Dump international?

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Tamalak
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Re: Dump international?

Post by Tamalak »

DonIce wrote: Wed Apr 24, 2019 1:19 pm I'll go out on a limb with my crystal ball and predict that US stock market cap will be down to 30% of world stock market cap by 2050. If so, that means total international will outperform US by about 2.3% annualized over the next 30 years.
This isn't necessarily so. New IPOs increase market cap but do not return stock market value. The international arena could release a slew of new companies that return crappy value, and US market cap could diminish while continuing to outperform.
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Vulcan
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Re: Dump international?

Post by Vulcan »

lostdog wrote: Wed Apr 24, 2019 12:53 pm I'm starting to question why I'm even on this board. If I was a young investor there would be a really good chance I would make a mistake going U.S. only.
Certainly the default recommendation of 3 fund portfolio with whatever US/Intl weights one is "comfortable with" betrays the "nobody knows nothing" paradigm.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
pdavi21
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Re: Dump international?

Post by pdavi21 »

I thought market timers are supposed to buy low and sell high...

Back-testing really is nearly useless, whether people want to believe it or not.
It's probably better to use logic to formulate one's Boglehead strategy portfolio.

Start at market cap (approx VT) since INTL stocks are now widely accessible.
Consider uncompensated risks, tax effects, costs, diversification benefits, etc.
Then decide what percentages you are comfortable with.
Using the "USA IS NUMBER ONE!" investment philosophy only works 100% in hindsight.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking
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Vulcan
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Re: Dump international?

Post by Vulcan »

Tamalak wrote: Wed Apr 24, 2019 1:36 pm
DonIce wrote: Wed Apr 24, 2019 1:19 pm I'll go out on a limb with my crystal ball and predict that US stock market cap will be down to 30% of world stock market cap by 2050. If so, that means total international will outperform US by about 2.3% annualized over the next 30 years.
This isn't necessarily so. New IPOs increase market cap but do not return stock market value. The international arena could release a slew of new companies that return crappy value, and US market cap could diminish while continuing to outperform.
Isn't it the United States that is the world champion in the crappy IPO market segment?;)
If you torture the data long enough, it will confess to anything. ~Ronald Coase
patrick
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Re: Dump international?

Post by patrick »

Australian stocks have dramatically outperformed US stocks since 1900. Why not an all-Australia portfolio?
visualguy
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Re: Dump international?

Post by visualguy »

DonIce wrote: Wed Apr 24, 2019 1:19 pm So many other nations are catching up so quickly in so many ways.
Ex-US is mostly Europe and Japan, so are you talking about those? What's changing for the better there? The big foreign economic engines are actually China and India, but indexing their stock markets isn't an effective way to participate in their economies, unfortunately.
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Vulcan
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Re: Dump international?

Post by Vulcan »

visualguy wrote: Wed Apr 24, 2019 1:49 pm
DonIce wrote: Wed Apr 24, 2019 1:19 pm So many other nations are catching up so quickly in so many ways.
Ex-US is mostly Europe and Japan, so are you talking about those? What's changing for the better there? The big foreign economic engines are actually China and India, but indexing their stock markets isn't an effective way to participate in their economies, unfortunately.
I just don't understand why all the world investors didn't dump their international stocks down to the floor to bid up the US prices even higher?

Do they know something I don't?

Do you?
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Vulcan
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Re: Dump international?

Post by Vulcan »

patrick wrote: Wed Apr 24, 2019 1:44 pm Australian stocks have dramatically outperformed US stocks since 1900. Why not an all-Australia portfolio?
I am all cash, since it was the top performing asset in 2018 :oops:
If you torture the data long enough, it will confess to anything. ~Ronald Coase
MotoTrojan
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Re: Dump international?

Post by MotoTrojan »

onourway wrote: Wed Apr 24, 2019 10:23 am The point of diversifying investments has never been to maximize returns.
+1

Monster Energy DESTROYED Total US, and even obliterated Netflix, Amazon, Apple, etc this century. Doesn’t make that a prudent decision.
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Taylor Larimore
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Re: Dump international?

