How to see historical returns for Total International stock?

[LFKB]

Vanguard Total International Stock Market has only been around since 2010. The index it follows, MSCI ACWI ex US (ACWX) has also only been around since 2009. Is there any good way to view what the historic returns over a longer period of time for Toal International Stock Market would be? I'm just curious to see what it looks like and how closely it correlates with Total Stock Market. Thanks

[zaboomafoozarg]

Not true, VGTSX was launched in 1996. Perhaps you were looking at the Admiral shares, VTIAX? In any case, Morningstar will show you the historical returns for VGTSX since inception.

http://quote.morningstar.com/fund/chart ... ture=en_US

http://i.imgur.com/mZpQTWg.png

[Trev H]

From my data set that was the start of Simba's backtesting spreadsheet

ILB - Total International – International Large Market:
=======================================================
1970-1987 MSCI EAFE Index (Developed Only)(-.29)
1988-1996 85% EAFE Index, 15% Emerg Mkt Index (-.34)
1997-Forward Vanguards Total International Index Fund (VGTSX)


ILB
VGTSX
-11.99 (1970)
29.31
36.01
-15.19
-23.49
35.11
2.21
17.81
32.31
4.51
22.31
-1.29
-1.19
24.31
7.61
56.41
69.61
24.61
30.03
18.59
-20.97
19.27
-8.66
38.85
5.45
8.74
5.19
-0.77
15.60
29.92
-15.61
-20.15
-15.08
40.34
20.84
15.57
26.64
15.52
-44.10
36.73
11.12
-14.56
18.14 (2012)

ILB (Smmary Stats)
9.79 = CAGR
22.92 = StDev
0.30 = Sharpe
0.67 = Correlation to US Market
55.56 = Growth of 1.00



TSM = US Cap Weighted Market:
=============================
1970-1992 CRSP Market Decile 1-10 (-.19)
1993-Forward Vanguards Total Stock Market Index Fund (VTSMX)

TSM
VTSMX
-0.19 (1970)
16.01
16.71
-18.29
-27.39
38.51
26.51
-4.39
7.31
22.81
32.51
-3.89
20.61
21.81
4.31
32.01
15.91
1.51
17.81
28.71
-6.19
34.51
9.61
10.62
-0.17
35.79
20.96
30.99
23.26
23.81
-10.57
-10.97
-20.96
31.35
12.52
5.98
15.51
5.49
-37.04
28.70
17.09
0.96
16.25 (2012)

TSM (Summary Stats)
9.75 = CAGR
17.86 = StDev
0.34 = Sharpe
0.67 = Correlation to Intl Market
54.58 = Growth of 1.00


Trev H

[Trev H]

Now here is the cool part...

Notice how similar the Summary Stats are for the two components...
The most significant difference is the higher volatility of international.

ILB (Smmary Stats)
9.79 = CAGR
22.92 = StDev
0.30 = Sharpe
0.67 = Correlation to US Market
55.56 = Growth of 1.00

TSM (Summary Stats)
9.75 = CAGR
17.86 = StDev
0.34 = Sharpe
0.67 = Correlation to Intl Market
54.58 = Growth of 1.00

If you invested in the two components 50/50 and rebalanced annually..

50% ILB, 50% TSM (annaul rebalancing)
10.05 = CAGR
18.68 = StDev
0.35 = Sharpe
61.47 = Growth of 1.00

Sweet !

Trev H

[LFKB]

Thanks for the help. Yes I was looking at the admiral shares.

Trevor, thanks for posting that info.

[hoppy08520]

Now here is the cool part...

Notice how similar the Summary Stats are for the two components...
The most significant difference is the higher volatility of international.

ILB (Smmary Stats)
9.79 = CAGR
22.92 = StDev
0.30 = Sharpe
0.67 = Correlation to US Market
55.56 = Growth of 1.00

TSM (Summary Stats)
9.75 = CAGR
17.86 = StDev
0.34 = Sharpe
0.67 = Correlation to Intl Market
54.58 = Growth of 1.00

If you invested in the two components 50/50 and rebalanced annually..

50% ILB, 50% TSM (annaul rebalancing)
10.05 = CAGR
18.68 = StDev
0.35 = Sharpe
61.47 = Growth of 1.00

Sweet !

Trev H

Trev, that is quite sweet, to invest in two funds and (potentially) get a higher return than either fund, and a markedly lower StDev than the fund with the higher StDev (ILB), and a "blended" StDev just a bit higher than the fund (TSM) with the lower StDev. What's not to like about that? Sweetness without empty calories or tooth decay.


