is foreign investing really worth it
is foreign investing really worth it
I have a significant chunk of my portfolio in foreign developed markets. So far these investment have been very disappointing. I am still a believer in diversification, guarding against home bias in investments, and not chasing yesterday's performance. These developed markets look cheap compared with the US markets. Jack Bogle and Warren Buffet stay close to home and have done very well indeed. The opportunity cost of holding onto these foreign investments is quite large. I am starting to question the conventional wisdom. Would you sell your foreign stocks and re-invest in the US?
Re: is foreign investing really worth it
Not for any of the reasons you stated. Stay the course my friend.sabhen wrote:Would you sell your foreign stocks and re-invest in the US?
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Re: is foreign investing really worth it
Actions should be based in principles and strategies, not imitations of apparent authority figures. So I think you've done well to develop a well-reasoned course and that you've already answered your own question.sabhen wrote:I am still a believer in diversification, guarding against home bias in investments, and not chasing yesterday's performance.
Quod vitae sectabor iter?
Re: is foreign investing really worth it
I only buy assets when they are disappointing.
Re: is foreign investing really worth it
If not due to yesterday's performance, then what exactly is the rationale for questioning your approach? Based on Bogle? To some extent he might be the last person I would turn to in terms of some form of fundamentally based guidance. It's no secret that's not really his thing. It's also no secret that over his investing lifetime, a US only strategy has done quite well.
Re: is foreign investing really worth it
So, I am filling up my car at the local BP gas station. A Toyota Camry pulls up and the driver gets out and proceeds to fill up his car. While waiting, he is chatting on his Samsung phone and eating a Nestle chocolate bar. Hmmm..................
"..the cavalry ain't comin' kid, you're on your own..."
Re: is foreign investing really worth it
Absolutely not. Back in 2007, things looked a whole lot different. International was a "must have" asset class. Back then, folks were saying that International does better than US. You have to understand that markets have cycles. Sometimes US does better, sometimes International does better. A lot of the cycle is currency fluctuations. Really a lot of what you are seeing is a very strong US Dollar which has a depressing effect on International Stocks and Bonds.sabhen wrote:I have a significant chunk of my portfolio in foreign developed markets. So far these investment have been very disappointing. I am still a believer in diversification, guarding against home bias in investments, and not chasing yesterday's performance. These developed markets look cheap compared with the US markets. Jack Bogle and Warren Buffet stay close to home and have done very well indeed. The opportunity cost of holding onto these foreign investments is quite large. I am starting to question the conventional wisdom. Would you sell your foreign stocks and re-invest in the US?
Diversify, guard against home bias, and don't chase performance. I am just repeating back your very wise advice. Why not follow it?
A fool and his money are good for business.
Re: is foreign investing really worth it
Regarding the under-performance of international, consider this. There are also parts of US that have under-performed, but it's not as obvious because those segments are combined with TSM. Some are saying that high dividend yielders and utilities may be overbought now. But of course those saying it can't tell us when they may revert to the mean. Last year, the so called FANG stocks (Facebook, Amazon, Netflix and Google) were driving a great deal of the market's return. But I didn't see any posts questioning holding the remainder of the market.
I'm seeing TISM yielding 3% and TSM yielding 2%. If markets go sideways for a year or two or even down, I will be happy to be receiving the extra dividends that TISM is yielding on that part of my portfolio. And I'll be even happier if TISM outperforms TSM going forward. But I'm not trying to time the markets. I hold the AA outlined in my Investment Policy Statement and will continue to do so.
Look at the Callan Periodic Table of Investment Returns. MSCI EAFE (Developed markets outside US & Canada) look good in 2005-07, along with emerging markets. I like holding TISM because it contains emerging markets. TSM has no emerging market exposure.
Also you can look at the individual companies that make up TISM. Ask yourself if you have a good reason to forgo any ownership in those companies. Many are well known global corporations. Reviewing these usually gives me some comfort about my international holdings.
