European stocks on sale

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InvestorNewb
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European stocks on sale

Post by InvestorNewb » Wed Apr 24, 2013 2:23 pm

Hello,

I'm thinking about investing more money into the Total International Stock Index. Given that Europe makes up around 50% of this index, it almost seems like a good time to buy.

Although it's hard diverging money away from the Total US Stock Index, given that it's done so well this year.

The only thing I don't like is the risk rating of 5. Not only that, but Bogle himself doesn't care too much about international.

I would be closer to 50:50 (domestic/international) if I invested my remaining chunk of cash.

How long do you think it will be before Europe recovers and the stock goes back up?
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

M1garand30064
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Re: European stocks on sale

Post by M1garand30064 » Wed Apr 24, 2013 2:36 pm

Your investment decisions should be based on time horizon and the amount of risk you can afford to take rather than trying to determine what asset classes are "on sale." Who knows? The Euro could collapse and Europe could go into free fall tomorrow.

Answer some of these questions and we may be able to better help you devise a portfolio that will deliver great results for you over time.

1. How old are you?

2. Do you have a stable job?

3. Are you married and do they have a stable job?

4. Do you have any debt? If so, what are they and at what interest rate?

5. Do you have any dependents or other major financial obligations that would suffer if your portfolio lost 40% of its value?

Grt2bOutdoors
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Re: European stocks on sale

Post by Grt2bOutdoors » Wed Apr 24, 2013 2:43 pm

Don't time the market. They've been on sale since late last year and I'm hoping this sale continues for the next twenty years, before ending.
You want to pick up as many cheap shares as you can.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Pacific
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Re: European stocks on sale

Post by Pacific » Wed Apr 24, 2013 2:57 pm

P/E of Total Int is 16.6
P/E of Total Stock Market is 18.0

A sale, perhaps, but not a Black Friday sale.

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bottomfisher
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Re: European stocks on sale

Post by bottomfisher » Wed Apr 24, 2013 3:14 pm

The only thing I don't like is the risk rating of 5.
International is more volatile than domestic equities. But if you graph TISM vs TSM on M* you see they are fairly well correlated. If you are investing for the long-term this volatility should not affect you much provided you have the discipline to stay the course in a market downturn. If you fear you will not have that type of discipline then you should avoid riskier funds.
How long do you think it will be before Europe recovers and the stock goes back up?
Its anybody's guess. My guess is that it may be awhile. But this also shouldn't affect your decision if you're investing for long-term.

trademil
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Re: European stocks on sale

Post by trademil » Wed Apr 24, 2013 3:22 pm

You should decide you TSM\TISM allocation regardless of market conditions and stick to it without letting the noise interfere with your plan. I hold TSM\TISM by their market cap (which was about 46\54 the last time I checked, but might have moved since), that's 2 VXUS for every 1 VTI if you are using ETFs.

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InvestorNewb
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Re: European stocks on sale

Post by InvestorNewb » Wed Apr 24, 2013 5:07 pm

M1garand30064 wrote:Your investment decisions should be based on time horizon and the amount of risk you can afford to take rather than trying to determine what asset classes are "on sale." Who knows? The Euro could collapse and Europe could go into free fall tomorrow.

Answer some of these questions and we may be able to better help you devise a portfolio that will deliver great results for you over time.

1. How old are you? 30

2. Do you have a stable job? Yes

3. Are you married and do they have a stable job? Not married

4. Do you have any debt? If so, what are they and at what interest rate? None

5. Do you have any dependents or other major financial obligations that would suffer if your portfolio lost 40% of its value? None
Grt2bOutdoors wrote:Don't time the market. They've been on sale since late last year and I'm hoping this sale continues for the next twenty years, before ending.
You want to pick up as many cheap shares as you can.
Why would you want the sale to be on for the next twenty years? I want the "sale" to be over after I've made a lump sum contribution.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

M1garand30064
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Re: European stocks on sale

Post by M1garand30064 » Wed Apr 24, 2013 5:12 pm

InvestorNewb wrote:
M1garand30064 wrote:Your investment decisions should be based on time horizon and the amount of risk you can afford to take rather than trying to determine what asset classes are "on sale." Who knows? The Euro could collapse and Europe could go into free fall tomorrow.

