International Stock Index Potential

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InvestorNewb
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International Stock Index Potential

Post by InvestorNewb »

Hello,

What potential does the international stock index (VXUS) have to grow in one year?

What was its best year? Could it potentially double in one year from very strong emerging markets?

I own more shares of international than my other ETFs...
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
nelson1015
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Re: International Stock Index Potential

Post by nelson1015 »

I dunno. I'm in VGTSX and it kind of has been stinky.
livesoft
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Re: International Stock Index Potential

Post by livesoft »

If one looks at the Callan periodic table of investment results http://www.callan.com/research/download ... %2F757.pdf , then one sees that Emerging Markets likes to hang out at top or at the bottom, so it is either the worst performing asset class or the best performing asset class.

However, EM since 1994 has not done better than 80% return. Since EM is about 21% of VXUS, you are really asking it to do too much.

I doubt VXUS could double in one year in my lifetime unless it dropped significantly from here first.
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grap0013
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Re: International Stock Index Potential

Post by grap0013 »

I guess since it's cap weighted then Emerging Markets could get really bubbly and start to dominant VXUS. I would think it would be overpriced at that point which sets one up for a crash.
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John3754
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Re: International Stock Index Potential

Post by John3754 »

The upside potential for equity funds is theoretically unlimited.
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dbCooperAir
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Re: International Stock Index Potential

Post by dbCooperAir »

nelson1015 wrote:I dunno. I'm in VGTSX and it kind of has been stinky.
Yeah, its been stinky.

Investors are a funny group, they are the only ones running out of the building when the best sale is in progress :wink:

But it has potential! I hope for some potential in the right direction being International mostly fills our Roth's :wink:
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John3754
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Re: International Stock Index Potential

Post by John3754 »

nelson1015 wrote:I'm in VGTSX and it kind of has been cheap.
There I fixed that for you.
nelson1015
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Re: International Stock Index Potential

Post by nelson1015 »

Considering this logic should I buy me some GDX too?
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ray.james
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Re: International Stock Index Potential

Post by ray.james »

The clues are in dollar index Dow Jones FXCM Dollar Index.

Because of currency strength, the gains in international are dwarfed. Also, this impacts large vs small cap inversely. Small caps rely more on local currency sales. Explain the VSS relative performance to total international.
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randomguy
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Re: International Stock Index Potential

Post by randomguy »

John3754 wrote:
nelson1015 wrote:I'm in VGTSX and it kind of has been cheap.
There I fixed that for you.
No it has been stinky. If it has been cheap also will be determined by what the value is in 20 years (or whatever time frame you like to use). Personally I think cheap is a bit of a stretch. I would go with less overvalued than the US:)
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baw703916
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Re: International Stock Index Potential

Post by baw703916 »

nelson1015 wrote:Considering this logic should I buy me some GDX too?
You should buy it when the P/E is below 20.
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Re: International Stock Index Potential

Post by John3754 »

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am
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Re: International Stock Index Potential

Post by am »

Total international has better expected return than total US. There are countries in there with PEs in the single digits. If conditions in foreign lands is better than expected (not great), than strong returns should follow. I am in low 40% for international and would go higher if I could,
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ray.james
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Re: International Stock Index Potential

Post by ray.james »

John3754 wrote:
ray.james wrote:The clues are in dollar index Dow Jones FXCM Dollar Index.

Because of currency strength, the gains in international are dwarfed. Also, this impacts large vs small cap inversely. Small caps rely more on local currency sales. Explain the VSS relative performance to total international.
Apples to oranges. A broadly diversified low cost index fund vs an actively managed high expense sector fund
?
I was not comparing dollar index to international. I was stating, dollar strength is impacting foreign companies earnings and return on assets when denominated in dollars. <Happens with TSM stocks too. eg coca-cola 10Q last week>

This is what I was saying about relative performance:
VSS- Vanguard FTSE All-World ex-US Small-Cap ETF

It outperformed VXUS- total international but by a meager 0.5%. Implying the risk vs rewards doesn't seem to fare better for international small vs large caps. My point is non-dollar earnings are skewing that. What sector or active fund are you talking about?
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John3754
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Re: International Stock Index Potential

Post by John3754 »

ray.james wrote:
John3754 wrote:
ray.james wrote:The clues are in dollar index Dow Jones FXCM Dollar Index.

