China Still Surging !!!!

purch

Always concerned when people talk about re-balancing

It's fine if you are balancing out some underperforming assets....but re-balancing out of good performing assets into lower performing one's for re-balancing sake just to meet some pre-dertermined ( and probably incorrect )formula is madness.

robp

purch wrote: »

It's fine if you are balancing out some underperforming assets....but re-balancing out of good performing assets into lower performing one's for re-balancing sake just to meet some pre-dertermined ( and probably incorrect )formula is madness.

Well, I'll stick to my madness I think!

As Aegis mentioned, I would like to maintain my exposure to risk rather than let it get out of control.

Surely that is the basis of a managed portfolio? Otherwise we just as well all invest in China/a n other fast growing sector and nothing else!

I'm an amature at this game anyway, so want to keep my risks lower than others may. :rolleyes:

nrsql

Depends if you think it's riskier to hold money in a growing sector or a falling sector.
Why let it get to 1700 and 1200 - why didn't you "rebalance" at 1050 and 1010 ish. Don't you consider the relative merits of China and the UK when you rebalance? If they fall to maybe China 500 and UK 900 would you rebalance then? What would you do if they went to 500 and 1500?

I doubt that you rebalance as bllindly as you suggest.

jamesd

Debt_Free_Chick, for the China part you might consider switching some to a general Asia Pacific fund. Still lots of growth there but not quite such concentration of risk. For the India part maybe some into Latin America and/or emerging Europe.

wombat42, it's a lot easier to not be bothered by a downturn in a single country fund when you hold 10-15 of them in a nice geographic spread and others are up. Global growth as a core and various countries or regions you like for concentration in areas you think look promising might be useful for you.

Don't neglect developed Europe and the US, though.

Aegis

nrsql wrote: »

Depends if you think it's riskier to hold money in a growing sector or a falling sector.
Why let it get to 1700 and 1200 - why didn't you "rebalance" at 1050 and 1010 ish. Don't you consider the relative merits of China and the UK when you rebalance? If they fall to maybe China 500 and UK 900 would you rebalance then? What would you do if they went to 500 and 1500?

I doubt that you rebalance as bllindly as you suggest.

I'll rebalance when the current allocation no longer feels comfortable to my risk profile, or when growth/falls have resulted in a lower risk profile than I am willing to be in. I wouldn't rebalance at the lower values you suggested because those could well be down to daily fluctuations rather than the long term growth of the funds.

As for the second 2 questions, my answers would depend entirely on a re-evaluation of my risk profile accounting for the downturn in one or more sectors. I'd be less inclined to shift money into what I considered to be a falling market, but conversely would kick myself if it then surged back to an all-time high and I missed a chance to get all the way in to my risk level. As I said, it would have to depend on my perception of the situation at the time.

Jonbvn

An article in the Torygraph todays provides a good indication of how volatile some of these Asian markets can be.

10% drop in a day?

Aegis

Jonbvn wrote: »

An article in the Torygraph todays provides a good indication of how volatile some of these Asian markets can be.

10% drop in a day?

I imagine that's exactly why rebalancing can be a very important concept in any portfolio that has significant investment in emerging markets. Sudden drops are part of the risk, asset allocation is how best to mitigate the risk while maintaining strong growth potential, and rebalancing is how to get your portfolio back in line with your desired asset allocation/risk profile.

As tempting as it is to just leave everything in strong growth sectors, the more you have in them the more you stand to lose when these inevitable reductions occur.

Still, rebalancing might not be what some people want to do, so good luck to everyone regardless of your attitude towards it!

wombat42_2

Aegis wrote: »

I imagine that's exactly why rebalancing can be a very important concept in any portfolio that has significant investment in emerging markets. Sudden drops are part of the risk, asset allocation is how best to mitigate the risk while maintaining strong growth potential, and rebalancing is how to get your portfolio back in line with your desired asset allocation/risk profile.

As tempting as it is to just leave everything in strong growth sectors, the more you have in them the more you stand to lose when these inevitable reductions occur.

Still, rebalancing might not be what some people want to do, so good luck to everyone regardless of your attitude towards it!

There is the argument that China is different and is a unique case:

1/Extremely high economic growth most likely to continue for years.
2/Chinese authorites desperate to keep Chinese people happy who have little choice except to pump money into the Chinese stock market as savings interest rates are negative after inflation.
3/The China investors are now piling into Hong Kong as they can buy the same company stocks as on the maniland but much cheaper.

Homg Kong market up again today over 1% inspite of most Asian markets falling.

jamesd

Jonbvn, worse than that: the Sensex dropped 7.91% in just three minutes before circuit breakers closed the market for an hour. It would have taken a 20% drop to close the market for the day.

Of course, for some it'll be a buying opportunity if the price doesn't recover too quickly.

Aegis

wombat42 wrote: »

There is the argument that China is different and is a unique case:

1/Extremely high economic growth most likely to continue for years.
2/Chinese authorites desperate to keep Chinese people happy who have little choice except to pump money into the Chinese stock market as savings interest rates are negative after inflation.
3/The China investors are now piling into Hong Kong as they can buy the same company stocks as on the maniland but much cheaper.

Homg Kong market up again today over 1% inspite of most Asian markets falling.

There may well be this argument, but it didn't stop you jumping ship as soon as the Hang Seng took a 2-3% fall in a couple of days, did it? While markets are influenced by government actions, the real movements are caused by the investors, and if a lot of people invested in China are anything like you, then rises and falls will continue to be hugely exacerbated by reactive transactions.

If investor confidence were suddenly to fall dramatically and stay low, you might well find that no matter how robust the companies, they were suddenly worth a lot less than previously. It's happened before, it will almost certainly happen again, the only questions are which sector(s) will be hit the hardest and when. Asset allocation and rebalancing is designed to mitigate those risks by diversifying across several sectors in the hope that a crash in, say, China will not have as large an impact on UK Equities, or Latin America, or Europe. Protection through diversification seems to be the aim of the game.