Why foreign stocks?

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scout1
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Re: Why foreign stocks?

Post by scout1 »

Rikaku wrote: Tue May 11, 2021 5:44 pm
Thesaints wrote: Tue May 11, 2021 1:02 pm
Rikaku wrote: Tue May 11, 2021 5:58 am
Thesaints wrote: Tue May 11, 2021 12:22 am
Do foreign stocks have higher expenses, or added geopolitical risks ? Not anymore.
How do support these claims? VTIAX has a higher expense ratio than VTSAX. As far as geopolitical risk , that is very much a variable that is still relevant. How is a country like China or Russia not politically different than the US or Canada ?
You can invest international with <0.10% ER (VXUS). At that point, 0.03% or 0.08% doesn't make a difference. 2% over 40 years is absolutely nothing compared to the stock market volatility.

China + Russia share of market capitalization is less than 5%. US + Canada is 60%. Basically, negligible added risk on a capitalization based index.
I see a lot more risk in leaving them out.
Negligible is subjective. I don’t consider an expense ratio 2.6x more expensive to be negligee , on top of the foreign taxes if held in a tax advantage account.

Market share of ALL ex-US is 40% — not a small amount of geopolitical risk when it’s looked at in the aggregate.
Geopolitical risk doesn't matter. It's all priced in. The fact that some countries are worse to do business in than others isn't an insight that the market hasn't figured out, it's one of the most obvious things about stocks like Gazprom, Saudi Aramco, and Alibaba. Moreover, foreign stocks may outperform because of perceived geopolitical risk, we don't know if the market is overpricing or underpricing geopolitical risk. Diversification solves this problem since you don't go all in on the US never having any geopolitical risk. 40% of the geopoltical risk you mentioned is spread across dozens of countries while 60% is just one country with "zero" political risk.
Last edited by scout1 on Tue May 11, 2021 6:10 pm, edited 1 time in total.
Rikaku
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Re: Why foreign stocks?

Post by Rikaku »

Rikaku wrote: Tue May 11, 2021 5:44 pm
Thesaints wrote: Tue May 11, 2021 1:02 pm
Rikaku wrote: Tue May 11, 2021 5:58 am
Thesaints wrote: Tue May 11, 2021 12:22 am
Do foreign stocks have higher expenses, or added geopolitical risks ? Not anymore.
How do support these claims? VTIAX has a higher expense ratio than VTSAX. As far as geopolitical risk , that is very much a variable that is still relevant. How is a country like China or Russia not politically different than the US or Canada ?
You can invest international with <0.10% ER (VXUS). At that point, 0.03% or 0.08% doesn't make a difference. 2% over 40 years is absolutely nothing compared to the stock market volatility.

China + Russia share of market capitalization is less than 5%. US + Canada is 60%. Basically, negligible added risk on a capitalization based index.
I see a lot more risk in leaving them out.
Negligible is subjective. I don’t consider an expense ratio 2.6x more expensive to be negligible , on top of the foreign taxes if held in a tax advantaged account.

Market share of ALL ex-US is 40% — not a small amount of geopolitical risk when it’s looked at in the aggregate.
Rikaku
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Re: Why foreign stocks?

Post by Rikaku »

Rikaku wrote: Tue May 11, 2021 6:10 pm
Rikaku wrote: Tue May 11, 2021 5:44 pm
Thesaints wrote: Tue May 11, 2021 1:02 pm
Rikaku wrote: Tue May 11, 2021 5:58 am
Thesaints wrote: Tue May 11, 2021 12:22 am
Do foreign stocks have higher expenses, or added geopolitical risks ? Not anymore.
How do support these claims? VTIAX has a higher expense ratio than VTSAX. As far as geopolitical risk , that is very much a variable that is still relevant. How is a country like China or Russia not politically different than the US or Canada ?
You can invest international with <0.10% ER (VXUS). At that point, 0.03% or 0.08% doesn't make a difference. 2% over 40 years is absolutely nothing compared to the stock market volatility.

China + Russia share of market capitalization is less than 5%. US + Canada is 60%. Basically, negligible added risk on a capitalization based index.
I see a lot more risk in leaving them out.
Negligible is subjective. I don’t consider an expense ratio 2.6x more expensive to be negligible , on top of the foreign taxes if held in a tax advantaged account. And your initial statement was that international and US are equal in expense, that claim is false; doesn’t matter if you think it’s a small difference, the difference still exists and international is still unquestionably more expensive.

Market share of ALL ex-US is 40% — not a small amount of geopolitical risk when it’s looked at in the aggregate.
Thesaints
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Re: Why foreign stocks?

Post by Thesaints »

Rikaku wrote: Tue May 11, 2021 5:44 pm Negligible is subjective. I don’t consider an expense ratio 2.6x more expensive to be negligee , on top of the foreign taxes if held in a tax advantage account.
When dealing with very small numbers it is very easy to get 10x ratios, which are meaningless anyway. I wrote that the 0.05% differential between domestic and ex-US stocks amounts to 2% over 40 years. It is a difference that will be invisible in the noise.
Market share of ALL ex-US is 40% — not a small amount of geopolitical risk when it’s looked at in the aggregate.
Yes, but three quarters of that 40% is developed markets, which have the same geopolitical risk as the US.
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Re: Why foreign stocks?

