Slanting International geographically or regionally

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TheTimeLord
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Slanting International geographically or regionally

Post by TheTimeLord » Wed Nov 22, 2017 9:57 am

Thinking of slanting my International holdings geographically or regionally. I am sure many BH slant their International toward or away from Emerging Markets but do any BH slant them geographically or regionally? I am considering doing this to reduce my exposure to Europe and was wondering if any others where slanting away from or towards a region and what funds or ETFs they were using to do so.
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2pedals
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Re: Slanting International geographically or regionally

Post by 2pedals » Wed Nov 22, 2017 10:01 am

Why would you think this would improve your returns?

jebmke
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Re: Slanting International geographically or regionally

Post by jebmke » Wed Nov 22, 2017 10:04 am

Why would you want to tilt away from Europe?
When you discover that you are riding a dead horse, the best strategy is to dismount.

Jack FFR1846
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Re: Slanting International geographically or regionally

Post by Jack FFR1846 » Wed Nov 22, 2017 10:07 am

I tend to be risk averse when it comes to international. Not quite to the level of Jack Bogle where I'd go to zero international but I hold only developed international. I feel it's a reasonable compromise. If I were to be able to pick "I want to stay out of these countries and I want to be invested in those countries", I would, but not at a much higher ER. Since these kinds of choices do indeed result in a much higher ER, I stick with developed international.
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Bwlonge
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Re: Slanting International geographically or regionally

Post by Bwlonge » Wed Nov 22, 2017 10:11 am

I was thinking about it, but I don't have my foundation in US/Diversified International yet, so can't go there yet. But I mean, Asian/Chinese funds have been killing it. As someone who isn't super well informed about intricacies, there's been plenty of people saying China is rising as an/the economic/political superpower. Again, I don't know anything about it really, but it makes me wonder.

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TheTimeLord
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Re: Slanting International geographically or regionally

Post by TheTimeLord » Wed Nov 22, 2017 10:38 am

jebmke wrote:
Wed Nov 22, 2017 10:04 am
Why would you want to tilt away from Europe?
I just believe it would be more productive for my portfolio. Since nobody knows nothing there is no point in stating my reasoning because I would adding to the financial porn on this site.
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livesoft
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Re: Slanting International geographically or regionally

Post by livesoft » Wed Nov 22, 2017 10:51 am

How would you know if you are slanted regionally anyways? What tool or metric would you use to analyze your portfolio that would tell you that? And why would you believe such a tool, calculator, or metric anyways?

I'll add a couple of figures to this post in a moment.

Vanguard Portfolio Watch has this for my portfolio:
Image
Do I believe it? Hard to believe only holding VEU (all-world ex-US large-cap), VEA (developed markets), VSS (all-world ex-US small-cap), and DGS (emerging markets small-cap value) for my international funds.

And a bit of a Morningstar Portfolio X-ray analysis:
Image
Last edited by livesoft on Wed Nov 22, 2017 10:59 am, edited 2 times in total.
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jebmke
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Re: Slanting International geographically or regionally

Post by jebmke » Wed Nov 22, 2017 10:53 am

TheTimeLord wrote:
Wed Nov 22, 2017 10:38 am
jebmke wrote:
Wed Nov 22, 2017 10:04 am
Why would you want to tilt away from Europe?
I just believe it would be more productive for my portfolio. Since nobody knows nothing there is no point in stating my reasoning because I would adding to the financial porn on this site.
So you are just making up investment strategies based on gut feel? Doesn't sound like a good idea.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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TheTimeLord
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Re: Slanting International geographically or regionally

Post by TheTimeLord » Wed Nov 22, 2017 11:01 am

livesoft wrote:
Wed Nov 22, 2017 10:51 am
How would you know if you are slanted regionally anyways? What tool or metric would you use to analyze your portfolio that would tell you that? And why would you believe such a tool, calculator, or metric anyways?

