International Index Funds

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DesertInvestor
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International Index Funds

Post by DesertInvestor » Tue Dec 20, 2016 1:06 pm

I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?

asif408
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Re: International Index Funds

Post by asif408 » Tue Dec 20, 2016 3:13 pm

So from 2002-2009, markets moved almost in lock step, just with lower returns in the US. In fact, the US index lagged the international index in 7 out of 8 years: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

So based on your comparable reasoning, in 2010 shouldn't one have just stuck to a total international stock market index for diversification and stayed outside the US? After all, the US is only one country, the international stock fund has many countries.

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Re: International Index Funds

Post by livesoft » Tue Dec 20, 2016 5:09 pm

DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
This is often asked, but the truth is that one cannot predict the future, so who knows?

Many people decide to use only US equities. Many people use both with a wide range of split between US and international. I've seen typical splits to international of 0% to 50%. I myself use 50% right now.

Thus, I don't think you will get a satisfactory answer to the question you posed. You can get confirmation bias though.
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Re: International Index Funds

Post by KyleAAA » Tue Dec 20, 2016 5:20 pm

The last 20 years have favored the US stock market. Will the next 20 years look like the last 20? I wouldn't bet on it which is why I put 50% of my equity allocation in foreign stocks.

Dulocracy
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Re: International Index Funds

Post by Dulocracy » Tue Dec 20, 2016 5:29 pm

I started with a 60/40 split between US and International. My understanding is that fiddling with things is worse than having the wrong asset allocation, so I have been staying the course. However, if I was starting out today, I would choose a 50/50 US/International split.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: International Index Funds

Post by abuss368 » Tue Dec 20, 2016 5:36 pm

DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
Hi DesertInvestor,

Welcome to the Bogleheads!

A very good question and one that has no shortage of threads and debates! Vanguard investment experts recommend an allocation of 20% - Market Weight (i.e. approximately 50%) of the stock portion of an investors portfolio to Total International Index fund. The Lifestrategy and Target funds from Vanguard have an allocation of 40% of the stock portion to Total International Index fund.

Jack Bogle has noted that in his opinion an international fund is not needed but simply Total Stock and Total Bond for an easy Two Fund Portfolio.

There is no way to know in advance how the markets will perform in the future. As such I would recommend to develop an asset allocation that works for you and stay the course.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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F150HD
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Re: International Index Funds

Post by F150HD » Tue Dec 20, 2016 8:27 pm

DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
Scroll down to "On people who would criticize that choice because the S&P 500 is a U.S. stock index:"

http://www.marketwatch.com/story/jack-b ... 2016-12-20

Worth a read....

donaldfair71
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Re: International Index Funds

Post by donaldfair71 » Tue Dec 20, 2016 8:59 pm

F150HD wrote:
DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
Scroll down to "On people who would criticize that choice because the S&P 500 is a U.S. stock index:"

http://www.marketwatch.com/story/jack-b ... 2016-12-20

Worth a read....
Thanks for sharing this.

Good Lord, 4-5% is kind of depressing from the stock side of the portfolio. I assume he means nominal so, hmmm.

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Taylor Larimore
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"How Much International Stock? A Suggestion."

Post by Taylor Larimore » Tue Dec 20, 2016 9:06 pm

DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
DesertInvestor:

You may find this post helpful:

How much international stock? A suggestion

Happy Holiday!
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

SteveB3005
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Re: International Index Funds

Post by SteveB3005 » Tue Dec 20, 2016 9:09 pm

Even if nothing else you pick up currency diversification, that seems to be a large part of what would appear as out-performance in a short and mid-term time frame.

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F150HD
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Re: International Index Funds

Post by F150HD » Tue Dec 20, 2016 10:07 pm

donaldfair71 wrote:
Thanks for sharing this.

Good Lord, 4-5% is kind of depressing from the stock side of the portfolio. I assume he means nominal so, hmmm.
Keep reading the board, many knowledgeable people here (far more then I)

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Kevin M
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Re: International Index Funds

Post by Kevin M » Tue Dec 20, 2016 10:13 pm

Try this Google search: international stock site:bogleheads.org. I get 27,200 results.

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iceport
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Re: International Index Funds

Post by iceport » Tue Dec 20, 2016 10:30 pm

livesoft wrote:
DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
This is often asked...
Maybe, but somehow I think it is asked far less often after international equity has outperformed domestic equity over a lengthy period.
"Discipline matters more than allocation.” ─William Bernstein

DesertInvestor
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Re: International Index Funds

Post by DesertInvestor » Thu Dec 22, 2016 4:46 pm

You guys are amazing, thanks. There has to be some wisdom to the elements of investing recommending a 50% allocation on the equity side to international. I reduced it to 40%, along the lines of the Vanguard target and life strategy funds.

