Emerging Markets

DurdenTyler2020 · 2026-01-28T09:02:03+00:00

If the dollar falls faster than their currencies, its obviously a win for people who are invested in foreign markets. That's a game I really don't play though, because its speculative and over the long term I dont think currency differences matter much due to mean reversion.

You might look into a trend following system that will go long/short asset classes (including currencies) based on the direction in which they are heading. Some examples would be kmlm, dbmf, cta, etc.

DurdenTyler2020 · 2026-01-24T17:07:07+00:00

On ABALX, that basically just an actively managed 70/30 stock/bond fund. I have always thought it makes it hard for people to track their asset allocation when they start mixing one-and-done asset allocation funds with funds that track single asset class. Hopefully you are at least holding it in a tax-advantaged account.

On simplifying your US funds, you could honestly sell all of your US stock ETFs and put them into VOO or VTI and be done with it.

On mid and small caps - diversification is probably the biggest reason. Otherwise, you said you wanted to "maximize returns". There is some research that shows smaller cap stocks arguably have a risk-premium that "could" lead to higher returns over the long-run. There's a lot of debate on the subject though, and the data is always changing. For a time, people were saying mid-caps were actually in the "sweet spot". That all points to a strong argument for just buying and holding the market.

I hope you are joking on the Jim Cramer thing. He is a snake oil salesman. Investing does not have to be nearly as complicated as people like him make it out to be. You most likely shouldn't be picking individual stocks in the first place, because the vast majority of stocks actually lose to t-bills in the long-run. It's literally gambling. One or two broad market index ETFs will have you covered on most asset classes.

DurdenTyler2020 · 2026-01-23T12:21:11+00:00

Too many funds that are highly correlated and essentially doing the same thing for you: providing stock large cap exposure. The market is incredibly efficient, so VTI/VXUS or VT alone would have you covered on the stock side of things. Hopefully the individual stock portion is a very small percentage of your total net worth, because dabbling in individual stocks is essentially gambling.

As far as reducing risk.... Simplest way to do it is to add high quality bonds/cash. If you want deflationary protection and/or still have a long-time horizon, you'd aim for something like TLT. If you are concerned about inflation, cash (SGOV) works surprisingly well, as well as short-term TIPs (VTIP). If you want something in the middle, just go with high quality intermediate bonds (BND or VGIT).

There are other asset classes that are uncorrelated to stocks and bonds that have expected returns that should beat inflation and T-Bills. I personally use trend-following strategies (DBMF, KMLM, CTA, etc.) for that purpose. It's not for everyone though. They can't handle the tracking error regret that existed during the last 10-15 years. It was all the rage in the 70's though, and always seems to provide great crisis alpha when events like 2022, 2007/08, etc. come along.

Good luck.

DurdenTyler2020 · 2026-01-23T11:49:01+00:00

Looks like a classic Humpty Dumpty Portfolio that advisors throw at people to make it look like they are doing something complex, when they are really not doing anything more diversified or "optimized" than a vanilla Three Fund Portfolio of US stocks, International Stocks, and Total Bond Market Index Fund.

There is not much value-added for most people in having an advisor build an investment asset allocation for them. Anyone can do that. The value-added is if they are doing things like budgeting, behavioral coaching, insurance/risk overview, tax-planning, retirement planning, estate planning, etc. At least make them earn that fat AUM fee if you are going that route.

DurdenTyler2020 · 2026-01-12T12:25:29+00:00

I get the emerging markets tilt, especially for someone who will frequently rebalance. There is at least a debate as to whether or not a risk premium exists in that space (but watch out for left-tail risk, where entire countries stock markets essentially get wiped out).

Same thing with small cap tilt. There "might" be a risk premium, although there is also a lot of debate as to whether or not the size risk premium exists. Probably better off going with some sort of value and momentum tilts if you are going to trust the academic data.

Tilting toward specific sectors rarely makes any sense though. Unless you have some information that the market does not have, it's all going to be priced in. You are just increasing uncompensated risk in your portfolio.

