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Is Listed Infrastructure The Most Attractive Investment Avenue Now?

Summary In the current global scenario where traditional asset classes no longer assure stable returns, listed infrastructure is attracting investors in a big way. In 2015, investors have largely been cautious about the equity markets due to expectations of stable growth in the US and the likely interest rate hike by the Fed. However, inconsistent economic indicators, the Greek crisis, and a slowdown in China impacted returns. Even amid concerns about the global economy, bond yields were at their lowest in most developed economies, making fixed income investments unattractive. Global fund managers consider real estate an alternative investment avenue for stable returns on their investments, as real estate assets are likely to witness substantial price appreciation. By Ati Ranjan and Subarna Poddar Global fund managers consider real estate an alternative investment avenue for stable returns on their investments, as real estate assets are likely to witness substantial price appreciation. Listed infrastructure, an up-and-coming segment of the real estate sector, is gradually gaining traction among fund managers due to its monopolistic nature, price inelasticity, stable predicted cash flows, and inflation hedging characteristic. Although these assets are also traded in the form of equities, the underlying asset is immune to default risks due to strong government backing. Furthermore, these equities act as defensive plays during the downturn. Listed infrastructure assets are largely government or quasi-government owned. The sovereign backing makes ongoing infrastructure projects less likely to default compared with other privately held real estate asset classes. These assets work in a cost plus model; hence, profitability is already hedged. Also, listed infrastructure assets typically enjoy monopoly due to entry barriers set by the local governments, thus maintaining stable cash flows. Demand for these assets is often inelastic to price changes, such as electricity, water, toll, as people continue using these utilities despite tariff changes. Thus, this asset class provides stable returns even during an economic downturn. Although investment in infrastructure is capital intensive, the equity route makes it cheaper, investor friendly and keeps transactions transparent. High-return, moderate-risk asset class What is listed infrastructure? Listed infrastructure is a comprehensive and diversified asset class of largely state-owned or public-private partnership (NYSE: PPP ) companies that develop, manage, and own assets related to energy, communications, water, transportation, and other systems essential for an economy. This asset class is segmented into small units and listed as equities on stock exchanges. Hence, the quantum of investment is lower than that of a direct investment in real estate. Furthermore, these equities act as defensive plays and protect investors during market corrections as they carry low default risk and are backed by sovereigns. The asset class outperformed during pre and post crisis period If we compare the performance of the S&P Global Infrastructure Index with its peers over the pre and post economic crisis period, we can see that infrastructure clearly outperformed during the pre-crisis (2006-07) and post recovery period, i.e., 2012 onward. During the recovery period (2010-2011), the asset class clearly outperformed equities (S&P 500 Index). The chart below shows that the asset class has remained superior to equity investments over 12 years and, hence, we can conclude that it offers better returns irrespective of the economic conditions. Performances of various asset classes over last 12 years: Source: Bloomberg Most attractive features of listed infrastructure Financial and operational performance · Access: Direct exposure to global basic infrastructure facilities that are monopolistic · Liquidity: Liquid exposure to infrastructure investments, and no issue with deal flows and fixed investment horizon · Transparency: Access to existing and established infrastructure facilities, and no issue with blind pool investing · Low impact of regulatory changes: Regulatory changes are managed by governments; as these assets are primarily government or PPP projects, the regulatory changes are likely to have low impact on them · Diversification: Allows global investors to easily diversify their portfolio holdings as per the specific risk profile (e.g., geographic allocation, currency, level of gearing, and regulatory and political risks) · Cost: Cost is lower than unlisted infrastructure investments or direct buying/selling of properties · Level of gearing: Lower level of gearing than unlisted infrastructure and real estate firms, and primarily backed by government funding Classification of listed infrastructure Source: Aranca Research Cash generation and return · Higher dividend: Dividend accounted for over 33% of the overall