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As for me, I was happy with my 2020 results---even with not much EM at all. Maybe I'll move a small bite from where it is in my bond/ballast sleeve into foreign equities. It's a really nice problem for everyone, that Markets are flying high. I hate buying at these levels, but I'll be "playing with the house's money." PRIDX. But that fund is not, ostensibly, EM. But M* shows almost 18% of its portfolio in Latin America and Asia Emerging. Less than 0.33 in Europe Emerging. I'm not surprised by that last. Which developing European countries are not run oligarch-style, like Putin's Russia? Is Ukraine in the EU yet? Will they ever throw off the Russian invasion? Putin's logic there is EXACTLY what Hitler did for the poor, downtrodden, oppressed German-speakers in the Sudetenland. And uncle Neville promised the British: "Peace in our time." In fact, uncle Donald owes some of those oligarchs big piles of money. Come to think of it. Anyway, PRIDX is closed to new investors.
@Crash, you are teasing us with PRIDX. Wish I invest in it earlier before it closed. The fund's 18% EM exposure is a decent allocation in the small and mid cap space. Asia is where the growth will be, not so much in eastern Europe and Latin America.
Also which regions in the world are in better shape dealing with their pandemic? This year it is likely those countries who are able to contain the coronavirus will able to advance their economy. My bet is on Asia. Matthews Asia, Grandeur Peaks, Rondure and Artisan are the shops I am investing with.
@Sven Yes. I had money with Matthews. A bad experience with them over the phone years ago killed my desire to keep my money with them. MAPIX had a great 2020, but did not pay at year-end. It happened all those years ago, with one particular Quarter--- which is why I was on the phone with them.... Still shepherding money for a colleague and his wife. She has some of her stuff in MAPIX and MAINX. (The rest in DODBX and DODIX.) Ever since 2010, when I rearranged their stuff. Can't complain that much, I suppose. David lately offered us some words of assurance re: MAINX. It has switch from Q to monthly pay-outs.
Our investment certainly cross-path multiple times. MAPIX is a solid conservative Asia fund. There was one year that MAPIX did not pay a year-end dividend. The explanation was not satisfactory in their annual report. I reduced my holding on MAPIX and invested with Andrew Foster (Seafarer). Several years ago I found Lewis Kaufman again at Artisan Developing World fund; previously I invested with Mr. Kaufman's Thornburg Developing World fund. The portfolio on the Artisan fund is more focus more on growth companies and I have not look back since.
Dodge & Cox has changed quite a bit lately. I used to invest with them in the 90's, but the drawdown in 2008 exposed their weakness in stock picking. Once my investment recovered several years later I moved on elsewhere. The only D&C funds I would invest with are their bond funds: Income and Global Income. MFO Premium has great tools to compare the funds with respect to their risk profile and drawdown.
The institional share of Thornberg funds are no load and requires $5K at Fidelity plus $49.95 transaction fee. It is better to go with ARTYX, NTF at Fidelity with $3K minimum. I gradually move some overseas funds toward growth style over several years. Finding good managers took sometime. So far Mr. Kaufman has done very well. I am okay with 20% invested in US growth companies. Stock picking has been right on so far. The only minor negative is the higher than average expense ratio, 1.36%.
Ok... I somehow can't take my eyes off the drawdown on those sectors. So, given that, what is the takeaway? Because from various articles, energy and financials and small and mid caps along with emerging markets are supposed to be the 2021 winners. Is that because the drawdowns were so large in 2020? Still learning about drawdowns and why they are so important.
Ok... I somehow can't take my eyes off the drawdown on those sectors. So, given that, what is the takeaway? Because from various articles, energy and financials and small and mid caps along with emerging markets are supposed to be the 2021 winners. Is that because the drawdowns were so large in 2020? Still learning about drawdowns and why they are so important.
I'm not a professional, but I can understand your question. It seems to me that current (magnificent!) Market returns are due to the fact that stocks and bonds are utterly disconnected from "fundamentals." Governments everywhere have been busy "juicing" their economies due to the pandemic. Prior to the Covid thing, there was the "stimulus" to grease the gears again, following the Real Estate bubble and Crash back in 2008-09. I don't think all of that stimulus had ever been removed, since then. So, paraphrasing from something I read here a while ago: "The Markets are on a Methamphetamine bender." And when "ordinary," established big names do very well, they normally drag the small-caps and EM along with them. This is when those other sectors outperform.
That got added to my Amazon watch list after reading the article. No memories about seeing it before. It would have been so long ago it will be new to me even if I have.....
@JonGaltIII, Drawdown has considerable impact on future returns. Let me try to explain this with some calculation.
Let say you lost 10% in fund A in 2020. An amount of $100 investment is reduced to $90. 100 X (1-0.1) = 90 In order to regain the $10 lost, you must gain 11% in 2021 (not merely 10%). 100 = (1+X)*90 (original 2020 value) and solve for X. X is the percentage gain required for 2021. X = 0.11 or 11%
Therefore the deeper the "hole" or drawdown is, the larger % gain is required and often longer duration to fully recover the loss. Case in point, S&P 500 index lost 40+% in 2008, and it took 53 months to fully recover and many investors can't handle the pain or patience to wait it out. Many cut their loss and sell near the bottom which is the worst outcome as the investors now lock-in the loss permanently. Therefore the magnitude of drawdown has a significant psychological effect that often lead to panic selling. The key here is minimize the drawdown while balancing a reasonable return. Thus a well balanced portfolio with the right asset allocation will likely to have a much smaller drawdown in a down market. This would allow the investors to sleep well.
