Knowledge of the country weights in the emerging and developed markets indices can be helpful in specifying allocations within the equity portion of a portfolio.

For those clients who wish to allocate primarily on a country basis (as opposed to a sector basis, for example), our general philosophy is to begin the design process from the starting point of world market capitalization, then deviate from there as appropriate per client.

More specifically, we recommend placing at least 50% of equity assets in broad index funds in proportion to world market capitalization. Then, depending on your degree of aggressiveness and your confidence in your assessment of markets, placing up to 50% of equity assets in regional or country funds with anywhere from minor to massive overweights or underweights.

In order to make a conscious overweight or underweight decision, you need to know the neutral weights.

The major weight categories, US (proxy VTI), non-US developed …

Summary:

In the words of Tony Soprano: “Fogetaboutit”.

Expanded Summary:

In the words of the IRS: “Section 1091“, “Section 267” and “Rev Ruling 2008-5”

Purpose:

All investors and their investment advisors, should have an understanding of the Wash Sale Rule and related rules before making investment decisions, instead of learning about them painfully from their accountants at tax filing time.

This article is about where we stand as investment advisors on the important Wash Sale Rule with respect to schemes to circumvent the 30-day exclusionary period with alternate investment accounts such as:

IRA accounts 401-k accounts other self directed tax qualified accounts sole owner limited liability companies sole owner S or C corporations revocable living trusts marital joint taxable accounts spouse’s individual taxable accounts children’s accounts

Disclaimer:

This article is for discussion purposes only and is not personal or specific “tax advice”. We are investment advisors, not tax accountants, tax lawyers or tax advisors, but we are able to read, and the

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Another ETF filing with a hat tip to IndexUniverse. WisdomTree has filed for the Middle East Dividend Fund that will include Bahrain, Dubai, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar and the United Arab Emirates. The prospectus has no info on country weightings (none that I found anyway) but surprisingly 54% of the companies have market caps greater than $2 billion. WisdomTree has an awful lot of very interesting funds on the shelf that I'd love to see list but thus far have not. Some of the filings are so old now that I doubt they will list so we'll see if this middle east fund ever lists or not. One thing seems pretty clear to me, frontier markets will open up to investors one way or another pretty quickly. PowerShares has a frontier fund in the works which takes in a few other countries ...

One of the principal reasons for asset allocation is risk management. 

Market risk is generally defined as return fluctuation – volatility.  That is different than issue risk (the risk of owning a single stock or bond issue), which includes not only volatility, but also the risk of company bankruptcy or default on bonds.

While most investment professionals understand and take the risk reduction aspect of asset allocation for granted, that is not the case for all investment advisory clients.  We have been asked on more than one occasion, how we know that to be true, and for some evidence of that truth.

There are probably many ways to respond to that question, one of which is with a practical example with real market data.  We have created one such example for this article.

The image below shows the relative weekly return and weekly rate of change of six index investment funds representing six major

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