International allocation
International allocation
What is your percentage? I know bogle promotes roughly 10%, 20 max. Right now I am at the 20% (13 intl, 7 em) and wondering if I should boost it up to 25 or 30. What are your thoughts on international?
I know some feel as though the bigger companies are selling across the border, thus their built in international exposure in otherwise us stocks.
I know some feel as though the bigger companies are selling across the border, thus their built in international exposure in otherwise us stocks.
Re: International allocation
I just read Bill Bernstein's Rational Expectations in which he advocates a 60/40 US/Int'l split. The rational is that the US is over it's historic valuation while the rest of the world is at or under.
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Re: International allocation
25% of equity
John
John
Re: International allocation
In ten of the last twenty years the EAFE has outperformed the SP500 (source Callan Tables). In total performance for that period the SP500 is way ahead despite the split. I have no clue what that means going forward. Personally I'm about 29% domestic and 16% international.
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Re: International allocation
Consensus seems to be that literally any number between 20% and 55% for your equities is okay for non-US allocation. I like closer to the market cap weight, so I'd do 50% international. You might also consider that if you're investing new money today, valuations for international stocks are lower than US stocks.
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Re: International allocation
If selecting individual funds for a 3-fund (or Core 4 or whatever your flavor is), a higher % of international gives you Admiral shares more quickly.
Re: International allocation
I pondered and pondered and struggled and struggled with this question for a long time. First I decided on 25% of stocks to international, but when I posted my allocation mannnyyy people commented that it was too low, again I heard that anywhere from 20% to 50% of stocks in international is OK, but I got many bogleheads commenting that 25 was on low side, so I reconsidered and went 1/3 of stocks international, 2/3 of stocks domestic, so i am at 33.33% international, and so far not happy with the switch since domestic is doing way better recently... but trying to take a long term view.
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Re: International allocation
We're at 30%, although I'm steadily becoming convinced, largely by all the discussions about international on this forum, that it should be higher, reflecting true market share.
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Re: International allocation
World market share and personal risk tolerance are two different issues. Some folks may not like the greater volatility of an large international holding.Austintatious wrote:We're at 30%, although I'm steadily becoming convinced, largely by all the discussions about international on this forum, that it should be higher, reflecting true market share.
Re: International allocation
You don't want too much Int'l since you spend US dollars.
Re: International allocation
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Last edited by mwm158 on Wed Jan 07, 2015 8:08 pm, edited 1 time in total.
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Re: International allocation
Well, that's exactly where I'm having some doubts. The Boglehead mantra is to buy and hold the market over the long haul yet, I dare say, most Bogleheads (and that includes me) don't fully practice what they preach. The forum's mentor, Jack Bogle, practices a pronounced home bias, certainly doesn't recommend holding international and grudgingly allows that up to 20% is OK if you really must, all the while maintaining his position that it isn't necessary and stating that he doesn't do it himself. My best guess is that most Bogleheads do not agree with Bogle on this point because they even more fully embrace the concept that broad diversification is a good thing; yet, even they choose not to own them in proportion to the market. To me, that's just another form of smart beta or active management, though practiced by the investor as opposed to the fund manager. If the basic reasons for broad diversification still apply, it seems to me that adding international proportionately should be expected to mitigate volatility and risk over the long term. Where am I wrong, here?gvsucavie03 wrote:World market share and personal risk tolerance are two different issues. Some folks may not like the greater volatility of an large international holding.Austintatious wrote:We're at 30%, although I'm steadily becoming convinced, largely by all the discussions about international on this forum, that it should be higher, reflecting true market share.
Re: International allocation
I'm at 30% of equities. I base this mostly on the range recommended on the Vanguard website. Although I believe 30% is on the lower end of the range.
Re: International allocation
30% of equities and 30% of fixed income, I'd be comfortable with up to 40% but nearly all the diversification benefit is achieved at 30%. Anywhere from 20-40% is reasonable for US investors.
Re: International allocation
Almost all of my equity portfolio is in the Total World ETF (VT) and it corresponding mutual fund. So almost 50% for me. You may want to read:https://personal.vanguard.com/pdf/ISGGEB.pdf. Short answer, Vanguard says 20% minimum up to whatever percent is held in VT.
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Re: International allocation
Not wrong, just some folks don't like adding that much risk for the diversification Int. stocks allow. I really don't think there is a right answer here.Austintatious wrote: Where am I wrong, here?