There are many very useful tools in MFO Premium site that allow one to compare fund candidates with respective to their drawdown %, recovery period, and annual return for various market cycles. And I am barely scratching the surface of Premium capabilities.
@Sven thanks for a great explanation. Makes complete sense. It's interesting because for the Buy and Hold investor that invests in let's say just Index Funds or the S&P 500 with a 10 year or more horizon... they can lose sleep too. If they jump off the roller coaster, they lock in their loss as you say. So, basically what you are saying and others at MFO ... the goal is to invest in funds with more consistent returns over longer periods of time? A lower drawdown number would certainly be part of that volatility equation.
That is my ultimate goal anyway: Find funds that consistently beat the S&P 500 over long periods of time with the less volatility, same or a tad more. This is a difficult task. Of course, by choosing "longer periods of time"... I miss out on the Grandeur Peak Global's that may be terrific over the short term (and it looks like they are) but I just need a bit more history. Does this make sense?
@Crash I think you are absolutely right re: juicing the economy. So, if you follow that logic - don't you think 2021 will be even juicier? I can't see Yellen and team providing less stimulus and monkeying with rates too much. Grantham BTW says "“This bubble will burst in due time, no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios,” in his book.
@JonGaltIII True. I think 2021 will be even juicier. Looking out into the future, whenever things start to get back to "normal," I'd say the best way to reduce stimulus is gradually, over a pretty long period of time. ... Grantham sounds VERY smart to me, but for years, he has sounded dour and negative, as if a Big, Bad Thing is going to happen--- maybe soon or maybe later on.
..... Which is to say: we are "condemned" to live in the world of our own making. And what's new or noteworthy about THAT, eh?
Many financial advisors will help you to draw up a balanced and diversified investment portfolio. Ideally, funds chosen will have negative asset correlation to each other. High quality bonds and equities are the classic examples. While in drawdown situations, the bonds will advanced when the equities fall. The net result is to have a reduced level of loss and the portfolio will recover in a shorter timeframe. More importantly, this helps the investors psychologically and they are more likely to stay the course rather than sell at the bottom.
If you read January's article from Lynn Bolin, a plot showing Vanguard Wellington fund (65/35 stocks/bonds allocation) versus S&P 500 index achieved the same level of gain over a prolong period. This is achieved with less ups and down. Wellesley Income fund (35/65) was also included on the plot.
Comments
updating-my-favorite-performance-chart-for-2020
Also which regions in the world are in better shape dealing with their pandemic? This year it is likely those countries who are able to contain the coronavirus will able to advance their economy. My bet is on Asia. Matthews Asia, Grandeur Peaks, Rondure and Artisan are the shops I am investing with.
Dodge & Cox has changed quite a bit lately. I used to invest with them in the 90's, but the drawdown in 2008 exposed their weakness in stock picking. Once my investment recovered several years later I moved on elsewhere. The only D&C funds I would invest with are their bond funds: Income and Global Income. MFO Premium has great tools to compare the funds with respect to their risk profile and drawdown.
Can Earnings Growth Justify Current Stock Prices?
Thank you very much. The article has lots of very insightful (almost too much) information.
Drawdown has considerable impact on future returns. Let me try to explain this with some calculation.
Let say you lost 10% in fund A in 2020. An amount of $100 investment is reduced to $90.
100 X (1-0.1) = 90
In order to regain the $10 lost, you must gain 11% in 2021 (not merely 10%).
100 = (1+X)*90 (original 2020 value) and solve for X. X is the percentage gain required for 2021.
X = 0.11 or 11%
Therefore the deeper the "hole" or drawdown is, the larger % gain is required and often longer duration to fully recover the loss. Case in point, S&P 500 index lost 40+% in 2008, and it took 53 months to fully recover and many investors can't handle the pain or patience to wait it out. Many cut their loss and sell near the bottom which is the worst outcome as the investors now lock-in the loss permanently. Therefore the magnitude of drawdown has a significant psychological effect that often lead to panic selling. The key here is minimize the drawdown while balancing a reasonable return. Thus a well balanced portfolio with the right asset allocation will likely to have a much smaller drawdown in a down market. This would allow the investors to sleep well.
There are many very useful tools in MFO Premium site that allow one to compare fund candidates with respective to their drawdown %, recovery period, and annual return for various market cycles. And I am barely scratching the surface of Premium capabilities.
That is my ultimate goal anyway: Find funds that consistently beat the S&P 500 over long periods of time with the less volatility, same or a tad more. This is a difficult task. Of course, by choosing "longer periods of time"... I miss out on the Grandeur Peak Global's that may be terrific over the short term (and it looks like they are) but I just need a bit more history. Does this make sense?
@Crash I think you are absolutely right re: juicing the economy. So, if you follow that logic - don't you think 2021 will be even juicier? I can't see Yellen and team providing less stimulus and monkeying with rates too much. Grantham BTW says "“This bubble will burst in due time, no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios,” in his book.
..... Which is to say: we are "condemned" to live in the world of our own making. And what's new or noteworthy about THAT, eh?
If you read January's article from Lynn Bolin, a plot showing Vanguard Wellington fund (65/35 stocks/bonds allocation) versus S&P 500 index achieved the same level of gain over a prolong period. This is achieved with less ups and down. Wellesley Income fund (35/65) was also included on the plot.
Asset correlation can be found in MFO Premium.