My biggest concern about TSM and TISM is that they are tilted to mega and large cap companies. That is why I hold some mid and small value. I feel it actually adds to my diversification. But I don't compare the returns of these tilts to the broader market. I just let them ride.
Kalo
I'm seeing TISM yielding 3% and TSM yielding 2%. If markets go sideways for a year or two or even down, I will be happy to be receiving the extra dividends that TISM is yielding on that part of my portfolio. And I'll be even happier if TISM outperforms TSM going forward. But I'm not trying to time the markets. I hold the AA outlined in my Investment Policy Statement and will continue to do so.
Look at the Callan Periodic Table of Investment Returns. MSCI EAFE (Developed markets outside US & Canada) look good in 2005-07, along with emerging markets. I like holding TISM because it contains emerging markets. TSM has no emerging market exposure.
Also you can look at the individual companies that make up TISM. Ask yourself if you have a good reason to forgo any ownership in those companies. Many are well known global corporations. Reviewing these usually gives me some comfort about my international holdings.
My biggest concern about TSM and TISM is that they are tilted to mega and large cap companies. That is why I hold some mid and small value. I feel it actually adds to my diversification. But I don't compare the returns of these tilts to the broader market. I just let them ride.
Kalo
"When people say they have a high risk tolerance, what they really mean is that they are willing to make a lot of money." -- Ben Stein/Phil DeMuth - The Little Book of Bullet Proof Investing.
Re: is foreign investing really worth it
I did. When I stopped buying individual stocks and started taking the advice of Jack Bogle and Warren Buffett. I heard the message from them for a long time, but it wasn't until around 2007-2008 that I woke up and realized I'm part of the "most people .. 99% of people" that Buffett says the advice, "just buy a low-cost broad based U.S. index fund averaged in over time" is directed too.sabhen wrote:... Would you sell your foreign stocks and re-invest in the US?
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Fundamental guidance?
swaption:swaption wrote:To some extent he (Mr. Bogle) might be the last person I would turn to in terms of some form of fundamentally based guidance.[/u]
If not Mr. Bogle, who do you turn to for "fundamentally based guidance?"
Wm Bernstein, author of many financial books, wrote this:
Thank you and best wishes."When I disagree with Jack Bogle I am usually wrong."
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: is foreign investing really worth it
While the recent results for "international" have been lackluster, at best, I try to look at the bright side. Back many years ago, I committed to merely 15% of stock assets in international. With a tad of a tilt to emerging.
One of these days, either I or my heirs, will appreciate. Investing is, as they say, for the "long term". But then, in the long term, we're all dead.
One of these days, either I or my heirs, will appreciate. Investing is, as they say, for the "long term". But then, in the long term, we're all dead.
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Re: is foreign investing really worth it
I'm in the same boat. It would be a lie to say that I have never considered going U.S. only. But I have not seriously considered that. I've been buying the whole way down. I hope to buy the whole way down and the whole way up. In my experience the best time to buy is when it feels really awful.
Re: is foreign investing really worth it
You're probably right. There's been a lot of negative reactions about International lately. Although I don't have an International allocation, it "feels" like the wrong time to be getting out of one if someone was going to make a change.whodidntante wrote:... In my experience the best time to buy is when it feels really awful.
Personally, I don't like the risks associated with International, and don't think further diversification from a U.S. index fund is needed either... but I also really don't like the idea of flip-flopping on allocations or chasing past performance either.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Re: is foreign investing really worth it
Remember March 9, 2009, the bottom of the abyss. All heck was breaking loose, folks had lost everything, andwhodidntante wrote:In my experience the best time to buy is when it feels really awful.
you bought, just when everyone else was selling. Your wife is now convinced you are a financial genius. I never attempt to disabuse my wife from thinking I am a genius, financial or otherwise.