I'll add a couple of figures to this post in a moment.
I was considering using VXUS the baseline and would consider any regional holdings in addition to my VXUS to be a slant towards that region and away from the other regions.
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livesoft
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Re: Slanting International geographically or regionally

Post by livesoft » Wed Nov 22, 2017 11:05 am

TheTimeLord wrote:
Wed Nov 22, 2017 11:01 am
I was considering using VXUS the baseline and would consider any regional holdings in addition to my VXUS to be a slant towards that region and away from the other regions.
VXUS may already be slanted due to Brexit, Grexit, and other things.
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TheTimeLord
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Re: Slanting International geographically or regionally

Post by TheTimeLord » Wed Nov 22, 2017 11:13 am

livesoft wrote:
Wed Nov 22, 2017 11:05 am
TheTimeLord wrote:
Wed Nov 22, 2017 11:01 am
I was considering using VXUS the baseline and would consider any regional holdings in addition to my VXUS to be a slant towards that region and away from the other regions.
VXUS may already be slanted due to Brexit, Grexit, and other things.
Doesn't really matter if I define it as my baseline/benchmark. I was asking a general question that people could have answered by just saying I only buy regional ETF and exclude regions. Or we could just look at is as "Does anyone add a slant to your VXUS holdings to either emphasize of de-emphasize a region or geography"?
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bgf
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Re: Slanting International geographically or regionally

Post by bgf » Wed Nov 22, 2017 11:24 am

My portfolio
50-25-25
VTI - VEA - VWO

VT
55-35-10

So I am overweight Emerging Markets and underweight International Developed. I'm pretty close on US.

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in_reality
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Re: Slanting International geographically or regionally

Post by in_reality » Wed Nov 22, 2017 9:07 pm

livesoft wrote:
Wed Nov 22, 2017 10:51 am
How would you know if you are slanted regionally anyways? What tool or metric would you use to analyze your portfolio that would tell you that? And why would you believe such a tool, calculator, or metric anyways?

I'll add a couple of figures to this post in a moment.

Vanguard Portfolio Watch has this for my portfolio:
Image
Do I believe it? Hard to believe only holding VEU (all-world ex-US large-cap), VEA (developed markets), VSS (all-world ex-US small-cap), and DGS (emerging markets small-cap value) for my international funds.

And a bit of a Morningstar Portfolio X-ray analysis:
Image
Simply holding more VSS vs. VEA will do that. It doesn't require M*'s data to be wrong.

VEA holds more stocks in Europe than VSS does.

The Schwab funds SCHF and SCHC work the same way.

Europe has more large cap than small so tilting small will reduce European exposure.

livesoft
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Re: Slanting International geographically or regionally

Post by livesoft » Wed Nov 22, 2017 9:15 pm

Thanks for that observation. VSS/VFSVX is our largest single equity holding. Larger than VEA + VEU combined.
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ThePrince
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Re: Slanting International geographically or regionally

Post by ThePrince » Wed Nov 22, 2017 11:03 pm

jebmke wrote:
Wed Nov 22, 2017 10:53 am
TheTimeLord wrote:
Wed Nov 22, 2017 10:38 am
jebmke wrote:
Wed Nov 22, 2017 10:04 am
Why would you want to tilt away from Europe?
I just believe it would be more productive for my portfolio. Since nobody knows nothing there is no point in stating my reasoning because I would adding to the financial porn on this site.
So you are just making up investment strategies based on gut feel? Doesn't sound like a good idea.
+1

Karamatsu
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Re: Slanting International geographically or regionally

Post by Karamatsu » Thu Nov 23, 2017 2:27 am

I am sure many BH slant their International toward or away from Emerging Markets but do any BH slant them geographically or regionally?
At one point I considered separating, say, Europe from Asia-Pacific, but it was more for rebalancing than because I had premonitions about which region might be going up/down anytime soon. If I'd done that, I would have used the Vanguard ETFs at the time: VPL for Asia-Pacific and... I think it's VGK? for Europe? In the end, though, I decided that simplicity was my friend. Of course, having said that, I continue to separate international into developed (SCHF), developed-small (SCHC), and EM (SCHE), but that's just to obtain greater market coverage, not to tilt.