returns of the S&P Global Infrastructure Index in the last 10 years; average dividend growth outpaced average inflation. · Predictable cash flow: The assets work in a cost plus model; therefore, future profitability is secured. · Inflation protection: Revenues of listed infrastructure companies are linked to inflation, thereby providing protection against it. (i.e. concessions permitting rent escalations linked to inflation, regulated price mechanisms that consider rate of inflation) Growth in dividend per share of listed infrastructure companies vs. CPI (click to enlarge) Source: Bureau of Labor Statistics, IMF, Bloomberg, Aranca Research Operational risks Delays: Since these kinds of projects are majorly government owned, there are possibilities of delays in project execution; this could interrupt income generation from the project. Financing: As many emerging market economies are facing funding shortage, there is possibility of slower disbursement of resources as well, as big funding organizations may not sanction adequate grants. Recovery of other alternative asset classes: Other asset classes could recover at a faster pace and make investment in listed infrastructure assets less attractive. Why listed infrastructure? Since the beginning of 2015, global equity markets have witnessed significant volatility due to a series of global events. Slowdown in China’s economy, declining GDP of Japan and the Greek debt crisis dampened investor sentiment. The Eurozone still has a long road ahead in terms of complete recovery. Amid a strengthening dollar, emerging economies such as China and India are not offering encouraging signs to equity investors. The US is the only market that has performed fairly well in 2015 compared with other geographies, supported by a bullish dollar and an expected rate hike by the US Federal Reserve later this year. The ongoing volatility in oil prices have kept investors directionless. Oil prices witnessed a steep fall until mid-2015, primarily due to strong non-OPEC oil production forecast. The OPEC’s refusal to reduce oil output worsened the situation. Furthermore, the withdrawal of sanctions on Iran after the nuclear deal exerted pressure on oil prices. The weak outlook for oil prices impacted the earnings of companies in the energy sector across the world, which consequently reflected in their stock prices. In addition, the ongoing drop in commodity prices affected investor sentiment across global markets. Separately, possibility of new drug pricing rules triggered negativity about biotech stocks, which was once considered the most defensive sector. Performance of major global equity indices (2015 YTD) Source: Bloomberg Among the investment options available, portfolio managers prefer fixed income or bonds, real estate investment trusts (REITs), bullion, and listed infrastructure to create a balanced portfolio. Bond yields globally are already under pressure and reached their all-time lows in January 2015 (US 30-year Treasury yield at +1.7%, UK 10-year gilt yield +1.4%). Moreover, any increase in the rates, especially a rate hike by the US Fed, would make them an unattractive investment option. With regards to gold, a sharp drop in its prices has severely impacted its safe-haven status. With continued decline in commodity and gold prices, the bullion price is expected to remain under pressure in the near term. Real estate is another alternative that provides higher capital gains; however, it is capital intensive and, hence, represents higher risk. In such a scenario, where most of the sectors are underperforming, a defensive play with stable returns and moderate risks is likely to gain attention of the global fund managers. Listed infrastructure is an asset class with all the above mentioned qualities. It offers high returns as well as steady income and assured capital benefits. The equity route makes it less capital intensive and provides benefits of the bull-run during positive economic scenario. Furthermore, this asset class is inflation protected. The inflation-linked nature of revenue from infrastructure businesses enables an automatic hedging against any rise in interest rates, thereby providing listed infrastructure an edge over other investment options. Market size of listed infrastructure assets to rapidly increase According to McKinsey Global Institute, infrastructure investment of around USD57 trillion would be required to achieve the projected global GDP by 2030, accounting for 3.5% of the expected global GDP in 2030. Furthermore, the Organization for Economic Co-operation and Development estimates a required global investment of USD40 trillion in new and existing infrastructure projects by 2030. With such large infrastructure spending, opportunities in listed infrastructure are expected to substantially increase. Market capitalization of listed infrastructure assets has increased to USD3.3 trillion in 2015 YTD as compared to USD861 billion in 15 years ago. Market capitalization of global listed infrastructure Source: Aranca