Post by ruralavalon »

scout1 wrote: Tue May 11, 2021 6:09 pmGeopolitical risk doesn't matter. It's all priced in. The fact that some countries are worse to do business in than others isn't an insight that the market hasn't figured out, it's one of the most obvious things about stocks like Gazprom, Saudi Aramco, and Alibaba. . . .
How do you know that "it's all priced in"?
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Thesaints
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Re: Why foreign stocks?

Post by Thesaints »

Is there more geopolitical risk in Switzerland, or in the US ?
Da5id
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Re: Why foreign stocks?

Post by Da5id »

ruralavalon wrote: Tue May 11, 2021 6:34 pm
scout1 wrote: Tue May 11, 2021 6:09 pmGeopolitical risk doesn't matter. It's all priced in. The fact that some countries are worse to do business in than others isn't an insight that the market hasn't figured out, it's one of the most obvious things about stocks like Gazprom, Saudi Aramco, and Alibaba. . . .
How do you know that "it's all priced in"?
Starting with an assumption that markets are reasonably efficient seems more reasonable than the opposite assumption to me. YMMV.
Da5id
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Re: Why foreign stocks?

Post by Da5id »

Thesaints wrote: Tue May 11, 2021 6:15 pm
Rikaku wrote: Tue May 11, 2021 5:44 pm Negligible is subjective. I don’t consider an expense ratio 2.6x more expensive to be negligee , on top of the foreign taxes if held in a tax advantage account.
When dealing with very small numbers it is very easy to get 10x ratios, which are meaningless anyway. I wrote that the 0.05% differential between domestic and ex-US stocks amounts to 2% over 40 years. It is a difference that will be invisible in the noise.
Yeah "Costs Matter" is certainly true. However when it is a handful of basis points it isn't really a material factor in making a choice. At least to me. .07% difference doesn't make me avoid a major asset class. If you make your investment allocation choices based on such small (in magnitude) differences you prioritize diversification differently than I do I guess.

The foreign tax credit if held in tax advantaged or the higher dividend yield if held in taxable may bother some people I guess.
scout1
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Re: Why foreign stocks?

Post by scout1 »

ruralavalon wrote: Tue May 11, 2021 6:34 pm
scout1 wrote: Tue May 11, 2021 6:09 pmGeopolitical risk doesn't matter. It's all priced in. The fact that some countries are worse to do business in than others isn't an insight that the market hasn't figured out, it's one of the most obvious things about stocks like Gazprom, Saudi Aramco, and Alibaba. . . .
How do you know that "it's all priced in"?
I don’t, but I would need to know in which direction it’s not “all priced in” in order to make an active bet. I don’t know if geopolitical risk is underpriced or overpriced so i’m stuck with a diversified portfolio.
Kookaburra
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Re: Why foreign stocks?

Post by Kookaburra »

Why foreign stocks?

Because they are great for tax loss harvesting
Soon2BXProgrammer
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Re: Why foreign stocks?

Post by Soon2BXProgrammer »

UpperNwGuy wrote: Mon May 10, 2021 1:03 pm
scout1 wrote: Mon May 10, 2021 1:00 pm The real question is why not? Most big foreign stocks have significant exposure to the USA.

Here are some common answers:
1) Diversification
2) Diversification
3) Diversification
How much diversification is enough diversification? And at what point does additional diversification start to produce diminishing returns?
International stocks, over the long run, historically have returned roughly what US equities have returned. This means that while in the short run, you might have an underperformance or overperformance due to having international stocks, in the long run, it is *mostly* a volatility and risk reduction strategy. US stocks and international stocks aren't perfected correlated, therefore on average it should decrease your volatility. Also, it is a risk reduction strategy with respect to having a Japan lost 30 years market in your home market.
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Re: Why foreign stocks?

Post by abuss368 »

Gaston wrote: Mon May 10, 2021 12:55 pm Educate me pls. I own an S&P 500 index fund. Many of the companies in the index, such as Apple, have a large proportion of international sales. So by owning an S&P 500 index fund, I feel I already have a significant (perhaps 30%) international exposure. So what benefit is there to also own foreign stocks or an international equity fund? Thx.
You are correct! S&P 500 companies earn about 50% of their profits overseas! There is enough exposure.

Jack Bogle and Warren Buffett have said simply own Total Stock or S&P 500 and Total Bond.

International investments have been bad. Jack Bogle pointed out that since 1994 international has returned a cumulative 230%. Ok not bad. But then US has returned over 700%. Now that gap is even wider.

Keep investing simple.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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abuss368
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Re: Why foreign stocks?

Post by abuss368 »

Kookaburra wrote: Tue May 11, 2021 8:38 pm Why foreign stocks?