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stemikger
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Re: International Index Funds

Post by stemikger » Thu Dec 22, 2016 5:29 pm

DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
I didn't read the other replies, so forgive me if this was already said.

If you stick with a U.S. only index portfolio you will be following the advice of two of the smartest minds in investing. Who are they? John Bogle and Warren Buffett. I personally have followed John Bogle's advice for over 20 years and I'm very comfortable to stick with it. I have never invested in international. I simply hold two funds the Vanguard Institutional Index and the Blackrock U.S. debt index. In retirement I plan to roll it all over in the Vanguard Balanced Index fund and call it a day.

I strongly suggest you purchase Common Sense on Mutual Funds and read the chapter on Global Investing and simplicity.
Deep down, I remain absolutely confident that the vast majority of American families will be well served by owing their equity holdings in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S. bond market index portfolio. ~ John Bogle
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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ruralavalon
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Re: International Index Funds

Post by ruralavalon » Thu Dec 22, 2016 6:47 pm

DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
That is an interesting question, which is often asked here. There are large differences of opinion on this.

My usual answer is that I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6).

Figure 3 on p.5 shows a very flat curve for volatility between 20% and 60%, indicating to me that historically it made very little difference where you fell in that range.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: International Index Funds

Post by lostdog » Thu Dec 22, 2016 7:44 pm

stemikger wrote:
DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
I didn't read the other replies, so forgive me if this was already said.

If you stick with a U.S. only index portfolio you will be following the advice of two of the smartest minds in investing. Who are they? John Bogle and Warren Buffett. I personally have followed John Bogle's advice for over 20 years and I'm very comfortable to stick with it. I have never invested in international. I simply hold two funds the Vanguard Institutional Index and the Blackrock U.S. debt index. In retirement I plan to roll it all over in the Vanguard Balanced Index fund and call it a day.

I strongly suggest you purchase Common Sense on Mutual Funds and read the chapter on Global Investing and simplicity.
Deep down, I remain absolutely confident that the vast majority of American families will be well served by owing their equity holdings in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S. bond market index portfolio. ~ John Bogle
+1

I was banging my head on this so much in the beginning so I decided to keep it simple with the two fund portfolio. Staying the course.

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Taylor Larimore
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Re: International Index Funds

Post by Taylor Larimore » Thu Dec 22, 2016 9:00 pm

lostdog wrote:
I was banging my head on this so much in the beginning so I decided to keep it simple with the two fund portfolio. Staying the course.
lostdog:

When experts disagree it is often because it makes no foreseeable difference.

Happy Holiday!
Taylor
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TimeRunner
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Re: International Index Funds

Post by TimeRunner » Thu Dec 22, 2016 9:06 pm

There's always VT, the ultimate long-term Boglehead ETF: https://personal.vanguard.com/us/funds/ ... IntExt=INT

Currently 54.1% USA, the rest the rest. :beer
"What'd ya expect in an opera, a happy ending?" -Bugs Bunny. "You gotta fight for your right to party!" -Beastie Boys

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Re: International Index Funds

Post by lostdog » Thu Dec 22, 2016 9:22 pm

Taylor Larimore wrote:
lostdog wrote:
I was banging my head on this so much in the beginning so I decided to keep it simple with the two fund portfolio. Staying the course.
lostdog:

When experts disagree it is often because it makes no foreseeable difference.

Happy Holiday!
Taylor
Hi Taylor. Happy Holidays to you also.

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White Coat Investor
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Re: International Index Funds

Post by White Coat Investor » Fri Dec 23, 2016 12:33 am

All this anti-international stock sentiment is just performance chasing and recency bias. We see it every time asset classes under perform in the last year or two. Even Bogleheads tend to add asset classes when they're hot and move away from them when they're not, seemingly for good reasons.

I've had 1/3 of my equity in international stocks since I started in investing in 2004. Sometimes it has worked out well. Lately it has not. Their time in the sun will come again during my investment horizon I am confident, so I plan to stay the course. To get an idea of just how variable the hot asset class can be, check out the Callan table:

https://www.americancentury.com/content ... _Table.pdf

You'll notice that international developed stocks beat US stocks in 9 of the last 20 years. Given that US has won 5 of the last 6 years, which do you think is going to be most likely to do well over the next 5 or 10 years?