Re: International allocation
I have 40% of my equity allocation in Int'l and---at least so far---0% of my fixed allocation int'l.
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan
Re: International allocation
You are not wrong. It's as much a shacky ground to style tilt as it is to tilt geographically. It's all just based on backtesting of superior returns of specific portfolios in the 20th century. small-value here, U.S. market there. May turn out right or not.Austintatious wrote:Where am I wrong, here?
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Re: International allocation
Across our portfolios, we are at 25%, which is lower than I would like it to be. As such, much of our moving into investments is concentrated in the international equity asset class. I would like my allocation to be around 1/3.
Few decisions in life motivated by greed ever have happy outcomes--Peter Bernstein, The 60/40 Solution
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Re: International allocation
I was between 20%-25% international. But I have been gradually increasing my position this year so that I’m currently 29% international. I would like to boost it around 33%. I also would like to increase my small cap int’l exposure as well to between 25%-30%. Even though it’s a small amount I hate the idea of losing more in tax credits by increasing the amount to foreign in my IRA. I’m curious as to what percent of foreign exposure the Bogleheads have in taxable vs. tax-deferred (or Roth IRA).
Taxable
Developed Markets (formerly TMI) – 52%
Emerging Markets – 20%
IRA
Int’l Explorer – 20%
Int’l Value – 8%
Mike
Taxable
Developed Markets (formerly TMI) – 52%
Emerging Markets – 20%
IRA
Int’l Explorer – 20%
Int’l Value – 8%
Mike
Time is your friend; impulse is your enemy - John Bogle |
Learn every day, but especially from the experiences of others, it's cheaper! - John Bogle
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Re: International allocation
maybe this will help...from Vanguard's own research:
http://i.imgur.com/BLwuiAT.jpg
in the past it seemed 30%-40% was the sweet spot offering lowered (overall) volatility with increased diversification. Who knows what the future will hold.
personally, I'm at 30% if that helps.
http://i.imgur.com/BLwuiAT.jpg
in the past it seemed 30%-40% was the sweet spot offering lowered (overall) volatility with increased diversification. Who knows what the future will hold.
personally, I'm at 30% if that helps.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
Re: International allocation
30%. Good enough for LS and TR funds, good enough for me. Have thought about bumping it up to 40%. Will probably think about it for another year or two then act. Or not.
Re: International allocation
Here's what Vanguard thinks:
https://personal.vanguard.com/pdf/icriecr.pdf
I hold 25% of my portfolio in intl equities (about 31% of my equities) based largely on this paper.
https://personal.vanguard.com/pdf/icriecr.pdf
I hold 25% of my portfolio in intl equities (about 31% of my equities) based largely on this paper.
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Re: International allocation
Taken from Rick Ferri off of a google search for "efficiency frontier - US stock/Int Stock"
Re: International allocation
Ditto - When I recently added new funds, I changed my IPS to 62/38 U.S./International equities. Maybe I just compromised between a lot of 50/50 recommendations and the Vanguard-recommended 70/30 that I incorporated into my IPS. Bernstein in his latest book Rational Expectations suggested 60/40 because, as of early 2014, foreign stocks were cheaper than U.S. stocks.mwm158 wrote:I struggled with determining a number when I was first getting started. I just did a lot of reading on the forum and came up with the magic number of 37.5%. I have nothing to back up that this is good or bad.
We're in our in our mid sixties and these equities are in our Roth IRA Risk Portfolio as part the three-fund portfolio model. However, I did "feel" comfortable with the Vanguard 70/30 and I really don't think there is a "right" or "wrong" - if I continued with 62/38 or went back to a 70/30.
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Re: International allocation
My advisor (1995) first advocated 50/50 and I've stayed the course. Also, it's the long term US/int'l average. I've considered lowering int'l but any other ratio seems strange now after all these years.
VT 60% / VFSUX 20% / TIPS 20%
- arcticpineapplecorp.
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Re: International allocation
Be careful there...depends on what time period you're looking at doesn't it?gvsucavie03 wrote:Taken from Rick Ferri off of a google search for "efficiency frontier - US stock/Int Stock"
http://i.imgur.com/oP9dy.jpg
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Re: International allocation
First image covers a much longer time period than the bottomarcticpineapplecorp. wrote:Be careful there...depends on what time period you're looking at doesn't it?gvsucavie03 wrote:Taken from Rick Ferri off of a google search for "efficiency frontier - US stock/Int Stock"
http://i.imgur.com/oP9dy.jpg
*edit* - first image 1970-2013.