Because they are great for tax loss harvesting
So sad but true! Does gains and international belong in the same sentence?

Tony
John C. Bogle: “Simplicity is the master key to financial success."
Da5id
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Re: Why foreign stocks?

Post by Da5id »

abuss368 wrote: Tue May 11, 2021 8:54 pm
Kookaburra wrote: Tue May 11, 2021 8:38 pm Why foreign stocks?

Because they are great for tax loss harvesting
So sad but true! Does gains and international belong in the same sentence?

Tony
Yep, performance chasing. Best boglehead practices anyone?
VTI
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Re: Why foreign stocks?

Post by VTI »

Soon2BXProgrammer wrote: Tue May 11, 2021 8:41 pm International stocks, over the long run, historically have returned roughly what US equities have returned.
Is this true? I have been under the impression that US equities have returned dramatically more over the long run than ex-US equities.
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Beensabu
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Re: Why foreign stocks?

Post by Beensabu »

VTI wrote: Tue May 11, 2021 9:26 pm
Soon2BXProgrammer wrote: Tue May 11, 2021 8:41 pm International stocks, over the long run, historically have returned roughly what US equities have returned.
Is this true? I have been under the impression that US equities have returned dramatically more over the long run than ex-US equities.
They've returned dramatically more over the last 10 years or so. That makes it look like a lot more over 20 and 30 years. But not 40 and 50 years. Except the backtesting sites don't go back that far.

It's like pong. Back and forth and back and forth and back and forth and you get the idea.

That's why it's a wash.

That's why Bogle said just do US. Because he knew we're all a bunch of performance chasers who will switch back and forth into highs and screw ourselves decade after decade.

That's also why global market cap that is automatically rebalanced is a good idea.
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abuss368
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Re: Why foreign stocks?

Post by abuss368 »

ruralavalon wrote: Tue May 11, 2021 11:04 am
Tattarrattat wrote: Mon May 10, 2021 9:16 pm Long term, US and Intl have similar returns and a fair amount of correlation with each other. Owning both will probably reduce the standard deviation of your returns a bit, but your terminal wealth accumulation over several decades is very unlikely to be significantly different going all US vs global market weight. Nobody's retirement will be made or broken by this decision. The most important factors under your control are savings rate during accumulation and spending rate during distribution. Next would be your overall equity allocation. The most important factor not under your control is luck; ie: market returns. The US vs Intl issue is not worth the amount of discussion it gets.
I agree.

The much more important issues are savings rate, and equity/fixed income allocation.
I agree. If that is not right, nothing else matters.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
Soon2BXProgrammer
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Re: Why foreign stocks?

Post by Soon2BXProgrammer »

VTI wrote: Tue May 11, 2021 9:26 pm
Soon2BXProgrammer wrote: Tue May 11, 2021 8:41 pm International stocks, over the long run, historically have returned roughly what US equities have returned.
Is this true? I have been under the impression that US equities have returned dramatically more over the long run than ex-US equities.
See:
https://economics.harvard.edu/files/eco ... s28533.pdf
Table VII: Real rates of return on equity and housing

Note: this is based on one of the best long term data sources we have, but it is still missing some markets. It doesn't have all equity markets in both the developed world nor emerging markets.
VTI
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Re: Why foreign stocks?

Post by VTI »

Soon2BXProgrammer wrote: Tue May 11, 2021 10:51 pm
VTI wrote: Tue May 11, 2021 9:26 pm
Soon2BXProgrammer wrote: Tue May 11, 2021 8:41 pm International stocks, over the long run, historically have returned roughly what US equities have returned.
Is this true? I have been under the impression that US equities have returned dramatically more over the long run than ex-US equities.
See:
https://economics.harvard.edu/files/eco ... s28533.pdf
Table VII: Real rates of return on equity and housing

Note: this is based on one of the best long term data sources we have, but it is still missing some markets. It doesn't have all equity markets in both the developed world nor emerging markets.
I appreciate the link! Looks like there's a lot of great information in there. It's quite long—before reading the whole thing, would you mind directing me to the relevant portion?
Soon2BXProgrammer
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Re: Why foreign stocks?

Post by Soon2BXProgrammer »

VTI wrote: Tue May 11, 2021 11:02 pm
Soon2BXProgrammer wrote: Tue May 11, 2021 10:51 pm
VTI wrote: Tue May 11, 2021 9:26 pm
Soon2BXProgrammer wrote: Tue May 11, 2021 8:41 pm International stocks, over the long run, historically have returned roughly what US equities have returned.
Is this true? I have been under the impression that US equities have returned dramatically more over the long run than ex-US equities.
See:
https://economics.harvard.edu/files/eco ... s28533.pdf
Table VII: Real rates of return on equity and housing

Note: this is based on one of the best long term data sources we have, but it is still missing some markets. It doesn't have all equity markets in both the developed world nor emerging markets.
I appreciate the link! Looks like there's a lot of great information in there. It's quite long—before reading the whole thing, would you mind directing me to the relevant portion?
I think its on page 39 of the pdf. (37 on the page footer). there is a table titled: "Table VII: Real rates of return on equity and housing"
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Re: Why foreign stocks?