Post by Taylor Larimore »

Luckywon wrote: Wed Apr 24, 2019 10:14 am I have maintained a 15% allocation to International equities for about 11 years now and it has been an appalling drag on my returns. Looking at some charts now, VXUS has underperformed VTI by approximately 50% over the last five years, and 15 % over the past 12 months. I am thinking strongly of throwing in the towel for international in my retirement accounts (about half of my international holdings), converting to domestic equities. Would be interested to hear from others who agree or disagree with this move.
Luckywon:

A well-diversified portfolio will always have underperforming funds. 15% international is not going to change your results by very much. When domestic stock underperform you will be very glad you own some international stocks.

You may find this post helpful:

How Much International Stock? A Suggestion.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
visualguy
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Re: Dump international?

Post by visualguy »

Vulcan wrote: Wed Apr 24, 2019 1:50 pm
visualguy wrote: Wed Apr 24, 2019 1:49 pm
DonIce wrote: Wed Apr 24, 2019 1:19 pm So many other nations are catching up so quickly in so many ways.
Ex-US is mostly Europe and Japan, so are you talking about those? What's changing for the better there? The big foreign economic engines are actually China and India, but indexing their stock markets isn't an effective way to participate in their economies, unfortunately.
I just don't understand why all the world investors didn't dump their international stocks down to the floor to bid up the US prices even higher?

Do they know something I don't?

Do you?
This "everything is priced in" argument could have been made and indeed was made in the past for ex-US, but we still got poor performance over a long-term period spanning many decades. If you think it will be different over, say, the next 20-30 years, then the question is why.

I'm not willing to bet on a revolution in China leading to a market economy any time soon, or any other radical development that would need to happen to change the picture enough. 50 years from now, maybe, but that would be too late for me. Within my time horizon, forget about it. It's still mostly about Europe and Japan, and good luck with that. I truly wish it was different - would love more viable investments.
H-Town
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Re: Dump international?

Post by H-Town »

Vulcan wrote: Wed Apr 24, 2019 1:51 pm
patrick wrote: Wed Apr 24, 2019 1:44 pm Australian stocks have dramatically outperformed US stocks since 1900. Why not an all-Australia portfolio?
I am all cash, since it was the top performing asset in 2018 :oops:
godspeed
Time is the ultimate currency.
H-Town
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Re: Dump international?

Post by H-Town »

patrick wrote: Wed Apr 24, 2019 1:44 pm Australian stocks have dramatically outperformed US stocks since 1900. Why not an all-Australia portfolio?
because to some of them, it's the USA! and to other group, they like to chase performance because why not.

Target Date Funds are a perfect portfolio for those people.
Time is the ultimate currency.
TomCat96
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Re: Dump international?

Post by TomCat96 »

monkey_business wrote: Wed Apr 24, 2019 1:07 pm Question for those advocating against international: Do you also advocate against domestic large caps?

Historically, small caps have outperformed large caps:

https://www.bogleheads.org/wiki/Histori ... ed_returns

Why not go all the way, dump all these portfolio anchors, and just invest in small caps?

I am both against international, and I have zero domestic large cap exposure, with 100% in domestic small and midcaps.
In my opinion small and midcaps isn't a bad strategy. My personal research has not shown that smallcaps out-perform everything. In fact, Midcaps have done the best. It's important to get empirical evidence however because for example, micro-caps do not outperform small or midcaps.

There are many reasons as to why this is, and I have done much personal exploration as to the causes, but suffice it to say,
1) the market is well aware of this
2) it is a wilder ride
3) For the long term, I don't think its a bad strategy

In fact, it was the ultimate answer to my question, how can I take on more risk cheaply while maximizing potential returns in the very long run. ~3 decades.
TomCat96
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Re: Dump international?

Post by TomCat96 »

H-Town wrote: Wed Apr 24, 2019 2:22 pm
patrick wrote: Wed Apr 24, 2019 1:44 pm Australian stocks have dramatically outperformed US stocks since 1900. Why not an all-Australia portfolio?
because to some of them, it's the USA! and to other group, they like to chase performance because why not.

Target Date Funds are a perfect portfolio for those people.
I created a whole thread about investing in Australia, and I have come to the conclusion while this is often stated,
it cannot be exploited as the basis for the claims were potentially inaccurate historical data.

viewtopic.php?t=256671

I want to invest in Australia, per the repeated claim, that the Australian stock market has outperformed the US market since 1900.

I don't want to invest in some random Australian ETF that started in 2002 and has underperformed the US indices.
Somewhere, somehow, on this site, there is the repeated claim that the Australian Stock market has outperformed the US over the past 118 years. I aim to find out exactly the composition of the index for the purposes of investing in it.