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Re: International allocation
yes, I know...it just wasn't listed along with the initial graph and while I find graphs useful to tell a story, without all the info a picture can be misleading. Was only trying to point out for the OP while 30% might be a "sweet spot" (it's what I said I use), it may not always be as optimal as the initial graph shows, which is why I wanted to make sure the OP knows that over shorter periods, decades long, the 30% may or may not be optimal.gvsucavie03 wrote: First image covers a much longer time period than the bottom
*edit* - first image 1970-2013.
Thanks for clarifying with the dates from the original graph, I wasn't exactly sure what time period that was covering.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
Re: International allocation
45% of equity is Internationalkazper wrote:What is your percentage?
0% of fixed income is International
I decided that my target should be somewhere between 30% International (Vanguard's choice within their all-in-one funds) and actual market mix which is somewhere around 51% International (based on current Vanguard Total World Stock (VT/VTWSX) portfolio. I decided on 45%.kazper wrote:What are your thoughts on international?
My guidance would be to pick a target between 20% and 50% and rebalance back to that target.
I would place very little weight on my guidance, and
recommend reading the thoughts of William Bernstein, Larry Swedroe, Rick Ferri, Robert T, etc.
Re: International allocation
The same percentage that I answered the last time this question was asked. I believe that was yesterday.kazper wrote:What is your percentage? ...
Gordon
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Re: International allocation
No problem.arcticpineapplecorp. wrote: Thanks for clarifying with the dates from the original graph, I wasn't exactly sure what time period that was covering.
Vanguard places Total Int on level 5 of risk while TSM is level 4. There is much to say about the additional risk of having a greater international holding.
Re: International allocation
A couple data points to add:
1. William Bernstein, in his recent book Rational Expectations, recommended ~40% International for investing adults (can decide on their strategy and can stick to it). This recommendation was made in the early 2014 timeframe, taking relative valuations into account. More broadly, he recommended a range of about 20% to 40% international in a previous book, Investors Manifesto.
2. DFA's Global Equity Fund (DGEIX) is at about 35% International.
1. William Bernstein, in his recent book Rational Expectations, recommended ~40% International for investing adults (can decide on their strategy and can stick to it). This recommendation was made in the early 2014 timeframe, taking relative valuations into account. More broadly, he recommended a range of about 20% to 40% international in a previous book, Investors Manifesto.
2. DFA's Global Equity Fund (DGEIX) is at about 35% International.
Re: International allocation
It's a "risk preference". I don't know anyone who holds a truly "market" portfolio, which could include MLP's, Junk Bonds, CDO's, insurance products, preferred stocks, commodities, hedge funds, etc.. Not everyone agrees that spreading your portfolio wider into potentially more risky assets has the same affect on risk or return. When people look at "risk" they're often not even talking about the same thing. You're right that most Boglehead's don't agree with him. When people even bring up his views about it there's a tendency for people here to erupt.Austintatious wrote:Well, that's exactly where I'm having some doubts. The Boglehead mantra is to buy and hold the market over the long haul yet, I dare say, most Bogleheads (and that includes me) don't fully practice what they preach. The forum's mentor, Jack Bogle, practices a pronounced home bias, certainly doesn't recommend holding international and grudgingly allows that up to 20% is OK if you really must, all the while maintaining his position that it isn't necessary and stating that he doesn't do it himself. My best guess is that most Bogleheads do not agree with Bogle on this point because they even more fully embrace the concept that broad diversification is a good thing; yet, even they choose not to own them in proportion to the market. To me, that's just another form of smart beta or active management, though practiced by the investor as opposed to the fund manager. If the basic reasons for broad diversification still apply, it seems to me that adding international proportionately should be expected to mitigate volatility and risk over the long term. Where am I wrong, here?gvsucavie03 wrote:World market share and personal risk tolerance are two different issues. Some folks may not like the greater volatility of an large international holding.Austintatious wrote:We're at 30%, although I'm steadily becoming convinced, largely by all the discussions about international on this forum, that it should be higher, reflecting true market share.