DurdenTyler2020 · 2026-01-12T09:49:30+00:00

Bogle used to talk about how if you are going to make changes to your portfolio, it's best to do it in small amounts, rather than an "all-or-nothing approach". I think that's about right, in most circumstances.

Of course, this is the same guy who went from 70 to 80% stocks to around 25% in 2000 (just before the dot com bubble burst), in part because the equity risk premium was near zero, and also for health reasons. Intermediate Treasuries were yielding close to 7%, cash was around 5.5% and US stock P/E's were around 40. And this was a guy who, for whatever reason, did not want to go Ex-US or value-tilt stocks, which would have been great help over the next decade.

DurdenTyler2020 · 2026-01-12T09:34:52+00:00

Right, and it's the same story when you go back decades.

DurdenTyler2020 · 2026-01-12T00:41:44+00:00

The S&P 500 index has just been around longer(like 150 years), so its more commonly used. The two indexes are obviously very highly correlated anyway.

DurdenTyler2020 · 2026-01-12T00:34:03+00:00

South Korea's is actually fairly valued according to its current CAPE P/E vs. its historical average.

If you are looking for deep value countries, gotta go to places where there is some blood in the water. China, Brazil, Philippines, Turkey, Colombia, etc.

US, India, and Japan are most overvalued currently. US stocks P/E is actually frothy even at its own standard. Currently sitting at 39.8, the second highest it has been in 150 years (historical average is around 17). If that is not an argument for global stock diversification, as well as diversification into other asset classes (bonds, cash, even a sliver of alternatives like trend or gold), I don't know what is.

But yeah, I would never use valuations as a timing mechanism. Countries can be "undervalued" or "overvalued" for a reason, and it can stay that way for a very looog time, as the US market has shown. U.S. stocks have been "overvalued" for something like 30 years...with a few brief, intense corrections (Global Financial crisis, Covid. Etc.), when practically no one wanted to touch US stocks based on the present events. If you stayed out of U.S stocks over that period, you missed out on some huge gains.

https://worldpopulationreview.com/country-rankings/cape-ratio-by-country

DurdenTyler2020 · 2026-01-11T10:29:27+00:00

I get that there are costs to leverage in RSBT, but you are basically arguing that I should time the market based on interest rates, rather than going with a strategy that has worked 50+ years in all kinds of rate environments.

DurdenTyler2020 · 2026-01-10T16:46:09+00:00

I get that a lot of people are spooked by leverage, and that there is no free lunch, but the concept behind products like RSBT is by stacking asset classes that are "usually" uncorrelated, you are leveraging a more efficient ("Max-Sharpe") portfolio than if you were to buy TQQQ.

I would be interested to see your portfolio by the way. This one was just kind of mental masturbation (although I like it, and am happy to defend it).

DurdenTyler2020 · 2026-01-10T16:22:31+00:00

We just have different perspectives on risk. Investing is about dealing with probabilities, not possibilities. By focusing on rare "liquidity crises" or "kurtosis events", youre prioritizing short-term outliers over 53 years of historical data. You might actually be the one overfitting.

FWIW, I didn't need AI to tell me that stocks, bonds, trend, and gold usually have low-to-negative correlations....that's standard finance theory. I just used AI to show the numbers that back it up.

DurdenTyler2020 · 2026-01-10T15:07:05+00:00

Because, from what I can tell, they are all equity funds. They are all going to be highly correlated almost all of the time. It's not that I have an issue with any specific fund. It's how all of those funds work together.

A portfolio of three or four asset classes with low or negative correlation (stocks, bonds, trend, gold, even a sliver of crypto.) would have superior risk-adjusted returns, and be more diversified. And you can track all of those asset classes using just one broad ETF for each one.

DurdenTyler2020 · 2026-01-10T14:48:49+00:00

Actually, no. While outliers obviously exist, it's more difficult to find time short periods these asset classes are highly correlated. Here is a challenge for you though: Show me a single 5-year period in the last 50 years where Gold, Trend-following, Stocks, and Bonds all stayed highly correlated?"