I'm still learning the theory, but is this sweetness because the two funds are negatively correlated? Is this the core part of modern portfolio theory?

BTW, I just discovered the amazing backtesting spreadsheet of Simba, which I understand grew out of contributions from you. I don't know how well this spreadsheet can predict future my future returns, but I can predict quite confidently that it will cause me much insomnia

Anyway, I've been playing around with the spreadsheet and what's fascinating is that I can take my current 3-Fund portfolio, and exchange 25% of the TSM for SCV, and then lower my overall equities by 5 or 10 percent and put that into more bonds, and find that the return stays the same but the StDev goes down a couple of percentage points. I know this is for entertainment purposes as it looks backwards and not forwards, but it's quite fascinating. Thank you the post here and for your role in launching the backtesting spreadsheet.

BTW, in my version of the spreadsheet, I exchanged 10% of the synthesized "Total_Intl - EAFE85/EM15" fund for Vanguard International Small ("VG Intl Small") to try to replicate better what Vanguard Total International Stock Market Index Fund is today. I didn't have a chance to check the before/after (I doubt it's very dramatic) but I thought this might make sense to reflect the current composition of the Fund.

[grabiner]

Notice how similar the Summary Stats are for the two components...
The most significant difference is the higher volatility of international.

ILB (Smmary Stats)
9.79 = CAGR
22.92 = StDev
0.30 = Sharpe
0.67 = Correlation to US Market
55.56 = Growth of 1.00

TSM (Summary Stats)
9.75 = CAGR
17.86 = StDev
0.34 = Sharpe
0.67 = Correlation to Intl Market
54.58 = Growth of 1.00

If you invested in the two components 50/50 and rebalanced annually..

50% ILB, 50% TSM (annaul rebalancing)
10.05 = CAGR
18.68 = StDev
0.35 = Sharpe
61.47 = Growth of 1.00

Sweet !

Trev H

Trev, that is quite sweet, to invest in two funds and (potentially) get a higher return than either fund, and a markedly lower StDev than the fund with the higher StDev (ILB), and a "blended" StDev just a bit higher than the fund (TSM) with the lower StDev. What's not to like about that? Sweetness without empty calories or tooth decay.


I'm still learning the theory, but is this sweetness because the two funds are negatively correlated? Is this the core part of modern portfolio theory?

Imperfectly correlated is good enough; negative correlation is not necessary. If two assets have the same expected return and a low enough correlation, you can reduce the standard deviation (which increases the growth rate if you rebalance) by adding a small amount of the higher-SD asset to the lower-SD asset.

The reason is the nature of the correlation. There is a general stock-market risk, which causes all returns to be correlated; in 2008, stock markets dropped all over the world. There is also a US-specific risk, and a Japan-specific risk, and a France-specific risk, and so on. If you have a US-only portfolio, then you have a lot of US-specific risk. If you reduce your US holdings and replace them with a small amount of Japanese holdings, you don't change the general stock-market risk. You reduce the US-specific risk, because your portfolio is likely to do poorly when the US-specific risk shows up. You increase the Japan-specific risk, but that risk is almost independent of your US-heavy portfolio returns. Therefore, you have reduced your risk, even if Japanese stocks are riskier than US stocks. If you add enough Japanese stock, you will eventually start increasing the risk. Now do the same thing with a large number of other countries, and you have a globally diversified portfolio; you have diversified the country-specific risks, and thus have a less risky portfolio even though it has higher-risk assets.

(edited to fix quoting)

[Trev H]

hoppy..

The correlation of assets in the mix does play a big part in the portfolio volatility.

The measured correlation for the period 1970-2012 for US and Intl Market was 0.67 (not negative) but less than perfectly correlated.

1.0 would be perfectly correlated (moving exactly the same).

Below shows the correlations of some other components, like SV (to US and Intl Market), REIT (to US and Intl Market) and Intl Small Market to US Market.

0.76 = SV and US Market
0.47 = SV and Intl Market

0.63 = REIT and US Market
0.44 = REIT and Intl Market

0.54 = Intl Small Market and US Market

A lot of folks avoid those components because of the individual component volatility... but if you look at how they work in the mix - like I said "Sweet".

PS - correlations change over time, The correlations reported above are for the period span.
Another good way to look at them is for rolling 5 or 10 year periods. When you do that you can see how it vaires, some periods actually being negative, and other periods higher on the positive side.

Hope this helps.

Trev H