Adding international to a portfolio has been shown to be able to reduce standard deviation of a portfolio by a very small amount if you have the proportions matched to some efficient frontier that may only be knowable in hindsight, but even that has only been true for specific periods of time. Over other periods of time it's been shown false, and no amount of international would reduce the standard deviation. I doubt most people would even notice the difference in the amount of standard deviation that the efficient frontier charts purport are possible. For some people, standard deviation doesn't even equate to the types of risks they look at. For some people it will lead them to diversify further into international, for others it may cause them to own less than market weights. You have to look at it, and come to your own conclusion.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Re: International allocation
Late 1960's to 1990 Japan's market share rose significantly from very low to 35% to 40% (by eye) levels, whilst US shrank from 75% to 30% levels. Since then US regained some, Japan declined a lot - up to 2003 or so. Since 2003 the 'others' (China perhaps) have been eating into the US's share.arcticpineapplecorp. wrote:Be careful there...depends on what time period you're looking at doesn't it?gvsucavie03 wrote:Taken from Rick Ferri off of a google search for "efficiency frontier - US stock/Int Stock"
http://i.imgur.com/oP9dy.jpg
Overexposing (tilting) to any one will do well if that choice expands, but could equally be a drag if it falters. Equal weighting all is a more neutral choice rather than weighting according to current size/market share.
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Re: International allocation
Thanks, gvsucavie03, jaab, JoMoney and others. This question of international investing and whether the broader diversification it brings is worth the potential for increased risk still interests me very much. It's been a good discussion.
Re: International allocation
I'm only at 10% now, but steadily adding to it. Goal is to be at 25%. Hopefully within the next year or two.
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Re: International allocation
Roughly 40% of equities with the plan to hold it around that percentage for a long while.
Re: International allocation
Nobody has brought this up yet, let me try. Out of curiosity I looked up the list of S&P 500 companies in Wikipedia and sorted it by headquarters. I found a bunch of companies headquartered in Dublin Ireland, some in Switzerland. My question is when we talk about allocation are we taking into account only where the company is headquartered? Does that make sense?
Many of us who think we are under allocated to international markets may not be under allocated as we all know all the mega caps get a significant chunk of their revenues and profits internationally. Similarly, many international companies like Glaxo Smithkline, Unilever, Dieageo, Samsung , Intercontinental Hotels, National Grid (I could go on for ever), rely on US economy for a significant chunk of revenues and profits.
The company's headquarters is just an address where the company has chosen to maintain for tax purposes. (I don't want to get into the moral rights/wrongs of that here). Before globalization, it might have made sense to think so seriously about international allocation but now in the era of globalization does it make sense?
More importantly if we want to do clearly know what your international/emerging market allocation is, is there a way to know it by revenue/profits of all these companies?
Many of us who think we are under allocated to international markets may not be under allocated as we all know all the mega caps get a significant chunk of their revenues and profits internationally. Similarly, many international companies like Glaxo Smithkline, Unilever, Dieageo, Samsung , Intercontinental Hotels, National Grid (I could go on for ever), rely on US economy for a significant chunk of revenues and profits.
The company's headquarters is just an address where the company has chosen to maintain for tax purposes. (I don't want to get into the moral rights/wrongs of that here). Before globalization, it might have made sense to think so seriously about international allocation but now in the era of globalization does it make sense?
More importantly if we want to do clearly know what your international/emerging market allocation is, is there a way to know it by revenue/profits of all these companies?
Re: International allocation
When I have read comments by our mentor about how much one might hold internationally, he has said 20% max while also suggesting that it be comprised of 1/2 Developed Markets and 1/2 Emerging Markets. That would mean 2 funds for international investing versus 1 fund as typically recommended here. I haven't run any numbers (which I don't know how to do and which I assume would be period dependent anyway), but I think it's reasonable to say that for someone who wants to invest internationally with the simplicity and/or tax efficiency of only using a "total" international stock index fund, holding 30% of equities (or higher) in international gets one closer to the level of risk suggested by John Bogle's 10-20%, while maintaining simplicity and conforming itself with Vanguard's white paper on the subject.kazper wrote:I know bogle promotes roughly 10%, 20 max.
