Domestic-International Equity Ratio at Retirement

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
tryonthis
Posts: 9
Joined: Tue Oct 31, 2017 4:18 pm

Domestic-International Equity Ratio at Retirement

Post by tryonthis »

<t>I'm 65 and retired, my wife still working for another year or so. In meeting with a Vanguard advisor to discuss among other things asset allocation going forward, he suggested we have a 60 / 40 ratio of domestic to international equity. Note, this is looking only at equity, not the overall allocation of equity to bonds. My reaction is that I would have expected a greater weight to domestic equity, perhaps 70 / 30 or 65 / 35. I'd like to know what others think.<br/>
<br/>
User avatar
CaliJim
Posts: 3050
Joined: Sun Feb 28, 2010 8:47 pm
Location: California, near the beach

Re: Domestic-International Equity Ratio at Retirement

Post by CaliJim »

market weight
-calijim- | | For more info, click this Wiki
User avatar
vineviz
Posts: 7813
Joined: Tue May 15, 2018 1:55 pm

Re: Domestic-International Equity Ratio at Retirement

Post by vineviz »

tryonthis wrote: Sun Sep 30, 2018 3:16 pm <t>I'm 65 and retired, my wife still working for another year or so. In meeting with a Vanguard advisor to discuss among other things asset allocation going forward, he suggested we have a 60 / 40 ratio of domestic to international equity. Note, this is looking only at equity, not the overall allocation of equity to bonds. My reaction is that I would have expected a greater weight to domestic equity, perhaps 70 / 30 or 65 / 35. I'd like to know what others think.<br/>
<br/>
I think 60/40 US/international is perfect for any stage of life.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
pkcrafter
Posts: 14324
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Domestic-International Equity Ratio at Retirement

Post by pkcrafter »

40% is Vanguard's recommendation, but I believe posters here would suggest anything from 20% minimum to 40% maximum international.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
MotoTrojan
Posts: 10653
Joined: Wed Feb 01, 2017 8:39 pm

Re: Domestic-International Equity Ratio at Retirement

Post by MotoTrojan »

Frankly I think what’s most important is that you are comfortable enough with your number that you’ll never change it. For me that’s 25%. Vanguard used to recommend 30% so this change smells of market timing.
User avatar
pokebowl
Posts: 382
Joined: Sat Dec 17, 2016 7:22 pm
Location: The Orion Spur of the Milky Way galaxy.

Re: Domestic-International Equity Ratio at Retirement

Post by pokebowl »

pkcrafter wrote: Sun Sep 30, 2018 3:34 pm 40% is Vanguard's recommendation, but I believe posters here would suggest anything from 20% minimum to 40% maximum international.

Paul
For those of us who recommend by market weight, it would be closer to 46%. Just a year ago this was even closer to 50/50.
dolfan1262
Posts: 5
Joined: Mon Nov 13, 2017 7:37 pm

Re: Domestic-International Equity Ratio at Retirement

Post by dolfan1262 »

If you're not comfortable with 40% int. you could go as low as 20% to use vpas that's what i have

[Post formatted by admin LadyGeek]
Last edited by dolfan1262 on Sun Sep 30, 2018 7:57 pm, edited 2 times in total.
stan1
Posts: 8891
Joined: Mon Oct 08, 2007 4:35 pm

Re: Domestic-International Equity Ratio at Retirement

Post by stan1 »

The difference between domestic/international equity allocation of 60/40, 65/35, and 70/30 over many years can't be predicted but is likely to be small (especially if 40-60% of your portfolio is bonds). Pick the one you will stick with.
susleni
Posts: 24
Joined: Thu Apr 06, 2017 12:04 pm

Re: Domestic-International Equity Ratio at Retirement

Post by susleni »

Agreed with MotoTrojan's market timing reference. Just pick a domestic/international allocation and staying the course. No AA is perfect in a given window (your investing lifetime), but it'll even out if you have heirs. Reversion to the mean.
Topic Author
tryonthis
Posts: 9
Joined: Tue Oct 31, 2017 4:18 pm

Re: Domestic-International Equity Ratio at Retirement

Post by tryonthis »

Thanks for the responses. To complete the picture, Vanguard is recommending 60 / 40 overall Equity to Bond ratio. For the Bonds a ratio of 70 /30 Domestic Bonds to International Bonds is recommended.

Tom
User avatar
JoMoney
Posts: 9766
Joined: Tue Jul 23, 2013 5:31 am

Re: Domestic-International Equity Ratio at Retirement

Post by JoMoney »

tryonthis wrote: Sun Sep 30, 2018 3:16 pm <t>I'm 65 and retired, my wife still working for another year or so. In meeting with a Vanguard advisor to discuss among other things asset allocation going forward, he suggested we have a 60 / 40 ratio of domestic to international equity. Note, this is looking only at equity, not the overall allocation of equity to bonds. My reaction is that I would have expected a greater weight to domestic equity, perhaps 70 / 30 or 65 / 35. I'd like to know what others think.<br/>
<br/>
I share Mr. Bogle's opinion that for U.S. investors, an international allocation isn't necessary.
History has also shown us that the justifications given in the past, that it would provide a higher risk-adjusted return, can not be relied upon.
As is indicated even on Vanguard's own website, international stocks come with higher risk. They note additional risks in the prospectus, the funds have higher standard deviation/volatility, they list it as a 5 on their "Risk potential" barometer.
What international does do, is provide more stocks, and some people believe more is always better (I don't share that view). It also gives you some "skin in the game" of international stocks if you would feel you're otherwise missing out on something.
Some people believe that the current price levels suggest higher expected returns for international stocks in the future. I view that like most other predictions, as being a coin flip... but even if that is the expectation the price is at least reflecting it as being a more risky proposition.
I sleep better at night without an international allocation than I would with one, and to the extent I might decide to reduce my exposure to risk, I would be holding more bonds.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
jclear
Posts: 106
Joined: Mon Aug 20, 2018 12:47 am

Re: Domestic-International Equity Ratio at Retirement

Post by jclear »

Vanguard used to recommend a maximum of 20%, now they recommend a minimum of 20%. It sounds like they really really want you at 20%. I don’t care what a Vanguard advisor thinks, but perhaps you do because you’re willing to meet with one.
fourwheelcycle
Posts: 968
Joined: Sun May 25, 2014 5:55 pm

Re: Domestic-International Equity Ratio at Retirement

Post by fourwheelcycle »

I am a strong believer that your portfolio should reflect whatever makes you worry about it as little as possible.

During my thirties I used to actively manage our savings with a mix of individual stocks and bonds plus domestic and international stock and bond funds. By my late thirties I decided fretting about our savings portfolio was an unwanted and unnecessary drain from attention I wanted to devote to our family and to work. I became familiar with Jack Bogle's investment advice and simplified our savings down to a two fund portfolio - Vanguard's domestic TSM and intermediate bond index funds. Ever since I have stopped worrying about our portfolio and it has taken care of itself.

My rationale for having no international funds is that US companies are already trying to maximize their income by finding optimal levels of domestic and international investment and they are probably better at guessing where too invest than I would be.
Post Reply