Answer some of these questions and we may be able to better help you devise a portfolio that will deliver great results for you over time.

1. How old are you? 30

2. Do you have a stable job? Yes

3. Are you married and do they have a stable job? Not married

4. Do you have any debt? If so, what are they and at what interest rate? None

5. Do you have any dependents or other major financial obligations that would suffer if your portfolio lost 40% of its value? None
Grt2bOutdoors wrote:Don't time the market. They've been on sale since late last year and I'm hoping this sale continues for the next twenty years, before ending.
You want to pick up as many cheap shares as you can.
Why would you want the sale to be on for the next twenty years? I want the "sale" to be over after I've made a lump sum contribution.
Something like this would be perfect for you: https://personal.vanguard.com/us/funds/ ... IntExt=INT

At your age I'd be 80% stock, 20% bond, or 90% stock, 10% bond. I like a 60/40 split between domestic and international equities. As others above have said, dont try to time the market. Set your allocation and rebalance as necessary, or buy the target retirement fund (which rebalances for you) and take up another hobby that is a lot more exciting and rewarding than chasing your tail!

Jfet
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Re: European stocks on sale

Post by Jfet » Wed Apr 24, 2013 5:17 pm

if stocks continue to go up for 20 years straight, then each year they are technically "on sale"

MoonOrb
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Re: European stocks on sale

Post by MoonOrb » Wed Apr 24, 2013 5:22 pm

As long as you're buying in accordance with your asset allocation, it's always a good time to buy.

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nisiprius
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Re: European stocks on sale

Post by nisiprius » Wed Apr 24, 2013 5:23 pm

I hate the "stocks on sale" meme. Even when it's Warren Buffett using it. It is an inaccurate analogy even on its own ground.

In the consumer world, I am pretty darn sure that the can of Progresso Traditional Chicken & Wild Rice I bought today for $2/3 is the same item that was selling last week for $2.99.*

When stocks drop in price, for whatever reason, it is because investors believe it is not the same thing as it was before. They believe it is going to earn less than before. It is not "stocks on sale." It is "hurt stocks" or "day-old stocks" or "factory seconds stocks."

"Stocks on sale" is pure manipulation. Someone says that in order to convince you to buy them, not to give you valuable and valid information to think about. The idea is that the sheer fact that the price has dropped means they must be a better value. It doesn't. All it means is that the price has dropped.

Do you really think that the market is always, consistently, actionable, bank-on-it wrong when they decide they are not willing to pay as much for, say, European stocks as they were willing to pay a couple of years ago?

*(Indeed, the $2.99 price sticker is still on it. But it did ring up for $1.50. I checked. And the expiration date is September 2014, so if they're rotating short-dated stock they're being pretty proactive about it).
Last edited by nisiprius on Wed Apr 24, 2013 5:31 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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InvestorNewb
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Re: European stocks on sale

Post by InvestorNewb » Wed Apr 24, 2013 5:27 pm

M1garand30064 wrote:At your age I'd be 80% stock, 20% bond, or 90% stock, 10% bond. I like a 60/40 split between domestic and international equities. As others above have said, dont try to time the market. Set your allocation and rebalance as necessary, or buy the target retirement fund (which rebalances for you) and take up another hobby that is a lot more exciting and rewarding than chasing your tail!
I'm invested in about 80% stocks and 10% cash. I'm in Canada so the target date funds aren't available to me - unfortunately. I read that TR funds aren't the best for tax efficiency, so they don't make a lot of sense for larger portfolios. Either way I'm happy with my current ETFs (see sig) but I'm just debating about increasing my international exposure. I'm currently at 30% int'l.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

