
@MikeM. Thanks for the additional details. Always appreciated.
Yes. It is difficult to think of CD's as a once in a lifetime investment given the return that was available with various grades of floating rates from bank loans to treasuries.
@MikeM - You seem to be missing the point about CDs. I don’t recall anyone advocating investing all of your money in CDs, or even a substantial portion. The great thing about CDs right now are the relatively high yields with predictable, stable returns. I have highly rated bond funds that have lost money over the past 3 years, with pitiful returns over the past 5, 10 years.
Now that I am approaching the age for required minimum distributions, it’s nice to know that I can put a portion of my portfolio in an investment with a guaranteed return. Using a ladder, I can create a guaranteed income stream up to 5 years or longer. My CD ladders are yielding 5% plus. Who knows what bond funds will return over the next 1, 3, 5 years? Nobody. BTW, I still own bond funds, and their returns still suck despite the dead-cat bounce in late 2023.
@MikeM - You seem to be missing the point about CDs. I don’t recall anyone advocating investing all of your money in CDs, or even a substantial portion. The great thing about CDs right now are the relatively high yields with predictable, stable returns. I have highly rated bond funds that have lost money over the past 3 years, with pitiful returns over the past 5, 10 years.
Now that I am approaching the age for required minimum distributions, it’s nice to know that I can put a portion of my portfolio in an investment with a guaranteed return. Using a ladder, I can create a guaranteed income stream up to 5 years or longer. My CD ladders are yielding 5% plus. Who knows what bond funds will return over the next 1, 3, 5 years? Nobody. BTW, I still own bond funds, and their returns still suck despite the dead-cat bounce in late 2023.
Great post that IMO should be required reading for all of the CD detractors on this forum.
We have maintained a CD ladder for ~15 years. But when CD rates crossed over our % hurdle in 2022, we SOLD all of our remaining dedicated bond funds that weren't SOLD when the great bond crash occurred.
We did NOT reduce our stock exposure, we only reduced our bond exposure which currently (and happily!) sits at its lowest point since retiring in 2012. (Our only bond exposure is via PRWCX and FBALX. Period.) We effectively replaced our bond sleeve with a larger CD ladder sleeve and are enjoying every minute of it.
It's really all about a couple of pretty simple questions:
What does an investor (NOT a trader) expect as LT, annual TRs on bond OEFs?
If your answer to that question is ~4%-5% or lower, then why in the freaking world would you NOT instead have invested those monies in a fixed rate, Call Protected, FDIC'd CD that GUARANTEES that same or better rate? (Aside: If it's higher than that, please pass me what you're smokin'!)
FWIW, ridding ourselves of the nuisances of owning bond funds and managing a bond portfolio allowed us SO much more time to concentrate on our stock portfolio and take on MORE RISK given the elimination of bond fund related risk. And since that transition our stock portfolio performance has significantly improved.
BTW, you can also create a ladder of US Treasuries extending out 10-20 years that now yields well over 4%. Treasuries are call-protected, and you can easily sell them if you need cash sooner than maturity dates. Treasury income is exempt from state and local taxes, further boosting yields if held in taxable accounts. They also are available as floating rate notes and TIPS.
None of the many bond funds (including intermediate and multisector) that I track have returns exceeding 4% over the past 5 and 10 years, and very few over 15 years.
Furthermore, 4% is often cited as a sustainable annual withdrawal rate for a retirement portfolio. So, you can now achieve that rate with Treasuries for at least the bond portion of a portfolio, presumably using stocks to account for inflation.
CDs? Sure for many, never for me because a good trader can do more. For months now I posted about the following 3 funds from less risky/volatile to more RPHIX,CBLDX,RSIIX/RSIVX.
And 2024 would continue to deliver much better results than CDs with low volatility. And yes, I know, CDs are guaranteed with no volatility but if I can make much more with bond funds and reduce my stock portion by a lot, it suites my needs. So, goals and style matter.
BTW, this thread is about EM, why discuss CDs or bonds.
Comments
Hmmm...M* data is more current than Fido's at 01/31/24? I guess pigs are flying today, too!
Note that the TRs I posted will all be different (and higher) in my comparisons as all the Fido data I previously posted was as of 01/31/24. My (very) bad!
YTD_1_3_5_10
FXAIX_7.97_32.11_11.32_14.78_12.77
GSIHX_11.85_33.70_9.24_13.00_N/A
NEAGX_15.64_43.34_12.25_24.13_14.37
GQGPX_9.27_38.07_1.06_10.18_N/A
So in effect, using more current MW and/or M* data, the relative performance of GQGPX is not any better!
Bottom Line_1: 2023 and 2024 may very well be the go-go years for EMs, or at least for GQGPX!
Bottom Line_2: Which of those funds would you have rather owned for those periods? Was venturing into a DEM worth your additional risk? Here's the biggie - Would you have stuck with GQGPX during its DOWN years?
Bottom Line_3: Was diversifying to a top-performing FLG or SCG fund a better option than diversifying to a top-performing DEM?