I repeat. I want to use the data on the exact index used to achieve the performance for the claim that Australia has outperformed the US for the past 118 years. My goal is not to pick a general Australian index fund and invest in that. That's not the basis for the claim. I want to crack open the mystery of what makes that market so good? What makes it superior.

Based on my preliminary investigations, the more recently created Australian index funds have not outperformed US index funds.
For example, the VXF appears to have dramatically outperformed EWA since it's inception.

And before anyone accuses me of cherry picking, that point is relevant to me. Not only am I 100% US stocks at the moment, I am 100% invested in VXF, the Vanguard Extended Market.

So I ask again, what am I missing.
Last edited by TomCat96 on Wed Apr 24, 2019 2:25 pm, edited 2 times in total.
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Vulcan
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Re: Dump international?

Post by Vulcan »

H-Town wrote: Wed Apr 24, 2019 2:20 pm
Vulcan wrote: Wed Apr 24, 2019 1:51 pm
patrick wrote: Wed Apr 24, 2019 1:44 pm Australian stocks have dramatically outperformed US stocks since 1900. Why not an all-Australia portfolio?
I am all cash, since it was the top performing asset in 2018 :oops:
godspeed
This baby is off the charts!
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Vulcan
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Re: Dump international?

Post by Vulcan »

visualguy wrote: Wed Apr 24, 2019 2:15 pm This "everything is priced in" argument could have been made and indeed was made in the past for ex-US, but we still got poor performance over a long-term period spanning many decades.
The "everything is priced in" argument was correct then, and is correct now.
Don't confuse strategy and outcome
If you think it will be different over, say, the next 20-30 years, then the question is why.
I don't know whether it will be different or not any better than the market does.
What I do know is that I can not invest in the past performance.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
bogledogle87
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Re: Dump international?

Post by bogledogle87 »

TheTimeLord wrote: Wed Apr 24, 2019 1:06 pm Here is a question, over the long term do you expect owning International to enhance results or primarily smooth out volatility?
Great Question - I recognize that International may do both, just one, or neither of those things. Smoothing volatility is likely based on history. There is a reasonable basis international could outperform US the next 10 years at current valuations. But neither of these are why I choose Global Cap.

The key for me is not having any specific expectations at all for international, just like I wouldn't for US Financial and Healthcare sectors, or Midcap Growth and Value. Once I realized I had absolutely no idea how to beat that market, what the future holds for any stock class, and that the US stocks may not be invincible for the rest of my life, I arrived at the most neutral possible stock allocation - Total World Cap Weighted. In doing so, I have eliminated all decisions for myself except how much more I can afford to buy, which is quite a liberation from most of the allocation debates on this forum.

My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
VTWAX and chill
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monkey_business
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Re: Dump international?

Post by monkey_business »

A few more question for those against international:

1. If you believe international exposure has more inherent risk, such as less stable currencies, political climate, business environments, etc, why do you not apply the same type of logic and pick individual stocks? Why not invest only in companies that have solid corporate governance, high profits, outperforming their peers, etc? Why invest in index funds?

2. If you don't want to invest in international because of underperformance during the last X years, do you believe past performance is guarantee of future results?
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Luckywon
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Re: Dump international?

Post by Luckywon »

Taylor Larimore wrote: Wed Apr 24, 2019 2:08 pm Luckywon:

A well-diversified portfolio will always have underperforming funds. 15% international is not going to change your results by very much. When domestic stock underperform you will be very glad you own some international stocks.

You may find this post helpful:

How Much International Stock? A Suggestion.

Best wishes.
Taylor
Thanks to all who offered their thoughts and Taylor for your comments and link which has a lot of excellent information.

I read here:

"If you're well diversified, there will always be something in your portfolio that you hate".

This struck me as funny and sage at the time, but I must say I didn't think it would be the same thing every year! Nevertheless, I also really like what Taylor wrote:

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

So I'll stay put with what I have. Obviously this may or may not work out well but reading the discussion and knowing that Taylor seems to be OK with leaving things the way they are is very helpful for me and I can put this to bed.
visualguy
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Re: Dump international?

Post by visualguy »

bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
patrick
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Re: Dump international?

Post by patrick »

TomCat96 wrote: Wed Apr 24, 2019 2:23 pm
H-Town wrote: Wed Apr 24, 2019 2:22 pm
patrick wrote: Wed Apr 24, 2019 1:44 pm Australian stocks have dramatically outperformed US stocks since 1900. Why not an all-Australia portfolio?
because to some of them, it's the USA! and to other group, they like to chase performance because why not.

