Elevation Wealth Management's quarterly review of the investment, financial, and economic landscape as of September 30, 2013. Key take-aways and useful insights for average and sophisticated investors alike.
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Quarter-In-Review, What's an Investor to Do?
1. Barry Mendelson, CFP®
President & Financial Advisor
1399 Y
Ygnacio V ll Rd S it 24
i Valley Rd, Suite
Walnut Creek, CA 94598
www.elevationwm.com
barry@elevationwm.com
b
@ l
ti
925-348-5852
Quarter In Review
Third Quarter 2013
2. Disclosures
Opinions expressed are those of Barry Mendelson, CFP® and Elevation
Wealth Management.
This presentation should not be construed as investment advice.
The information contained in this presentation is compiled from sources
p
p
believed to be reliable.
Investments in securities involve the risk of loss. Past performance is no
guarantee of future results.
The markets can remain irrational longer than you can remain solvent.
2
3. Timeline f Events: Q t in Review
Ti li of E
t Quarter i R i
Selected headlines from Q3 2013
12%
US Federal Reserve refrains from
tapering and continues its pace of
monthly bond buying purchases.
S&P 500 Index hits all-time high of 1,729.86.
US Congress
fails to agree
on spending
bill, resulting
in partial
government
shutdown.
10%
8%
US Federal Reserve
announces it will carry
on with current pace
of stimulus.
GDP in euro zone climbs 0.3%
in second quarter following six
consecutive negative quarters.
Indian rupee falls to
a record low of 68.85
against US dollar.
6%
4%
2%
0%
6/28
Dow Jones Industrial
Average replaces Alcoa,
HP, and BofA with Nike,
Visa, and Goldman Sachs.
Egyptian
President
Mohammed
Morsi ousted
and Egypt’s
constitution
suspended.
US and Russia agree on
framework to destroy
Syria’s chemical weapons.
Prime Minister Shinzo Abe and Liberal
Democratic Party win majority of seats
in Japan’s upper house.
7/28
7/31
8/28
8/31
Returns in US dollars. Graph Source: MSCI ACWI Index. MSCI data copyright MSCI 2013, all rights reserved.
It is not possible to invest directly in an index. Performance does not reflect the expenses associated with management of an actual portfolio. Past performance is not a guarantee of future results.
9/28
9/30
3
4. Market Returns
U.S. and International Market Indexes
July 1, 2013 through September 30, 2013
U.S.
Large Cap
Stocks
U.S.
Value
Stocks
+5.2%
+3.9%
U.S.
U.S. REIT
Small Cap
Stocks
Stocks
+10.2%
-3.2%
U.S. STOCKS
Int’l Value Int’l Small
Stocks
Stocks
12.5%
15.0%
Emerging
Markets
Stocks
5.8%
INTERNATIONAL STOCKS
U.S. Gov/
Global
1-5 Year Credit 1-3
Bonds Year Bonds
0.5%
0.4%
BONDS
ONE
Year
19.3%
19 3%
22.3%
22 3%
30.1%
30 1%
4.7%
4 7%
22.6%
22 6%
24.8%
24 8%
1.0%
1 0%
0.8%
0 8%
0.7%
0 7%
FIVE
Years
10.0%
8.9%
11.2%
5.3%
6.0%
11.1%
7.2%
2.5%
2.5%
TEN
Years
7.6%
7 6%
8.0%
8 0%
9.6%
9 6%
9.3%
9 3%
8.3%
8 3%
10.1%
10 1%
12.8%
12 8%
3.2%
3 2%
2.9%
2 9%
Annualized for 5 and 10 Year Periods
Source: Morningstar Direct 2013. Market segment (Index representation) as follows: U.S. Large Cap (S&P 500 Index), U.S. Value Stocks (Russell 1000 Value Index), U.S. Small
Company Stocks (Russell 2000 Index), U.S. Real Estate Market (Dow Jones U.S. Select REIT Index), International Developed (MSCI World Ex USA Value Index (net div.)),
Internationall S ll (MSCI W ld E USA S ll ( t di )) E
I t
ti
Small
World Ex
Small (net div.)), Emerging M k t (MSCI E
i Markets
Emerging M k t I d ( t di )) Gl b l B d (Citi WGBI 1 5 Y Hd USD) US B d
i Markets Index (net div)), Global Bonds
1-5 Yr Hdg USD),
Bonds
(BofA ML Corp & Govt 1-3 Yr TR). Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the
expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.
