I have written about emerging markets plenty of times and frontier markets quite a few times. I believe emerging markets have a place in diversified portfolio and frontier markets should be there for quite a few folks. I wrote about the N-11 in this context in January.We are moving closer to some sort of US listed exchange traded product. I found this on IndexUniverse about an MSCI Index that also mentions the an S&P frontier market index.
This is going to happen in a more accessible way. I have disclosed exposure to Vietnam, not so easy to access, and there will be more. I think in addition to funds there will be individual stocks available too.
Emerging markets have been hot for several years and despite Michael Kahn's warning of a correction (which I am not disagreeing with) they will be attractive to US based investors for a while to come.
The point to make for now is one of moderation. I believe I first disclosed owning the Vietnam Opportunity Fund (VTOPF and VOF.L) a little over a year ago. I actually first bought it in the spring of 2006 at around $2.48. I disclosed selling half of it in a video post from January at $4.73. For the very few people I bought it for I only allocated 1-1.5% to it. A 1% allocation to something that goes up 90% adds a lot to a diversified portfolio. Granted it won't make you rich but it adds meaningfully to your result without taking a huge risk.
I think this sort of smaller exposure makes sense for a lot of people where frontier markets are concerned. I have discussed moderation with regular emerging markets more times than I can link to but during the selloff this summer a lot of emerging market things were 20% or so. When these events happen, a lot of comments come in from people who learn the hard way they had too much.
Did you catch any of the Red Sox/Angels game last night on TBS? While I am glad the Red Sox won, its going to be a long post season with Ted Robinson and Steve Stone doing the games.
12 comments:
I really wanted to catch that game, but I was out all night.
Stonie is a GREAT color guy. He really knows his stuff and can usually tell you what the manager is going to do in advance. But he does like to talk, and I heard he barely let the play by play guy get a word in edgewise.
The pci you have in right column... Neil Cavuto... ice cream cone.
What gives ??
roger..i posted late lastnight...question: are you familiar with "structured notes"? Is this the kind product that has the same pros and cons of an annuity?
There were some other points/inquiries in the post should you feel inclined to comment. You answer so much here I dont want to sound pushy.
I am not an expert on structured notes. I can say a few things. Anytime I have ever looked at on there has always been more than met the eye.
They take one exposure--long stocks as a common one--and split it into two pieces. The buyer get the return within a narrow band (usually you get 100% of you investment back as the worst case guarantee but they can move in price while they trade, obviously I am talking about the ones that list on an exchange) and the firm creating it gets the return out side the band. They are not creating this product because they think they will lose money when all the hedging is done.
On top of that they are expensive.
further if when the market has its next 2003 you will be left way behind which is ok if you don't think of it as equity exposure but if yoiu are thinkingof that as equities you will be left way behind.
you can tell i am not a fan but if you have a low tolerance for volatility...
To add to Roger's comment, an annuity might have structured notes in its portfolio I suppose but they are not the same thing as an annuity nor would they likely be covered under the same section of the tax code.
It is currently being claimed that distributions from some classes of notes such as ETN's should not be taxable but AFAIK the IRS has not ruled on this claim and so, unlike annuities, the purchaser of an ETN or similar note could discover they were liable for taxes (assuming the note was not being held in a tax deferred or nontaxable account).
Structured notes tend to be complex and/or highly customized, typically tied to an index rather than collateralized; examples would include step-up bonds, index amortizing notes, range bonds, inverse floaters, etc.
i would add that those new Fido (it is fidelity right?) MF that are kind of like annuities, but are not, could be interesting. similar concept but tradeable.
If an individual investor wishes to buy into new frontiers, then simply buy some EEM. Low cost, no pharisees pretending to determine what's hot, and what's not...
Go Sox.
Rog baby,
You still own the double short fund?
Ouch!
anon 3:48, I do say that frontier markets are not for everyone but to be clear it is a different asset class than emerging.
Emerging might be more appropriate for many more people than frontier markets but I don't think you capture frontier with EEM.
Roger,
How can you recommend a highly volatile stock position, like Vietnam stock, completely out of proportion to it's current market capitalization in the world economy, and then declare you have achieved a diversified, low risk portfolio? This mish-mash of a portfolio will NEVER maximize return for a given level of risk...in the long or short terms.
"A 1% allocation to something that goes up 90% adds a lot to a diversified portfolio. Granted it won't make you rich but it adds meaningfully to your result without taking a huge risk."
Ted Robinson's tennis coverage makes me nuts....
I gather he is first and foremost a baseball guy, but honestly, his voice still drove me crazy last night....
:(
Linda, very funny.
anon 6:08, my stats in this regard are quite good and while I do not discount luck this is simply how I choose to do things, and it works.
I don't publish r2, sharpe or treynor because I do not want this to be a marketing piece. this site is simply a look over one person's shoulder.
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