Post by Rikaku »

Thesaints wrote: Tue May 11, 2021 6:15 pm
Rikaku wrote: Tue May 11, 2021 5:44 pm Negligible is subjective. I don’t consider an expense ratio 2.6x more expensive to be negligee , on top of the foreign taxes if held in a tax advantage account.
When dealing with very small numbers it is very easy to get 10x ratios, which are meaningless anyway. I wrote that the 0.05% differential between domestic and ex-US stocks amounts to 2% over 40 years. It is a difference that will be invisible in the noise.
Market share of ALL ex-US is 40% — not a small amount of geopolitical risk when it’s looked at in the aggregate.
Yes, but three quarters of that 40% is developed markets, which have the same geopolitical risk as the US.
Seems like you’re now trying to minimize and confront your original statements. Facts are there IS geopolitical risk and international IS more expensive no matter how one tries to distort reality.
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vineviz
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Re: Why foreign stocks?

Post by vineviz »

Rikaku wrote: Wed May 12, 2021 3:23 am
Thesaints wrote: Tue May 11, 2021 6:15 pm
Rikaku wrote: Tue May 11, 2021 5:44 pm Negligible is subjective. I don’t consider an expense ratio 2.6x more expensive to be negligee , on top of the foreign taxes if held in a tax advantage account.
When dealing with very small numbers it is very easy to get 10x ratios, which are meaningless anyway. I wrote that the 0.05% differential between domestic and ex-US stocks amounts to 2% over 40 years. It is a difference that will be invisible in the noise.
Market share of ALL ex-US is 40% — not a small amount of geopolitical risk when it’s looked at in the aggregate.
Yes, but three quarters of that 40% is developed markets, which have the same geopolitical risk as the US.
Seems like you’re now trying to minimize and confront your original statements. Facts are there IS geopolitical risk and international IS more expensive no matter how one tries to distort reality.
I'd urge you to put a little more weight on the points that @Thesaints is making. On a $1 million portfolio, the difference in fees between being US only and being fully diversified internationally is about $200. No rational framework can justify using that as an excuse for excluding international stocks completely.

As for geopolitical risk, international diverisification REDUCES the geopolitical risk of your portfolio.

For one thing, it's not as if the US is the least risky country in the world. I don't recall a Belgian gas pipeline ever being taken down by hackers, for instance. By spreading your investments across many different geopolitical risks, the potential for any SINGLE country to cause catastrophic outcome for your portfolio is greatly diminished.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Rikaku
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Re: Why foreign stocks?

Post by Rikaku »

vineviz wrote: Wed May 12, 2021 6:47 am
Rikaku wrote: Wed May 12, 2021 3:23 am
Thesaints wrote: Tue May 11, 2021 6:15 pm
Rikaku wrote: Tue May 11, 2021 5:44 pm Negligible is subjective. I don’t consider an expense ratio 2.6x more expensive to be negligee , on top of the foreign taxes if held in a tax advantage account.
When dealing with very small numbers it is very easy to get 10x ratios, which are meaningless anyway. I wrote that the 0.05% differential between domestic and ex-US stocks amounts to 2% over 40 years. It is a difference that will be invisible in the noise.
Market share of ALL ex-US is 40% — not a small amount of geopolitical risk when it’s looked at in the aggregate.
Yes, but three quarters of that 40% is developed markets, which have the same geopolitical risk as the US.
Seems like you’re now trying to minimize and confront your original statements. Facts are there IS geopolitical risk and international IS more expensive no matter how one tries to distort reality.
I'd urge you to put a little more weight on the points that @Thesaints is making. On a $1 million portfolio, the difference in fees between being US only and being fully diversified internationally is about $200. No rational framework can justify using that as an excuse for excluding international stocks completely.

As for geopolitical risk, international diverisification REDUCES the geopolitical risk of your portfolio.

For one thing, it's not as if the US is the least risky country in the world. I don't recall a Belgian gas pipeline ever being taken down by hackers, for instance. By spreading your investments across many different geopolitical risks, the potential for any SINGLE country to cause catastrophic outcome for your portfolio is greatly diminished.

I urge you to re-read his original statement that foreign investments are equal to US in cost - that is patently false. Regardless if you think it I a trivial amount or not, his statement is mathematically wrong.

For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it. The correlation between US and international is about 99%, with international having steeper downturns and reduced upside for the past 30+ years.
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vineviz
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Re: Why foreign stocks?

Post by vineviz »

Rikaku wrote: Wed May 12, 2021 6:58 am For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it.
You don't have to 'envision" it: you can simply look back at history to see multiple examples of time periods when international stocks did indeed buffer the poor performance of US stocks.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Dave55
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Re: Why foreign stocks?

