International debate again!!

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stocknoob4111
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International debate again!!

Post by stocknoob4111 » Fri Jan 11, 2019 3:16 am

Vanguard has just upped it's recommendation to 40% International now:

https://www.yahoo.com/amphtml/finance/n ... 04803.html

i'm right now at 20% but just wondering if anyone is taking this advice seriously. Aren't there arguments against this?

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mrspock
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Re: International debate again!!

Post by mrspock » Fri Jan 11, 2019 3:19 am

stocknoob4111 wrote:
Fri Jan 11, 2019 3:16 am
Vanguard has just upped it's recommendation to 40% International now:

https://www.yahoo.com/amphtml/finance/n ... 04803.html

i'm right now at 20% but just wondering if anyone is taking this advice seriously. Aren't there arguments against this?
Since when do these folks have a crystal ball which works better than anyone else’s? Pass.

AlohaJoe
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Re: International debate again!!

Post by AlohaJoe » Fri Jan 11, 2019 3:33 am

mrspock wrote:
Fri Jan 11, 2019 3:19 am
stocknoob4111 wrote:
Fri Jan 11, 2019 3:16 am
Vanguard has just upped it's recommendation to 40% International now:

https://www.yahoo.com/amphtml/finance/n ... 04803.html

i'm right now at 20% but just wondering if anyone is taking this advice seriously. Aren't there arguments against this?
Since when do these folks have a crystal ball which works better than anyone else’s? Pass.
"One reason for the increase: Fees have fallen on international funds, improving net returns."

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JoMoney
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Re: International debate again!!

Post by JoMoney » Fri Jan 11, 2019 3:45 am

Yes, there are argument for and against. You'll find lots of threads with those arguments on here.
I will point out, that Vanguard continues to list more risks related to international in the funds prospectus, and gives international a risk profile of "5" on the Total International fund, relative to the lower risk rating of "4" they put on the Total U.S. index fund.
I haven't read the linked article yet, but I'm going to guess they do not argue that having a higher international weighting is lower risk for a U.S. investor.
"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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oldcomputerguy
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Re: International debate again!!

Post by oldcomputerguy » Fri Jan 11, 2019 4:07 am

I’m at 30%. I was at 30% yesterday, and will be at 30% tomorrow. I don’t care what Vanguard does. 30% is where I’ve decided I want to be.

Stay the course
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

Culbretd
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Re: International debate again!!

Post by Culbretd » Fri Jan 11, 2019 4:34 am

I try to stay between 25% and 30%.

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nisiprius
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Re: International debate again!!

Post by nisiprius » Fri Jan 11, 2019 8:14 am

Interesting. They upped the percentage of international in their own all-in-one funds (Target Retirement, LifeStrategy) to 40% in 2015 so it's no surprise, the only surprise is that they're formalizing that as a recommendation to individuals who aren't using those funds.

There's no point in rehashing the sterile debate. In my opinion, the reason why it gets so much debate is because based on actual past history using the oldest international (MSCI EAFE, which goes back to 1970), it never would have made much difference either way.

Therefore, the debates center on claims of subtleties about small differences in standard deviation and Sharpe ratios, claims about the behavior of currency fluctuations, claims based on highly-endpoint-dependent returns over various time periods since 1970, and lots of opinion about the future--often written between the lines--about whether the US is going to Hades in a handbasket or whether "For 240 years it's been a terrible mistake to bet against America, and now is no time to start." (Warren Buffett).

At the same time, I don't yet see any updated version of their paper, International Equity: Considerations and Recommendations, dated 2008; does anyone? Therefore, I maintain that their advice there is still current:
  • International stocks should be considered for inclusion in a domestic portfolio.
  • Empirical and practical issues suggest a starting allocation to international stocks of 20%, with an upper limit based on the proportion of the global market they represent.
  • The exact allocation to international equities will depend on the investor’s view regarding the short- and long-term tradeoffs.
And I don't think the recommendations built into Portfolio Watch have changed. Looking at my own account, it is still a cool blue "consider," not a literal red warning, and the range to "consider" is still 30% to 50%. (Back around 2008 or so I got a literal red warning because my international allocation, which was something like 20.5%, was said to be too high!).

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Glockenspiel
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Re: International debate again!!

Post by Glockenspiel » Fri Jan 11, 2019 8:19 am

I've always been comfortable at around 25% of equities. Sometimes I get an urge to increase it and sometimes I get an urge to decrease it, so I figure it must be my comfort zone, so I'll just leave it as it is.

sabtastic
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Re: International debate again!!

Post by sabtastic » Fri Jan 11, 2019 9:21 am

nisiprius wrote:
Fri Jan 11, 2019 8:14 am

There's no point in rehashing the sterile debate. In my opinion, the reason why it gets so much debate is because based on actual past history using the oldest international (MSCI EAFE, which goes back to 1970), it never would have made much difference either way.
As far as I can tell, you are the only one to get this right. I think of international is a way to reduce risk WITHOUT changing performance. I think vanguard has been slowly changing the allocation percentage over the years simply because investing in international equity was more expensive previously. If the costs between domestic and international were the same, I believe vanguard would simply recommend market weight.