Emerging markets are often either the best asset class or the worst. (8 times best, 7 times worst in 20 years.) Don't bail out just before you see the return to the mean.

Get a reasonable plan. Write it down. Stick with it for a few decades. You'll be glad you did (and you'll be rich.)
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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stemikger
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Re: International Index Funds

Post by stemikger » Fri Dec 23, 2016 12:47 am

lostdog wrote:
stemikger wrote:
DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
I didn't read the other replies, so forgive me if this was already said.

If you stick with a U.S. only index portfolio you will be following the advice of two of the smartest minds in investing. Who are they? John Bogle and Warren Buffett. I personally have followed John Bogle's advice for over 20 years and I'm very comfortable to stick with it. I have never invested in international. I simply hold two funds the Vanguard Institutional Index and the Blackrock U.S. debt index. In retirement I plan to roll it all over in the Vanguard Balanced Index fund and call it a day.

I strongly suggest you purchase Common Sense on Mutual Funds and read the chapter on Global Investing and simplicity.
Deep down, I remain absolutely confident that the vast majority of American families will be well served by owing their equity holdings in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S. bond market index portfolio. ~ John Bogle
+1

I was banging my head on this so much in the beginning so I decided to keep it simple with the two fund portfolio. Staying the course.
+1
Me too. When I first joined the boards that is the only question I asked (probably every two weeks). I even held international for a week before I went back to my two fund all U.S. portfolio. Other than that one week, I have held no international for over 20 years.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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stemikger
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Re: International Index Funds

Post by stemikger » Fri Dec 23, 2016 12:52 am

White Coat Investor wrote:All this anti-international stock sentiment is just performance chasing and recency bias. We see it every time asset classes under perform in the last year or two. Even Bogleheads tend to add asset classes when they're hot and move away from them when they're not, seemingly for good reasons.

I've had 1/3 of my equity in international stocks since I started in investing in 2004. Sometimes it has worked out well. Lately it has not. Their time in the sun will come again during my investment horizon I am confident, so I plan to stay the course. To get an idea of just how variable the hot asset class can be, check out the Callan table:

https://www.americancentury.com/content ... _Table.pdf

You'll notice that international developed stocks beat US stocks in 9 of the last 20 years. Given that US has won 5 of the last 6 years, which do you think is going to be most likely to do well over the next 5 or 10 years?

Emerging markets are often either the best asset class or the worst. (8 times best, 7 times worst in 20 years.) Don't bail out just before you see the return to the mean.

Get a reasonable plan. Write it down. Stick with it for a few decades. You'll be glad you did (and you'll be rich.)
I don't disagree with any of your facts, but I can tell you on my end, it is not performance chasing. Right or wrong, I just don't feel comfortable holding international. I could be very wrong on this, but like I said in prior posts, it has been over 20 years of not holding it because that is what I feel comfortable with. After reading what John Bogle has to say about it in Common Sense on Mutual Funds, that just really stuck with me.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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Re: International Index Funds

Post by Valuethinker » Fri Dec 23, 2016 3:43 am

TimeRunner wrote:There's always VT, the ultimate long-term Boglehead ETF: https://personal.vanguard.com/us/funds/ ... IntExt=INT

Currently 54.1% USA, the rest the rest. :beer
To me, this would seem the optimum portfolio. No worries about EM weightings etc.

From a volatility point of view, it might have too much non US for a US investor. However if you have a substantial chunk of bonds (US bonds) then that reduces that effect.

I might throw in US small cap value 10% of portfolio if I was a US investor.

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Re: International Index Funds

Post by Valuethinker » Fri Dec 23, 2016 3:43 am

stemikger wrote:
White Coat Investor wrote:All this anti-international stock sentiment is just performance chasing and recency bias. We see it every time asset classes under perform in the last year or two. Even Bogleheads tend to add asset classes when they're hot and move away from them when they're not, seemingly for good reasons.

I've had 1/3 of my equity in international stocks since I started in investing in 2004. Sometimes it has worked out well. Lately it has not. Their time in the sun will come again during my investment horizon I am confident, so I plan to stay the course. To get an idea of just how variable the hot asset class can be, check out the Callan table:

https://www.americancentury.com/content ... _Table.pdf

You'll notice that international developed stocks beat US stocks in 9 of the last 20 years. Given that US has won 5 of the last 6 years, which do you think is going to be most likely to do well over the next 5 or 10 years?