Bottom Line_4: It's SO HARD to consistently beat or at least track with the S&P but some funds do it. DEMs generally do not but GQGPX is worth a shot if so inclined to try.
https://www.morningstar.com/funds/xnas/gqgpx/performance
I now own FEDDX and FSEAX - and am adding on dips. EM Value is GMO’s big pick (and EM, generally) based on simple RTTM expectations. Note, GMO has been known to be wrong.
Detailed discussions on BB.
It doesn't fit the definition exactly, in that the investor is not adding similarly correlated exposures, but it does track with the process:
Diworsification is the process of adding investments to a portfolio in such a way that the risk-return tradeoff is worsened. (Investopedia)
When investor add EM exposure, they are increasing portfolio risk but are very unlikely to increase its return over extended periods of time. Yep, you can do well with them in the ST, but I joined many others in going down the EM rabbit hole and learned it ain't for me and ain't necessary in a retiree portfolio.
I won't touch EM anymore.
Having said that, I think EM funds can be useful at certain times. Right now (as exemplified in this discussion) there is antipathy for EM investments. And yet, China has recently started up the world’s first Gen-IV nuclear reactor, and designed a battery that lasts 50 years. They also expect to launch a revolutionary space-based telescope next year to make discoveries concerning dark energy and dark matter, and they’ve invented a pair of eyeglasses that allows blind people to navigate their way around. Yeah I know about the political risks and communist party, but I still don’t think this is your grandparents’ China.
Just an example.
All that said, at the ripe old age of 70, I now see no reason to hold specific EM funds myself. But that's just my comfort zone and opinion.
But SD is independent of the benchmark. So, it may be used to compare volatility of things that are different, i.e. different asset classes.
A ratio of SD can be found using the SD of a benchmark that could be SP500, EAFE, MSCI EM, etc.
Even so,
SD/SDbenchmark = beta/r,
or, SD = (beta/r)*SDbenchmark.
It is rather remarkable that the 3 quantities in the right-hand side depend on the benchmark used, but the left-hand side, SD, is independent of the benchmark.
So, use SDem/SDsp500 OR SDem/SDmsciem.
Couldn't care less how cheap etc etc. no, not for me
Good luck to all
Baseball fan
Everyone should check their arithmetic periodically.
In the last 15 years, it has been one of the easiest time to make money since the easiest most common category, US LC, has been at the top, but that didn't stop the background noice for Value, SC, international, utilities, gold, the market is overvalued.
It's amazing how much effort investors making to be in the wrong categories year after year.
Yes. It is difficult to think of CD's as a once in a lifetime investment given the return that was available with various grades of floating rates from bank loans to treasuries.
Now that I am approaching the age for required minimum distributions, it’s nice to know that I can put a portion of my portfolio in an investment with a guaranteed return. Using a ladder, I can create a guaranteed income stream up to 5 years or longer. My CD ladders are yielding 5% plus. Who knows what bond funds will return over the next 1, 3, 5 years? Nobody. BTW, I still own bond funds, and their returns still suck despite the dead-cat bounce in late 2023.
We have maintained a CD ladder for ~15 years. But when CD rates crossed over our % hurdle in 2022, we SOLD all of our remaining dedicated bond funds that weren't SOLD when the great bond crash occurred.
We did NOT reduce our stock exposure, we only reduced our bond exposure which currently (and happily!) sits at its lowest point since retiring in 2012. (Our only bond exposure is via PRWCX and FBALX. Period.) We effectively replaced our bond sleeve with a larger CD ladder sleeve and are enjoying every minute of it.
It's really all about a couple of pretty simple questions:
What does an investor (NOT a trader) expect as LT, annual TRs on bond OEFs?
If your answer to that question is ~4%-5% or lower, then why in the freaking world would you NOT instead have invested those monies in a fixed rate, Call Protected, FDIC'd CD that GUARANTEES that same or better rate? (Aside: If it's higher than that, please pass me what you're smokin'!)
FWIW, ridding ourselves of the nuisances of owning bond funds and managing a bond portfolio allowed us SO much more time to concentrate on our stock portfolio and take on MORE RISK given the elimination of bond fund related risk. And since that transition our stock portfolio performance has significantly improved.
None of the many bond funds (including intermediate and multisector) that I track have returns exceeding 4% over the past 5 and 10 years, and very few over 15 years.
Furthermore, 4% is often cited as a sustainable annual withdrawal rate for a retirement portfolio. So, you can now achieve that rate with Treasuries for at least the bond portion of a portfolio, presumably using stocks to account for inflation.
Sure for many, never for me because a good trader can do more.
For months now I posted about the following 3 funds from less risky/volatile to more RPHIX,CBLDX,RSIIX/RSIVX.
One year chart shows the results.
https://schrts.co/REtABeZs.
And 2024 would continue to deliver much better results than CDs with low volatility.
And yes, I know, CDs are guaranteed with no volatility but if I can make much more with bond funds and reduce my stock portion by a lot, it suites my needs.
So, goals and style matter.
BTW, this thread is about EM, why discuss CDs or bonds.