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Re: is foreign investing really worth it
Actually, US Stocks feel pretty awful right now. We had an almost mini-bear market and since then the markets have almost completely recovered. My gosh, have you read the financial articles? The rally is fake. The market is overvalued. Some billionaire says that the market is about to crash! Former Congressman Ron Paul is warning us about bad things. Robert Kiyosaki says the markets will crash this year and he has been foreseeing this for years. The technical indicators don't look good. On and on, doom and gloom.JoMoney wrote:You're probably right. There's been a lot of negative reactions about International lately. Although I don't have an International allocation, it "feels" like the wrong time to be getting out of one if someone was going to make a change.whodidntante wrote:... In my experience the best time to buy is when it feels really awful.
Personally, I don't like the risks associated with International, and don't think further diversification from a U.S. index fund is needed either... but I also really don't like the idea of flip-flopping on allocations or chasing past performance either.
I don't see any euphoria out there. Markets look reasonably priced to me.
A fool and his money are good for business.
Re: is foreign investing really worth it
Respectfully
Over the years and reading through various posts about when to invest, the phrase "buy when there's blood in the streets."
Well...Europe comes to mind.
Over the years and reading through various posts about when to invest, the phrase "buy when there's blood in the streets."
Well...Europe comes to mind.
"..the cavalry ain't comin' kid, you're on your own..."
Re: is foreign investing really worth it
Philip Morris (PM) is foreign or domestic? What % of GE sales are international? What % of Nestle sales are in the US?
How do you account for this? This is why Bogle and Buffet know the S&P 500 is just fine for most.
How do you account for this? This is why Bogle and Buffet know the S&P 500 is just fine for most.
Re: is foreign investing really worth it
Nedsaid, I bailed last week in my Trust Account, sold every last centavo. If it wasn't nailed down, it got sold. I have absolutely no faith in this market.
Riding into the sunset with a boat-load of cash, I am.
Riding into the sunset with a boat-load of cash, I am.
Re: is foreign investing really worth it
I'm underinvesting in Europe. I just don't see where the future growth is going to come from. Is it business friendly? Is it attracting the most talented people in the world or are the immigrants not well versed in world class business theory---ie where are the Elon Musk's and Sergey Brin's of the world emigrating to? Is the work ethic amongst the strongest in the world? Is the right kind of population growth happening?
Europe's a great place to visit, but a very poor place to do business. There's still some world class companies in Europe, but their growth is coming from outside of Europe.......but I can get this by investing in the U.S. markets.
Europe's a great place to visit, but a very poor place to do business. There's still some world class companies in Europe, but their growth is coming from outside of Europe.......but I can get this by investing in the U.S. markets.
Re: is foreign investing really worth it
I did the "15%" international with a tilt to emerging, I drank the Kool-Aid. I get it. At some point in time, one merely has to accept the fact that international did not pan out.
One merely needs to accept the fact that "international" ain't what it was.
"Pan out" is, itself, an interesting story. When miners had no success in their pans, during the gold rush, they would "pan out"
One merely needs to accept the fact that "international" ain't what it was.
"Pan out" is, itself, an interesting story. When miners had no success in their pans, during the gold rush, they would "pan out"
Re: is foreign investing really worth it
I tend to agree with John Bogle and Warren Buffett. When you diversify into international markets, emerging markets or frontier markets you introduce 1) political risk, 2) foreign accounting standards risk and 3) currency risk. I have abstained from foreign investing for years and do not seem to have suffered from lack of foreign diversification.
To be truly diversified I should probably have some blue chip stocks, some dedicated to sustainability green stocks, probably some grey market equities and some black market companies.
So far I have not color diversified and that does not seem to be a detriment either
All diversifications are not equal............Gordon
To be truly diversified I should probably have some blue chip stocks, some dedicated to sustainability green stocks, probably some grey market equities and some black market companies.
So far I have not color diversified and that does not seem to be a detriment either
All diversifications are not equal............Gordon
Disciple of John Neff
Re: Fundamental guidance?
