Author Topic: Bargain Sale on European Equity?  (Read 3214 times)

StAugustine

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Bargain Sale on European Equity?
« on: February 27, 2015, 07:16:53 AM »
As I ponder how to allocate this year's Roth contribution, I am seriously considering putting it all in VFWIX (All-World Ex-US) or VEURX (European Stock Index).  I was going to go all-in American equity, but the relatively strong dollar and relatively anemic European recovery make international equity seem especially appealing from a buy-and-hold standpoint.  Right now, I'm game for an aggressive asset allocation since I am so far from FI.

This smacks of market timing to me, so I am second-second guessing myself.  Am I trying to catch a falling knife here?  I am willing to bet that the potential for recovery is already priced into stock prices. 

I'd love to hear the thoughts of this forum.

Heckler

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Re: Bargain Sale on European Equity?
« Reply #1 on: February 27, 2015, 08:25:38 AM »
What is your asset allocation plan?   Follow that.  Mine plan is 17% EAFE index XEF and 3% VEE emerging markets.

frugledoc

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Re: Bargain Sale on European Equity?
« Reply #2 on: February 27, 2015, 08:46:45 AM »
I just bought VERX 1 week ago which is the UK version of vanguard europe exc UK. 

I think Europe is at the same point now as USA at the beginning of the financial crisis. 

VERX also has a yield of around 3.5% (paid in quaterly installments).

StAugustine

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Re: Bargain Sale on European Equity?
« Reply #3 on: February 27, 2015, 01:25:14 PM »
My ideal allocation is 50:50 US:World equity.  I am starting from scratch, so I have absolutely nothing in my portfolio.  I was planning on starting with $5500 in US equity this year and then adding another $5500 in international equity next year.  Bond funds would come next.

My biggest contributions will go to my 6.8% student loans, but I don't want to miss out on tax sheltered Roth contribution in the meantime.

Gone Fishing

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Re: Bargain Sale on European Equity?
« Reply #4 on: February 27, 2015, 01:37:10 PM »
You can still fund a 2014 IRA through April 15th.  Fund it first.  But before you fund a Roth read this:

http://www.madfientist.com/traditional-ira-vs-roth-ira/

skyrefuge

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Re: Bargain Sale on European Equity?
« Reply #5 on: February 27, 2015, 01:59:39 PM »
I am starting from scratch, so I have absolutely nothing in my portfolio.

Ah, then not only is it market timing, it's utterly pointless market timing. $5500, while it seems like a shitload of money now, is a tiny fraction of the amount you will be investing over your life. You could put it in the "right fund", put it in the "wrong fund", or, hell, even light it on fire (not recommended), and you wouldn't notice any difference in your life 30 years from now. However, you *will* notice a difference if you waste an hour trying to outguess the market every time over the next 15 years that you're making an investment.

Just invest in your desired asset allocation. No need to go 100% US stock this year. A Vanguard LifeStrategy or Target Retirement fund would be a closer match to your allocation than 100% US stock, or if you really don't care about bonds yet, Total World Stock will put you right on that 50:50 balance. Then next year when you have more than $6000 (or even sooner, if you can contribute to a 2014, or if your money grows as hoped!) you can divide into more funds to really dial in your allocation.

Bob W

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Re: Bargain Sale on European Equity?
« Reply #6 on: February 27, 2015, 02:02:59 PM »
I am starting from scratch, so I have absolutely nothing in my portfolio.

Ah, then not only is it market timing, it's utterly pointless market timing. $5500, while it seems like a shitload of money now, is a tiny fraction of the amount you will be investing over your life. You could put it in the "right fund", put it in the "wrong fund", or, hell, even light it on fire (not recommended), and you wouldn't notice any difference in your life 30 years from now. However, you *will* notice a difference if you waste an hour trying to outguess the market every time over the next 15 years that you're making an investment.

Just invest in your desired asset allocation. No need to go 100% US stock this year. A Vanguard LifeStrategy or Target Retirement fund would be a closer match to your allocation than 100% US stock, or if you really don't care about bonds yet, Total World Stock will put you right on that 50:50 balance. Then next year when you have more than $6000 (or even sooner, if you can contribute to a 2014, or if your money grows as hoped!) you can divide into more funds to really dial in your allocation.

But the pretty red dresses when they are on sale and sell them when the prices go up.  You won't be sorry. 

StAugustine

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Re: Bargain Sale on European Equity?
« Reply #7 on: February 27, 2015, 05:14:28 PM »
You can still fund a 2014 IRA through April 15th.  Fund it first.  But before you fund a Roth read this:

http://www.madfientist.com/traditional-ira-vs-roth-ira/

I would, but alas, I was not gainfully employed at any time in 2014 and am not eligible.

josstache

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Re: Bargain Sale on European Equity?
« Reply #8 on: February 27, 2015, 08:21:36 PM »
VEA has a distribution yield of something like 3.5%, which tends to tell me that European stocks have more room to grow without actually making more money. Or maybe not?  I don't make any decisions based on this information.  It's part of my normal asset allocation, so ultimately I just appreciate that its looks different from my US stocks, helping with diversification.

innerscorecard

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Re: Bargain Sale on European Equity?
« Reply #9 on: February 28, 2015, 07:53:13 AM »
Europe may not be cheap as simple metrics state, for reasons such as described in the below article:

http://www.philosophicaleconomics.com/2014/11/dilution-index-evolution-and-the-shiller-cape-anatomy-of-a-post-crisis-value-trap/