How should I balance emerging markets against mature?
Of my money invested in stocks, I currently have about 20% in emerging markets (all through low cost funds), the rest in mature markets (low cost funds and some stocks).
My question is what is the correct balance? I am a very long-term (20-40 years) essentially buy-and-hold investor. As a result I am not too worried about seeing large losses in individual holdings (especially if they are diverse funds), and would most likely take that as a signal to buy more, unless the fundamentals had really changed.
With that in mind, would it be reasonable for me to increase my exposure to emerging market funds to, say, 50%? I realise these markets come with risk, but over time surely that is where the better growth is. I would also adjust this down as I got older, and closer to retirement, so as to avoid too much volatility.
Or would it be imprudent to put so much into emerging markets?
Thanks for the advice.
Best Answer
2769 points
Oldman answered one year ago …
I'm over 70, and I have to live on my investments. I have not purchased a U.S. security in 3 years, with the exception of YUM brands. I believe that you can do much better by investing mare in BRIC than developed AmerEUroJapan ... and I believe they will be around with a growing GDP for years to come.
Now, in Britain, you have an opportunity to buy into Frontier markets...and I would put a small percentage of the overall portfolio there, and 30-40 % in BRIC. You could buy individual securities, but keep the risk to <2% of the portfolio, to avoid wipeouts.
You don't need the steady income from bonds now...and if inflation ever gets admitted to in a realistic context...and not the govt's manipulsted consumer price index...., bond prices will plummet as the premia for fixed income yields will soar. Recall, in 1981-84, 30 yr treasuries here went to 12%, and via zero-coupon bonds, an investment would double in value every 6 years for 30 yrs!
Answers
3943 points
MNSL answered one year ago …
I think we have to be global investor if we want to get above average returns from the market in the next there decade.
In addition investment should diversify into emerging market and frontier market as well.
In developed world we should look for companies with global presence.
Long term investors will have great investment opportunities in next 03 years through out the world.
