Anyone more than 50% International Allocation? Reasons?

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Anyone more than 50% International Allocation? Reasons?

Postby cb474 » Sat Dec 29, 2012 9:49 pm

I'm wondering from people who have chosen to invest more than 50% of their equity allocation in international equities what their reasons are.

Please, this is not meant to be a general, "what is your international allocation?," thread. I know there are lots of those and have read them.

The one thing you don't hear much about in those threads is why people have chosen in some cases to go more than 50% international allocation (though in some boglehead polls about 10% of people have indicated they do this).

Thanks for any reponses.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby gt4715b » Sat Dec 29, 2012 9:58 pm

Most people that have more than 50% international allocation do it because they believe in having their portfolio match the global equity market capitalization. Right now the US is about 44% of the global market cap, thus a person doing this would have a 56% international allocation. For more details look at the Vanguard ETF VT. This is usually considered the maximum recommended international allocation.

This is discussed widely in many other threads.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby livesoft » Sat Dec 29, 2012 10:04 pm

The polls could be giving you a false impression. As an example, I want nominally 50% international, but because international has done well I actually have slightly more than 50% of equities in international. If the poll has an option "more than 50%", then I have to choose that and I fall into that 10% category that you mentioned.

I will go out on a limb and guess that a significant fraction of the folks with more than 50% international actually do not live in the US. Another fraction is probably really nominally 50%.

That doesn't leave many others to explain their reasons.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby FireProof » Sat Dec 29, 2012 10:13 pm

The US market is less than 50%. But even if it were, I'm not comfortable with 50% invested in a single country, however large it is - we saw what can happen with Japan. Lastly, a lot of my human capital is essentially invested in the US - my professional degree, my experience, network, language skills etc. - the same reason not to invest in your employer.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby z3r0c00l » Sat Dec 29, 2012 10:38 pm

The reasoning for me is as follows...

Firstly, I attempt to own the market as I have been convinced by experts that it is the most efficient way to invest. So owning the market gives me a bit more than 50% intl (presuming you mean of equity holdings.)

Another almost equally important factor is diversification. We all tend to agree that it is not smart to own a huge amount of company stock; if the company goes under, you are both out of a job, and your investments tank. Although I think the United States is more stable than any single company, I know that a severe economic downturn like a depression would possibly put me out of work. In the unlikely but possible event that a depression here is not as bad elsewhere, say in Russia, India, China, I want some of my money there.

Less damaging but more likely is the possibility that the United States will fall behind the rest of the world in growth at some point, perhaps for decades, possibly for the rest of my life. Either the US will do better, worse, or the same as the rest of the world. I have no plans to pick the lucky region and beat the world market, instead I plan on matching the world market. When it comes to investing, I want the sure thing. And the only sure thing is that you can match the market and be content with it.

Also, not for nothing, I like to own spicy things like emerging markets and NICs. I am convinced that they are likely to do well in the future, at great risk to investors and possibly great reward. I would not own them above their market share, but would worry about not taking some exposure to them also. Missing out on small parts of the world market could mean missing out on a significant amount of growth.
Last edited by z3r0c00l on Sat Dec 29, 2012 10:47 pm, edited 1 time in total.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby cb474 » Sat Dec 29, 2012 10:45 pm

gt4715b wrote:Most people that have more than 50% international allocation do it because they believe in having their portfolio match the global equity market capitalization. Right now the US is about 44% of the global market cap, thus a person doing this would have a 56% international allocation. For more details look at the Vanguard ETF VT. This is usually considered the maximum recommended international allocation.

This is discussed widely in many other threads.

As I indicated in my original post, I've been reading a lot of those old threads on international allocation, going back years, and although I have seen this rationale mentioned for going more than 50%, I don't know that I found a single person saying they were actually doing this for that reason. So I was just curious to hear from the horses mouth, as it were. And I thought perhaps people had some other unstated reasons.

livesoft wrote:The polls could be giving you a false impression. As an example, I want nominally 50% international, but because international has done well I actually have slightly more than 50% of equities in international. If the poll has an option "more than 50%", then I have to choose that and I fall into that 10% category that you mentioned.

I will go out on a limb and guess that a significant fraction of the folks with more than 50% international actually do not live in the US. Another fraction is probably really nominally 50%.

That doesn't leave many others to explain their reasons.

Yes, I wondered if many of the people who are over 50% don't live in the U.S. Again, that's why I wanted to ask explicitly. See if anyone is using global market cap to determine their international allocation and what they think/how the feel about that. I have seen a few people say they overweight international due to current valuations (but I suppose that is not a strickly boglehead way of doing things).

I also find myself in a position of going over 50% when that was nominally intended to be my international allocation, although this occured for me because I decided to split my 10% (of equities) REIT allocation 50/50 between U.S. and global. This effecitvely put me at 45% U.S., 55% international. Now I'm just trying to decide if I should bother rejiggering all of my other allocations to get back to 50/50 U.S./International.