Target Date Funds are a perfect portfolio for those people.
I created a whole thread about investing in Australia, and I have come to the conclusion while this is often stated,
it cannot be exploited as the basis for the claims were potentially inaccurate historical data.

viewtopic.php?t=256671

I want to invest in Australia, per the repeated claim, that the Australian stock market has outperformed the US market since 1900.

I don't want to invest in some random Australian ETF that started in 2002 and has underperformed the US indices.
Somewhere, somehow, on this site, there is the repeated claim that the Australian Stock market has outperformed the US over the past 118 years. I aim to find out exactly the composition of the index for the purposes of investing in it.



I repeat. I want to use the data on the exact index used to achieve the performance for the claim that Australia has outperformed the US for the past 118 years. My goal is not to pick a general Australian index fund and invest in that. That's not the basis for the claim. I want to crack open the mystery of what makes that market so good? What makes it superior.

Based on my preliminary investigations, the more recently created Australian index funds have not outperformed US index funds.
For example, the VXF appears to have dramatically outperformed EWA since it's inception.

And before anyone accuses me of cherry picking, that point is relevant to me. Not only am I 100% US stocks at the moment, I am 100% invested in VXF, the Vanguard Extended Market.

So I ask again, what am I missing.
Your comparison looks at a small fraction of the US market (perhaps 25% of it) for a 16 year period. That shows shows very little about how the whole US market did over 118 years, and is not a good reason to doubt that the actual total market data.
cj2018
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Re: Dump international?

Post by cj2018 »

bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm
TheTimeLord wrote: Wed Apr 24, 2019 1:06 pm Here is a question, over the long term do you expect owning International to enhance results or primarily smooth out volatility?
My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
Finally, someone mentioned this.

I agree with what I highlighted in Green.

However, I don't believe pass index equity fund is the proper vehicle for you to capture everything and anything happens in this wonderful world of ours.

That being said, if there is indeed an efficient vehicle out there to truly capture world growth like how VTSAX does for the US market, I would gladly load up on that.

1 simple example. China over the past 30 years have gone from the bottom of world economy to world #2 - here's the kicker, stock market would not be the way to capture all that benefit :)
cj2018
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Re: Dump international?

Post by cj2018 »

visualguy wrote: Wed Apr 24, 2019 2:48 pm
bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
Ditto - see my comment above!
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Vulcan
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Re: Dump international?

Post by Vulcan »

cj2018 wrote: Wed Apr 24, 2019 2:54 pm
visualguy wrote: Wed Apr 24, 2019 2:48 pm
bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
Ditto - see my comment above!
Neither is VTSAX a perfect proxy for US GDP. Nor do we want it to be.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
Culbretd
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Re: Dump international?

Post by Culbretd »

mrspock wrote: Wed Apr 24, 2019 12:40 pm
Luckywon wrote: Wed Apr 24, 2019 10:14 am I have maintained a 15% allocation to International equities for about 11 years now and it has been an appalling drag on my returns. Looking at some charts now, VXUS has underperformed VTI by approximately 50% over the last five years, and 15 % over the past 12 months. I am thinking strongly of throwing in the towel for international in my retirement accounts (about half of my international holdings), converting to domestic equities. Would be interested to hear from others who agree or disagree with this move.
Dump them. I’m bonds plus US equity, the water is fine. Use bonds w/ AA for volatility control not international equities IMO.

For the International bulls: exactly how many decades of unlikely levels of outperformance will it take to you be proven right (catching up to the US-only folks)? 1? 2 now? Pass.

There’s a simple reason they have low PEs: they are simply worth less (taxes, political climates, volatility, earnings history etc). Check out the “Money for the rest of us” podcast on this topic (episode 209), he breaks it down quite well. Or you can take the advice of Bogle himself or Buffet, both have spoken at length on this topic.

Warren Buffet owns a lot of international stock. He hasn't told anyone that they should not buy international. All he said was one could do just fine with the s&p 500 index.

Buffet has been buying a lot of international lately because of valuations. Took a major stake in Teva pharmaceuticals, an Israeli company.
cj2018
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Re: Dump international?