Hi Taylor,Taylor Larimore wrote:swaption:swaption wrote:To some extent he (Mr. Bogle) might be the last person I would turn to in terms of some form of fundamentally based guidance.[/u]
If not Mr. Bogle, who do you turn to for "fundamentally based guidance?"
Wm Bernstein, author of many financial books, wrote this:Thank you and best wishes."When I disagree with Jack Bogle I am usually wrong."
Taylor
My point essentially is that the premise behind much of what Mr. Bogle advocates is that efforts to allocate investments based on one's view of fundamentals are not generally beneficial. We readily accept this with respect to stocks, so why not markets? I'm not sure why we should expect Mr. Bogle to have any superior insight regarding the choice of particular markets. With all due respect to Mr. Bogle, he is human after all and as we know much of the path he has taken was due to the shortcomings of his early approaches. Now this particular approach has not had much in the way of shortcomings, so there really isn't much incentive to modify his approach. Diversification is a free lunch and there is no reason to think international equities would be priced to provide any lower risk adjusted return.
Point taken on Mr. Bernstein's quote. But I will point out that this is one topic where Mr. Bernstein has disagreed with Mr. Bogle for quite some time, and I have yet to see the white flag of surrender.
Re: is foreign investing really worth it
It's easy to find good reasons to sell investments that have recently done poorly and favor investments that have recently done well. If you find yourself doing that, you should think long and hard about the validity of your reasons or if you're just reacting to recent performance. If you invested in international for diversification, have you stopped believing in diversification?
Wait a good long while before acting to make sure you're not just chasing performance.
Wait a good long while before acting to make sure you're not just chasing performance.
- in_reality
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Re: Fundamental guidance?
Well if Bogle made the all the rules, we wouldn't have ETFs and expats, who legally can't be sold mutual funds due to the way mutual funds handle tax credits, would really be left with buying individual stocks and thankful Schwab introduced a discount brokerage.Taylor Larimore wrote: If not Mr. Bogle, who do you turn to for "fundamentally based guidance?"
Wm Bernstein, author of many financial books, wrote this:"When I disagree with Jack Bogle I am usually wrong."
I think there is no clear answer. Just as there may be no clear answer on whether or not a value premium is realizable with commonly available funds in one's investing timeframe.
If money starts to flow towards international, it will likely slosh!!! Have you ever held a sloshing pan of water? It moves like it has a life of it's own. I don't want to be holding only US if the market sloshes like it tends to do.
So Bogle has his reasons for saying what he does, but it doesn't mean it's applicable to me. He's not transcendent.
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Re: is foreign investing really worth it
Current performance of foreign investing is challenging the patience of the investor. As I get closer to retirement age, I am losing patience. The current geopolitical and economic conditions in Europe do not look promising for my time horizon.
"Ignorance more frequently begets confidence than does knowledge" |
“At 50, everyone has the face he deserves”
Re: is foreign investing really worth it
I don't think there is a black and white case for every investor to have a global or near global equity allocation. But, you can't make the determination of what international equities you should allocate to by focusing on the relatively poor performance over the last few years. That might tell you that they are a real bargain and you should double up on them instead of selling out.
That being said I think what country you are in, your age and your financial status should weigh in on how much you invest outside of your home country. I'm sure there are other factors.
Best case for having a large allocation to foreign equities. -
1 You are young so there is a lot that can happen over 5 or more decades so you are hedging you bets that while your home country looks good now that might not always be the case.
2, If your financial position is less than you desire. You might need the benefits of maximum diversity.
3. Your country's economic, political and military situation to name a few factors. e.g. If you live in a small country, with an economy based on a natural resource such as coal that is going out of favor and accounts for 2% of the world economy, you are surrounded by some unfriendly countries, etc.
If you have the above situation(s) you would be very wise to maximize your international equity and fixed income allocation.
If you live in a country that has the largest world economy that is very diverse, has a strong military, a good deal of natural resources, a highly educated population, friendly neighbors etc,, you are retired and are in a decent shape financially the need for foreign investing is less. I'm not saying it is a bad idea just that it is less critical.