All investments involve risk, including loss of principal. Foreign securities involve additional risks, including foreign
currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting.
6. Diversified Portfolios Review
Growth of Wealth
Asset
Class
Qtr
1
Year
5
Year
10
Year
10 Year
Volatility
100% Stocks
8.6%
21.2%
8.4%
8.0%
16.4%
75-25
6.7%
16.0%
7.6%
7.3%
11.9%
50-50
4.7%
10.8%
6.2%
6.2%
7.7%
25-75
2.6%
5.7%
4.4%
4.7%
3.8%
100% Bonds
Oct 2003 – Sep 2013
0.4%
0.6%
2.2%
2.9%
1.3%
Source: Morningstar Direct 2013. 5 and 10 year periods are annualized. Asset allocations and index portfolio returns are for illustrative purposes only and do not represent
actual performance. Stocks represented by MSCI World IMI Index (net div.) and Bonds represented by 50% Citi World Government Bond Index 1-5 Yr Hedged and 50% Bank
of America Merrill Lynch US Treasury/Agency 1-3 Yr. Globally diversified portfolios rebalanced annually. Hypothetical value of $1 and kept invested through June 31, 2013
from th respective d t A
f
the
ti dates. Assumes reinvestment of iincome and no t
i
t
t f
d
transaction costs or t
ti
t
taxes. Thi iis f ill t ti purposes only and not iindicative of any iinvestment.
This for illustrative
l
d t di ti
f
t
t
Indexes are unmanaged baskets of securities that are not available for direct investment by investors.
Index performance does not reflect the expenses associated with the management of an actual portfolio.
Past performance is not a guarantee of future results. Stock investing involves risks, including volatility
(up and down movement in the value of your assets) and loss of principal.
7. 7
Source: Morningstar Direct 2013. Market segment (Index representation) as follows: U.S. Large Cap (S&P 500 Index), Indexes are unmanaged baskets of securities that are not
available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a
guarantee of future results. All investments involve risk, including loss of principal. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign
taxes, and different methods of accounting and financial reporting. The time period for the performance shown was chosen to correlate with the market crisis in 2008. Therefore,
performance is only shown up to January 31, 2009 and is not current to the most recent data available. More recent performance may alter these assessments or outcomes.
8. Greatest Lessons from the Great Recession
1. Don t
1 Don’t let emotions drive investment decisions
2. Don’t try to time the markets
3. Active managers do not consistently outperform in bear
markets
k t
4. Diversification still works
5. Don’t take unnecessary risks with bonds
6. Rebalance your portfolio regularly
7. There may be no better alternative to buy-and-hold investing
9. Don’t Let Emotions Drive Investment Decisions
It s
It’s easy to let emotions influence your confidence
11. “Default would produce global
economic and financial crisis of
major proportions”
“Pressure grew on Republicans
to accept an increase in the
nations debt ceiling y
g yesterday
y
when a major Wall Street rating
firm threatened to downgrade
US government securities”
S&P 500 Performance
During Gov Shutdown
0.37%
0 37%
“The Treasury Department said it was its
12‘duty and intention to take all18.72%
Months Following
legal steps
necessary t assure that the nation’s
to
th t th
ti ’
financial obligations — obligations already
approved by Congress — are honored”
Source: Morningstar Direct 2013. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index
performance does not reflect the expenses associated with the management of an actual portfolio Past performance is not a guarantee of future
portfolio.
results. All investments involve risk, including loss of principal.
11
Source: Wikipedia — http://www.fool.com/investing/general/2013/09/30/the-most-important-thinginvestors-should-remember.aspx
Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the
management of an actual portfolio. Past performance is not a guarantee of future results. All investments involve risk, including loss of principal.