Research The advancements in the global listed infrastructure market have enabled easier access to an asset class that has been traditionally illiquid. Historically, the global listed infrastructure market has performed robustly irrespective of the market scenario. This asset class offers higher returns at moderate risk. Currently, in addition to several smaller-sized funds, six major global funds are operating in this segment, with a combined asset size of USD4 billion. Some major players in the listed infrastructure segment that hold investments from top global fund managers are: Source: Fund fact sheets, Aranca Research Larger players attract major portion of investments in listed infrastructure The S&P Global Infrastructure Index comprises 76 companies, with a combined market capitalization of nearly USD1.2 trillion. The top 10 companies account for a large portion of the market capitalization. In terms of sector classification, Industrials accounts for 40.7% of the total index weight, followed by Utilities (39.3%) and Energy (20.0%). The key index players attract higher investments from global fund managers. S&P Global Infrastructure Index Country Number of constituents Index weight (%) US 22 35.1% Canada 7 7.9% Australia 4 7.8% Italy 4 7.1% UK 4 6.9% France 3 6.9% China 8 5.9% Spain 2 5.2% Japan 4 4.1% Germany 2 2.7% Singapore 3 2.6% Mexico 2 2.3% New Zealand 1 1.3% Switzerland 1 1.3% Brazil 3 1.1% Chile 2 0.7% Austria 1 0.4% Hong Kong 2 0.4% Netherlands 1 0.3% Source: Index fact sheet Listed infrastructure – an attractive alternative investment in current scenario Listed infrastructure assets have high potential for steady returns, low volatility, diversification, higher income, longer duration, and abundant capacity. Such investment options were traditionally considered off-market activities; however, listed infrastructure is an upcoming and promising real estate investment alternative, and is likely to be widely accepted globally. We believe the asset class is not overvalued and is trading at a fair projected 12-month P/E of 8.05x (P/E of S&P Global Infrastructure Index) compared with 15.2x P/E of S&P 500, offering significant opportunities for investors. Emerging investment opportunities in the water, communications and transmission, transportation, and distribution sectors are expected to substantially influence the listed infrastructure segment, driving growth in this segment and attracting long-term investors. Upgrading infrastructure is expected to become one of the key focus areas for governments of emerging economies. Demand for electricity, water, and sanitation would significantly increase due to higher population growth and urbanization. Hence, despite the recent drop in commodity prices, resource-rich governments would continue investing significant capital into infrastructure investments. Key drivers of listed infrastructure assets across the world are: Global population growth: According to the IMF projections, the global population is expected to grow over 8 billion by 2020. Increasing population requires additional housing and power supply, public transport, clean water, healthcare, and education facilities, which would further increase demand for public spending in the infrastructure sector. Increasing wealth: With per capital income growing in developing countries, the population would start expecting world-class infrastructure facilities. Economic expansion: Economic expansion in Brazil, Russia, India, and China (BRIC nations) and Southeast Asia would boost government spending on social infrastructure. Urbanization: With growing urbanization in the developed as well as developing countries, demand for road transportation, telecom, and energy utilities is expected to significantly rise. Climate change: Improved long-distance infrastructure is essential not only for more efficient provision of energy but also for potentially remote and renewable energy resources such as solar and wind. Climate change represents both a challenge and an opportunity for development in emerging markets. Limited supply: Roads, airports, and pipelines can only operate up to a fixed maximum capacity, beyond which additional assets are required. As emerging markets develop, governments typically focus on ensuring the transport infrastructure is sufficiently robust to support growth. Shift in financing: As governments worldwide increasingly face fiscal constraints, particularly in the developed world, the private sector is expected to be involved greatly in construction responsibilities through the PPP route. The private sector is actively involved through PPP into listed infrastructure projects in Australia, Europe, Canada, and the US, and this trend is expected to continue. Performance of two of the largest listed infrastructure funds Source: Fund fact sheets Major listed infrastructure funds and their asset size (click to enlarge) Source: Fund fact sheets, Aranca Research Breakdown of the listed infrastructure investment universe Source: Aranca Research.