I'm retired, live in the U.S and am in pretty good financial shape. I have some international equities but probably less than many. I view international equities as a tilt -- maybe 10% or so of my conservative equity allocation.
That being said I think what country you are in, your age and your financial status should weigh in on how much you invest outside of your home country. I'm sure there are other factors.
Best case for having a large allocation to foreign equities. -
1 You are young so there is a lot that can happen over 5 or more decades so you are hedging you bets that while your home country looks good now that might not always be the case.
2, If your financial position is less than you desire. You might need the benefits of maximum diversity.
3. Your country's economic, political and military situation to name a few factors. e.g. If you live in a small country, with an economy based on a natural resource such as coal that is going out of favor and accounts for 2% of the world economy, you are surrounded by some unfriendly countries, etc.
If you have the above situation(s) you would be very wise to maximize your international equity and fixed income allocation.
If you live in a country that has the largest world economy that is very diverse, has a strong military, a good deal of natural resources, a highly educated population, friendly neighbors etc,, you are retired and are in a decent shape financially the need for foreign investing is less. I'm not saying it is a bad idea just that it is less critical.
I'm retired, live in the U.S and am in pretty good financial shape. I have some international equities but probably less than many. I view international equities as a tilt -- maybe 10% or so of my conservative equity allocation.
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Re: is foreign investing really worth it
Let's see, should I dump an asset class that has done well recently for one that has not? You tell me.sabhen wrote:Would you sell your foreign stocks and re-invest in the US?
Best regards, -Op |
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"In the middle of difficulty lies opportunity." Einstein
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Re: is foreign investing really worth it
Yes, if you can predict the future.Call_Me_Op wrote:Let's see, should I dump an asset class that has done well recently for one that has not? You tell me.sabhen wrote:Would you sell your foreign stocks and re-invest in the US?
"Ignorance more frequently begets confidence than does knowledge" |
“At 50, everyone has the face he deserves”
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Re: is foreign investing really worth it
The fault for misinterpretation - or choosing the wrong take-away - of what I thought Mr Swedroe wrote in his 4/1/16 article is entirely my own.
http://www.etf.com/sections/index-inves ... nopaging=1
That said, if you are investing based on market performance during any recent 3 to 5 year - and possibly 10 year - period, you're probably investing based on noise. So, if you have a well thought out plan, you might as well stick with it unless something has changed in your personal circumstances that warrant a change. Simply, if your IPS says a portion of your portfolio should be in international, invest in accordance with your IPS.
http://www.etf.com/sections/index-inves ... nopaging=1
That said, if you are investing based on market performance during any recent 3 to 5 year - and possibly 10 year - period, you're probably investing based on noise. So, if you have a well thought out plan, you might as well stick with it unless something has changed in your personal circumstances that warrant a change. Simply, if your IPS says a portion of your portfolio should be in international, invest in accordance with your IPS.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Re: is foreign investing really worth it
You have to understand that "the current geopolitical and economic conditions in Europe" are what explains the "current performance of foreign investing", implication being that what you think you know is fully priced in.goodenyou wrote:[
Current performance of foreign investing is challenging the patience of the investor. As I get closer to retirement age, I am losing patience. The current geopolitical and economic conditions in Europe do not look promising for my time horizon.
Re: is foreign investing really worth it
The one argument that seems somewhat silly is the 'US companies do a lot if not most of their business outside of USA anyways, so that's how I am getting international exposure'...
If that's the case - you can just buy total international to get US exposure too.
Basically if you flip this argument - there's no reason to own US stocks for US exposure?
I think hardly anyone is doing this.
If that's the case - you can just buy total international to get US exposure too.
Basically if you flip this argument - there's no reason to own US stocks for US exposure?
I think hardly anyone is doing this.
Get rich or die tryin'
- in_reality
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Re: is foreign investing really worth it
OK, so if I go 100% foreign equities, what % US exposure does that give me?dziuniek wrote:The one argument that seems somewhat silly is the 'US companies do a lot if not most of their business outside of USA anyways, so that's how I am getting international exposure'...