As it stood, all my allocations were rounded off to simple even 10% proportions, which I liked for simplicity sake and it just made it easy to keep track of. Now I would have to shift to a bunch of oddball numbers 12, 33, 18, 9, etc. to get the same proportions I had with my other funds. It's relatively trivial, I suppose, one way or the other, but that's why I'm curious to hear the thoughts of anyone who has deliberately chosen to have more than 50% international.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby cb474 » Sat Dec 29, 2012 10:51 pm

z3r0c00l wrote:The reasoning for me is as follows...

Firstly, I attempt to own the market as I have been convinced by experts that it is the most efficient way to invest. So owning the market gives me a bit more than 50% intl (presuming you mean of equity holdings.)

Another almost equally important factor is diversification. We all tend to agree that it is not smart to own a huge amount of company stock; if the company goes under, you are both out of a job, and your investments tank. Although I think the United States is more stable than any single company, I know that a severe economic downturn like a depression would possibly put me out of work. In the unlikely but possible event that a depression here is not as bad elsewhere, say in Russia, India, China, I want some of my money there.

Less damaging but more likely is the possibility that the United States will fall behind the rest of the world in growth at some point, perhaps for decades, possibly for the rest of my life. Either the US will do better, worse, or the same as the rest of the world. I have no plans to pick the lucky region and beat the world market, instead I plan on matching the world market. When it comes to investing, I want the sure thing. And the only sure thing is that you can match the market and be content with it.

Also, not for nothing, I like to own spicy things like emerging markets and NICs. I am convinced that they are likely to do well in the future, at great risk to investors and possibly great reward. I would not own them above their market share, but would worry about not taking some exposure to them also. Missing out on small parts of the world market could mean missing out on a significant amount of growth.

Thanks for the explanation z3r0c00l. I am generally persuaded by the diversification argument. As it is, I suppose my only reason for feeling uncomfortable with having gone to 55% international is maybe a little home country bias (which of course, is pretty insignificant at this level, compared to those who hold no international funds or 30% or less). And something about the 50/50 split just irrationally felt like the most even hedging of my bets (which helped me sleep at nights, if for no good reason). But certainly the reason I chose 50% international to begin with was to hold something close to the global market cap.
Last edited by cb474 on Sun Dec 30, 2012 10:27 pm, edited 1 time in total.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby HongKonger » Sat Dec 29, 2012 11:42 pm

My 'international' is roughly 60/40 US/Europe which makes up roughly 65% of my equities. I am totally dispassionate about the US as I don't live there, have never lived there, and will never live there - hence I have no reason to hold anything other than somewhere in between economic weight and global market weight. I overweight Asia (if using market weight) because I live here. The rest is the rest because thats the space I have left over and I just try to buy the rest of the world at the best price with the least taxes.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby Nathan Drake » Sun Dec 30, 2012 4:32 am

I tilt more towards intl due to market cap and the fact that intl is attractively valued right now.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby z3r0c00l » Sun Dec 30, 2012 9:35 am

Nathan Drake wrote:I tilt more towards intl due to market cap and the fact that intl is attractively valued right now.


How does one decide that?
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Re: Anyone more than 50% International Allocation? Reasons?

Postby Y » Sun Dec 30, 2012 10:23 am

Live in US ---am 48 % us and 52 % international in equities--have been investing for 40 yrs and as international became more available for indexing diversifying this way seemed right. So far I ve been very satisfied --only time will tell if just investing in US vs international diversification is better financially . But I sleep better with the diversification.
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Re: Anyone more than 50% International Allocation? Reasons?

Postby upsydaisy » Sun Dec 30, 2012 1:00 pm

I'm 50:50 if that counts. (this includes both a REIT and Small Cap tilt which are both US). Reasons:

At the end of the day the US market represents around 45% of all equities, so anything higher than that suggests you're tilting towards the US either due to some belief that valuations in the US are unfairly depressed OR you like to be 'in-synch' with the US market because you live here and its painful if your international-weighted allocation is dragging you down in a year when everyone at every dinner party you go to is enjoying a strong US year.

I don't think the first argument is very boglehead-ish, but I do think there's a valuable psychological aspect to the second. If you went over 50% international but the second reason caused you to panic every time your international investments moved relatively negatively vs your US ones and were therefore tempted to sell when low you'd be in a whole bunch of trouble.

For me personally, though, although I live in the US, I am from Asia by way of Europe, so I spend time and have friends/family/colleagues in all three regions. That both gives me confidence in what I'm investing in (I know those far-off foreign climes are real places and have real businesses, etc) and also means that given I attend dinner parties on all three continents, even if I felt a bit left out at one in teh US, I'd feel ok next time I was back in Europe or Asia.

Hope that helps!
- UD
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Re: Anyone more than 50% International Allocation? Reasons?

Postby cb474 » Sun Dec 30, 2012 10:26 pm

upsydaisy, Y, Nathan Drake, and HongKonger, thanks for your replies and explanations of your reasoning.
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