Quote:
Originally Posted by Rain Man
It's easy to argue that 1989 was a bubble, but even if you eliminate that, it's essentially been stagnant since the early 1990s.
I don't get it. It's not like fly-ridden people are starving in the streets. You'd think that even stagnation would produce a mild gain every year just due to inflation. I keep pondering buying in on Japan, but after 20 years, what's changing for the positive? I'm mystified.
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While Modern Portfolio Theory would suggest that a well rounded portfolio would consist of I holdings, the fact that both Germany and Japan have flirted with negative interest rate bonds in the past few years ( I believe the Bund in fact has had a few terms with negative returns) speaks to their central bank's outlook on inflation. If there is no inflation occurring, you won't be able to capture the gains on their equities either.
Ultimately it depends on your risk tolerance, objectives, and your time until retirement. If you are in your 20s or early 30s and self directing, with a taste for a bit of risk, I would forgo the I fund and do US equities. The large cap stuff will capture inflation and do well in a bull market, while the small cap will grab you some nice gains theoretically.
I have a taste for throwing in some fixed income, or at least equities that pay strong dividends (check out VYM by Vanguard). When you reinvest proceeds during a market downturn you can strongly improve your dollar cost average over the long turn. VYM has the added benefit of performing well in a bull market as well because it's all large cap.
If y'all want, I can dig up some nice textbook type info why this is a good idea in your portfolio.