There are numerous emerging market mutual funds. If your 401k doesn't offer one, then buy one in an IRA, if you don't have an IRA, buy them in a taxable fund.
Without putting words into Faber's mouth, my impression of the situation is that even a 100% allocation to existing emerging market funds might in effect be underweight the best growth opportunities. 100% allocation to a Global allocation fund would be for sure.
IMO, Emerging markets are less developed in the sense that less established equity markets mean a narrower selection of choices, less liquidity in those choices, and as you mention, more risk. Even the ADRs tend to be the very large foreign concerns- telco's, banks, and some industrial operations (Paper/Forest, Chemical, Oil n Gas).
Perahps the ideal would be a closed end equivalent of 'emerging market focused private equity funds'.
It would be a fair assertion that not only is there no effective route for 401k money to such opportunities, there isn't really a route at all for any but the most sophisticated funds.
On the other hand, creating such a conduit would provide capital to developing concerns, which might actually help make the entire global pie larger.
I know numerous people who have left their jobs and rolled out their 401s into self directed IRAs which carry almost all the investment options that you can buy in any brokerage house except direct short selling and margin.
Being 'not employed', I don't participate personally in a 401k at this time, though I did avail myself of them when working as an employee. You might say I'm one who has taken this path. When active in 401k's, I felt restricted by the narrow windows allowed for changing allocations, so I stuck to cash equivalents, thinking I could participate in stock markets using my non 401k resources. Then and now I see myself as risk adverse, and a bit of a 'babe in the woods' investor.
They limit these types of investments to accredited investors because they aren't appropriate investments for 98% of the people out there. You won't find many high net worth people who would allocate much more than a small portion of their worth into this kind of investment. If we learned nothing from the political fall out from the public markets falling it is that the public only wants to participate in investments that cannot go to zero when it comes to their retirement funds, that they want the gains associated with high risk investments but they don't want the attendant risk that goes with those returns.
Yes, this a key cornerstone. Not so much the sour grapes by those who gambled and lost, some of whom who truly are/were innocent and needed 'protection' from themselves. But that the best returns accrue to the funds invested in 'accredited' investor only class.
I've seen some of these accredited opportunities. Like the chance to own 10% unsecured debentures in a coporation whose only asset consisted of an art collection pledged by one of the founders, stored in his Nevada home, who sought to create a cross between Kinko's and a cybercafe. Frankly, I wouldn't put my enemies money into some of what I've seen.
But on the other hand, I've also seen that closed end funds such as HQH/HQL have some non-public or restricted investments, not unlike venture capital placements. This suggests there may be a model already existing, which can provide a conduit for long term money into long term, potential high reward, efforts.
Many hedge funds own private placements and many public companies own private placement shares. If you owned CSCO you've owned private company shares as well, indirectly. Venture capital firms provide a much needed service to the capital markets.
And perhaps this is what I'm wondering about. Perhaps a closed end fund that makes venture/vulture risk/reward available (albeit indirectly for 401k investors).
When I said I could make more money with the money I can borrow from the rich, it is because high net worth individuals actually get fairly low returns because they choose conservative investments for the majority of their assets or cash even if they roll the dice on those high yielding private placements (most fail).
Interesting that you mention that, in light of the subsequent mention of your own style, that being holding a large portion of cash (safe) and taking risks with a smaller pool. Mirrors mine to some extent, though I don't follow money flow as closely as you do. Similar to a 90/10 guideline suggested by one KT/MB long ago. Though with today's yields, perhaps 98/2 might be more appropriate. <g>
If nothing else, you have to be flexible to operate in these markets and you have to be ready to be wrong without inventing a whole bunch of myths to justify your actions.
Like there not being enough debt in this world? <g>
Everyone dollar of debt appears somewhere as someone else's asset. I think America has securitized and placed just about every possible form of future promise to pay, so now we branch out encouraging people like the Koreans to try out Consumer Credit, expanding the potential homes for capital seeking a 'safe' return.
People just don't seem to get that if debt is paid off, then money previously invested has to find a new home. And that debt tends to have a higher position in the capital structure, therefore seems more desirable to risk averse groups.
I agree with your statement, about flexibility. I see that as a big advantage for the little guy. 100% LTBH negates this advantage. |
