Chet Courrier from Bloomberg has a good article up expressing caution about the Emerging Markets.
The article is not really that different from some of the concern I have written about over the last couple of weeks but it makes a good second opinion.
I receive email from readers of this site or my content elsewhere and it is truly astonishing to hear how much some folks have in emerging markets or energy trusts. One reader mentioned he would lighten up when CNBC started giving too much coverage. He might be able to time any moves based on something like a TV indicator but I find that to be making portfolio management much more difficult than it needs to be.
There is no real harm in irrationally justifying an asset class that takes up 10% of your portfolio. You may lag the market, which is OK, but you won't damage yourself financially. A 30% weight in the wrong area and you will damage yourself financially.
Can it be that people really don't get this?
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4 comments:
Or make a lot of money if 30% is in the correct area. Personally I think 50 to 70% of my assets in Asia is above average risk but well invested (that is where the worlds manufacturing base is growing – like it or not). Although, I would not be comfortable with more than 10% in emerging markets in general.
The lure of profits will always attract lots of money. Why do you think even obvious fraudulent scams still work?
i imagine the consequences of thinking you area in the right area but being wrong will not deter some folks which is my point.
Too many people do not understand the risk they are taking.
It's not like having 40% of your portfolio in US indexes is a 'safe' play either. I'm probably north of 50% foreign, and my US exposure is probably less than 10%. I think it's risky to assume putting money in the US equity markets is 'safe'.
My foreign holdings are split between equity, real estate, and bonds. As always, diversification is the key--my Asia holdings are hedged by Central American positions, etc. I would rather a larger allocation to US equities, but every bone in my body screams 'danger will robinson!'
I think even he has trimmed positions, but remember that Jeremy Grantham publically stated last year that in his personal account he was short the S&P and long emerging markets.....that got some attention, no doubt.
Then, in January of this year, a huge sell off in US large cap growth and into EM...
fyi---
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