I agree.

Good line about the previous allocation maybe having been
all red on the roulette table. Chuckling here. :-)

<wyu[at]talisys.com> wrote
- quote -

Oh I agree about this for my own planning. But doesn't mean somebody
who has 10000% more tolerance for risk might think all EM or all
microcap value is a good idea. Maybe their previous asset allocation
was 100% red on the roulette table. From that perspective, what we
think as risky is safe from their view.

Elle wrote:
- quote -

Right, and microcap value stocks' returns have far exceeded
the S&P 500's, historically speaking. Neither of these
realities justifies an all EM portfolio or an all microcap
value stocks portfolio. Do you understand why? I'll give you
a hint: It's a statement made in every mutual fund
prospectus in the U.S., among other publications.

Keep in mind, too, that the number of mutual funds has grown
exponentially in the last thirty years. I suspect little was
available by way of EM funds in the early 1980s, for one. I
suspect the data of which you speak is dubious in its
applicability here.

<wyu[at]talisys.com> wrote
- quote -

I'm feeling too lazy right now to google up the backup data but I have
read before that Emerging Markets is the top return sector over
extended periods of time. Obviously, it's way more volatile so the
typical 10 year horizon for S&P500 is not long enough. You may be
looking at 20-30 years as a reasonable timeframe for a 100% Emerging
Market portfolio.

Elle wrote:
- quote -

"Will Trice" <wwtrice[at]paragondynamics.com> wrote
- quote -

I have never seen anyone recommend strictly emerging market
and international stocks for one's portfolio. I think it's a
fair assumption that this is based on historical returns
over several decades, which is the OP's timeframe. (He said
he was "relatively young."

You went back ten years with your examination of some
international etc. funds. IMO this is not enough history.
Asset allocation tools use many more years of data.

- quote -

Your reasoning does not make sense to me, because it uses
20/20 hindsight.

Since REITs have done way better than the S&P 500 during XYZ
period, telling people to buy an S&P 500 index fund is also
poor advice. Right?

Nope.

Also, note that I said the OP should use the tools /for
ideas/. I do not write casually, Will. I try to be careful
in what I say. If I mess up, I'll admit it.

- quote -

We need to look forward.

Elle wrote:
- quote -

Are you sure about this? Have you looked at historical data? If I take
his allocation, rebalance every year, then $1 would become $2.44 (my
period here is March 1996 - March 2006, that's as far back as the data
for FHKCX - his China fund - goes on Yahoo, it was established in Nov.
1, 1995, so I couldn't go much further back anyway even if I had the data).

- quote -

If I use the most aggressive asset allocation from the first link you
suggest at the site above, it gives me a 40% large-cap, 20% small-cap,
20% bond and 20% foreign allocation. Using the S&P 500, Russell 2000,
RPSIX, and FWWFX for these, respectively, then in the same time period
this allocation would give a result of $2.22 over the same period
(rebalancing once per year). This holds when starting in any other
month as well. It seems that your tools don't give optimal allocations
either.

I'm not suggesting that the OP has a good allocation, but it wasn't a
bad allocation either (return-wise).

-Will

Prion wrote:
- quote -

That's one risky puppy.

- quote -

How would you see a "serious swing in the market"? I can tell you
about this one stock I own. It's a great company, makes lots of money,
has lots of institutional ownership, and was undervalued to boost.
Then one day it dropped 35%. No one saw it coming (except the
insiders). The name of the company is Merck. Fortunately I am
diversified so the drop had only a small impact on my portfolio. But
that's a moral story for you.

- quote -

That's long term. I doubt that your portfolio is going to return that
for the long term.

- quote -

Again, you can't tell when trends develop. At least you can't move
faster than professionals in the field.

- quote -

"Prion" <prionnvcjd[at]gmail.com> wrote
- quote -

The last sentence above is somewhat oxymoronic. Do you
understand and can you state what the purpose of
diversification is? If you do understand this, then you will
understand that, historically speaking, your current
allocation has not been optimal for returns.

For ideas on allocations, try some of the free online asset
allocation calculators linked at
http://home.earthlink.net/~elle_navorski/id8.html . Then ask
more questions as needed. Certainly keep lurking here and at
other online fora.

Remember, chasing short term returns, as you seem to be
proposing, is a proven losing strategy for long term
investing.

- quote -

You spoke of the dotcom bust. Prior to the bust, you do
realize that returns were well north of 12-15%, too, right?
What lesson should one take from this?

I currently contribute to a 403B plan provided by my company. A total
of 14% of my monthly pay is contributed each month 8% by my employer
and 6% by me.

I am 25% in emerging markets,25% latin america, 25% pacific basin and
25% china region. Through Fidelity.

This has resulted in a 37% rate of return last year, and the previous
year was <25% I have never been less than 25% in the past 4 years that
I have used this combination. Do you see any problem with me
continuing this investment protocol? I realize I am not in any way
diversified, but I watch the market every day and can easily shift
funds if I saw a serious swing in the market.

It is very hard to diversify when one realizes this kind of return
annualy, compared to a diversified portfolio that may result in only a
12-15% return.

I am relatively young and was on the tail end of the dot com implosion
when I initially started my retirement account, therefore I didn't lose
that much, I have a much more considerable amount to lose this time if
asia and latin america tank but I think I am able to be more proactive
if a trend were to develop.

Any help would be appreciated.