Is I fund too limited, w/o emerging mkt exposure?

[tsp34diy]

I recently learned that the I fund only provides exposure to developed market, and provides no exposure to emerging markets. Are we missing out? Has anyone considered a fund, possibly the Vanguard FTSE World Ex/US, outside the TSP to possibly fulfill the international portion of their overall investing portfolio? Thanks for any input. Tom

 

[Bullitt]

Depends on what kind of exposure are you looking for? India, China, Vietnam, Nigeria? I Fund is pretty well put together when it comes to the stability of national economies.

I prefer to keep on rocking in the developed world.

 

[Birchtree]

I'm gently withdrawing the Mrs. from her international fund (AEPGX) over this coming year on a DCA basis. Why, you ask? MSCI Barra indexes for India and China were up 59.5% and 54.3%, respectively, for the year through Dec. 18. Five-year annualized returns are running at a 40% rate for both countries. But some like me worry that these markets are overvalued and set to fall. According to Bespoke Investment Group, the exchange-traded fund tracking China's key index, the Shanghai Composite, has a price to earnings ratio of 46.4 and the ETF tracking India's Sensex is 26.4. That ranks them first and third-highest among a group of 22 major world stock markets tracked by Bespoke. The risk at this point is that you may be late to the party. But if you don't mind cold pizza and warm flat wine - go for it.

 

[rokid]

I recently learned that the I fund only provides exposure to developed market, and provides no exposure to emerging markets. Are we missing out? Has anyone considered a fund, possibly the Vanguard FTSE World Ex/US, outside the TSP to possibly fulfill the international portion of their overall investing portfolio? Thanks for any input. Tom

As noted, the I fund only invests in developed international markets. Unfortunately, for asset allocation purposes, developed international markets have recently had a rather high correlation with the U.S. market, e.g. for example the C, S, and I funds did poorly in the 2000-2002 bear market.

Emerging markets on the other hand, are highly volatile (risky), but have a rather low correlation with the U.S. market and developed international markets. Consequently, they have been an attractive diversifier for a buy and hold portfolio.

In my opinion, it would be nice to have an emerging markets option for diversification purposes. Vanguard does have an emerging markets index fund - VEIEX. A 7-15% allocation in the international portion of your portfolio would compliment your I Fund allocation and "goose" your returns without dramatically increasing your risk.

If on the other hand, if you're looking to make a "play" in emerging markets, as Birch mentioned, they are probably ready for a "reversion to the mean", i.e. go down. They've been surging for a while.----Jim

 

[chezhoy]

I'd like to see us mainly in China, Japan, India, Singapore, South America (for their copper), Turkey, Germany, England, Australia.

I believe we are missing out. Steel and copper are on the rise as China is growing. My old commander who is now a civilian invests in copper and is making a killing.

 

[tsp34diy]

I appreciate the replies and really like Jim's suggestion about just adding VEIEX on the side. I probably am late to the party, but I may take a chance and put some money there before long. Thanks again. Tom

 

[Bullitt]

I'd like to see us mainly in China, Japan, India, Singapore, South America (for their copper), Turkey, Germany, England, Australia.

I believe we are missing out.

I remember around early 2006 there was a push amongst TSPers for a REIT Fund because some felt we were missing out on that as well.

 

[rokid]

Bullitt,

I'd still like a REIT fund. -----Jim

 

[Bullitt]

At these levels, so would I.

 

[chezhoy]

It's pretty unanimous it seems...too bad nothing will ever be done about it...

 

[dljm]

Yes, the I Fund is missing, what, 30-40% of current world economic growth by excluding emerging markets; it also excludes Canada, by the way, and ALL foreign small and mid caps. The new Vanguard FTSE All-World index and VEIEX can help balance this, but they both charge small purchase fees. PRMSX is a very good actively managed emerging market option, and with the high valuations of emerging markets as a whole right now, I think an actively managed fund is the way to go. PRIDX isn't a bad smaller cap foreign option.

Someone mentioned REITs; they are included in the domestic fund indexes -- a lot of them are mid-caps. I doubt there's much real estate exposure in the I fund; most aren't in the mega-cap territory of the EAFE index.

Another I-related TSP gripe is that the L funds are too heavily weighted toward the S&P 500, with not enough exposure to international or mid/small caps.

The TSP by and large is a dinosaur. When it's time to retire, unless there are big changes and more options by then, I'll be pulling out and transferring to Vanguard and T. Rowe Price.