The one country I think of doing something special about is Japan, since it's my home, but I can never decide whether to go long or short, which is sad.

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Re: Slanting International geographically or regionally

Post by magneto » Thu Nov 23, 2017 3:33 am

Perspective from another non-US (UK) investor.

We maintain specific allocations on the 'Risk = Stocks' side to :-
+ UK
+ Global
+ USA
+ Asia/Pacific
+ Europe
+ Emerging Markets

The major decision has been the UK (Domestic) v International balance, as the currency swings there can come into play with a vengeance.

Opportunities for rebalancing among the various international geographical regions do open up from time to time, but this is a relatively minor event in the scheme of things.
When the DOW/S&P moves, then pretty much all the geographical regions move,
The one exception have noticed is Emerging Markets which de-couples from time to time, so a useful diversifier there.
Overall agnostic on Geographical Regional Allocations versus a single Global Fund.

Potentially more rewarding might be market sector allocations?
But life is complicated enough already :!: .
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Re: Slanting International geographically or regionally

Post by Didymograptus » Thu Nov 23, 2017 9:02 am

As someone who will be retiring to the UK in the next 2-5 years I have felt the need to have a more internationally diversified stock portfolio than others and not have a too high US focus. So I'm ensuring that 35-50% of my stock funds are international (VTIAX or SWISX).

It is said that when America sneezes, the world catches a cold. However I have no idea how international stock will fare when the US economy goes through its cycles but I did feel it was better to be reasonably diversified than not.
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Re: Slanting International geographically or regionally

Post by abuss368 » Thu Nov 23, 2017 9:05 am

TheTimeLord wrote:
Wed Nov 22, 2017 9:57 am
Thinking of slanting my International holdings geographically or regionally. I am sure many BH slant their International toward or away from Emerging Markets but do any BH slant them geographically or regionally? I am considering doing this to reduce my exposure to Europe and was wondering if any others where slanting away from or towards a region and what funds or ETFs they were using to do so.
Hi TheTimeLord -

I understand your reason as you may believe (correctly or incorrectly) that Europe may appear attractive from a value standpoint. Who knows? All information is priced into stocks.

Personally I would consider Total International Stock Index Fund and call it a day. I have also allocated a percentage to Vanguard's International REIT/RE Index fund for a two fund international punch. This strategy has worked well.

Best.
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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TheTimeLord
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Re: Slanting International geographically or regionally

Post by TheTimeLord » Thu Nov 23, 2017 9:35 am

ThePrince wrote:
Wed Nov 22, 2017 11:03 pm
jebmke wrote:
Wed Nov 22, 2017 10:53 am
TheTimeLord wrote:
Wed Nov 22, 2017 10:38 am
jebmke wrote:
Wed Nov 22, 2017 10:04 am
Why would you want to tilt away from Europe?
I just believe it would be more productive for my portfolio. Since nobody knows nothing there is no point in stating my reasoning because I would adding to the financial porn on this site.
So you are just making up investment strategies based on gut feel? Doesn't sound like a good idea.
+1
My reasoning is based on multiple factors, some of which may be out of bounds for this forum, and looking at what I believe is the most likely outcome 10 years hence ignoring the volatility that will occur in the meantime. As a Buy and Hold investor this strategy makes sense to me, as an index investor I might say this is unknowable and I will just let the index adjust as they will and if I am correct they will become tilted that way over time anyway. So it is a question of either trying to get out front of a long term trend or riding it. Obviously trying to get out front is the riskier strategy. These would start out as small tilts that I would build over time. Full disclosure, I did own the Norway ETF (ENOR) for a time based on Norway's very enviable fiscal position but exited when I felt the economy was too depend on energy production.
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TheTimeLord
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Re: Slanting International geographically or regionally