12. Don’t Try to Time the Markets
Best and Worst Days in the U.S. Stock Market
S&P 500 Index, Jan. 1, 1970 through Dec. 30, 2012
Worst
Ten Days
Source: Yahoo! Finance. Market segment (Index representation) as follows: U.S. Large Cap (S&P 500 Index), Indexes are unmanaged
baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses
associated with the management of an actual portfolio. Past performance is not a guarantee of future results. All investments involve risk,
including loss of principal.
Best
Ten Days
13. Active Managers Do Not Consistently Outperform
g
y
p
The S&P 500 began 2008 at 1468..
Noted Market Strategists’ Predictions for the
S&P 500 Index at the End of 2008
– Abhijit Chakrabortti (Morgan Stanley)
1520
– Richard Bernstein (Merrill Lynch)
1525
– Stuart Freeman (A.G. Edwards)
1575
– Rod Smyth (Wachovia Securities)
1590
– Thomas Lee (JP Morgan Chase)
1590
– Tom McManus (Bank of America Securities)
1625
– Abby Joseph Cohen (Goldman Sachs)
1675
– Tobias Levkovich (Citigroup)
( g p)
1675
– Jason Trennert (Strategas Research Partners)
1680
…and ended at 903
and
13
Source: USA Today. 2008 predictions for the S&P 500. January 2, 2008.
14. Active Managers Have Not Outperformed in Bear Markets
Active Managers Do Not Consistently Outperform
2008
Active Managers
underperformed
S&P 500 by
1.67%
14
•
Standard and Poor’s study of 2008
bear market concluded: “the belief
that bear markets favor active management is a
myth.”
•
Study found similar results in 2003
for the 2000 - 2002 bear market.
Source: Standard and Poor’s Investment Service, 2009. Indexes are not available for direct investment. Their performance does not
reflect the expenses associated with the management of an actual portfolio. The data assumes reinvestment of income and does not
account for taxes or transaction costs. Past performance is not a guarantee of future results.
15. Active Managers Do Not Consistently Outperform
Percentage of Active Managers Failing to Beat Index
August 2008 through July 2013
Source: Standard & Poor’s Indices Versus Active (SPIVA) Aug 2008 – Jul 2013. Index used for comparison: US Large Cap — S&P 500 Index; US Mid Cap — S&P MidCap 400
Poor s
(SPIVA),
2013
Index; US Small Cap — S&P SmallCap 600 Index; Global— S&P Global 1200 Index; International — S&P 700 Index; Emerging Markets — S&P/IFCI Composite; Short-Term Inv.
Grade Fixed Income — Barclays 1-3 Year Government/Credit Index. Outperformance is based upon equal weight fund counts. For illustrative purposes only. Index returns do not
include payment of any sales charges or fees an investor would pay to purchase the securities they represent. Such costs would
lower performance. Past performance is not an indication of future results.
16. Diversification Still Works
20%
300%
10%
250%
0%
200%
Cumulative
Return Mar 2009
– Sep 2013
-10%
150%
-20%
100%
-30%
Cumulative
Return Jan 2008
– Feb 2009
50%
-40%
0%
-50%
-50%
-60%
16
Emerging Marke
ets
Emerging Marke
ets
International Sma
all
International Sma
all
International Valu
ue
International Valu
ue
REIT
Ts
REIT
Ts
US Sma
all
US Sma
all
US Valu
ue
US Valu
ue
US Larg
ge
US Larg
ge
Global Bond
ds
Global Bond
ds
US Bond
ds
US Bond
ds
-100%
-70%
Source: Morningstar Direct 2013. Market segment (Index representation) as follows: U.S. Large Cap (S&P 500 Index), U.S. Value Stocks (Russell 1000 Value Index), U.S. Small
Company Stocks (Russell 2000 Index), U.S. Real Estate Market (Dow Jones U.S. Select REIT Index), International Developed (MSCI World Ex USA Value Index (net div.)),
International Small (MSCI World Ex USA Small (net div.)), Emerging Markets (MSCI Emerging Markets Index (net div)), Global Bonds (Citi WGBI 1-5 Yr Hdg USD), US Bonds
(BofA ML Corp & Govt 1-3 Yr TR). Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the
expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. All investments involve risk, including loss of principal.
Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. The risks
associated with investing in stocks and overweighting small company and value stocks potentially include increased volatility (up and down movement in the value of your assets)
and loss of principal. Emerging markets involve additional risks, including, but not limited to, currency fluctuation, political instability, foreign taxes, and different methods of
accounting and financial reporting. Bonds are subject to market and interest rate risk. Bond values will decline as interest rates rise, issuer's creditworthiness declines, and are
subject to availability and changes in price. Real estate securities funds are subject to changes in economic conditions, credit risk and interest rate fluctuations.
17. Diversification Still Works
Ranking of Markets Around the World — Ten-Year Performance in US Dollars
Annualized Returns Year Ending September 30, 2013
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
17
Colombia
Philippines
Brazil
Egypt
Indonesia
Peru
Thailand
Mexico
Turkey
China
Norway
y
Czech Republic
South Africa
Sweden
Denmark
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Malaysia
Singapore
Korea
Chile
India
Australia
Hong Kong
Poland
Germany
Switzerland
Canada
New Zealand
Morocco
Netherlands
Russia
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
UK
Spain
France
USA
Austria
Belgium
Israel
Hungary
Taiwan
Japan
Finland
Portugal
Italy
Ireland
Greece
Source: Morningstar Direct 2013 Countries represented by their respective MSCI IMI(net div ) Indexes are unmanaged baskets of securities in which investors cannot
2013.
div.).
directly invest; they do not reflect the payment of advisory fees or other expenses associated with specific investments or the management of an actual portfolio. Past
performance is not a guarantee of future results. All investments involve risk, including loss of principal. Foreign securities involve additional risks, including foreign
currency changes, political risks, foreign taxes, and different methods of accounting and financial reporting. Diversification neither assures a profit nor guarantees against
loss in a declining market.
18. Don’t Take Unnecessary Risks with Bonds
Fixed Income Maturity Risk
1970 – 2012
Source: Morningstar, January, 2013. Short-term government bonds are represented by the one-year U.S. government bond for 1970–2012. Intermediate-term government bonds
are represented by the five year U S government bond and long term government bonds by the 20 year U S government bond An investment cannot be made directly in an index
five-year U.S.
long-term
20-year U.S.
bond.
index.
The data assumes reinvestment of all income and does not account for taxes or transaction costs. For the annual periods 1970 through 2012, each year was categorized as a year
when yields rose or a year when yields fell. The price changes during all years when yields rose were then averaged. The same was done for years in which yields declined. The
price change was isolated, as opposed to the total return, so that the effect would be more pronounced. Bonds are subject to
market and interest rate risk.
Bond values will decline as interest rates rise, issuer's creditworthiness declines, and are subject
to availability and changes in price.
19. Don’t Take Unnecessary Risks with Bonds
10 Year Treasury Yield
Jan. 1,
Jan 1 Sep 30, 2013
Apr 1 – 1983 30Sep 30 2013
–
30,
Source: US Department of the Treasury. Past performance is not a guarantee of future results. All investments involve risk, including
loss of principal.
20. Rebalance Your Portfolio Regularly
Keys to Rebalancing
• Automatic
-
Set it and forget it
• Disciplined
-
Remove emotion from decision
• Frequency
-
Monthly, Quarterly, Annual make little difference
• Risk Management
-
Vital to maintaining a desired portfolio exposure
The buying and selling of securities for the purpose of rebalancing may have adverse tax consequences.
22. Pioneer of Modern Finance
2013 Nobel Prize in Economics S
Science
University of Chicago Professor Eugene Fama, Sr.
For his groundbreaking work on Efficient Market Hypothesis
23. Greatest Lessons from the Great Recession
1. Don t
1 Don’t let emotions drive investment decisions
2. Don’t try to time the markets
3. Active managers do not consistently outperform in bear markets
4.
4 Diversification still works
5. Don’t take unnecessary risks with bonds
6. Rebalance your portfolio regularly
7.
7 There may be no better alternative to buy and hold investing
buy-and-hold
24. Given Time Markets Recover
Time,
Source: Morningstar Direct 2013. Market segment (Index representation) as follows: U.S. Large Cap (S&P 500 Index), Indexes
are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect
the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. All
investments involve risk, including loss of principal.
