2006-05-11
Foreign Exposure
I will start with my foreign holdings. I started moving a significant amount of my portfolio overseas around 2003. The US stock market was still not doing too much and I really thought that the dollar was overvalued against other world currencies making foreign stocks look like they were trading at bargain basement prices in dollar terms.
It is this foreign allocation that I am starting to rethink the most, as I was thinking the phenomenon would correct itself over a three to five year period. It has been three years and I am up about 100% in all of my foreign investments during that time. Now I am faced with the wonderful investors dilemma, do I let it keep running or starting taking some gains? I think the dollar still looks a little fragile and some of the foreign stocks, Japan in particular, still seem cheap. So, for now, I am going to leave the positions unchanged, but I want to keep a close eye where they are. I am particularly concerned about my emerging market exposure. If the developed world equity markets start to sell off, the EM markets will crack harder and faster.
I have my brokerage account at Fidelity, so I often utilize their funds if I am just looking for exposure to a specific sector. I figure I get most of my return from making the correct sector calls and tend not to get too hung-up on the mutual fund I use to get there.
I bought some of their Diversified Int’l Fund in 2002 and again in 2004. I also have used their Emerging Markets Fund with investments in 2004 and again in 2005.
I also really wanted to make a bet on Asia with this portion of my portfolio. So I also utilized a pair of exchange traded funds (closed-end mutual funds) to give me more concentrated exposure. I bought a hefty chunk of the MSCI Japan Fund (EWJ) back in the summer of 2003 around $7.57 a share and much less of the Korea Fund (KF) in late 2004 around $22.50 a share. My thoughts on both of these were that the economies (and stock markets) of those countries would benefit from the rise of China (so I could play the China story without actually overpaying for China stocks) and I also felt that Japan was finally getting ready to get its act together.
Those four funds are the grand total of my foreign investment. I wish I had some better ideas right now on where to reinvest for additional 25% annual gains, but these still seem like the best bets to me right now. I still think the dollar weakens from here and this exposure is a nice hedge.
If you made it this far, I think this will be the most boring of this series to read. There was no real discussion of what company’s do and why I am investing and where I think they may go. Those will be forthcoming, but we will have to do commodity plays on the next installment before we get to my speculative bets where I throw caution to the wind in the hopes of high profit returns.
-- rockabillie at 11:57 a.m.