Could John Bogle Be Right About International Stock?

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orca91
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Re: Could John Bogle Be Right About International Stock?

Post by orca91 »

It seems like it. Lots of threads today about buying international.

Funny how an event like this brings out the market timer in a bunch of non-market timers. :happy

Those that invest in international are aware of the volatility, I believe. And, the US market isn't exactly fun today either. Showing how everything sort of moves together, if you ask me.

I am wondering, with the EU event going on I can see why things would get shaky in international.... but, why isn't money flooding to US stocks? Isn't that how it's supposed to work?
inbox788
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Re: Could John Bogle Be Right About International Stock?

Post by inbox788 »

orca91 wrote:It seems like it. Lots of threads today about buying international.

Funny how an event like this brings out the market timer in a bunch of non-market timers. :happy

Those that invest in international are aware of the volatility, I believe. And, the US market isn't exactly fun today either. Showing how everything sort of moves together, if you ask me.

I am wondering, with the EU event going on I can see why things would get shaky in international.... but, why isn't money flooding to US stocks? Isn't that how it's supposed to work?
Where do you think the cash is coming from. There is no such thing as cash on the sidelines. http://www.pragcap.com/the-horrid-cash- ... unting-us/

Volume of US equities is high, so people are buying and selling US equities in droves, but at a lower price. There are more eager sellers because they can sell US stocks and funds and use the cash to buy the international holdings for an even bigger discount. If you had $100 yesterday in a US fund, would you sell it for $97 today an use the funds to buy $93 priced international? Lots of market timers are doing exactly that.
orca91
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Re: Could John Bogle Be Right About International Stock?

Post by orca91 »

That makes sense. I hadn't thought of that.
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Re: Could John Bogle Be Right About International Stock?

Post by golfallday »

I'm like Billy Martin in the old Lite Beer commercial..."I feel strongly both ways." As we know, Mr. Bogle feels the SP500 and Total US Stock Index have a tremendous int'l footprint because so many of those companies sales occur overseas. A compelling argument. The rule of law is far more predictable and consistent in US as well. However, after reading the books of Dr. Bernstein, Mr. Ferri, Mr. Schultheis, and Mr. Larimore's contributions in "The Bogleheads' Guide To Investing", an international equity allocation just feels right. So in my 457 plan I'm 15% Total Int'l Stock Index...45% VIIIX...4% SP Mid Cap 400 Index...6% Russell 2000 Index....30% Total US Bond Index. I have the Vanguard Target 2035 fund for my Traditional and Roth IRAs. The target funds have a higher allocation to int'l stocks than I have in my 457, but I'm comfortable with that mix. :moneybag
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Uncle Pennybags
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Re: Could John Bogle Be Right About International Stock?

Post by Uncle Pennybags »

orca91 wrote:I am wondering, with the EU event going on I can see why things would get shaky in international.... but, why isn't money flooding to US stocks? Isn't that how it's supposed to work?
The money is flowing into US Bonds and gold.
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patrick013
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Re: Could John Bogle Be Right About International Stock?

Post by patrick013 »

The below chart is the Dow Jones TSM Index compared with the
Dow Jones Global Index. Looks like they were close till about
5 years ago. The VG indexes have similar results depending on
which time period is used. This chart only goes back 1 decade.
US stocks still seem overbought, market moving sideways, trying
to consolidate with low EPS to look at. Oh well.

Image
age in bonds, buy-and-hold, 10 year business cycle
jfave33
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Re: Could John Bogle Be Right About International Stock?

Post by jfave33 »

Uncle Pennybags wrote:
orca91 wrote:I am wondering, with the EU event going on I can see why things would get shaky in international.... but, why isn't money flooding to US stocks? Isn't that how it's supposed to work?
The money is flowing into US Bonds and gold.
Fear.
orca91
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Re: Could John Bogle Be Right About International Stock?

Post by orca91 »

Uncle Pennybags wrote:
orca91 wrote:I am wondering, with the EU event going on I can see why things would get shaky in international.... but, why isn't money flooding to US stocks? Isn't that how it's supposed to work?
The money is flowing into US Bonds and gold.
Total bond went up today, but not by much. I wouldn't call that flowing or flooding to bonds.
jay22
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Re: Could John Bogle Be Right About International Stock?

