It is the relative strength of US market, people would move money from emerging markets to US; until the relative strength change again.

They are the same thing - fund supermarkets http://www.investopedia.com/terms/f/fund-supermarkets.asp
Just operated by different companies

Yes it is relative, it doen't mean both markets are moving in opposite direction but US has been relatively bullish than the emerging markets.

Generally the world is in recovery mode, which means equity everywhere will move up. Just US has been moved up quite strongly in recent months, driven by rather clear and certain policy and earning visibility.

Many has stated US is rather expensive. If you run a Lynch valuation on their stocks you will find currently many has been over-priced. But the US market has not lost its steam because we can anticipate upcoming policy "updates" would be beneficial to the market. Do note many opined it will continue to move up with rather slower rate.

In that case money will move back to the EMs, the keyword is still the same -- it will be relative, not absolute change; and all markets will be floated up. If you invest in a diversified portfolio with good exposure to markets at both ends, you will be able to capture those "moving money" at time you perform periodical re-balancing.

Lynch valuation will also find several stocks in some Malaysian mutual funds are undervalued and attractive to invest. Find them and buy gradually.

This post has been edited by Kokman: Oct 21 2017, 04:59 PM

I did not state an absolute fled of money from EM to US market, but on relative terms. When a market is stronger in relative to others, mainly because of a policy change, money will move around. My point is on recent months relative movement. On YTD, we observe the raise of markets on all sides because of the global recovery. The raise of Copper future price is a good indicator of global market recovery.


Figure: 5Y Comex Copper price

On market outlook (Global, US, & Asia Pacific, etc.) we can refer:
https://russellinvestments.com/us/insights/...look/us-outlook

As money moves around, this quarter some overweight in one end, next quarter at another; the markets would be floated up. A rising tide would float all boats. So it is good to keep a balanced portfolio at both end and re-balance periodically.

Please also keep a good share of fixed-income instrument in your portfolio, and increase its share gradually into the next 2? years.

In that case you have 2 things you could do now for later advantage: sell some of your EM fund and buy either fixed-income instrument, China funds, Asia Pacific funds, or fixed-income funds. Best is have a plan, or a policy of periodical re-balancing.

They keyword is *some*, I am not stating cash out of your EM fund entirely

Happy investing!

So to make things clear:

1. Disregard the relative strength of any market because any out-performance/under-performance is relative. The entire world is in recovery mode, which is well indicated by the Copper price up-trend

2. You never know what the general result of the market would be, and if people would over-weight on which side; so never overweight on one side in your portfolio. Invest broadly in US, global, Asia Pacific, and China funds, and re-balance periodically to "trap the running mouse"

3. Pick those of good Sharpe ratio from each category as they are the best bet you could place

4. Do not forget fixed-income and bonds, you may keep a 90% equity from early this year because of the positive equity outlook. But as equity is bullish for some time already, you can gradually enlarge your fixed-income instrument by switching equity funds over. Next quarter to 15%, then slowly to 40% after n quarters

5. You have the rights to make independent judgment on which market to overweight on, also on which type equity/fixed-income to be overweight on. Market insights of major institutions (Russells, JP Morgan, Credit Suisse, etc.) could be a good guide

All the best! We want to compound our money so we are all friends. Good luck

This post has been edited by Kokman: Oct 21 2017, 07:00 PM

You got a point there. We can either go momentum, or go contra. I have two strategy suggestions to offer, each have its own advantage:

Momentum (and rather rational) re-balancing strategy based on Sharpe ratio (SR). Those of higher SR get higher allocation. Higher SR tend to be those having stable up-trends
Contra re-balancing based on pre-determined and fixed allocation ratio

What I am doing is, have a contra-like allocation to broad class: x% fixed-income and (1-x)% equity; and within the equity class, I do momentum based re-balancing

Then I slowly enlarge the fixed-income portion while the equity bull has charge higher and higher. I experience a pull back recently, and had moved money out from the fixed-income side to equity, eventually achieving 90% equity. As fixed-income tend to be more stable, you are very likely to have a chance to buy equity at low side this way. Now I will keep my portfolio share rather unchanged; mostly to enlarge my fixed-income portion marginally in the following re-balancing period, until the market fundamental tell me to do otherwise.

This post has been edited by Kokman: Oct 21 2017, 07:50 PM

Yes, although I do not use managed portfolio, I do like this service FSM has offered. I encourage friends to use managed portfolio if they do not like the hassle of studying the market. Manage portfolio could help people to easily stay investing all time.

This post has been edited by Kokman: Oct 21 2017, 07:49 PM

Managed portfolio service is like having a bunch of qualified brokers to help manage our stock portfolio based on their market studies, if we resemble FSM service to stock broking service. The difference is FSM charge really low for the professional service, while having broker (remisier) service could be expensive if we are not investing at large amount of money. This is also another thing I like about the FSM managed portfolio service.

Yes, fund-houses when they compare re-balancing strategies they like to talk about period based vs. percentage based re-balancing. Vanguard for instance has many writings discussing portfolio re-balancing strategies.

I like period based re-balancing, because I am rather 'lazy' and do not like to check my portfolio too often. When a bull charge has started, it will run with momentum for an extended period of time (otherwise it is not called a bull charge); and as Gary Shilling like to say: people react slowly to macro changes so when investors generally thing the market is in bull, they would keep investing for a rather extended period of time. So I would let a bullish part of my portfolio to run for 3 months, if the earning is good enough to justify a re-balancing, I would do. Otherwise, I let it run for another 3 months without doing anything now.

That's what I do, I am not saying percentage based re-balancing is bad. In fact, I do think it is a good strategy, even could be better than what I am doing.

Problem is we never know if a market is hot or warm. Current US market is considered very hot. If you run a valuation of stocks held by many well-performing US funds, their price is just too high compare to their earning performance. But if tax reform is passed, the general macro-economy and earning visibility of companies would be changed. Then current hotness is relatively cool as the passing of the tax reform may trigger another round of stronger bull run.

But what if the tax reform fail to materialize?

Exposure to those kind of dilemma could only be mitigated by having a disciplined and rational investment & portfolio management. Unfortunately, there is no magic formula and we have to setup our own rules for that.

Glad discussing with you. Have a nice evening.

Of all statements I have read, this statement made by Neoh is what I like most:

Neoh says the most important principle in investment is to be well diversified because a single good choice can compensate for several poor choices. “The mathematical principle that most ­investors don’t understand is this: What is the biggest loss you can suffer in one share? 100%, right? But what is the biggest gain you can make from one share? It can be infinite.”

Legendary value investor in Malaysia Dr. Neoh Soon Kean, he runs http://www.dynaquest.com.my/ company

Quote:

Dynaquest provides boutique investment advisory services to a number of large to very large investment institutions including insurance companies, mutual funds and investment companies as well as individuals.

At present Dynaquest provides investment advisory services to portfolios with total market value exceeding RM600 million.

Nice! Also good to know you are a friend of Harry. I like MPT too.

He tried to narrate the benefit of diversification in bare simple term. But regardless of size invested a rising stock could continue to rise in the next 10 years

Exactly. For single market fund, we diversify across sectors. For single sector fund (like REITs mutual funds) we diversify across geographical region.
That's the advantage of mutual fund investing!

What you said here is correct. Yes, when we invest in mutual fund we actually are buying the fund manager's service. So it is important to study the fund manager in addition to picking the market to buy into.

A fund that has consistently outperformed the benchmark is a good indicator on the quality of the management. We cannot do the same on 1 stock else our exposure to risk would be extremely high and volatile.

Anyway, I posted the statement from Neoh to share his way of saying diversification is important.