Time to tweak your China strategy
Emerging markets on face value appear to be blowing up. Turkey has called an emergency monetary meeting, China's growth rate is far from double digits, Brazil and Argentina are stumbling under huge debt, and Thailand is facing tumultuous protests. It's an ugly environment to be sure.
In particular, China is under scrutiny because of the size of their economy and the apparent reliance on Chinese economic growth to increase global GDP. China will grow but the world simply cannot look to China to heroically rescue global economies; the slowdown is real.
So what are investors to do based on a slowdown in the Chinese economy? In our view, there are several ways you can adjust your China strategy:
(Read more: China banking worries 'way overblown': Wilbur Ross)
1. Don't focus on exports when it comes to China. Internal consumption is the way to go. That's the focus of the Chinese government; to transform China's export economy to be more balanced.
2. Reduce your China exposure. There is no reason to believe the bumpy road will be over anytime in the near future and there could very well be a better entry point.
3. Don't abandon China now completely. All the pundits might be wrong as emerging markets tend to spike up and down rapidly without much notice. Reduce, don't abandon.
4. Pay attention to the real estate sector as the Chinese efforts slow the economy are most mostly focused on runaway real estate prices.
5. Watch for companies that are focused on expanding their exposure to the internal consumer in China. Companies like Apple, General Motors and Johnson Air Controls will benefit from an expanding Chinese consumer base.
6. Know the pain you can take. Emerging markets can rise double digits in a matter of days but they can fall just as quickly. The amount of emerging markets in your portfolio should be the amount that you can hang onto even if times get ugly.
(Read more: Why emerging market concerns could boost US stocks)
Everyone knows China is a long-term home run but current positioning and entry points are important. Have patience and choose your battles carefully. Be selective, extremely cautious, and make sure that you invest in future trends — not those that have worked in the past.
—By Michael A. Yoshikami
Michael A. Yoshikami is the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also chairman of the firm's investment committee.