Slice & Dice International
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Slice & Dice International
After reading over the wiki for slice and dice http://www.bogleheads.org/wiki/Slice_and_dice and international slice and dice http://www.bogleheads.org/wiki/Slice_an ... ernational , I'm still not totally clear on something. It seems that there are two ways to do set up a S&D for international funds. The first is by sub asset class with something like: 25% Int'l stocks, 25% Int'l value stocks, 25% Int'll small cap stocks, 25% Int'l small value stocks. Or whatever weights you desire. The second is by region with something like: 33% Europe, 33% Pacific, 33% emerging. Or a more market weighted split.
The objective for both is to outweigh sectors that may outperform each other over different time periods or have negative correlation to each other and then rebalancing to harvest those gains. Does anyone find that either of those two options or a hybrid is simpler?
Assuming 40% of stocks are international, I was thinking of doing something like 30% Total International Stock Index (VTIAX) and 10% Pacific Stock Index (VPADX). If Pacific slipped to 8% or rose to 12%, rebalance that quarter accordingly. I realize that 28% of the Total International Index is the Pacific Index. I'm not at the point where I'm comfortable to be fussing around with a slice and dice portfolio. Just trying to gain a better understanding.
Thanks!
The objective for both is to outweigh sectors that may outperform each other over different time periods or have negative correlation to each other and then rebalancing to harvest those gains. Does anyone find that either of those two options or a hybrid is simpler?
Assuming 40% of stocks are international, I was thinking of doing something like 30% Total International Stock Index (VTIAX) and 10% Pacific Stock Index (VPADX). If Pacific slipped to 8% or rose to 12%, rebalance that quarter accordingly. I realize that 28% of the Total International Index is the Pacific Index. I'm not at the point where I'm comfortable to be fussing around with a slice and dice portfolio. Just trying to gain a better understanding.
Thanks!
Re: Slice & Dice International
I find simpler is Large vs Small as in VEU (large-cap foreign) plus VSS (small-cap foreign). These both have Developed and Developing countries in them.
If one wishes to overweight developing countries (emerging markets) then VWO (large-cap EM) and EWX (small-cap EM) are available.
One could also decide they wanted just more small-cap developed and that would be SCZ.
I do not worry about Europe vs Pacific/Asia myself.
I think the idea of Europe vs Pacific stemmed from the old days where the expense ratios were cheaper for those index funds AND the combined index fund did not let one deduct the foreign taxes on those funds. A little bit of Japan bubble bursting can also be blamed.
If one wishes to overweight developing countries (emerging markets) then VWO (large-cap EM) and EWX (small-cap EM) are available.
One could also decide they wanted just more small-cap developed and that would be SCZ.
I do not worry about Europe vs Pacific/Asia myself.
I think the idea of Europe vs Pacific stemmed from the old days where the expense ratios were cheaper for those index funds AND the combined index fund did not let one deduct the foreign taxes on those funds. A little bit of Japan bubble bursting can also be blamed.
Re: Slice & Dice International
Why not just buy sfilx or pdn? These funds have had lower standard deviation than large caps, better returns, and rebalances between countries by itself.
There are no guarantees, only probabilities.
Re: Slice & Dice International
I suppose it depends on what you're looking for, but what I do is differentiate based on size. The correlation between regional funds like VGK (Europe) and VPL (Pacific) is really quite high (take a look at the graphs), so it's questionable whether there is much benefit to be had in separate allocations there. Developed/emerging seems to make a real difference. Size less so, in part because companies in funds like VSS are still quite highly capitalized, more "mid-caps" than really small. Nevertheless for convenience I just used VEA, VSS, and VWO (or their Schwab equivalents, SCHF, SCHC, SCHE) for international. Someday I might look for something that really "small" to replace VSS/SCHC.
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Re: Slice & Dice International
livesoft - I like the idea of only slicing it two ways. If what Karamatsu said is true, wouldn't it be better to split it two ways by developed vs emerging rather than by cap size? P.S. Thanks for the wiki write up on ETFs vs Mutual Funds. Very educational. You are the expert on this. I'd be going all admiral shares, if there is the option. Since I am young (25 years old), rebalancing by adding rather is probably not an issue for at least a few years. You'd recommend ETF's for me then, no?
grap0013 - I haven't considered buying an ETF and unless the reasoning is very compelling, I'd rather not bother. Don't those two funds overlap quite a bit? They both are small-cap, developed, non-US funds correct?