This logic makes a lot more sense if you live in a country that has a smaller piece of the pie. Would you hold 100% of your assets in only 3.4% of the world's companies as it is in Canada? Most would agree there is a lot of risk there. You won't take as much risk having 100% of your assets in 50% of the world's market cap, especially when that country's companies created most of the world's wealth over the past century.

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Re: International debate again!!

Post by lostdog » Fri Jan 11, 2019 9:25 am

At some point when Total World gets cheap, that fund will be their standard.
VT/VTWAX+BNDW

BoggledHead2
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Re: International debate again!!

Post by BoggledHead2 » Fri Jan 11, 2019 10:27 am

i love how people bang the "past performance doesn't equal future results" drum but then still dismiss International investing [not directed at anyone specifically]. The world is changing. The US, to put it lightly, is changing. I, and everyone else, have no idea which markets will outperform going forward.

I did a bit o' research, then just for kicks I looked at what Vanguard has decided to put into their funds. To my surprise (in a good way), everything I've read/determined for myself essentially matched what Vanguard is recommending (target date funds, Total World, etc.). I know "nobody knows nothing", but I feel I've read enough to make an informed decision. The "experts" at Vanguard apparently agree with what I've determined going forward.

My allocation: 55% US, 45% INT'L, with 5% rebalancing bands. I came to this determination based on current valuations, various other factors, and the fact that quite frankly I have no idea which 1 will outperform going forward. I also read in several places that, despite the lack in overall performance, year-to-year volatility was actually reduced with this high of an INT'L allocation as the markets don't rise/fall in tandem. This approach literally guarantees I own the best performing markets every year. There are years where INT'L has outperformed the US, which some people have conveniently forgotten due to recency bias/home bias/whatever bias.

In short, I chose to own the world as it currently stands and I will get whatever returns the world decides to provide. I will admit it was nice to think/research for myself then realize my determinations essentially match the Total World ETF. Maybe I/Vanguard will be right, maybe not. Nobody knows nothing!

BoggledHead2
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Re: International debate again!!

Post by BoggledHead2 » Fri Jan 11, 2019 10:28 am

lostdog wrote:
Fri Jan 11, 2019 9:25 am
At some point when Total World gets cheap, that fund will be their standard.
it's fairly easy to mimic this fund with 2 low cost index funds ... but I agree, once the expense ratio drops it could/should/would be the standard equity holding.

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Mountain Doc
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Re: International debate again!!

Post by Mountain Doc » Fri Jan 11, 2019 10:36 am

lostdog wrote:
Fri Jan 11, 2019 9:25 am
At some point when Total World gets cheap, that fund will be their standard.
It will get a lot cheaper this month with the creation of Admiral shares.

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ruralavalon
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Re: International debate again!!

Post by ruralavalon » Fri Jan 11, 2019 10:42 am

stocknoob4111 wrote:
Fri Jan 11, 2019 3:16 am
Vanguard has just upped it's recommendation to 40% International now:

https://www.yahoo.com/amphtml/finance/n ... 04803.html

i'm right now at 20% but just wondering if anyone is taking this advice seriously. Aren't there arguments against this?
This is not new. Vanguard has been using 40% of stocks in international stocks in its target date funds and LifeStrategy funds for several years.

Vanguard's several papers on the subject have shown that historically almost all of the diversification benefit from adding international stocks would have been captured using around 20-30% of stocks in international stocks.

The impact is small, despite the frequent heated debates on the subject.
Last edited by ruralavalon on Fri Jan 11, 2019 10:49 am, edited 1 time in total.
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2pedals
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Re: International debate again!!

Post by 2pedals » Fri Jan 11, 2019 10:48 am

This itty bitty news article is not substantial enough for a US to ex-US equity change in my portfolio AA. Vanguard has some more explaining to do.

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jakehefty17
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Re: International debate again!!

Post by jakehefty17 » Fri Jan 11, 2019 11:48 am

I'll stick with 30%. If that's a tilt, I'm comfortable with it.

However, I see where they're going. To own the haystack, you should be holding the market weight of international stock.

Total world indices currently hold around 54% US.
https://www.msci.com/documents/10199/1f ... 9f51551701
https://www.msci.com/documents/10199/b9 ... c5aecd9d6d
https://www.msci.com/documents/10199/a7 ... b1213bc3c5

To each their own. It's tiresome to see this argument play out as often as it does on this forum.

Stay indexed, stay diversified, stay the course.
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski

yousha
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Re: International debate again!!

Post by yousha » Fri Jan 11, 2019 11:52 am

Of late, International is doing better!

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