If that's the case - you can just buy total international to get US exposure too.
Basically if you flip this argument - there's no reason to own US stocks for US exposure?
I think hardly anyone is doing this.
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Re: is foreign investing really worth it
It's too bad an asset class's volatility is not as readily published as its growth or decline performance and that risk adjusted return isn't considered. When I look more deeply at my total portfolio performance, which includes 35% international index funds, I see that the international component has indeed been a drag on portfolio growth recently (as US was in the past) - but volatility is much lower as a result of international.
Re: is foreign investing really worth it
That makes more sense than what the OP proposes.Call_Me_Op wrote:Let's see, should I dump an asset class that has done well recently for one that has not? You tell me.
Re: is foreign investing really worth it
What if your IPS was written by a relatively inexperienced investor.....like me...or you. Do you follow it by rote?......GordonRadAudit wrote: Simply, if your IPS says a portion of your portfolio should be in international, invest in accordance with your IPS.
Disciple of John Neff
- in_reality
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Re: is foreign investing really worth it
Well did you see the market earlier this year? There were any number of posts about "I miscalculated my risk tolerance and have to reduce my stocks". It's too late. Better to stay the possibly slightly-off course than abandon navigation and drift to the winds of your current mood.gwrvmd wrote:What if your IPS was written by a relatively inexperienced investor.....like me...or you. Do you follow it by rote?......GordonRadAudit wrote: Simply, if your IPS says a portion of your portfolio should be in international, invest in accordance with your IPS.
Get the IPS right enough that you can follow it.
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Re: is foreign investing really worth it
I respectfully disagree. Europe is business friendly. It attracts many of the most talented people in the world and allows them to move across borders to efficiently allocate resources and talent as business cycles demand, and the immigrant population is well educated in large part.Flashes1 wrote:I'm underinvesting in Europe. I just don't see where the future growth is going to come from. Is it business friendly? Is it attracting the most talented people in the world or are the immigrants not well versed in world class business theory---ie where are the Elon Musk's and Sergey Brin's of the world emigrating to? Is the work ethic amongst the strongest in the world? Is the right kind of population growth happening?
Europe's a great place to visit, but a very poor place to do business. There's still some world class companies in Europe, but their growth is coming from outside of Europe.......but I can get this by investing in the U.S. markets.
Re: is foreign investing really worth it
I stopped playing those " crystal-Ball" mind games long ago! Not just The Vanguard Group think tanks, but most all others agree that a well diversified portfolio should have about 30% to 40% of its bucks invested in international stocks AND bonds,..What Buffet and Bogle do is their business. They are both on another plain money wise, and therefore have special interests to consider.
SeeMoe..
SeeMoe..
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}
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Re: is foreign investing really worth it
While there will be some growing pains for Europe, I personally believe that the influx of migrants will be beneficial in the long run. I'm investing for decades, not next week.
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Re: is foreign investing really worth it
Good point. I'm not that good to think up an investment policy on my own. So, after about forty years of investing, I finally got to an IPS that looks like an age appropriate AA of geographically diversified, market and cap weighted stocks and bonds. It's essentially a consensus opinion. So far, I'm following it. Have been for several years.gwrvmd wrote:What if your IPS was written by a relatively inexperienced investor.....like me...or you. Do you follow it by rote?......GordonRadAudit wrote: Simply, if your IPS says a portion of your portfolio should be in international, invest in accordance with your IPS.
Now, that said, the last time I switched from individual stock investing to index investing was early October 1987. You've been warned.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
Re: is foreign investing really worth it
Not sure but what about the other way around? Is it the same? Is it more? Or is it less?in_reality wrote:OK, so if I go 100% foreign equities, what % US exposure does that give me?dziuniek wrote:The one argument that seems somewhat silly is the 'US companies do a lot if not most of their business outside of USA anyways, so that's how I am getting international exposure'...
