rickcrna wrote: ↑Mon Apr 27, 2020 2:19 pm
VXUS represents about 15% of my stock portfolio and after due diligence and research I've decided that for me continuing to hold this position simply doesn't pencil out. To my way of thinking, it makes little sense to hold onto something when it chronically underperforms in the hopes that there will be a time period when the losses are reversed. Yes, I acknowledge the arguments for holding onto VXUS and all of the fancy metrics and rationalizations often cited but its not working for my portfolio. If trends change, I can always reconsider. So my proceeds went to buy additional shares of VTI.
This was my reasoning as well. And I hope I am wrong. But if we get a few years of international out-performance there is no way it will ever close the yawning gap that's opened up. That would IMO be a selling opportunity, one that I will avail myself of in the few places where I'm stuck in VEA. I seem to be largely immune from "anchoring" to past prices, the only thing that matters is what lies ahead, and at this point, it's hard to see foreign markets leading the US despite their apparently attractive valuations. Maybe at some point they'll become attractive enough that the US companies will just buy them up!
Someone said if you don't understand something don't invest in it. And there is something about these foreign index funds that I'm clearly not understanding. I cannot explain their poor performance. I've looked at the strong dollar and that doesn't explain it. I've stripped tech out of the S&P 500 and the US still outperforms. Possibly there is some sector I need to strip out
of the foreign indexes to reach parity with the US, but I haven't found it. Also if one sector was doing that badly you'd expect it to just shrink as a fraction of the foreign index (as, for instance, energy has done here in the US indexes).
I've considered the demographic headwinds Europe and Japan face, as well as their rising social spending costs (that we also face, BTW). But how can that explain the under-performance of global mega-corps based in those countries, that also sell into the US, China, and elsewhere, just as their US counterparts do? Just because their home country is struggling doesn't mean the companies in the same industries should suffer.
- Shell or BP versus XOM or Chevron
- Roche, Astra Zeneca, Glaxo versus Merck, J&J, Bristol Meyers
- Samsung versus Intel or TI
- Toyota or Daimler versus GM and Ford
Edit: I found this article interesting, it's a short read, Christine Benz interview:
https://www.morningstar.com/articles/96 ... ave-lagged
It was written pre-crash, so now we have the L-shaped recovery in international versus the V in the US to add to the mix. Even before the crash, I didn't get anything like 10% annualized out of my international allocation. How well did VXUS track the MSCI All-World index cited in the article? I can't easily answer that, ACWX seems like the same index. It's up a tad from 10 years previously, maybe 10% over 10 years. VEA has beaten it (but it doesn't have the emerging market drag), VXUS has lagged it. None looks to have returned anything better than 1% a year on price. Even with 3% dividend yield that's still nowhere close.