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As one might imagine, CNBC Hong Kong is all over the rout. Bernie LO and his new partner Sysan Li are trying to explain it. Makes for some good laughs in the morning.
giggle. Yes, dreadful today. Two of three bond funds up: PREMX, DLFNX. (MAINX down a penny.) All else in the toilet. Portf. was down -1.11% for the day, 10th April, 2014. (TRAMX has been white-hot. Down just .02 cents this day, comprises just 2.74% of portf.)
A moderate risk globally diversified allocation portfolio with the typical 60/40, small/large and growth/value split would be down about .90% today. Calibrate your portfolio results and/or allocation funds accordingly regarding risk levels you/fund may have assumed intentionally or not.
I didn't do too bad considering I have a conservative global balanced portfolio - down about .73% today. Several bond funds (DODIX, MWTRX, THOPX, MITFX, PRFHX) were up while a couple others (PIMIX, RSIVX) were even. Days like this tend to help reveal which funds are more volatile than others, however.
MJFOX will already have factored in the 4/11 movement in Japan in today's NAV with fair value pricing. If the US markets go up tomorrow and Japan is expected to follow on Monday, tomorrow's NAV for MJFOX can be up at end of day pricing despite the Fri fall in Nikkei.
For people who know how to hedge, this situation would have been a good example to hedge than panic and sell at this point which is likely to be within 1-2% of a short term low for a bounce back from oversold technicals.
For example, my hedging with 2x inverse QID and TWM (mentioned a while ago in the thread on buying/selling/pondering) made my play money portfolio go up .20% today but the intent was to keep the portfolio neutral without a lot of trades unwinding positions in this volatile period than make money. It is trivial to take the hedges off with just two sells at any time.
There are many ways to hedge and some less riskier than leveraged inverse funds and it is only feasible for small portfolios or buckets (< 100k). I would NOT recommend it to everybody but would encourage the curious and adventurous comfortable with basic math to learn some hedging techniques.
It may come in handy even in some special situations like what @crash is facing that wants to get out of Japan in a downward trending market. You know that it is going to recover sometime in the future but don't know when. Further losses may lead to panic selling.
Instead, if you have cash that is lying around doing nothing, you hedge against that position ideally as soon as possible rather than after a deep loss and potentially close to bottom. An inverse ETF is the most direct when available at a level which makes it neutral (this is where some basic math comes in handy). This effectively puts a floor at the current level while you wait for it finish its slide and come back up when you remove the hedge. Often this is easier than unwinding positions and buying back.
If at some point, Japan keeps going down with no end in sight and another market is recovering well, you sell both equivalent to selling at that floor and buy into the position you would have made the allocation instead. This way, you don't suffer the opportunity costs of waiting for the fund to come back.
The risk is that it shoots up suddenly and so selling would still be at the floor you set when you sell both. But this is the lower probability scenario and even more manageable if you have a technical situational awareness.
It is simpler than it sounds and definitely not for every temperament but a useful tool to have in your investing arsenal, especially if you are sticking your nose out in high beta funds or making speculative asset or sector bets.
Thanks, man. For an amateur like me, it's too much to juggle. No spare cash sitting around, either. I've always been fully invested, like I am currently. I own other Matthews funds. I don't want to go chasing performance, but what do you think about closing my MJFOX and moving it into MSMLX (Asia small cap?) Not right away. I could move it into MAPIX, but am already overweight there. Or MAINX, but that's a different animal, entirely.
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Comments
Was that a bit harsh?
Anything with short or emerging is doing better and this fund has a lot of it.
Hussman would be another happy camper if it was possible for him to be happy about investing.
For people who know how to hedge, this situation would have been a good example to hedge than panic and sell at this point which is likely to be within 1-2% of a short term low for a bounce back from oversold technicals.
For example, my hedging with 2x inverse QID and TWM (mentioned a while ago in the thread on buying/selling/pondering) made my play money portfolio go up .20% today but the intent was to keep the portfolio neutral without a lot of trades unwinding positions in this volatile period than make money. It is trivial to take the hedges off with just two sells at any time.
There are many ways to hedge and some less riskier than leveraged inverse funds and it is only feasible for small portfolios or buckets (< 100k). I would NOT recommend it to everybody but would encourage the curious and adventurous comfortable with basic math to learn some hedging techniques.
It may come in handy even in some special situations like what @crash is facing that wants to get out of Japan in a downward trending market. You know that it is going to recover sometime in the future but don't know when. Further losses may lead to panic selling.
Instead, if you have cash that is lying around doing nothing, you hedge against that position ideally as soon as possible rather than after a deep loss and potentially close to bottom. An inverse ETF is the most direct when available at a level which makes it neutral (this is where some basic math comes in handy). This effectively puts a floor at the current level while you wait for it finish its slide and come back up when you remove the hedge. Often this is easier than unwinding positions and buying back.
If at some point, Japan keeps going down with no end in sight and another market is recovering well, you sell both equivalent to selling at that floor and buy into the position you would have made the allocation instead. This way, you don't suffer the opportunity costs of waiting for the fund to come back.
The risk is that it shoots up suddenly and so selling would still be at the floor you set when you sell both. But this is the lower probability scenario and even more manageable if you have a technical situational awareness.
It is simpler than it sounds and definitely not for every temperament but a useful tool to have in your investing arsenal, especially if you are sticking your nose out in high beta funds or making speculative asset or sector bets.