BRICs, PITs, And PIGS: Go Ugly

In my research and investing, I stress three things: people, structure and value. I look for companies that are controlled and managed by quality people, have corporate structures that align minority and majority shareholder interests, and trade at valuations that are below fair value if not outright cheap. This blog is somewhat aligned with valuation and yet another example of how investing in beaten down, unpopular and ugly markets can lead to better returns. Usually, valuations are low in markets that are not very attractive. Stocks can look very inexpensive, and prices seem to reflect all the negative news, but who knows when the news can get even worse? And it can take even greater will power to stay invested when nobody around you sees your point of view, friends and peers are calling you crazy, and well-educated, respected and slick I-bank analysts and traders are negative (think negative of your point of view?). It’s a lot easier to invest in markets when (where) there’s a lot of good news and the future looks very bright. The problem is that these markets tend to be expensive and future returns tend not to be as good. To contrast these two points, let’s look at two emerging market acronyms – BRICs and PITs that originated about the same time. BRICs stands for Brazil, Russia, India and China. The acronym is attributed to Jim O’Neill in a paper he wrote for Goldman Sachs in November 2001. In it, he argued that these four countries should be included in high-level government groupings such as the “G7” because their size and growth would make them increasingly influential. The acronym came out not long after the tech crash. Wall Street was ripe for a new story, and over the next few years, the term became more popular. Goldman Sachs and many others launched BRIC funds and ETFs. There are now over 200 of them, according to a very expensive database. The term took on a life of its own and the four appear to like the grouping. Just a few months ago the four countries and South Africa formally launched the BRICS Development Bank ( link here ). About the same time BRICs was coined, traders and analysts who survived the late 1990s Asian financial crisis were referring to the ASEAN countries as PITs. The term stood for Philippines, Indonesia and Thailand: the three of the hardest economies and markets. Unlike BRICs, I don’t think anybody has come forward to claim responsibility for it. Calling your home market a degrading term soon after your clients lost money would not likely make one popular. Investing in the four BRIC countries when the phrase was coined would have been smart. The four countries’ headline indexes are up 302% since late 2001 for a CAGR of some 10.5% (return figures are based on equally weighted headline indexes, in USD, dividends not included). In contrast, and despite the acronym’s negative connotation, one would have done considerably better by investing in the three PITs markets than the four BRICs markets. An equally weighted investment in the three grew by 675% over the same time period, which means the PITs investor would have made more than double the money than the BRICs investor. All three PITs indexes did better than even the best performing BRIC index. Thailand, the worst performing PITs country, rose by 229%, a bit more than the best performing BRICs country, which rose by 611% from November 2001 to November 2015. The outperformance of the PITs countries continued after the expression was coined. In July 2006, Goldman Sachs launched a BRIC fund. From launch to close, the fund’s performance was just under 20% and almost exactly in line the four countries’ equally weighted performance. Over the same time period, the three PITs indexes increased by 157%, meaning that one would have made almost eight times more money by investing in the markets that were unloved rather than the ones that were popular by investment funds and advisors. Are PIGS Today’s PITs? PIGS stands for Portugal, Italy, Greece, and Spain and was supposedly coined by traders. These are of the world’s worst performing economies and equity markets since the 2008 global financial crisis. Like PITs it is not a flattering grouping and member countries have reportedly renounced the term (more information on PIGS is here ). I suspect PIGS could be an up-to-date version of PITs. The origins of both are the same and they describe markets that are having problems and are out of favor. Also, like PITs, the countries in the grouping are geographically close and have a lot in common in terms of economic integration, language, and culture. This is more than can be said of BRICs. Except for their size, I don’t really see much that binds them like PITs and PIGS. Since July 2012, the four PIGS headline indexes are up 9% on average. Not very impressive for two-and-a half-years. However, these could be some of the better performing markets in the next 10 to 15 years if similar to the PITs. Back to BRICs Ironically, now may be a good time to consider investing in BRIC equities. Russia has some of the world’s least expensive large companies and is one of my biggest exposures. Brazil is starting to look interesting with its currency down some 40% in the last two years. There are some exciting and inexpensive companies in China, and at 7x PE, the Hang Seng China Enterprise Index does not seem very expensive. Weren’t US equities trading at the same level in the early 1980s just before that market’s 18-year bull run? There’s also a good contrarian signal. Big banks have a good habit of closing operations and products just when things start turning around. HSBC closed its South East Asian equity research offices in 2001 – just before those markets went on a multi-year bull run. Goldman’s closing of its BRICs fund may be a similar signal. Go Ugly This short piece is meant to show that going against the grain and doing what is uncomfortable and unconventional many times leads to higher returns. The best place to find value is typically in ugly sectors and geographies. Are there other places that appear to be ugly and warrant catchy phrases such as PIGS? How’s “RUKs”, for Russia, Ukraine and Kazakhstan, three ex-Soviet countries whose currencies are down and some of the highest interest rates in the world. Or “PCB”, for Peru, Columbia and Brazil, three of the worst performing equity markets this year for US dollar investors? Or “JOBQE”, for Jordan, Oman, Bahrain, Qatar and Egypt which are amongst the world’s least expensive equity markets likely due to the large amount of uncertainty in the Middle East?