Emerging markets are often either the best asset class or the worst. (8 times best, 7 times worst in 20 years.) Don't bail out just before you see the return to the mean.

Get a reasonable plan. Write it down. Stick with it for a few decades. You'll be glad you did (and you'll be rich.)
I don't disagree with any of your facts, but I can tell you on my end, it is not performance chasing. Right or wrong, I just don't feel comfortable holding international. I could be very wrong on this, but like I said in prior posts, it has been over 20 years of not holding it because that is what I feel comfortable with. After reading what John Bogle has to say about it in Common Sense on Mutual Funds, that just really stuck with me.
You have reduced your overall portfolio volatility by doing this, and it hasn't cost you performance (in fact, it's won you performance). Those are good arguments for the strategy.

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Re: International Index Funds

Post by White Coat Investor » Fri Dec 23, 2016 11:04 am

Valuethinker wrote:
stemikger wrote:
White Coat Investor wrote:All this anti-international stock sentiment is just performance chasing and recency bias. We see it every time asset classes under perform in the last year or two. Even Bogleheads tend to add asset classes when they're hot and move away from them when they're not, seemingly for good reasons.

I've had 1/3 of my equity in international stocks since I started in investing in 2004. Sometimes it has worked out well. Lately it has not. Their time in the sun will come again during my investment horizon I am confident, so I plan to stay the course. To get an idea of just how variable the hot asset class can be, check out the Callan table:

https://www.americancentury.com/content ... _Table.pdf

You'll notice that international developed stocks beat US stocks in 9 of the last 20 years. Given that US has won 5 of the last 6 years, which do you think is going to be most likely to do well over the next 5 or 10 years?

Emerging markets are often either the best asset class or the worst. (8 times best, 7 times worst in 20 years.) Don't bail out just before you see the return to the mean.

Get a reasonable plan. Write it down. Stick with it for a few decades. You'll be glad you did (and you'll be rich.)
I don't disagree with any of your facts, but I can tell you on my end, it is not performance chasing. Right or wrong, I just don't feel comfortable holding international. I could be very wrong on this, but like I said in prior posts, it has been over 20 years of not holding it because that is what I feel comfortable with. After reading what John Bogle has to say about it in Common Sense on Mutual Funds, that just really stuck with me.
You have reduced your overall portfolio volatility by doing this, and it hasn't cost you performance (in fact, it's won you performance). Those are good arguments for the strategy.
Right, but Stemikger is unusual in this respect. He's successful because he picked a reasonable plan and stuck with it for decades not because he chose to have relatively little of his portfolio in international stocks. In a different time period, it would have cost him performance. The problem is that many people are CHANGING their portfolios every few years in response to recent performance. And new investors just setting up their portfolios will assume that what has happened in the last 5 or 10 years is similar to what will happen over their investment horizons.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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iceport
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Re: International Index Funds

Post by iceport » Fri Dec 23, 2016 12:13 pm

White Coat Investor wrote:
Valuethinker wrote:
stemikger wrote:
White Coat Investor wrote:All this anti-international stock sentiment is just performance chasing and recency bias. We see it every time asset classes under perform in the last year or two. Even Bogleheads tend to add asset classes when they're hot and move away from them when they're not, seemingly for good reasons.

I've had 1/3 of my equity in international stocks since I started in investing in 2004. Sometimes it has worked out well. Lately it has not. Their time in the sun will come again during my investment horizon I am confident, so I plan to stay the course. To get an idea of just how variable the hot asset class can be, check out the Callan table:

https://www.americancentury.com/content ... _Table.pdf

You'll notice that international developed stocks beat US stocks in 9 of the last 20 years. Given that US has won 5 of the last 6 years, which do you think is going to be most likely to do well over the next 5 or 10 years?

Emerging markets are often either the best asset class or the worst. (8 times best, 7 times worst in 20 years.) Don't bail out just before you see the return to the mean.