Post by Dave55 »

abuss368 wrote: Tue May 11, 2021 8:54 pm
Kookaburra wrote: Tue May 11, 2021 8:38 pm Why foreign stocks?

Because they are great for tax loss harvesting
So sad but true! Does gains and international belong in the same sentence?

Tony
Good morning my good friend Tony. International was up +21% in 2019, +10.6% in 2020 and +8% this year. Those are technically "gains". In the hedge fund, we don't exclude any markets and our returns speak for themselves. :wink:

Dave
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Re: Why foreign stocks?

Post by whereskyle »

vineviz wrote: Wed May 12, 2021 7:02 am
Rikaku wrote: Wed May 12, 2021 6:58 am For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it.
You don't have to 'envision" it: you can simply look back at history to see multiple examples of time periods when international stocks did indeed buffer the poor performance of US stocks.
The 70s and early 80s are a perfect example. Terrible performance for US stocks AND bonds. Ex-US equities impressively outperformed.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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Re: Why foreign stocks?

Post by asif408 »

vineviz wrote: Wed May 12, 2021 6:47 am No rational framework can justify using that as an excuse for excluding international stocks completely.
If there's one thing I've learned from being on this board, it's that rational frameworks are much less common than emotional frameworks, and trying to use reason to counter emotional arguments overall is a losing battle.

A compelling story or line generally trumps the most rational arguments. Shopworn phrases like "when the US sneezes the world catches a cold", or "the US is the cleanest shirt in a dirty hamper".
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Re: Why foreign stocks?

Post by asif408 »

whereskyle wrote: Wed May 12, 2021 7:09 am
vineviz wrote: Wed May 12, 2021 7:02 am
Rikaku wrote: Wed May 12, 2021 6:58 am For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it.
You don't have to 'envision" it: you can simply look back at history to see multiple examples of time periods when international stocks did indeed buffer the poor performance of US stocks.
The 70s and early 80s are a perfect example. Terrible performance for US stocks AND bonds. Ex-US equities impressively outperformed.
But that way 30-40 years ago, what's the compelling story today? All that matters is the last 30 years to Rikaku.
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Re: Why foreign stocks?

Post by Da5id »

Rikaku wrote: Wed May 12, 2021 6:58 am I urge you to re-read his original statement that foreign investments are equal to US in cost - that is patently false. Regardless if you think it I a trivial amount or not, his statement is mathematically wrong.

For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it. The correlation between US and international is about 99%, with international having steeper downturns and reduced upside for the past 30+ years.
As to costs, come now. This is nitpicking. To show how silly the point is, if US cost 0.11% ER and international cost 0.04% ER would you really suggest 100% international? If not, what are you arguing about? The cost difference, while it exists, is surely not material.

As to recency bias, yep, surely a thing. I agree with you there.
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Re: Why foreign stocks?

Post by vineviz »

whereskyle wrote: Wed May 12, 2021 7:09 am
vineviz wrote: Wed May 12, 2021 7:02 am
Rikaku wrote: Wed May 12, 2021 6:58 am For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it.
You don't have to 'envision" it: you can simply look back at history to see multiple examples of time periods when international stocks did indeed buffer the poor performance of US stocks.
The 70s and early 80s are a perfect example. Terrible performance for US stocks AND bonds. Ex-US equities impressively outperformed.
Even 2002 to 2010 is a good example, and isn't so long ago that people should have forgotten about it.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Why foreign stocks?

Post by abuss368 »

Dave55 wrote: Wed May 12, 2021 7:08 am
abuss368 wrote: Tue May 11, 2021 8:54 pm
Kookaburra wrote: Tue May 11, 2021 8:38 pm Why foreign stocks?

Because they are great for tax loss harvesting
So sad but true! Does gains and international belong in the same sentence?

Tony
Good morning my good friend Tony. International was up +21% in 2019, +10.6% in 2020 and +8% this year. Those are technically "gains". In the hedge fund, we don't exclude any markets and our returns speak for themselves. :wink:

Dave
Hi Dave -

Ouch! You have always said you have traveled the world and want to own a piece of all companies. For you, having an allocation to international has never bothered or kept you up at right correct?

Right now REITs would keep you up correct?

Tony
Last edited by abuss368 on Wed May 12, 2021 10:11 am, edited 1 time in total.
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Re: Why foreign stocks?

Post by Dave55 »

abuss368 wrote: Wed May 12, 2021 7:54 am
Dave55 wrote: Wed May 12, 2021 7:08 am
abuss368 wrote: Tue May 11, 2021 8:54 pm
Kookaburra wrote: Tue May 11, 2021 8:38 pm Why foreign stocks?

Because they are great for tax loss harvesting
So sad but true! Does gains and international belong in the same sentence?

Tony
Good morning my good friend Tony. International was up +21% in 2019, +10.6% in 2020 and +8% this year. Those are technically "gains". In the hedge fund, we don't exclude any markets and our returns speak for themselves. :wink:

Dave
Hi Dave -

Ouch! You have always said you have travel the world and want to own a piece of all companies. For you, having an ally to international has never bothered or kept you up at right correct?