Jfet
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Re: European stocks on sale

Post by Jfet » Wed Apr 24, 2013 5:30 pm

nisiprius wrote: When stocks drop in price, for whatever reason, it is because investors believe it is not the same thing as it was before. They believe it is going to earn less than before. It is not "stocks on sale." It is "hurt stocks" or "day-old stocks" or "factory seconds stocks."
LOL I love the terms, especially "factory seconds stocks"

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Liquid
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Re: European stocks on sale

Post by Liquid » Wed Apr 24, 2013 6:16 pm

nisiprius wrote:I hate the "stocks on sale" meme. Even when it's Warren Buffett using it. It is an inaccurate analogy even on its own ground.

In the consumer world, I am pretty darn sure that the can of Progresso Traditional Chicken & Wild Rice I bought today for $2/3 is the same item that was selling last week for $2.99.*

When stocks drop in price, for whatever reason, it is because investors believe it is not the same thing as it was before. They believe it is going to earn less than before. It is not "stocks on sale." It is "hurt stocks" or "day-old stocks" or "factory seconds stocks."

"Stocks on sale" is pure manipulation. Someone says that in order to convince you to buy them, not to give you valuable and valid information to think about. The idea is that the sheer fact that the price has dropped means they must be a better value. It doesn't. All it means is that the price has dropped.

Do you really think that the market is always, consistently, actionable, bank-on-it wrong when they decide they are not willing to pay as much for, say, European stocks as they were willing to pay a couple of years ago?

*(Indeed, the $2.99 price sticker is still on it. But it did ring up for $1.50. I checked. And the expiration date is September 2014, so if they're rotating short-dated stock they're being pretty proactive about it).
I hate the "stocks are always accurately priced" meme. The can of Progresso Traditional Chicken & Wild Rice, may be the same item in your eyes, but it is not in the eyes of the grocer... maybe it is close to expiration, maybe not selling well, for whatever reason it is not the same value, they are not doing you a personal favor.

The efficient market hypothesis is useful for understanding the behavior of the market, however it is not a natural law, and it has been show to be incomplete in countless academic examples. Buffet probably knows a thing or two about stock pricing...

Edit: I should clarify, the reason I "hate" this meme/ reasoning is because Efficient Market Theory, is frequently utilized in investor hazardous advice/ behavior... buy Growth it's expensive for a reason!.... sell at market bottom, everyone is doing it!!! Etc.

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nisiprius
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Re: European stocks on sale

Post by nisiprius » Wed Apr 24, 2013 7:40 pm

Liquid wrote:The can of Progresso Traditional Chicken & Wild Rice, may be the same item in your eyes, but it is not in the eyes of the grocer... maybe it is close to expiration...
September, 2014. I checked.

Stocks surely are not accurately priced and the market is not omniscient, but the fact that a price has dropped does not tell you anything. It is not the case that stocks are always inaccurately priced after a drop. Sometimes they might be inaccurately priced before the drop and the drop brings them closer to an accurate price. Sometimes they are too high before the drop and still too high after the drop. Sometimes they are too low before the drop and much too low after the drop.

And the same stock may have different values to different people. If everything had only one value to everyone, trade would be impossible.

Which brings us back to the can of soup. It may be less valuable to the grocer, yet still be just as valuable to me.
Last edited by nisiprius on Wed Apr 24, 2013 7:44 pm, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Jfet
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Re: European stocks on sale

Post by Jfet » Wed Apr 24, 2013 7:42 pm

nisiprius wrote:
Liquid wrote:The can of Progresso Traditional Chicken & Wild Rice, may be the same item in your eyes, but it is not in the eyes of the grocer... maybe it is close to expiration...
September, 2014. I checked.
It is probably that European stocks are being marketed as a loss leader, like the $0.19 a pound turkeys at thanksgiving, just to get you into the market.

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