The 4 ETFs That Will Replace My Portfolio’s Core

Summary All of the ETFs mentioned have annual expenses under 0.15%. The ETFs mentioned will allow broad based diversification for my portfolio’s core. These offerings are from Vanguard, but several other low cost fund families exist. Nearly two years ago I wrote an article entitled My Retirement Portfolio Could Be Replaced With These 5 ETFs . At the time, the article was written basically to as an alternative concept to my portfolio (at that time) of individual stocks. We all tend to evolve as investors over time. Each of us are on our own journey, whether we’re talking about investing or life in general. I know the focus of my life has evolved over the past few years. If you are interested in a summary my family’s journey thus far, read about it HERE . Over the past 2 years I have come to two important realizations, which encourage me to eventually rotate mostly out of individual stocks and to the portfolio outlined below. First and most importantly, there simply aren’t that many companies around the world that deserve my family’s capital. To be clear, I don’t mean there aren’t some reasonable values in the global equity markets. I am talking about companies that are so well run, and have amazingly sustainable competitive advantages, that I would commit to owning these companies for the next 20 or 30 years. Perhaps you think the idea of holding an investment for decades is a simplistic and illogical consideration, but I contend that it’s exactly my intention when I invest in an individual company on the “long-term side” of our bifurcated portfolio . For that reason, in the future I will cap individual stock investments at 25% or 30% of our portfolio’s value. It will be limited to companies that can compound my capital, and unlock value, for decades and I think those are few and far between. The second consideration in proposing the portfolio outlined below, is my personal time commitment . Currently I have a day job and enjoy researching our individual stock investments, but we are moving toward semi retirement. I anticipate additional flexibility and travel in semi retirement, but I can’t allow the time commitments of monitoring a portfolio of individual stock investments to get in the way our flexibility/freedom. That sounds too much like work. With those two considerations in mind, let’s take a look at the ETF offerings below. (Note: the funds discussed are all Vanguard offerings, but there are also other low cost fund families to consider like Fidelity and T. Rowe Price. Vanguard Total Stock Market ETF (NYSEARCA: VTI ) First up is Vanguard’s Total Stock Market ETF, my proxy for exposure to domestic US companies. In the previous article I mentioned Vanguard’s S&P 500 ETF (NYSEARCA: VOO ). Several readers commented that Vanguard’s Total Stock Market ETF might be a better alternative, because it includes both small and mid capitalization companies. After some thought, I agree. While this ETF is capitalization weighted, which in this case means it’s heavily skewed toward the large cap companies of the S&P 500, it also gives me some exposure to the small and mid capitalization companies. I like the concept of this additional exposure, because the small and mid capitalization companies tend to be much more isolated from international troubles and get nearly all of their business within the United States. I like to think of this ETF as the S&P 500, with a little extra kick. Given so much diversification, it’s hard to beat the annual expense ratio of 0.05%. Below is a snap shot of Vanguard’s Total Stock Market ETF, from Vanguard’s website. The companies in the portfolio represent a wide variety of industries. (click to enlarge) Vanguard FTSE All World ex US ETF (NYSEARCA: VEU ) The next ETF would be Vanguard’s FTSE All World ex US ETF. This fund includes stock in more than 2500 different companies around the world. The holdings are skewed to the largest capitalization companies, because of the fund’s capitalization weighting. Also as a result of the fund’s weighting, you probably recognize all of the names in the top 10 portfolio holdings. (Think Nestle ( OTCPK:NSRGY ), Royal Dutch Shell (NYSE: RDS.A ), Toyota (NYSE: TM ), and Unilever (NYSE: UL )). In the graphic below, courtesy of Vanguard’s website, you can see that this truly is a global fund. This is the type of diversification I expect from a capitalization weighted all world fund. Additionally, if you don’t feel comfortable having a large weighting of emerging market companies in your portfolio you may be able to hit your desired asset allocation within the 17.5% of this fund that represents companies located in emerging market economies. The annual expense ratio of this fund is only 0.14%, which is paltry considering the diversification (and rebalancing efforts) achieved by owning this fund. (click to enlarge) Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ) If you are optimistic about the future of emerging market economies, you may want to add additional exposure to your portfolio by including something like Vanguard’s FTSE Emerging Markets ETF. I own this fund, but be warned that everyone has a different definition of what an “emerging market” economy is. Some people think of frontier economies, like those found in Africa and the Middle East. Others think of countries like Brazil, Russia, India and China. I’m not here to tell you what the right answer is, but remember that some emerging market economies have been “emerging” for decades. Remember to dig into your