Right now REITs would keep you up correct?

Tony
Tony, I sleep much better with International. :wink: I am neutral to REIT's though, but they would not keep me up. 8-)

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
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Re: Why foreign stocks?

Post by abuss368 »

Dave55 wrote: Wed May 12, 2021 8:06 am
abuss368 wrote: Wed May 12, 2021 7:54 am
Dave55 wrote: Wed May 12, 2021 7:08 am
abuss368 wrote: Tue May 11, 2021 8:54 pm
Kookaburra wrote: Tue May 11, 2021 8:38 pm Why foreign stocks?

Because they are great for tax loss harvesting
So sad but true! Does gains and international belong in the same sentence?

Tony
Good morning my good friend Tony. International was up +21% in 2019, +10.6% in 2020 and +8% this year. Those are technically "gains". In the hedge fund, we don't exclude any markets and our returns speak for themselves. :wink:

Dave
Hi Dave -

Ouch! You have always said you have travel the world and want to own a piece of all companies. For you, having an ally to international has never bothered or kept you up at right correct?

Right now REITs would keep you up correct?

Tony
Tony, I sleep much better with International. :wink: I am neutral to REIT's though, but they would not keep me up. 8-)

Dave
Thanks Dave. I edited me post. Darn spell checks on iPhone!

Tony
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JSPECO9
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Re: Why foreign stocks?

Post by JSPECO9 »

The question is "So what benefit is there to also own foreign stocks or an international equity fund?" The answer is diversification. There's no other answer. If you feel like you have enough diversification with the S&P 500, all power to you.
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Re: Why foreign stocks?

Post by Stargazer65 »

This may sound weird, but I do it because it allows me to feel comfortable with a higher ratio of equities. The more diverse my equities are, the less I care about what the markets do. If I only had US stocks, I might be more tempted to tinker and keep the ratio of equities lower for fear of being overweight in something, even if the thought is not rational. So I think in the long run I passively invest better this way. Even if the international markets underperform the rest of my life, I probably will end up doing better, because I feel comfortable with the more aggressive stock/bond ratio.
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Re: Why foreign stocks?

Post by bertilak »

Why foreign stocks? Lower risk due to diversification.

Why NOT foreign stocks? Possible lower returns than US stocks alone.

With multiple asset classes the overall expected return is the weighted average of the classes, which (obviously) is lower than the asset class with the highest expected return. So, if foreign stocks have a lower expected return than US stocks, mixing the two will have a lower expected return than US stocks alone. The expected volatility (aka risk) is lower than either asset class alone.

That is the multiple haystack view.

The single haystack view is that US and foreign stocks are the same asset class, or at least asset classes with the same expected return and same volatility. They are usually treated as separate asset classes. I don't know how their expected returns and volatilities compare.
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Re: Why foreign stocks?

Post by abuss368 »

vineviz wrote: Wed May 12, 2021 7:40 am
whereskyle wrote: Wed May 12, 2021 7:09 am
vineviz wrote: Wed May 12, 2021 7:02 am
Rikaku wrote: Wed May 12, 2021 6:58 am For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it.
You don't have to 'envision" it: you can simply look back at history to see multiple examples of time periods when international stocks did indeed buffer the poor performance of US stocks.
The 70s and early 80s are a perfect example. Terrible performance for US stocks AND bonds. Ex-US equities impressively outperformed.
Even 2002 to 2010 is a good example, and isn't so long ago that people should have forgotten about it.
Vince -

During that timeframe the difference was very small. I believe a 1.5% vs 3%. $100k invested was $110k IS and perhaps $138 international (close enough). Unfortunately international has not showed up cumulative since 1986.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Why foreign stocks?

Post by index245 »

abuss368 wrote: Wed May 12, 2021 7:37 pm
vineviz wrote: Wed May 12, 2021 7:40 am
whereskyle wrote: Wed May 12, 2021 7:09 am
vineviz wrote: Wed May 12, 2021 7:02 am
Rikaku wrote: Wed May 12, 2021 6:58 am For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it.
You don't have to 'envision" it: you can simply look back at history to see multiple examples of time periods when international stocks did indeed buffer the poor performance of US stocks.
The 70s and early 80s are a perfect example. Terrible performance for US stocks AND bonds. Ex-US equities impressively outperformed.
Even 2002 to 2010 is a good example, and isn't so long ago that people should have forgotten about it.
Vince -

During that timeframe the difference was very small. I believe a 1.5% vs 3%. $100k invested was $110k IS and perhaps $138 international (close enough). Unfortunately international has not showed up cumulative since 1986.

Tony
Be careful about your timeframe, these numbers matter to people hoping to retire in the next 5 to 10 years, or those starting their retirement now.

Portfolio 1 = Total Stock, Portfolio 2 = Total International

January 2002 to December 2009:

Portfolio 1 $100,000 $122,237 2.54%
Portfolio 2 $100,000 $186,084 8.07%

I hedge my bets. I'm not market weight, but not going to do 0% international....too risky.
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Re: Why foreign stocks?