Post by cj2018 »

Here's the million dollar question to all the International peeps on this board:
  • What makes you think Passive Equity Index Fund is the proper vehicle to capture ex-US economic growth?
Remember, passive indexing only works as intended under a few market conditions. This is not to say that there's no better way to capture EX-US growth and economic benefit for investors, but I just don't think passive indexing is the way to go folks.

All I know is this:
  • Where and Why and How Stock and Equity was originally invented - hint (Europe to the New World)
  • Passive index investing was invented in the US, for US-based public equities only in the past few decades.
  • Passive index investing, as how we practice here in the US, can't be replicated to the same extend for EX-US market
Dottie57
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Re: Dump international?

Post by Dottie57 »

I have international because I think there is a possibility the U.S. will not always be on top financially. Therefore I hold international, but not in market weight but less. The world is changing, but I don’t know how.
cj2018
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Re: Dump international?

Post by cj2018 »

Culbretd wrote: Wed Apr 24, 2019 3:06 pm
mrspock wrote: Wed Apr 24, 2019 12:40 pm
Luckywon wrote: Wed Apr 24, 2019 10:14 am I have maintained a 15% allocation to International equities for about 11 years now and it has been an appalling drag on my returns. Looking at some charts now, VXUS has underperformed VTI by approximately 50% over the last five years, and 15 % over the past 12 months. I am thinking strongly of throwing in the towel for international in my retirement accounts (about half of my international holdings), converting to domestic equities. Would be interested to hear from others who agree or disagree with this move.
Dump them. I’m bonds plus US equity, the water is fine. Use bonds w/ AA for volatility control not international equities IMO.

For the International bulls: exactly how many decades of unlikely levels of outperformance will it take to you be proven right (catching up to the US-only folks)? 1? 2 now? Pass.

There’s a simple reason they have low PEs: they are simply worth less (taxes, political climates, volatility, earnings history etc). Check out the “Money for the rest of us” podcast on this topic (episode 209), he breaks it down quite well. Or you can take the advice of Bogle himself or Buffet, both have spoken at length on this topic.

Warren Buffet owns a lot of international stock. He hasn't told anyone that they should not buy international. All he said was one could do just fine with the s&p 500 index.

Buffet has been buying a lot of international lately because of valuations. Took a major stake in Teva pharmaceuticals, an Israeli company.
But you are not Buffet. You know the difference between a direct majority shareholder with heavy influence of a company's operations versus a passive index/minority holder via a fund structure with no saying in how the company is operated, right?

The way he owns international stock is not the same as how you and me do it - he does it through direct investing via large stakes and the only vehicle you have would most likely be passive index fund, which doesn't give you the same rights and benefits as Buffet would get.
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nedsaid
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Re: Dump international?

Post by nedsaid »

Just dump everything. The US Bond Index returned 0.1% in 2018. Don't need no stinking bonds. International stocks have trailed US Stocks for a decade. Don't need no stinking International. Much of the gain in the S&P 500 and the US Total Stock Market Index has been in the FAANG stocks (Facebook, Apple, Amazon, Netflix, Google). The rest of the S&P 500 and the Total US Stock Market Index were drug down by everything but the FAANG stocks. Don't need no stinkin' Total Stock Market or S&P 500. All you need are the FAANG stocks. Then you will find out that the four stocks were a drag on the performance of the one stock that did best. Don't need no stinkin' Apple. Get my point?
A fool and his money are good for business.
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TheTimeLord
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Re: Dump international?

Post by TheTimeLord »

Culbretd wrote: Wed Apr 24, 2019 3:06 pm
mrspock wrote: Wed Apr 24, 2019 12:40 pm
Luckywon wrote: Wed Apr 24, 2019 10:14 am I have maintained a 15% allocation to International equities for about 11 years now and it has been an appalling drag on my returns. Looking at some charts now, VXUS has underperformed VTI by approximately 50% over the last five years, and 15 % over the past 12 months. I am thinking strongly of throwing in the towel for international in my retirement accounts (about half of my international holdings), converting to domestic equities. Would be interested to hear from others who agree or disagree with this move.
Dump them. I’m bonds plus US equity, the water is fine. Use bonds w/ AA for volatility control not international equities IMO.

For the International bulls: exactly how many decades of unlikely levels of outperformance will it take to you be proven right (catching up to the US-only folks)? 1? 2 now? Pass.

There’s a simple reason they have low PEs: they are simply worth less (taxes, political climates, volatility, earnings history etc). Check out the “Money for the rest of us” podcast on this topic (episode 209), he breaks it down quite well. Or you can take the advice of Bogle himself or Buffet, both have spoken at length on this topic.