Post by TheTimeLord » Fri Nov 24, 2017 10:38 am

Started executing what I plan to be a long term tilt this morning. Baby steps.
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alex_686
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Re: Slanting International geographically or regionally

Post by alex_686 » Fri Nov 24, 2017 10:44 am

livesoft wrote:
Wed Nov 22, 2017 10:51 am
How would you know if you are slanted regionally anyways? What tool or metric would you use to analyze your portfolio that would tell you that? And why would you believe such a tool, calculator, or metric anyways?
I am going to take this argument in a slightly different direction. Investing in European companies is different then investing in European countries. In the past 30 years we have seen a shift to multinational companies. The companies more strongly react to global forces, not their home country. If one wants country exposure than one needs to find companies that are primarily in one country. There are benefits to be had by doing this but one will have to actively trade, not passively.

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TheTimeLord
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Re: Slanting International geographically or regionally

Post by TheTimeLord » Fri Nov 24, 2017 10:50 am

alex_686 wrote:
Fri Nov 24, 2017 10:44 am
livesoft wrote:
Wed Nov 22, 2017 10:51 am
How would you know if you are slanted regionally anyways? What tool or metric would you use to analyze your portfolio that would tell you that? And why would you believe such a tool, calculator, or metric anyways?
I am going to take this argument in a slightly different direction. Investing in European companies is different then investing in European countries. In the past 30 years we have seen a shift to multinational companies. The companies more strongly react to global forces, not their home country. If one wants country exposure than one needs to find companies that are primarily in one country. There are benefits to be had by doing this but one will have to actively trade, not passively.
That would largely be the argument John Bogle has about not owning International since something like 40% of a the S&P 500 revenues come from outside the U.S., but where a company is domiciled does have an affect on that company. Not an expert by any means but I my guess this is particularly true for large financial institutions.
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jebmke
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Re: Slanting International geographically or regionally

Post by jebmke » Fri Nov 24, 2017 10:55 am

TheTimeLord wrote:
Fri Nov 24, 2017 10:38 am
Started executing what I plan to be a long term tilt this morning. Baby steps.
Do you plan to keep increasing the tilt until it becomes a needle-moving level? We tilted heavily to small and mid-cap value in the mid-80s and let it run until 2005. But the tilt was hard over (65-75% of our equity) - I just felt that dabbling, over the long term would just be a distraction.

Hope it works out for you.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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TheTimeLord
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Re: Slanting International geographically or regionally

Post by TheTimeLord » Fri Nov 24, 2017 11:05 am

jebmke wrote:
Fri Nov 24, 2017 10:55 am
TheTimeLord wrote:
Fri Nov 24, 2017 10:38 am
Started executing what I plan to be a long term tilt this morning. Baby steps.
Do you plan to keep increasing the tilt until it becomes a needle-moving level? We tilted heavily to small and mid-cap value in the mid-80s and let it run until 2005. But the tilt was hard over (65-75% of our equity) - I just felt that dabbling, over the long term would just be a distraction.

Hope it works out for you.
I expect a lot of volatility in this tilt so I am moving into it slowly, bit by bit, but I do expect to keep increasing it over time until it becomes needle moving. I would say at this point in my life any tilt I put on is probably based on a belief that it has a high probability of being correct over a 10 or more year period, not because raw valuations look cheaper or I think something is oversold or under loved. To put it another way, I am basing my tilts on what I see as long term macro trends that I do not believe will abate.
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Re: Slanting International geographically or regionally

Post by HongKonger » Fri Nov 24, 2017 12:41 pm

I do.

I do a chunk of VXUS with a dash of VSS and a healthy side of the Hong Kong Tracker Fund (2800:hk), plus a good chunk of individual commercial Asian REITs.

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