Post by jay22 »

I have started to second guess myself with 30% of equities in international markets (divided equally between developed, emerging, and FTSE All-World ex-US Small Cap). I keep putting money in these funds, but can't help but wonder when it will pay off. And even when it pays off, will it be enough to make up for the money I would have made if I had just sticked to US markets?

I think I will wait to see how it goes this year: if the subpar performance continues, I will probably decrease my foreign allocation by 5-10%.
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Re: Could John Bogle Be Right About International Stock?

Post by inbox788 »

jay22 wrote:I have started to second guess myself with 30% of equities in international markets (divided equally between developed, emerging, and FTSE All-World ex-US Small Cap). I keep putting money in these funds, but can't help but wonder when it will pay off. And even when it pays off, will it be enough to make up for the money I would have made if I had just sticked to US markets?

I think I will wait to see how it goes this year: if the subpar performance continues, I will probably decrease my foreign allocation by 5-10%.
I'm in the same boat, but don't consider the outcome as important as the insurance value of diversification into international funds and treat any lesser performance the way an insurance premium is a necessary cost. Since I don't rebalance too often, the relative decrease in international funds has already decreased my AA by 5-10%, so I'm compensating by adding more to my international allocation, not less. If/when international outperforms, will you be looking to add more AA to international at that time? By the time that comes around, if that comes around, you will have already missed a lot of the gains.
jay22
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Re: Could John Bogle Be Right About International Stock?

Post by jay22 »

inbox788 wrote:
jay22 wrote:I have started to second guess myself with 30% of equities in international markets (divided equally between developed, emerging, and FTSE All-World ex-US Small Cap). I keep putting money in these funds, but can't help but wonder when it will pay off. And even when it pays off, will it be enough to make up for the money I would have made if I had just sticked to US markets?

I think I will wait to see how it goes this year: if the subpar performance continues, I will probably decrease my foreign allocation by 5-10%.
I'm in the same boat, but don't consider the outcome as important as the insurance value of diversification into international funds and treat any lesser performance the way an insurance premium is a necessary cost. Since I don't rebalance too often, the relative decrease in international funds has already decreased my AA by 5-10%, so I'm compensating by adding more to my international allocation, not less. If/when international outperforms, will you be looking to add more AA to international at that time? By the time that comes around, if that comes around, you will have already missed a lot of the gains.
That's one reason why I have not decreased it so far; I keep waiting for it to outperform, but do not know how long I can take it for. :D
Lobster
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Re: Could John Bogle Be Right About International Stock?

Post by Lobster »

jay22 wrote:That's one reason why I have not decreased it so far; I keep waiting for it to outperform, but do not know how long I can take it for. :D
I highly recommend reading Bogle's story about the introduction of the value and growth indices (several interviews cover it, and it's also in the Little Book). In addition, studying regression to the mean is worthwhile also. Ditching out of a position after X years of underperformance (selling low) and reallocating to a hotter sector (buying high) is classic performance chasing. It is a very common cause of underperformance by investors (perhaps second to paying hefty fees). Performance must be measured in decades. If an investor is having trouble sleeping with her current portfolio, she should consider permanently adjusting her AA accordingly. Emphasis on permanent. Dynamically adjusting AA based on recent performance will result in sadness.

This portfolio solutions article covers reasons to change AA, which provides a helpful guideline.
https://portfoliosolutions.com/latest-l ... allocation
Submit to the relentless rules of humble arithmetic and avoid the tyranny of compounding costs.
tomd37
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Re: Could John Bogle Be Right About International Stock?

Post by tomd37 »

I notice that the Portfolio Solutions posts/blogs or whatever you want to call them are not dated. That concerns me and I don't remember that being the case when Rick Ferri was at the helm.
Tom D.
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Re: Could John Bogle Be Right About International Stock?

Post by Lobster »

tomd37 wrote:I notice that the Portfolio Solutions posts/blogs or whatever you want to call them are not dated. That concerns me and I don't remember that being the case when Rick Ferri was at the helm.
Interesting observation. I'm not sure when that article was posted, based on context I believe it was in/around the 2008 collapse.
Submit to the relentless rules of humble arithmetic and avoid the tyranny of compounding costs.
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Re: Could John Bogle Be Right About International Stock?