Warren Buffet owns a lot of international stock. He hasn't told anyone that they should not buy international. All he said was one could do just fine with the s&p 500 index.

Buffet has been buying a lot of international lately because of valuations. Took a major stake in Teva pharmaceuticals, an Israeli company.
Charlie Munger is fond of Chinese companies as I remember, but Warren is not.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
cj2018
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Re: Dump international?

Post by cj2018 »

Vulcan wrote: Wed Apr 24, 2019 2:58 pm
cj2018 wrote: Wed Apr 24, 2019 2:54 pm
visualguy wrote: Wed Apr 24, 2019 2:48 pm
bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
Ditto - see my comment above!
Neither is VTSAX a perfect proxy for US GDP. Nor do we want it to be.
There's certainly no "perfect proxy" for US GDP, but VTSAX is the best option/vehicle we got at this point to participate in US GDP growth (God bless Jack for creating this vehicle!) if you are just a ordinary non-billionaire like I am.

However, if you care to suggest a better way to participate in US GDP, I am all ears.
Trader Joe
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Re: Dump international?

Post by Trader Joe »

Luckywon wrote: Wed Apr 24, 2019 10:14 am I have maintained a 15% allocation to International equities for about 11 years now and it has been an appalling drag on my returns. Looking at some charts now, VXUS has underperformed VTI by approximately 50% over the last five years, and 15 % over the past 12 months. I am thinking strongly of throwing in the towel for international in my retirement accounts (about half of my international holdings), converting to domestic equities. Would be interested to hear from others who agree or disagree with this move.
Yes, if I were in your position I would dump international today. Good luck.
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Re: Dump international?

Post by stocknoob4111 »

Here is a question - the term "International" as most people are using it here refers to Total International aka ex-US. However from many i've spoken with they differentiate between Japan/EU (+Aus, Canada but they are too small to make much of a difference) and EM. The outlook for Japan/EU seems bleak due to a multitude of systemic issues including aging demographics. The outlook for EM appears more promising. That seems to be a theory.

So, does this mean a pure EM fund is a better better diversification bet than Total International? Or perhaps hold International allocation as 70% EM/30% Total? I know Total holds some EM but I believe it's only 10-15%. Thoughts?
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Vulcan
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Re: Dump international?

Post by Vulcan »

cj2018 wrote: Wed Apr 24, 2019 3:18 pm
Vulcan wrote: Wed Apr 24, 2019 2:58 pm
cj2018 wrote: Wed Apr 24, 2019 2:54 pm
visualguy wrote: Wed Apr 24, 2019 2:48 pm
bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
Ditto - see my comment above!
Neither is VTSAX a perfect proxy for US GDP. Nor do we want it to be.
There's certainly no "perfect proxy" for US GDP, but VTSAX is the best option/vehicle we got at this point to participate in US GDP growth (God bless Jack for creating this vehicle!) if you are just a ordinary non-billionaire like I am.

However, if you care to suggest a better way to participate in US GDP, I am all ears.
Great! Now replace "US" with "Global" and "VTSAX" with "VTWAX".
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Vulcan
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Re: Dump international?

Post by Vulcan »

cj2018 wrote: Wed Apr 24, 2019 3:12 pm But you are not Buffet. You know the difference between a direct majority shareholder with heavy influence of a company's operations versus a passive index/minority holder via a fund structure with no saying in how the company is operated, right?

The way he owns international stock is not the same as how you and me do it - he does it through direct investing via large stakes and the only vehicle you have would most likely be passive index fund, which doesn't give you the same rights and benefits as Buffet would get.
Now replace "international" with "US".
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: Dump international?

Post by cj2018 »

OK! I just pulled this country allocation % for VTWAX (Vanguard Total World Stock).

I actually don't see anything wrong with this fund given the ER is only 10 basis point (0.1%).

What are we arguing here? Vanguard's VTWAX is fundamentally not that different from VTSAX. I thought it was some outrageous allocation to developing countries.

OP - case's closed. You can invest in either VTWAX or VTSAX wouldn't make much difference to your return 30-50 years down the road. Good luck!

