If China gets hit hard over the lending "bubble" -- or something else -- and other emerging markets go with it, which they would, something like 30% in that space would cause the entire portfolio to drop a lot more than the broad market and a lot more than what might be tolerable, resulting in a sell-off at exactly the wrong time. Having a lot of anything is great while it's working, but it also sets the stage for panic selling at the low when it isn't. That mistake is avoided by moderate exposure. Putting 5% of a portfolio in China at the worst possible time wouldn't be ruinous but 30% might be.
At the time of publication, Roger Nusbaum had no positions in the securities mentioned.

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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