Emerging Markets are extremely * v O L i T i L e ! * and the 20% recommendations I've read and heard from Mr. Bogle would give a person the same amount of EM stocks as someone who holds 50% of stocks (or more) in Vanguard's Total International Stock Index fund. That's a world market weight of EM in a portfolio that is hardly world market weight for an investor that is presumably risk-averse when it comes to international markets. Compare it to a world market cap portfolio here.
I can't support it, but I have also been led to understand that St. Jack tried international investing once and couldn't tolerate it, so he retreated back to what he knows, loves, understands and can tolerate: owning the U.S. market + Bonds. Knowing oneself is critical to asset allocation. He allocates accordingly.
He has also said not to listen to him concerning international investing. (Again, it's not his thing.) I don't object to the recommendation as I understand it. Ultimately, one's international allocation is as personal as one's combined stock-bond allocation.
Last edited by pingo on Mon Aug 25, 2014 12:27 pm, edited 7 times in total.
Re: International allocation
Right now I am about 35% of total stock holdings. Of that 35% its nearly a 50/50 split between Developed and Emerging Markets.
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Re: International allocation
We presently allocate 40% of our equity to international with Total International Index and International REITs.
We used to allocate 30% of equities as Vanguard uses in the Target and Life Strategy funds. Vanguard has recently been advising 20% up to world market weights (i.e. 50%-60%). In most of the research and graphs that I look at, 30% and 40% appear almost identical in terms of risk and return historically. I would rather have a larger balance in an asset class thus we are using 40%. I will not be surprised at all if over the next couple of years this is the next change to the Target and Life Strategy funds - increase to 35% or 40% of equities.
The best thing you can do as an investor is to determine what works best for you and allows you to sleep at night.
Best.
We used to allocate 30% of equities as Vanguard uses in the Target and Life Strategy funds. Vanguard has recently been advising 20% up to world market weights (i.e. 50%-60%). In most of the research and graphs that I look at, 30% and 40% appear almost identical in terms of risk and return historically. I would rather have a larger balance in an asset class thus we are using 40%. I will not be surprised at all if over the next couple of years this is the next change to the Target and Life Strategy funds - increase to 35% or 40% of equities.
The best thing you can do as an investor is to determine what works best for you and allows you to sleep at night.
Best.
John C. Bogle: “Simplicity is the master key to financial success."
Re: International allocation
Greetings,
I am somewhat risk averse and have no idea what the correct
allocation would be. Considering this I am 25% international to total equities.
I attempt to split J. Bogles 20% and Vanguards 30. I am retired and not contributing
new money any longer. However if I were still investing new money, international
allocation would probably increase due to valuations.
Thanks,
bj
I am somewhat risk averse and have no idea what the correct
allocation would be. Considering this I am 25% international to total equities.
I attempt to split J. Bogles 20% and Vanguards 30. I am retired and not contributing
new money any longer. However if I were still investing new money, international
allocation would probably increase due to valuations.
Thanks,
bj
Re: International allocation
Same here!!!! 33.3333% of equities...feh wrote:33% of equities.
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Re: International allocation
The only thing that surprises me with Bogleheads in terms of international allocation is I would have expected more investors to take the simple route of 50% US and 50% International with the basis being no one knows what will out or under perform in the future and simplicity. Perhaps we are all moving in that direction.
John C. Bogle: “Simplicity is the master key to financial success."
Re: International allocation
For better or worse, about 20%, with a tilt to EM.
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Re: International allocation
I'm about 30% international. Right on par with Vanguard's Target Retirement funds.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
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Re: International allocation
I have been thinking the same thing, I'm still at 30% for international however.abuss368 wrote:The only thing that surprises me with Bogleheads in terms of international allocation is I would have expected more investors to take the simple route of 50% US and 50% International with the basis being no one knows what will out or under perform in the future and simplicity. Perhaps we are all moving in that direction.
I think 50/50 for iIRA/tIRA falls in the same camp to as well.
Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him. |
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Re: International allocation
My international equity is 15% of total equity which is 10% of my total retirement portfolio. I know this is a little lighter than some on here prefer, but I have been very pleased with that allocation.kazper wrote:What is your percentage? I know bogle promotes roughly 10%, 20 max. Right now I am at the 20% (13 intl, 7 em) and wondering if I should boost it up to 25 or 30. What are your thoughts on international?
I know some feel as though the bigger companies are selling across the border, thus their built in international exposure in otherwise us stocks.