Post by itstoomuch »

I heard Bogle on WallStreetWeek with Louis Rukyser when the Index was just a few 10's mill.
No bonds. No International. So that leaves just the US's SP500 Index :oops:

The times when I strayed, I got mauled sometimes not immediately, some took decades to develop.
If you want to do Bonds and International then you also think about market timing and retirement cycle timing.

ymmv :annoyed

Disclaimer: SS and small pension. GLWB annuities. Discretionary Acct (Indexes, stocks, cash @~80%, No bonds, No International). Rental condo. Each bucket will have approx. equal future cash flow. 66/69.
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Re: Could John Bogle Be Right About International Stock?

Post by Petrocelli »

I have not held any international funds since last November. The sector has not had any momentum. However, I expect it will get oversold and will come back at some point.
Petrocelli (not the real Rico, but just a fan)
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Uncle Pennybags
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Re: Could John Bogle Be Right About International Stock?

Post by Uncle Pennybags »

orca91 wrote:
Uncle Pennybags wrote:
orca91 wrote:I am wondering, with the EU event going on I can see why things would get shaky in international.... but, why isn't money flooding to US stocks? Isn't that how it's supposed to work?
The money is flowing into US Bonds and gold.
Total bond went up today, but not by much. I wouldn't call that flowing or flooding to bonds.
Verb flow; fall or flow in a certain way..

Bonds up 0.46 (0.55%); that's a "flow".
orca91
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Re: Could John Bogle Be Right About International Stock?

Post by orca91 »

Uncle Pennybags wrote:
orca91 wrote:
Uncle Pennybags wrote:
orca91 wrote:I am wondering, with the EU event going on I can see why things would get shaky in international.... but, why isn't money flooding to US stocks? Isn't that how it's supposed to work?
The money is flowing into US Bonds and gold.
Total bond went up today, but not by much. I wouldn't call that flowing or flooding to bonds.
Verb flow; fall or flow in a certain way..

Bonds up 0.46 (0.55%); that's a "flow".
Weak.

The flow certainly didn't match the outflow from stock funds. Explain. :wink:
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GordonGekko1987
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Re: Could John Bogle Be Right About International Stock?

Post by GordonGekko1987 »

I see Jack Bogle's viewpoint on this issue as well but I still see a need to invest internationally for diversification purposes.
I am a first time investor (laughable given my user name & profile) but I like Developed Markets better and I like the change Vanguard
made recently.I see a downside to having Total International because of Emerging Markets. At least Developing Markets Fund provides some return on your money.Plus I like the low ER and Price per share ! :greedy

A. Developed Markets (VTMGX) ER .09 $11.54 (See Note)
https://personal.vanguard.com/us/funds/ ... undId=0127

* May 31, 2016 /PRNewswire/ -- Vanguard announced today that the $52 billion Vanguard Developed Markets Index Fund, including its ETF share class (ticker: VEA), will begin tracking a new index, the FTSE Developed All Cap ex US Index, effective with the opening of trading on June 1, 2016.
*The fund's new target index, the FTSE Developed All Cap ex US Index, is a market-capitalization weighted benchmark representing the performance of large-, mid-, and small-cap companies in developed markets, including Canada and excluding the U.S. The index comprises approximately 3,700 securities from 24 countries, and is derived from the FTSE Global Equity Index Series.

The new benchmark's 10.6% exposure to small-cap stocks moves the fund closer to market-cap weightings and offers additional diversification. With the addition of Canada, which represents approximately 8.3% of the benchmark, the Developed Markets Index Fund will be the largest market-cap weighted index fund of its type to offer all-cap exposure to all developed markets outside the U.S1.

B. Emerging Markets Stock Index Fund Admiral Shares (VEMAX) ER.15 $28.00
https://personal.vanguard.com/us/funds/ ... undId=5533

C. International Stock Index Fund Admiral Shares (VTIAX) ER .12 $23.08
https://personal.vanguard.com/us/funds/ ... undId=0569

[Note: http://www.prnewswire.com/news-releases ... 77214.html
Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. | Greed, in all of its forms greed for life, for money, for love, knowledge has marked the upward surge of mankind.
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Hector
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Re: Could John Bogle Be Right About International Stock?

