China hard landing / long term equity strategy

[CDP45]

Hello frugal friends,
I seek knowledge from those with more experience than myself, which should be everyone here ;).

The majority of my net worth is with employer 401k and (seemingly) decent funds are provided with some .33% cost target date funds, large mid small cap funds at .07%, and an Asia excluding Japan fund at 1%. Basically I have a theory that all those poor asian people are developing their economies and should provide me long term gains when I supply them capital.

I've read some of the boggle heads and obviously mmm views but those would recommend holding bonds at this point in time which to me says those theories don't take into account all situations like our currently over-valued bond bubble. I'm much more swayed by relative value PE of the S&P and I've been long there for some time.

What I'm perplexed by is the mixed messages from Asia and if there is some good advice or direction on what a beginner should read (or retread) when I have such a long investment horizon.

Thanks for the motivation everyone!

[JamesAt15]

What's the makeup of the target date funds? Would they include a decent amount of International (everyone but the US) stocks?

I don't know squat about if Asia countries outside of Japan are expected to perform well over the next several decades, which I gather is what you are asking.

Do you have investment accounts outside of your 401k? Are those "large mid small cap funds" index funds or actively managed? I'd think with ERs of .07% they're probably index funds but wanted to check.

You might look at if it's worthwhile to use the 401k to handle the US markets portion of your asset allocation, by putting the money into those low-ER funds. For the international portion, it might make more sense to use a personal account/IRA to buy Vanguard or other low-expense International funds. But that could get complicated.

[JamesAt15]

The reason I ask those questions is that if I want my asset allocation to include a good chunk of non-US international stocks, I would prefer that to be a broad selection of many different countries. Not just non-Japan Asian countries.

A non-Japan Asian country fund makes me, personally, feel a bit uncomfortable, as I would wonder if this is a fund created in the days of the "Asian Tigers" mindset. It might be a perfectly good fund, but I would want to take a close look at it to see if it felt like a "Flavor of the Month" fund from ten years ago that's still hanging around and taking investments.

Anyhow, if the target date funds include a good balance of US funds, international, and bonds, it might be easiest to just go with one of those whose balance looks good. An ER of .33% isn't horrible.

[marty998]

Ok lets put it this way...

China is growing at 8% right? Thats a freaking huge number compared to the developed world. But it will revert to a more "normal" level eventually. Maybe not soon, but eventually.

But guess what...growing at 8% per year tends to increase the absolute size of your economy very quickly. So in 10 years time, growing at 4% is the same absolute size growth as 8% today (inflation adjusted of course)

Geddit? I've said it before, %'s can be a crock of shit to the uninitiated So yes China's growth rate may go down, but they will be producing and consuming much higher volumes than what they are.

I don't think you have anything to worry about with China.

The real problem will continue to be Europe.

[grantmeaname]

marty, what does that have to do with individual asset allocation decisions, though?

[marty998]

It means you shouldn't suddenly switch out of Asia-Pacific / Global Emerging Market Funds because China is growing at only 7% whereas the rest of the developed world is between -1% and 2%

[JamesAt15]

I believe the OP was asking if, based on what he had heard about the China and Asian markets, should he allocate his 401k investments into the "Asia Excluding Japan" fund available to him, which has a 1% expense ratio.

If he doesn't have a position in that fund already, do you think he should look at putting funds into it?

If he's going to, I'd think he should take a closer look at the fund to see which markets it invests in - how much of it goes to China (if he thinks China is going to significantly outperform) and how much goes to other Asian markets, and then consider what he thinks those other markets are going to do over his investment timeframe.

Personally, I follow a pretty passive investing method so I don't have to think about these things. I don't know much about the China market and how it is expected to do, and in five years, I still won't. So I won't/can't really get into that.