Get a reasonable plan. Write it down. Stick with it for a few decades. You'll be glad you did (and you'll be rich.)
I don't disagree with any of your facts, but I can tell you on my end, it is not performance chasing. Right or wrong, I just don't feel comfortable holding international. I could be very wrong on this, but like I said in prior posts, it has been over 20 years of not holding it because that is what I feel comfortable with. After reading what John Bogle has to say about it in Common Sense on Mutual Funds, that just really stuck with me.
You have reduced your overall portfolio volatility by doing this, and it hasn't cost you performance (in fact, it's won you performance). Those are good arguments for the strategy.
Right, but Stemikger is unusual in this respect. He's successful because he picked a reasonable plan and stuck with it for decades not because he chose to have relatively little of his portfolio in international stocks. In a different time period, it would have cost him performance. The problem is that many people are CHANGING their portfolios every few years in response to recent performance. And new investors just setting up their portfolios will assume that what has happened in the last 5 or 10 years is similar to what will happen over their investment horizons.
Right. Or as Larry often says, "Don't confuse strategy and outcome."

stemikger's success is due to the correct strategy of staying the course, not necessarily because avoiding international stocks was a good decision.
"Discipline matters more than allocation.” ─William Bernstein

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Re: International Index Funds

Post by Kevin M » Fri Dec 23, 2016 2:11 pm

Sticking with only US stocks and avoiding international stocks for the last 20 years seems to have been a winning strategy (uh, I mean outcome). But if we were having this conversation about 20 years ago, we would be coming to the opposite conclusion.

I've shared this chart in other posts, but maybe some of you haven't seen it. It's a telltale chart, which is one of John Bogle's favorite tools to compare the relative performance of different asset classes or investments. In a telltale chart you divide the cumulative dollar performance of one investment by that of another. When the line is increasing, the investment in the numerator is outperforming, and when the line is decreasing the investment in the denominator is outperforming.

In this chart I compare a total US stock market portfolio (numerator) to a portfolio of 60% total US stocks and 40% total international stocks (denominator). So rather than just comparing US stocks to international stocks, it compares US stocks to the blend of US and international stocks currently held by the Vanguard Target Retirement and LifeStrategy funds (and which also happens to be my own target allocation for US and international stocks for the last 10 years or so).

Image

So we see that US stocks have generally outperformed over the last 20 years (with a significant exception from 2002-2007, when the 60/40 portfolio outperformed), but over the 17-year period 1972-1988, the 60/40 portfolio significantly outperformed US stocks. Even as recently as 2010, the cumulative performance of US-only stocks was less than 80% of the 60/40 US/international portfolio. So the time period we examine makes all the difference, but of course it is human nature to be subject to recency bias.

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lostdog
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Re: International Index Funds

Post by lostdog » Sun Dec 25, 2016 10:09 am

stemikger wrote:
lostdog wrote:
stemikger wrote:
DesertInvestor wrote:I've read Elements of Investing, which recommends 50% asset allocation to international index for diversification. But, with markets moving almost in lock step and international index lagging behind US is it really diversification? It seems to me they correlate quite closely, just with lower returns. Should one just stick to a total market index for diversification and stay in the US?
I didn't read the other replies, so forgive me if this was already said.

If you stick with a U.S. only index portfolio you will be following the advice of two of the smartest minds in investing. Who are they? John Bogle and Warren Buffett. I personally have followed John Bogle's advice for over 20 years and I'm very comfortable to stick with it. I have never invested in international. I simply hold two funds the Vanguard Institutional Index and the Blackrock U.S. debt index. In retirement I plan to roll it all over in the Vanguard Balanced Index fund and call it a day.

I strongly suggest you purchase Common Sense on Mutual Funds and read the chapter on Global Investing and simplicity.
Deep down, I remain absolutely confident that the vast majority of American families will be well served by owing their equity holdings in an all-U.S. stock-market index portfolio and holding their bonds in an all-U.S. bond market index portfolio. ~ John Bogle
+1

I was banging my head on this so much in the beginning so I decided to keep it simple with the two fund portfolio. Staying the course.
+1
Me too. When I first joined the boards that is the only question I asked (probably every two weeks). I even held international for a week before I went back to my two fund all U.S. portfolio. Other than that one week, I have held no international for over 20 years.

I also held 20% international for a few weeks. I was not comfortable at all. I tried. So moving forward I am staying the course with the two fund portfolio. The power of simplicity.

MnD
Posts: 3790
Joined: Mon Jan 14, 2008 12:41 pm

Re: International Index Funds

Post by MnD » Sun Dec 25, 2016 10:24 am

I don't choose a split but rather hold US and non-US in their proportion to global market cap.
As of 11/30/2016 that is 54% US/46% non-US.

Years and decades from now I very much doubt the split will be 54%/46% but I don't care. The proportion will adjust automatically without any need for rebalancing or expending mental energy to decide if my current "split" is better or smarter than what the global equity allocation looks like.

By choosing a split you could end up over many years making very large periodic rebalancings into US or out of US contrary to what the US versus ex-US markets are doing. I'd rather take what the markets are giving me rather than try and outguess them with my "split".

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