Post by Triple digit golfer »

abuss368 wrote: Wed May 12, 2021 7:37 pm
vineviz wrote: Wed May 12, 2021 7:40 am
whereskyle wrote: Wed May 12, 2021 7:09 am
vineviz wrote: Wed May 12, 2021 7:02 am
Rikaku wrote: Wed May 12, 2021 6:58 am For geopolitical risk, I cannot envision a scenario where the US had a catastrophic downturn that it does not take down the rest of the world with it.
You don't have to 'envision" it: you can simply look back at history to see multiple examples of time periods when international stocks did indeed buffer the poor performance of US stocks.
The 70s and early 80s are a perfect example. Terrible performance for US stocks AND bonds. Ex-US equities impressively outperformed.
Even 2002 to 2010 is a good example, and isn't so long ago that people should have forgotten about it.
Vince -

During that timeframe the difference was very small. I believe a 1.5% vs 3%. $100k invested was $110k IS and perhaps $138 international (close enough). Unfortunately international has not showed up cumulative since 1986.

Tony
All of your arguments are based on past performance. I suggest you read some of Jack Bogle's many excellent books, in which he advises not to rely on past performance.
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Re: Why foreign stocks?

Post by abuss368 »

Triple digit golfer wrote: Wed May 12, 2021 7:44 pm
abuss368 wrote: Wed May 12, 2021 7:37 pm
vineviz wrote: Wed May 12, 2021 7:40 am
whereskyle wrote: Wed May 12, 2021 7:09 am
vineviz wrote: Wed May 12, 2021 7:02 am

You don't have to 'envision" it: you can simply look back at history to see multiple examples of time periods when international stocks did indeed buffer the poor performance of US stocks.
The 70s and early 80s are a perfect example. Terrible performance for US stocks AND bonds. Ex-US equities impressively outperformed.
Even 2002 to 2010 is a good example, and isn't so long ago that people should have forgotten about it.
Vince -

During that timeframe the difference was very small. I believe a 1.5% vs 3%. $100k invested was $110k IS and perhaps $138 international (close enough). Unfortunately international has not showed up cumulative since 1986.

Tony
All of your arguments are based on past performance. I suggest you read some of Jack Bogle's many excellent books, in which he advises not to rely on past performance.
Easy!

* your arguments for including international are based on past performance citing Japan and early 2000s. No difference there!

* If you read Mr. Bogle’s books you would be aware that not one book recommends international. Only Total Stock and Total Bond. I think you are confused and may be thinking of another investment expert perhaps?

😂 Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Why foreign stocks?

Post by Triple digit golfer »

abuss368 wrote: Wed May 12, 2021 7:50 pm
Triple digit golfer wrote: Wed May 12, 2021 7:44 pm
abuss368 wrote: Wed May 12, 2021 7:37 pm
vineviz wrote: Wed May 12, 2021 7:40 am
whereskyle wrote: Wed May 12, 2021 7:09 am

The 70s and early 80s are a perfect example. Terrible performance for US stocks AND bonds. Ex-US equities impressively outperformed.
Even 2002 to 2010 is a good example, and isn't so long ago that people should have forgotten about it.
Vince -

During that timeframe the difference was very small. I believe a 1.5% vs 3%. $100k invested was $110k IS and perhaps $138 international (close enough). Unfortunately international has not showed up cumulative since 1986.

Tony
All of your arguments are based on past performance. I suggest you read some of Jack Bogle's many excellent books, in which he advises not to rely on past performance.
Easy!

* your arguments for including international are based on past performance citing Japan and early 2000s. No difference there!

* If you read Mr. Bogle’s books you would be aware that not one book recommends international. Only Total Stock and Total Bond. I think you are confused and may be thinking of another investment expert perhaps?

😂 Tony
My argument has nothing to do with Japan or past performance. It's about diversification.
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Re: Why foreign stocks?

Post by abuss368 »

Triple digit golfer wrote: Wed May 12, 2021 7:55 pm
Easy!

* your arguments for including international are based on past performance citing Japan and early 2000s. No difference there!

* If you read Mr. Bogle’s books you would be aware that not one book recommends international. Only Total Stock and Total Bond. I think you are confused and may be thinking of another investment expert perhaps?

😂 Tony
My argument has nothing to do with Japan or past performance. It's about diversification.
[/quote]

There is enough diversification with 3,500 stock in Total Stock and at a much lower cost.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Why foreign stocks?

Post by Triple digit golfer »

abuss368 wrote: Wed May 12, 2021 7:57 pm
Triple digit golfer wrote: Wed May 12, 2021 7:55 pm
Easy!

* your arguments for including international are based on past performance citing Japan and early 2000s. No difference there!

* If you read Mr. Bogle’s books you would be aware that not one book recommends international. Only Total Stock and Total Bond. I think you are confused and may be thinking of another investment expert perhaps?