26. Standardized Performance Data and Disclosures
Average Annual Total Returns (%)
3 Mo
1 Yr
5 Yr
10 Yr
Since Inception
S&P 500 TR
5.24
19.34
10.02
7.56
10.43
Jan-26
Russell 1000 Value TR USD
3.94
22.30
8.87
7.99
12.28
Dec-78
Russell 2000 TR USD
10.21
30.06
11.16
9.64
11.90
Dec-78
DJ US Select REIT TR USD
-3.15
4.70
5.31
9.29
8.99
Dec-86
MSCI World Ex USA Value NR USD
12.52
22.56
5.99
8.26
11.90
Dec-74
MSCI World Ex USA Small Cap NR USD
14.97
24.75
11.06
10.15
9.19
Dec-00
MSCI EM NR USD
5.77
0.98
7.22
12.80
10.97
Dec-98
Citi WGBI 1-5 Yr Hdg USD
0.48
0.80
2.53
3.18
5.98
Jan-85
BofAML US Corp&Govt 1-3 Yr TR USD
0.43
0.72
2.51
2.91
5.43
Jun-86
Data as of 9/30/13
Source: Morningstar Direct 2013. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect
p
g
portfolio. Past p
performance is not a g
guarantee of future results. All investments involve risk, including loss of
g
the expenses associated with the management of an actual p
principal. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes, and different methods of accounting and financial
reporting.
29. International Developed Stocks
Third Quarter 2013 Index Returns
During the third
D i th thi d quarter, d
t developed markets outside
l
d
k t
t id
the US posted strong performances. The size premium
rebounded after reversing its negative trend in the
second quarter.
The US dollar depreciated relative to the currencies
of most major foreign developed countries, in particular
the euro and the British pound, further adding to US
dollar returns.
Ranked Returns f th Quarter (%)
R k dR t
for the Q t
Local Currency
14.97
Small Cap
11.09
12.52
12 52
Value
8.54
11.31
Large Cap
Across the size spectrum, value outperformed g
p
p
growth.
World Market Capitalization—International Developed
W ld M k t C it li ti
I t
ti
lD
l
d
US Currency
7.37
10.10
Growth
G
th
6.20
Period Returns (%)
P i dR t
*A
Annualized
li d
Asset Class
1 Year
3 Years**
Large Cap
14.66
21.45
7.89
6.12
8.18
Small Cap
18.99
24.75
9.92
11.06
10.15
Value
40%
YTD
5 Years**
10 Years**
14.58
22.56
7.87
5.99
8.26
Growth
14.70
20.32
7.85
6.19
8.02
International
Developed
Market
$15.7 trillion
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.
Market segment (index representation) as follows: Large Cap (MSCI World ex USA Index), Small Cap (MSCI World ex USA Small Cap Index), Value (MSCI World ex USA Value Index), and Growth (MSCI World ex USA
Growth). All index returns are net of withholding tax on dividends. World Market Cap: Non-US developed market proxies are the respective developed country portions of the MSCI All Country World IMI ex USA Index.
Proxies for the UK, Canada, and Australia are the relevant subsets of the developed market proxy. MSCI data copyright MSCI 2013, all rights reserved.
29
30. Emerging Markets Stocks
Third Quarter 2013 Index Returns
Emerging markets rebounded i th l tt part of the
E
i
k t
b
d d in the latter
t f th
third quarter. Value outperformed growth by 2.82%,
and large caps outperformed small caps by 2.28%
in US dollar terms.
Ranked Returns f th Quarter (%)
R k dR t
for the Q t
US Currency
7.19
Value
The US dollar depreciated against most emerging
markets currencies.
6.95
5.77
5 77
Large Cap
5.63
4.37
4.33
Growth
3.49
3 49
3.42
Small Cap
World Market Capitalization—Emerging M k t
W ld M k t C it li ti
E
i Markets
Local Currency
Period Returns (%)
* Annualized
Asset Class
YTD
1 Year
3 Years**
5 Years**
10 Years**
11%
Large Cap
-4.35
0.98
-0.33
7.22
12.80
Small Cap
-0.21
4.88
-1.41
12.36
13.77
Emerging
Markets
$4.2 trillion
Value
-5.65
-1.21
-1.15
7.08
14.07
Growth
-3.18
3.03
0.42
7.30
11.50
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio.