fund’s portfolio allocation, to be sure you are comfortable with what you are buying. (click to enlarge) See the table below for a perfect case in point. This is the geographic distribution of Vanguard’s FTSE Emerging Market ETF. A full 28.2% of the portfolio is comprised of businesses based in China, and 55.3 percent of the portfolio’s companies are based in China, Taiwan, or India. I would prefer if the percentage of companies from those three countries was reduced somewhat, but overall I feel the diversification achieved by this fund fits my family’s needs pretty well. For my annual expense ratio of 0.15%, I gain exposure to over 2500 different global companies. As a result of the difficulty gathering quality corporate information in many of these emerging economies, I have always used an ETF (and this one specifically) to purchase my desired allocation of emerging market companies. Vanguard Total Bond Market ETF (NYSEARCA: BND ) There is a conversation raging right now about whether or not bond investors are being adequately compensated for the risks present in the bond market. That’s a conversation for another day, although I will note that because I am still in my 30s and interest rates are so painfully low, I have not had any meaningful bond exposure in my portfolio for several years. Clearly this is an individual decision, and every investor is different. If however you would like exposure to more than 7700 bonds, for an annual expense ratio of 0.07%, Vanguard’s Total Bond Market ETF may be for you. As you can see in the three tables below, courtesy of Vanguard’s website, the vast majority of holdings are highly rated bonds. The bonds held in the portfolio are also from a variety of issuers and of varying duration. For simple and straight forward bond market exposure, Vanguard’s Total Bond Market ETF is worth a look. Specialty (Sector, County, and Asset) ETFs It’s amusing sometimes to look at all the different specialty ETFs and mutual funds currently being offered. While the typical investor has no need to invest in many of these funds, they are available if the investor so decides. Two specialty funds that come up in my conversations with readers are listed below, but rest assured that your own imagination is the only limit of fund offerings. If you want to invest in a socially responsible fund that only invests in women owned businesses in the former Soviet Union states, I’m sure there is a fund out there for you. I’m exaggerating to prove a point, but I assure you that there are literally thousands of specialty funds available to you, if you take the time to look for them. Remember that just because these funds exist, doesn’t mean they are worthy of your hard earned capital. Vanguard REIT ETF (NYSEARCA: VNQ ) In the current low interest rate environment, investors have been searching for yield anywhere they can get it. Many investors have turned to corporate dividends and distributions from REITs (real estate investment trusts) or MLPs (master limited partnerships). If you are interested in owning a basket of REITs, Vanguard’s REIT ETF may be for you. For a 0.12% annual expense ratio, you gain exposure to 140+ different REITs. In the graphic below (courtesy of Vanguard’s website) you can see the sector diversification offered within the fund, as well as the top ten fund holdings. (click to enlarge) Vanguard Healthcare ETF (NYSEARCA: VHT ) Many investors are keen to take advantage of long term trends, such as aging demographics, and global healthcare issues. If you are looking for this type of exposure, Vanguard’s Healthcare ETF is worth a look. For a low 0.12% annual expense ratio, you can gain exposure to over 330 companies within the healthcare industry. The distribution of those companies is shown in the graphic (courtesy of Vanguard’s website) below, as are the funds top portfolio holdings. (click to enlarge) In a future article I will write about my asset allocation goals for my portfolio, but I hope this article gave you an idea of several very sold ETFs offered within the Vanguard family of funds. (Other low cost fund families you may want to look at include Fidelity and T. Rowe Price). Given the impressive returns posted by equity markets around the world, I have been hesitant to shift all of our holdings over to passive index ETFs just yet. The reality is that I currently enjoy researching and picking individual stocks. Eventually I will not have the time, or desire, to spend so much time on our investments. At that time, having a core portfolio position in the group of ETFs mentioned here will be my best bet. I took an early step in that direction this summer, following China’s massive sell off, when began accumulating a large position in Vanguard’s Emerging Markets ETF. I still have a long way to go before I reach my desired asset allocations, but I am optimistic that better investment opportunities (and lower prices) will present themselves in the future. Do you hold index funds or ETFs in your portfolio? Why or why not? Disclosure: The only ETF mentioned that I currently own is VWO. I do own individual stocks included in some of the other ETFs. Please consult your investment professional to create an asset allocation mix that meets your specific needs. Mine is a fairly unusual case given my young age and mix of investment holdings. This article is for informational purposes only and should not be considered a recommendation for anyone to buy, sell, or hold any securities. I am not a financial professional. The information above is available at Vanguard.com.