Karamatsu - Europe and Pacific are highly correlated; you are right! I suppose that the Developed Market Index would be easier than owning both of those. I like the idea of that 3 fund split you proposed. If you go the non-ETF route, the equivalents from Vanguard are:
VTMGX - Developed Markets Index Admiral - ER .09%
VEMAX - Emerging Markets Index Admiral - ER .15%
VFSVX - FTSE All-World Small Cap Index Investor - 0.40%
ETF's:
VEA - Developed Markets Index - ER .09%
VWO - Emerging Markets Index - ER .15%
VSS - FTSE All-World Small Cap Index - 0.20%
grap0013 - I haven't considered buying an ETF and unless the reasoning is very compelling, I'd rather not bother. Don't those two funds overlap quite a bit? They both are small-cap, developed, non-US funds correct?
Karamatsu - Europe and Pacific are highly correlated; you are right! I suppose that the Developed Market Index would be easier than owning both of those. I like the idea of that 3 fund split you proposed. If you go the non-ETF route, the equivalents from Vanguard are:
VTMGX - Developed Markets Index Admiral - ER .09%
VEMAX - Emerging Markets Index Admiral - ER .15%
VFSVX - FTSE All-World Small Cap Index Investor - 0.40%
ETF's:
VEA - Developed Markets Index - ER .09%
VWO - Emerging Markets Index - ER .15%
VSS - FTSE All-World Small Cap Index - 0.20%
Re: Slice & Dice International
I have no preference in recommending ETFs vs mutual funds for others. For myself, I use both, but prefer ETFs.
I have no problem with VEA, VWO, VSS (or their mutual fund equivalents). I own them all as well as other international funds.
A chart shows that there were some market timing rebalancing and tax-loss harvesting opportunities this year and thus a benefit to slice & dice:
I have no problem with VEA, VWO, VSS (or their mutual fund equivalents). I own them all as well as other international funds.
A chart shows that there were some market timing rebalancing and tax-loss harvesting opportunities this year and thus a benefit to slice & dice:
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Re: Slice & Dice International
If you're going to slice and dice, why not hold value-y international equities?
EFV - for EAFE Value
DLS - Wisdomtree Small Cap Dividend
I wouldn't necessarily be fixated on holding specific regions as most broad market indexes will hold ALL of the international regions-ex US.
EFV - for EAFE Value
DLS - Wisdomtree Small Cap Dividend
I wouldn't necessarily be fixated on holding specific regions as most broad market indexes will hold ALL of the international regions-ex US.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: Slice & Dice International
livesoft - Great chart. Owning EWX (yellow) would be redundant it seems. I like the idea of going with three funds: Developed, Emerging and Small. I was considering adding a 4th for value (VTRIX) and then just splitting them 25% each. Rebalance/gamble on them quarterly with 20% and 30% bounds.
Grt2bOutdoors - I was just thinking the same thing. Vanguard has an that's not an index fund - VTRIX. It's a gamble picking any of these, right? Any big harm in not picking Vanguard's?
Grt2bOutdoors - I was just thinking the same thing. Vanguard has an that's not an index fund - VTRIX. It's a gamble picking any of these, right? Any big harm in not picking Vanguard's?
Re: Slice & Dice International
I would suggest that one not use "quarterly", but look often (weekly or daily) and rebalance as needed. You can see that with 20% and 30% bounds you probably would not have rebalanced this year at all. Nevertheless, buying VWO in early February and selling after the 20% gain would have been useful. Indeed, rebalancing this week might turn out to be a good idea, too. 10% changes in less than 30 days occur rather often.OriolesFan89 wrote:Rebalance/gamble on them quarterly with 20% and 30% bounds.
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Re: Slice & Dice International
Fair enough. Weekly sounds much more doable than daily. Monthly sounds even better... I'm pretty handy with a spreadsheet so neither would be too daunting.
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Re: Slice & Dice International
Is the expense ratio on this fund worth it (59 bp)?Grt2bOutdoors wrote:DLS - Wisdomtree Small Cap Dividend
Re: Slice & Dice International
For smallcap foreign and especially small EM, I'm at least as concerned with hidden costs as I am with ER.
Though Powershares and Schwab RAFI mid/small developed ex-US seems to have done OK the last 5 years. Can't tell if this is luck or they've gotten trading and/or other problems under control.
Take a look at the "CODE" quotes starting from this post: viewtopic.php?f=10&t=151020#p2263029
Though Powershares and Schwab RAFI mid/small developed ex-US seems to have done OK the last 5 years. Can't tell if this is luck or they've gotten trading and/or other problems under control.
Take a look at the "CODE" quotes starting from this post: viewtopic.php?f=10&t=151020#p2263029