A little weekend food for thought...
"Be brave. It is only at extreme times like this that asset allocation can earn
its keep with non-traditional behavior. I believe a conventional diversified approach
is nearly certain to fail."
"In mid-December last year, I told my colleagues in asset allocation
that I was putting up to 50% of my sister’s and children’s pension funds into Emerging....My sister and children are at about 55% today. Why it was not 100% back then, however, is a
good and very difficult question to answer. Failure of nerve, I suspect."
From:
https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf?sfvrsn=48Here are a few EM funds and ETFs that have a value tilt: SIVLX, BEMAX, PRIJX, PZVEX, TFMAX, AZMAX, MAEMX, TLTE, EDIV, and DEM. I own SIVLX and recently added to it and might be drawn to PRIJX but its not available thru Fido. After some more ruminating on the contents of the article, I may decide to add to MEASX as part of a year-end portfolio update.
Comments
Europe...still not impressed. investing in Europe requires a good manager who is willing to find good fundamentals ...company by company. I believe FMIJX does a good job of understanding this. The QE story in Europe has had too many corrupt companies who borrowed (stole) QE from Dragi. Brexit leaves me wondering. Negative yields makes me wonder.
No one seems to see the "value" in Japan...pay attention to the Yen. A weak Yen + additional QE by the (BOJ)...who are buyer of Japanese equities...will lift Japanese equities.
A combination of VT (this is an eft...just not hyperlinking here for some reason) and VSS covers the world pretty cheaply. On the bond side I am just not so sure where you would turn...maybe LT Treasuries. Currencies may be the new alt-bond. Currencies will rise in a equity selloff...equities will do well if they remain weak. Every country seems to want to control/manipulate their currency...favoring a weak currency for trade. It is an interesting time to chart the value of gold in various currencies. Gold...hmm another "Store of Value". Finally, Is it time to reconsider the forgotten "permanent value fund", PRPFX?
It does not make sense to me to focus on Japan until the crisis in Korea resolves itself. I remember from a few decades ago how short the boat ride was from Japan to Korea. Unfortunately, by missile the ride would be very much shorter. Both Korea and Japan seem quite risky to me at present.
Your pondering about whether it is time for PRPFX is interesting. Last summer I began to decide what to do with a pot of new cash derived from the sale of a "winter" house. In July, in part using the sort of thinking you presented in a recent post about high yield, I made the following investments: MCRDX = 12.5%, PONDX = 12.5%, IOFIX = 16.7%, RPGAX = 16.7%, and GDMZX = 16.7%. Since then I have added DSENX = 6.3%, WEMMX = 6.3% and SIVLX = 7.5%. That leaves 5% which will probably soon become MEASX. All but 2 of these investments represent increases to existing holdings. This results in about 40% in stocks with about 45% of that foreign. (I allot the bonds in DSENX to the domestic stock percentage given the benchmark DSENX ties itself to.) Bonds are a little over 50% of this pot. It will be interesting to watch how this "pot" of new investments performs going forward. Its about 10% lighter in stocks and 10% heavier in bonds than the rest of my portfolio.
So maybe compare w AOM from here out.
FSTVX 30%
VXUS 20%
VBTLX 22%
PTIAX 22%
RPHYX 6%
The RPHYX accounts for a near cash set-aside maintained to assure the availability of cash for the 3.5% annual withdrawals drawn from the portfolio (withdrawn in quarterly segments based on the prior year-end portfolio balance). It really takes a full market cycle to evaluate things, but I like to check in with a reference benchmark along the way.
value fund.
One of his suggestions is “liquid alternatives” - which Investopedia loosely defines as hedge funds for the little guy (low minimums and few restrictions on redemption) - as the answer to the conundrum he sets up. But, with these you’re paying a ton in management fees and are highly vulnerable to the decision making of the manager. I’m not convinced most are any better at guessing which direction to lean toward at any given moment than most of us are. Some get it right. Many don’t. A change in manager can spell disaster for a previously successful fund. Shorting equities costs the fund additional money in the form of interest and also increases risk. So I’m not a fan of liquid alts.
@bee - The knock against PRPFX has always been that as an individual you can purchase the bonds, gold, silver, natural resource stocks, Swiss Francs, real estate and aggressive growth holdings (and in the same proportions) cheaper yourself than paying Mr. C to do that for you. My answer is: Yes you can. But who among us has the time, resources and wherewithal to do all that - and than to rebalance it all periodically? If anyone here is replicating the fund on their own, they haven’t voiced it. I don’t know what the “right” amount is for that type of holding. I hold a bit - and sleep very well on it. Guess it amounts to something like 5-10% of my total. Content to leave it alone and take distributions elsewhere. I do consider it something of a liquid alt - but not as normally viewed or defined in the investment community.
I bought AZMIX through Fidelity. My relationship with a Fido representative allows me to do this. Originally, I mentioned to him that I could buy Pimco & Allianz institutional funds at Vanguard for $25,000 minimum. They wanted to keep my business so they allowed the purchases. Initial orders need to be through a representative.
You note a good point about flexibility with some investment houses. Several years ago I had a "finger problem" combined with a "too busy of a day syndrome" with a Fidelity purchase. I bought a Fido fund I had not intended to purchase. The fund happened to be one with the 60 day holding period or a 1% sell fee would be subtracted. I didn't realize the purchase problem until the next day. A phone call explaining the error removed the errant purchase and no fees were attached. Customer service/relationship has always been a most positive experience for us with Fidelity.
Never hurts to ask, eh?
Regards,
Catch
Flexibility is key. My Fidelity rep has also upgraded many funds from investor
class to institutional like several Matthews and Seafarer funds. Bringing down the expense ratio by 25 basis points is important for me.
Also, many times the $49.95 fee for buying institutional share class funds has been
waived.
If your rep works with you like mine, it is important that you send an email to Fidelity telling them how pleased you are working with their rep.
Mitchelg