Because of currency strength, the gains in international are dwarfed. Also, this impacts large vs small cap inversely. Small caps rely more on local currency sales. Explain the VSS relative performance to total international.
Apples to oranges. A broadly diversified low cost index fund vs an actively managed high expense sector fund
?
I was not comparing dollar index to international. I was stating, dollar strength is impacting foreign companies earnings and return on assets when denominated in dollars. <Happens with TSM stocks too. eg coca-cola 10Q last week>

This is what I was saying about relative performance:
VSS- Vanguard FTSE All-World ex-US Small-Cap ETF

It outperformed VXUS- total international but by a meager 0.5%. Implying the risk vs rewards doesn't seem to fare better for international small vs large caps. My point is non-dollar earnings are skewing that. What sector or active fund are you talking about?
My apologies, I replied to the wrong person here, my comment was meant for nelson1015, sorry for the confusion.
John3754
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Re: International Stock Index Potential

Post by John3754 »

nelson1015 wrote:Considering this logic should I buy me some GDX too?
Apples to oranges. A broadly diversified low cost index fund vs an actively managed high expense sector fund.
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nisiprius
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Re: International Stock Index Potential

Post by nisiprius »

InvestorNewb wrote:Hello,

What potential does the international stock index (VXUS) have to grow in one year?

What was its best year? Could it potentially double in one year from very strong emerging markets?

I own more shares of international than my other ETFs...
Do the math, do the math, do the math. VXUS, Vanguard Total International Stock ETF, is 14.48% emerging markets, according to Morningstar.

Call it 1/7th.

Suppose you have $6,000 worth of developed markets and $1,000 worth of emerging markets = $7,000. In order for that to double, you need to have the total grow to $14,000. That means you would need to add $7,000 of new value. If it didn't come from developed markets, it means that $1,000 worth of emerging markets would need to increase in value by $7,000.

700% growth in one year. A eightfold multiplication in value.

Do you think that is "potentially" possible? Only in the sense that the potential gains (or losses!) are limited only by your imagination.

Hint: the best single year in history for the MSCI Emerging Markets Index, from 2000 to 2013, was 2009, when it gained 79.02%. Not even close to 800%.

The Emerging Markets Index, all by itself has never doubled in a single year.

The best performance I see for MSCI ACWI Ex-US IMI, the index formerly tracked by Total Stock Index Fund, was 44.28%, also in 2009. That, of course, follows a -45.71% loss in 2008, and, alas, the cruel arithmetic tells us that after a 45% loss, even a full 45% gain does not make up the difference--$10,000 x (100% - 45%) * (100% + 45%) = $10,000 * 0.55 * 1.45 = $7,975, i.e. a 21.25% loss.

P.S. The only way I see this "potentially" happening would be if the dollar collapsed, which I think is out there in fringe-theory land, but it is certainly possible. If that happened, it would not be a happy get-rich-quick scenario for owners of international stock funds, because it would surely be associated with near-hyperinflation. They would merely preserve the value of whatever portion of their total net worth happened to be invested in the stock fund.
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Valuethinker
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Re: International Stock Index Potential

Post by Valuethinker »

nisiprius wrote:
P.S. The only way I see this "potentially" happening would be if the dollar collapsed, which I think is out there in fringe-theory land, but it is certainly possible. If that happened, it would not be a happy get-rich-quick scenario for owners of international stock funds, because it would surely be associated with near-hyperinflation. They would merely preserve the value of whatever portion of their total net worth happened to be invested in the stock fund.
In such a situation there would be foreign exchange controls. It's not likely those resident in the USA would benefit to the full extent from their overseas investments (they would benefit *some* but not the full amount). See what's happening in Russia now (rumours that Russians will be forced to close their USD accounts) as the currency collapses. Or Argentina. Or Venezuela.