If that's the case - you can just buy total international to get US exposure too.
Basically if you flip this argument - there's no reason to own US stocks for US exposure?
I think hardly anyone is doing this.
- Why guess when you can get exposure from both ends?
Do US companies sell more to China or do Chinese companies sell more to the US? What about 25 years from now?
Get rich or die tryin'
Re: is foreign investing really worth it
I thought you were not supposed to use a phone or electronic device near the gas pump...peppers wrote:So, I am filling up my car at the local BP gas station. A Toyota Camry pulls up and the driver gets out and proceeds to fill up his car. While waiting, he is chatting on his Samsung phone and eating a Nestle chocolate bar. Hmmm..................
As for international investing, I thought the value of it was that it was less correlated with the US stock market. Now that this expectation has proven correct, everybody is complaining...
Isn't this exactly was it was supposed to do to lessen volatility over the long run, and thus isn't it working as predicted?
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Re: is foreign investing really worth it
I also am getting the first shades of tracking error regret. I've learned a lot of investing lessons along the way and the only way to really cement them is to go through it. Sticking with my plan.
Re: Fundamental guidance?
And, what's the saying about when experts disagree?swaption wrote:Point taken on Mr. Bernstein's quote. But I will point out that this is one topic where Mr. Bernstein has disagreed with Mr. Bogle for quite some time, and I have yet to see the white flag of surrender.
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When experts disagree . .
orca91:What's the saying about when experts disagree?
This is another saying that often applies:"When experts disagree it is often because it makes no foreseeable difference."
Best wishes"There is more than one road to Dublin."
Taylor
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"Simplicity is the master key to financial success." -- Jack Bogle
Re: is foreign investing really worth it
If you define market as the World market, then by investing only in the US market you are actually making a decision that you know more than the market. Is this not what Bogleheads so emphatically reject?
Erwin
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Re: is foreign investing really worth it
I put 40% of my equity investments in international. Here is my reasoning, which I think is fairly Boglehead-ish:
Diversification in equity holdings is good. My equity holdings should be proportional to market capitalization unless I have some reason to think that some groups of stocks will do better for me than others. There are three ways that could happen: (a) I have information that other market participants lack, (b) I have reason to believe that a lot of market participants are acting irrationally, and I know which way that irrationality is leading them, or (c) I have better access to some stocks than others.
Do I have information that other market participants lack? I do not. I'm pretty sure that other market participants know more than I do. (Check out my screen name.)
Do I have reason to believe that people are acting irrationally? Yes! (Again, check out my screen name--I know the irrationality of human nature all too well.) Do I know which way that irrationality is leading market participants? No, I have no idea.
Do I have better access to some stocks than others? Yes, slightly. I'm under the impression that the transaction costs for me to buy international stocks are a bit higher than the transaction costs for me to buy U.S. stocks. This leads me to think it's prudent to have a slight tilt toward domestic equities, but only a slight tilt. My understanding, based on year-old market capitalization data, is that buying 60% domestic stock constitutes a slight tilt toward domestic.
I'm aware that many people regard currency risk as a relevant consideration. It seems to me that currency risk cuts both ways, and I don't know how to think about it, so I choose not to think about it.
Diversification in equity holdings is good. My equity holdings should be proportional to market capitalization unless I have some reason to think that some groups of stocks will do better for me than others. There are three ways that could happen: (a) I have information that other market participants lack, (b) I have reason to believe that a lot of market participants are acting irrationally, and I know which way that irrationality is leading them, or (c) I have better access to some stocks than others.
Do I have information that other market participants lack? I do not. I'm pretty sure that other market participants know more than I do. (Check out my screen name.)
Do I have reason to believe that people are acting irrationally? Yes! (Again, check out my screen name--I know the irrationality of human nature all too well.) Do I know which way that irrationality is leading market participants? No, I have no idea.