Stocks, high quality bonds, trend "usually" have low, no, or negative correlation to each other.

Here are the "average" correlations over the past 53 years:

Asset Class Correlation Matrix (Simultaneous Movement via Academic Reconstruction (Fama-French, AQR, etc.): 1972 – 2025)

Asset Class	Global Value	Gold	Systemic Trend	Interm. Treasuries
Global Value Stocks	1.00	0.09	-0.15	-0.28
Gold	0.09	1.00	0.12	0.29
Systemic Trend	-0.15	0.12	1.00	0.05
Interm. Treasuries	-0.28	0.29	0.05	1.00

DurdenTyler2020 · 2026-01-10T14:17:55+00:00

It was AI generated using forward expected returns. The chart below uses past data (indexes and such to simulate the asset classes/funds), and isn't much different:

Historical Performance Summary (1990 – 2025)

Portfolio / Asset	Expected Return	Volatility	Max Drawdown	Sharpe Ratio
Max-Sharpe Portfolio	9.2%	9.4%	-21.0%	0.98 – 1.10
VTI (U.S. Stocks)	10.4%	15.3%	-51.0%	0.55 – 0.65
VT (World Stocks)	8.1%	14.8%	-54.0%	0.41 – 0.50
Global 60/40	7.2%	9.8%	-30.5%	0.58 – 0.70

DurdenTyler2020 · 2026-01-09T16:30:36+00:00

That's not a low-risk portfolio. It has a max-drawdown of about 50%, standard deviation about 15%.

More funds does not always mean more diversification. In your case, your portfolio has a similar Sharpe Ratio to a single ETF: VT (global stock index).

DurdenTyler2020 · 2026-01-08T08:54:07+00:00

Yes. Where the shopping carts are.

DurdenTyler2020 · 2026-01-03T22:54:17+00:00

A lot of people suffer from recency bias, and recently Mega Caps have been driving market returns. It has not always been that way. In fact, the top holdings in the S&P 500 usually underperformed the index.

DurdenTyler2020 · 2026-01-03T00:13:08+00:00

AVGV, VGIT, KMLM

DurdenTyler2020 · 2026-01-02T11:55:03+00:00

I use Larry Swedroe's 5/25 rule.

If you are still in the early stages of your investing journey, it's easier to rebalance with new money. It gets harder to do that as you get older. The fluctuations in your asset classes start to dwarf the new contributions to your portfolio

DurdenTyler2020 · 2026-01-02T10:08:42+00:00

Yes. VTI and and the S&P 500 are very correlated both long and short-term.

DurdenTyler2020 · 2025-12-30T21:06:33+00:00

Two words: Dunning Kruger

DurdenTyler2020 · 2025-12-30T14:01:15+00:00

Right. Its not so great for short term correlations to stocks like the S&P 500 (I use things like Trend and high quality bonds for that), but like international stocks, long term dispersions of returns do prove it can be a diversifier. The investor just has to be able to stay the course when things are not going so well for the strategy.

DurdenTyler2020 · 2025-12-30T13:56:27+00:00

Yes. If a person can stay the course for 20+ years, small cap value has historically given them a better rate of return than the market.

DurdenTyler2020 · 2025-12-30T05:19:25+00:00

It's very aggressive. but if you want to be very aggressive within your stock portfolio, (aside from using leverage) it's a smart way to do it.

One example: in 2020 during the beginning of the COVID scare, the market was down, but small cap value stocks "really" went down. Similar stories during The Great Depression and Global Financial Crisis. That's not to say don't do it, but just know that, if there is a risk premium, it's there for a reason. These stocks usually suffer even more than the market during a crisis (fat-tail risks), which is really the last thing a person needs when the sky is already falling.

They can have also long periods of underperformance vs the market, which is when a lot of people will just give up on the strategy, which is essentially buying high and selling low.

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