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Emerging-Markets Large-Caps Take on Dow

Regardless of the fundamentals, real or perceived, anytime a sector grows larger than 20% of the S&P 500, it should be underweighted. This will spare a lot of pain. Building a portfolio with sector funds allows for these types of decisions to be implemented by anyone uncomfortable with picking individual stocks.

Similarly, it doesn't take much to assess a country's debt situation, unemployment level and other macro-economic factors. Recently, Pimco's Bill Gross talked about avoiding countries like the U.K., France and Japan for possibly having unsustainable debt. It's also easy to see that Denmark and Australia have very little debt to reckon with.

None of this guarantees any success, but avoiding the parts of the market that pose the most risk puts the odds in your favor. This is most easily accomplished by using specialized funds like the iShares MSCI Emerging Market Financial Sector Index Fund and the iShares MSCI Emerging Market Materials Sector Index Fund.
At the time of publication, VALE was a client holding.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.
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