Do I have better access to some stocks than others? Yes, slightly. I'm under the impression that the transaction costs for me to buy international stocks are a bit higher than the transaction costs for me to buy U.S. stocks. This leads me to think it's prudent to have a slight tilt toward domestic equities, but only a slight tilt. My understanding, based on year-old market capitalization data, is that buying 60% domestic stock constitutes a slight tilt toward domestic.
I'm aware that many people regard currency risk as a relevant consideration. It seems to me that currency risk cuts both ways, and I don't know how to think about it, so I choose not to think about it.
- Crushtheturtle
- Posts: 333
- Joined: Sat Mar 15, 2014 10:29 pm
- Location: SC
Re: is foreign investing really worth it
My thinking as well.Erwin wrote:If you define market as the World market, then by investing only in the US market you are actually making a decision that you know more than the market. Is this not what Bogleheads so emphatically reject?
- Boglehead meets Daytrader |
- The opposite of love is apathy. I apathy the market
- Crushtheturtle
- Posts: 333
- Joined: Sat Mar 15, 2014 10:29 pm
- Location: SC
Re: is foreign investing really worth it
humanities wrote:I put 40% of my equity investments in international. Here is my reasoning, which I think is fairly Boglehead-ish:
Diversification in equity holdings is good. My equity holdings should be proportional to market capitalization unless I have some reason to think that some groups of stocks will do better for me than others. There are three ways that could happen: (a) I have information that other market participants lack, (b) I have reason to believe that a lot of market participants are acting irrationally, and I know which way that irrationality is leading them, or (c) I have better access to some stocks than others.
Do I have information that other market participants lack? I do not. I'm pretty sure that other market participants know more than I do. (Check out my screen name.)
Do I have reason to believe that people are acting irrationally? Yes! (Again, check out my screen name--I know the irrationality of human nature all too well.) Do I know which way that irrationality is leading market participants? No, I have no idea.
Do I have better access to some stocks than others? Yes, slightly. I'm under the impression that the transaction costs for me to buy international stocks are a bit higher than the transaction costs for me to buy U.S. stocks. This leads me to think it's prudent to have a slight tilt toward domestic equities, but only a slight tilt. My understanding, based on year-old market capitalization data, is that buying 60% domestic stock constitutes a slight tilt toward domestic.
I'm aware that many people regard currency risk as a relevant consideration. It seems to me that currency risk cuts both ways, and I don't know how to think about it, so I choose not to think about it.
Well said. And you are correct about 60% US being a slight tilt in that direction. Presently, the global market cap is 53.4% US. One can monitor it via the VTWSX (Vanguard Total World Stock Index Fund Investor Shares) web page, which the Vanguard worker bees seem to update monthly:
https://personal.vanguard.com/us/funds/ ... =INT#tab=2
- Boglehead meets Daytrader |
- The opposite of love is apathy. I apathy the market
Re: is foreign investing really worth it
Most here think international is necessary. John Bogle does not. It depends on who you want to listen to.sabhen wrote:I have a significant chunk of my portfolio in foreign developed markets. So far these investment have been very disappointing. I am still a believer in diversification, guarding against home bias in investments, and not chasing yesterday's performance. These developed markets look cheap compared with the US markets. Jack Bogle and Warren Buffet stay close to home and have done very well indeed. The opportunity cost of holding onto these foreign investments is quite large. I am starting to question the conventional wisdom. Would you sell your foreign stocks and re-invest in the US?
For the record John Bogle wrote 9 books on investing. Most are not for the novice, are very analytical and filled with facts and figures that may be too much for the beginner. He purposely wrote The Little Book of Common Sense Investing so the average person can also understand why indexing works so well (this book was recommended by Warren Buffett in his 2014 Letter to the Shareholders).
I have never invested in international, but as far as you bailing out because it has not done well is the wrong reason. If you will sleep better because you believe it is the way to go and John Bogle is right, then that is another story.
I personally would not bet against John Bogle and Warren Buffett even though many folks here are very smart also.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!