Note that with FATCA it is increasingly difficult, I would say almost impossible, to conceal wealth from US government even if you are non resident (perhaps if your spouse was a citizen of a foreign country and NOT a citizen of USA). The wonders of computers that it is feasible to collect all this data about deposit holders and send it to the US government.

The 'good' news about this is that if 1/4 of the world's economy accounted for by USA had that kind of dollar collapse, the cause would hit the rest of us (especially Canada and Mexico, but who knows) as hard as you. This is the 'good' news ;-).

I remain convinced of the virtues of a large stockpile of germanium. That and anti-agathic drus ;-).

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ps56k
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Re: International Stock Index VGTSX Potential

Post by ps56k »

I was thinking about this same general topic, and was going to post a thread for 2015 -
but found this old one.... so, just added.

Basically, looking back over the past several years, it appears to be a seesaw geographic market.
When we were slowly climbing out of our self inflected financial abyss,
the International market was better - until recently not -

And now that we are doing better, the International market is not....
back to their QE issues, Greece, etc.

And welcome to the oil crisis - careful what you wish for.....
I was always afraid of Fracking, and what it was doing to our water supply.

Anyway - with Europe in a mess - is this not a great time to add to holdings of Total International - VGTSX - ?
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curiouskitty
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Re: International Stock Index Potential

Post by curiouskitty »

ps56k wrote:I was thinking about this same general topic, and was going to post a thread for 2015 -
but found this old one.... so, just added.

Basically, looking back over the past several years, it appears to be a seesaw geographic market.
When we were slowly climbing out of our self inflected financial abyss,
the International market was better - until recently not -

And now that we are doing better, the International market is not....
back to their QE issues, Greece, etc.

And welcome to the oil crisis - careful what you wish for.....
I was always afraid of Fracking, and what it was doing to our water supply.

Anyway - with Europe in a mess - is this not a great time to add to holdings of Total International - VGTSX - ?
Agreed
selftalk
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Re: International Stock Index Potential

Post by selftalk »

My opinion is that the international asset class is a much better value at this time than the U.S. but it takes time to get back into favor. If you`re short on time forget it. Make up your asset allocation and stick to it.
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Re: International Stock Index Potential

Post by YDNAL »

InvestorNewb wrote:Hello,

What potential does the international stock index (VXUS) have to grow in one year?
It has the "potential" to do the same it did over any of the past 5 years. The same applies to other funds.

Code: Select all

Year	Total Int.	Total U.S.
2010	   11.12%	17.09%
2011	  -14.56%	 0.96%
2012	   18.14%	16.25%
2013	   15.04%	33.35%
2014	   -4.24%	12.43%
Those are Vanguard funds.
That said, current yield provides a good estimator of potential forward returns.
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Re: International Stock Index Potential

Post by minesweep »

selftalk wrote:My opinion is that the international asset class is a much better value at this time than the U.S. but it takes time to get back into favor. If you`re short on time forget it. Make up your asset allocation and stick to it.
+1

I'll turn 70 in a couple of months. I hope I'm not short on time.

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siamond
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Re: International Stock Index Potential

Post by siamond »

OP, you might want to take a good look at this Wiki page and the Simba worksheet: https://www.bogleheads.org/wiki/Simba%2 ... preadsheet

You'll find returns for plenty of asset classes, including international and emerging. And to answer your question, international went up 69% once (1986), and emerging went up 75% (2009). And to answer a question you didn't ask, international went down 42% once (2008) and emerging went down 53% (same year, which puts the 2009 returns in some perspective). I am not entirely sure why such extreme data points are that relevant, but here you are...
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