😂 Tony
My argument has nothing to do with Japan or past performance. It's about diversification.
There is enough diversification with 3,500 stock in Total Stock and at a much lower cost.

Tony
[/quote]

Nope. All one country.
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Re: Why foreign stocks?

Post by abuss368 »

Triple digit golfer wrote: Wed May 12, 2021 8:02 pm
abuss368 wrote: Wed May 12, 2021 7:57 pm
Triple digit golfer wrote: Wed May 12, 2021 7:55 pm
Easy!

* your arguments for including international are based on past performance citing Japan and early 2000s. No difference there!

* If you read Mr. Bogle’s books you would be aware that not one book recommends international. Only Total Stock and Total Bond. I think you are confused and may be thinking of another investment expert perhaps?

😂 Tony
My argument has nothing to do with Japan or past performance. It's about diversification.
There is enough diversification with 3,500 stock in Total Stock and at a much lower cost.

Tony
Nope. All one country.
[/quote]

Yep. Those 3,500 stocks earn almost one half of revenue overseas.

Simplicity is the master key to financial success.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Why foreign stocks?

Post by Triple digit golfer »

abuss368 wrote: Wed May 12, 2021 8:05 pm
Triple digit golfer wrote: Wed May 12, 2021 8:02 pm
abuss368 wrote: Wed May 12, 2021 7:57 pm
Triple digit golfer wrote: Wed May 12, 2021 7:55 pm
Easy!

* your arguments for including international are based on past performance citing Japan and early 2000s. No difference there!

* If you read Mr. Bogle’s books you would be aware that not one book recommends international. Only Total Stock and Total Bond. I think you are confused and may be thinking of another investment expert perhaps?

😂 Tony
My argument has nothing to do with Japan or past performance. It's about diversification.
There is enough diversification with 3,500 stock in Total Stock and at a much lower cost.

Tony
Nope. All one country.
Yep. Those 3,500 stocks earn almost one half of revenue overseas.

Simplicity is the master key to financial success.

Tony
[/quote]

Would you please learn to quote properly? This is about the fourth time tonight you've messed it up.
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Re: Why foreign stocks?

Post by abuss368 »

Triple digit golfer wrote: Wed May 12, 2021 8:05 pm
abuss368 wrote: Wed May 12, 2021 8:05 pm
Triple digit golfer wrote: Wed May 12, 2021 8:02 pm
abuss368 wrote: Wed May 12, 2021 7:57 pm
Triple digit golfer wrote: Wed May 12, 2021 7:55 pm
Easy!

* your arguments for including international are based on past performance citing Japan and early 2000s. No difference there!

* If you read Mr. Bogle’s books you would be aware that not one book recommends international. Only Total Stock and Total Bond. I think you are confused and may be thinking of another investment expert perhaps?

😂 Tony
My argument has nothing to do with Japan or past performance. It's about diversification.
There is enough diversification with 3,500 stock in Total Stock and at a much lower cost.

Tony
Nope. All one country.
Yep. Those 3,500 stocks earn almost one half of revenue overseas.

Simplicity is the master key to financial success.

Tony
Would you please learn to quote properly? This is about the fourth time tonight you've messed it up.


Ha!😂
Tony
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Re: Why foreign stocks?

Post by Da5id »

abuss368 wrote: Wed May 12, 2021 8:05 pm Yep. Those 3,500 stocks earn almost one half of revenue overseas.

Simplicity is the master key to financial success.

Tony
VT + Bond, equally simple. More diversified.
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Re: Why foreign stocks?

Post by abuss368 »

Da5id wrote: Wed May 12, 2021 8:12 pm
abuss368 wrote: Wed May 12, 2021 8:05 pm Yep. Those 3,500 stocks earn almost one half of revenue overseas.

Simplicity is the master key to financial success.

Tony
VT + Bond, equally simple. More diversified.
Simple yes. But not all investors want to invest in international. VTI is a modern marvel!

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Why foreign stocks?

Post by Triple digit golfer »

abuss368 wrote: Wed May 12, 2021 8:14 pm
Da5id wrote: Wed May 12, 2021 8:12 pm
abuss368 wrote: Wed May 12, 2021 8:05 pm Yep. Those 3,500 stocks earn almost one half of revenue overseas.

Simplicity is the master key to financial success.

Tony
VT + Bond, equally simple. More diversified.
Simple yes. But not all investors want to invest in international. VTI is a modern marvel!

Tony
Yep, some investors want to chase performance. Tell us about it. When did you dump internstional to chase performance and how long after that did you start spamming the board encouraging others to do the same?
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Re: Why foreign stocks?

Post by abuss368 »

Triple digit golfer wrote: Wed May 12, 2021 8:17 pm
Yep, some investors want to chase performance. Tell us about it. When did you dump internstional to chase performance and how long after that did you start spamming the board encouraging others to do the same?
Simplicity is the master key to financial success. Reading Jack Bogle’s and Warren Buffett’s thoughts made it very clear!

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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