Post by Hector »

orca91 wrote:
Uncle Pennybags wrote:
orca91 wrote:
Uncle Pennybags wrote:
orca91 wrote:I am wondering, with the EU event going on I can see why things would get shaky in international.... but, why isn't money flooding to US stocks? Isn't that how it's supposed to work?
The money is flowing into US Bonds and gold.
Total bond went up today, but not by much. I wouldn't call that flowing or flooding to bonds.
Verb flow; fall or flow in a certain way..

Bonds up 0.46 (0.55%); that's a "flow".
Weak.

The flow certainly didn't match the outflow from stock funds. Explain. :wink:
Most times when stock market crashes, a lot of us sell stocks, but do not buy bond using all proceed from selling stock.
freedom66
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Re: Could John Bogle Be Right About International Stock?

Post by freedom66 »

Since there is a good amount of historical data in this thread, perhaps it could be considered at this point to ask, besides if John Bogle "could be right" also if he already "was right" depending on your specific history. When did he first say this? Was it in "Bogle on Mutual Funds" in 1993 or "Common Sense" in 1999 or other? Int'l investing is such a polarizing topic, coupled with the unknowable issue of predicting the future. But there were and are Bogleheads in every stage of portfolio all the time - just starting, have a lot but still dollar-cost-averaging, retired and living off the aggregate, etc. So my point is that if folks like Stemiger and others who followed the advice of Bogle a long time ago have reaped the rewards of this, they are likely so far ahead of the game that int'l would have to significantly outperform for decades just to break even with their all-U.S. portfolio. If you are starting today, well, it might be a different story. But perhaps it is good to consider the advice of John Bogle from when he said it and for periods since that time to now or better yet to see how his advice would have changed your own situation, to compare against if you had not or are not taking the advice, in order to compare apples to apples and see if John Bogle "was right" so significantly that "catching up" via perseverance with int'l would be mathematically difficult. To know if he'll be right in the future, time will tell, but there is enough history to know how his advice has worked out so far by comparing apples with apples and then you would know how much return itnt'l would have to give to make up for that.
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Taylor Larimore
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Investors who followed Mr. Bogle's advice are richer than those who didn't

Post by Taylor Larimore »

When did he first say this? Was it in "Bogle on Mutual Funds" in 1993 or "Common Sense" in 1999 or other?
Freedom66:

In his first book, Bogle on Mutual Funds, published in 1994, Mr. Bogle wrote:
Given the incremental currency risk, not to mention the addition of sovereign risk (the risk that a nation will default on it financial obligations and the risk of political instability or even war), your exposure to mutual funds investing in foreign stocks should not exceed 20% of your equity portfolio.
Since 1994, investors who followed Mr. Bogle's advice are richer than those who didn't.

Best wishes.
Taylor
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GordonGekko1987
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Re: Could John Bogle Be Right About International Stock?

Post by GordonGekko1987 »

Very well said ! That is the dilemma here really, looking at the past to predict the future. And we all know that "The performance data shown represent past performance, which is not a guarantee of future results." I prefer Developed Markets over Total International Stock Index because it does keep with Jack Bogle's core philosophy of low cost, low price per share - even if it leaves a slice of the market out and sacrifices a broader diversification of my portfolio and a slice of Jack Bogle's other philosophy - Own the whole market.

A. Developed Markets (VTMGX) ER .09 $11.54 (See Note)
https://personal.vanguard.com/us/funds/ ... undId=0127

B. Emerging Markets Stock Index Fund Admiral Shares (VEMAX) ER.15 $28.00
https://personal.vanguard.com/us/funds/ ... undId=5533

C. International Stock Index Fund Admiral Shares (VTIAX) ER .12 $23.08
https://personal.vanguard.com/us/funds/ ... undId=0569

[Note: http://www.prnewswire.com/news-releases ... 77214.html
Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. | Greed, in all of its forms greed for life, for money, for love, knowledge has marked the upward surge of mankind.
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