Market segment (index representation) as follows: Large Cap (MSCI Emerging Markets Index), Small Cap (MSCI Emerging Markets Small Cap Index), Value (MSCI Emerging Markets Value Index), and Growth (MSCI
Emerging Markets Growth Index). All index returns are net of withholding tax on dividends. World Market Cap: Emerging markets proxies are the respective emerging country portions of the MSCI All Country World IMI ex USA
Index. MSCI data copyright MSCI 2013, all rights reserved.
30
33. Riding the Emerging Markets Tiger
Third Quarter 2013
Many investors fell for emerging markets in
recent years when they delivered sizeable
returns. More recently, the associated risk
has reasserted itself and the infatuation has
faded. What s the right approach?
What's
A major theme in media commentary since the turn
of the century has been the prospect of a gradual
passing of the baton in global economic leadership
from the world’s most industrialized nations to the
emerging economies.
Anticipating this change, investors have sought
greater exposure to these changing economic forces
by including in their portfolios an allocation to some
of the emerging powerhouses such as China, India,
and Brazil.
These markets historically have provided higher
average returns than developed markets.
But the flipside of these returns is that emerging
markets also tend to be riskier and more volatile.
This is reflected in their higher standard deviation
of returns, which is one measure of risk.
The i k
Th risk associated with emerging markets h
i t d ith
i
k t has
reasserted itself in recent months. Expectations that
the US Federal Reserve will “taper” its monetary
stimulus have led to a retreat by many investors
from these developing markets.
In its latest economic assessment released in
September, the Organization of Economic
Cooperation and Development (OECD) noted that
while advanced economies were growing again,
some emerging economies were slowing.1
Naturally, many investors will be feeling anxious
about these developments and wondering whether
emerging markets still have a place in their
portfolios. There are number of points to make in
response to these concerns.
First, this information is in the price. Markets reflect
concerns about the impact of the Fed’s tapering on
Fed s
capital flows. Changing a portfolio allocation based
on past events is tantamount to closing the stable
door after the horse has bolted.
Second, just as rich economies and markets
like the US, Japan, Britain, and Australia tend to
, p ,
,
perform differently from one another, emerging
economies and markets tend to perform differently
from rich ones.
This just
Thi j t means that irrespective of short-term
th t i
ti
f h tt
performance, emerging markets offer the benefit of
added diversification. And we know that historically,
diversification across securities, sectors, industries,
and countries has been a good source of risk
management for a portfolio.
Third, emerging markets perform differently from
one another, and it is extremely difficult to predict
with any consistency which countries will perform
best and worst from year to year. That’s why
concentrated bets are not advised. Fourth, in judging
your exposure to emerging markets, it is important to
distinguish between a country’s economic footprint
and the size of its market. Combined, emerging
markets make up only 11% of the total world market.
This is not to downplay the importance of emerging
markets. The global economy is changing, and the
internationalization of emerging markets in recent
decades has allowed investors to invest their capital
more broadly. Emerging markets are part of that.
We know that risk and return are related, so getting
out of emerging markets or reducing one’s exposure
to them after stock prices have dropped means
p
pp
forgoing the increased expected return potential.
A bumpy ride on this tiger is not unexpected. But for
those adequately diversified with an asset allocation
set for their needs and risk appetites, it is worth
holding on.
1."Interim Economic Assessment," OECD, September 3, 2013
Adapted from “Riding the Emerging Markets Tiger” by Jim Parker, Outside the Flags column on Dimensional’s website, September 2013. This information is for educational purposes only and should not be considered
investment advice or an offer of any security for sale. All expressions of opinion are subject to change. Diversification does not eliminate the risk of market loss. General investment risks include loss of principal and fluctuating
value. International investing involves special risks such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks.
Dimensional Fund Advisors LP ("Dimensional") is an investment advisor registered with the Securities and Exchange Commission.
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