Code: Select all

VTWAX
Country 	VTWAX 	Benchmark 	+/- Weight Region
United States	54.6%	54.6%		0.0%	North America
Japan		7.7%	7.7%		0.0%	Pacific
United Kingdom	5.4%	5.3%		0.1%	Europe
China		3.3%	3.3%		0.0%	Emerging Markets
France		3.0%	3.0%		0.0%	Europe
Canada		3.0%	3.1%		– 0.1%	North America
Germany		2.5%	2.5%		0.0%	Europe
Switzerland	2.5%	2.5%		0.0%	Europe
Australia	2.2%	2.2%		0.0%	Pacific
Korea		1.5%	1.5%		0.0%	Pacific
Top 10 equals	85.7%	of net equities 		
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Re: Dump international?

Post by bogledogle87 »

visualguy wrote: Wed Apr 24, 2019 2:48 pm
bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
I concede this point, fair enough. There are some missing pieces not currently available - like China’s A Shares. I still don’t have a reason to say that US only haystack is a better bet than the current world’s investible stocks going forward. This is as close as I can get to an ideal and neutral portfolio at present day and I’m more than happy with it.
VTWAX and chill
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Re: Dump international?

Post by cj2018 »

Vulcan wrote: Wed Apr 24, 2019 3:49 pm
cj2018 wrote: Wed Apr 24, 2019 3:18 pm
Vulcan wrote: Wed Apr 24, 2019 2:58 pm
cj2018 wrote: Wed Apr 24, 2019 2:54 pm
visualguy wrote: Wed Apr 24, 2019 2:48 pm

This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
Ditto - see my comment above!
Neither is VTSAX a perfect proxy for US GDP. Nor do we want it to be.
There's certainly no "perfect proxy" for US GDP, but VTSAX is the best option/vehicle we got at this point to participate in US GDP growth (God bless Jack for creating this vehicle!) if you are just a ordinary non-billionaire like I am.

However, if you care to suggest a better way to participate in US GDP, I am all ears.
Great! Now replace "US" with "Global" and "VTSAX" with "VTWAX".
Yes! See my comment above :)

I feel kinda sad though that Total World Market mostly equals 10 countries. Oh well totally separate issue lol.
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Vulcan
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Re: Dump international?

Post by Vulcan »

cj2018 wrote: Wed Apr 24, 2019 3:53 pm OK! I just pulled this country allocation % for VTWAX (Vanguard Total World Stock).

I actually don't see anything wrong with this fund given the ER is only 10 basis point (0.1%).

What are we arguing here? Vanguard's VTWAX is fundamentally not that different from VTSAX. I thought it was some outrageous allocation to developing countries.
I don't know what you are arguing.
I am arguing in favor of global market cap investing. ;)
OP - case's closed. You can invest in either VTWAX or VTSAX wouldn't make much difference to your return 30-50 years down the road.
You don't know that. Maybe it will, maybe it won't.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Vulcan
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Re: Dump international?

Post by Vulcan »

bogledogle87 wrote: Wed Apr 24, 2019 3:54 pm
visualguy wrote: Wed Apr 24, 2019 2:48 pm
bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
I concede this point, fair enough. There are some missing pieces not currently available - like China’s A Shares. I still don’t have a reason to say that US only haystack is a better bet than the current world’s investible stocks going forward. This is as close as I can get to an ideal and neutral portfolio at present day and I’m more than happy with it.
Don't concede too soon! I just got them pinned down on VTSAX as US GDP proxy issue;)
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Vulcan
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Re: Dump international?

Post by Vulcan »

cj2018 wrote: Wed Apr 24, 2019 3:55 pm
Vulcan wrote: Wed Apr 24, 2019 3:49 pm Great! Now replace "US" with "Global" and "VTSAX" with "VTWAX".
Yes! See my comment above :)

I feel kinda sad though that Total World Market mostly equals 10 countries. Oh well totally separate issue lol.
First two is too many, now 10 is too few?

And VTSAX is largely 10 biggest stocks.
If you know better than the market, you can always pick stocks, segments, countries, or lottery tickets

;)
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Vulcan
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Re: Dump international?

Post by Vulcan »

stocknoob4111 wrote: Wed Apr 24, 2019 3:45 pm Here is a question - the term "International" as most people are using it here refers to Total International aka ex-US. However from many i've spoken with they differentiate between Japan/EU (+Aus, Canada but they are too small to make much of a difference) and EM. The outlook for Japan/EU seems bleak due to a multitude of systemic issues including aging demographics. The outlook for EM appears more promising. That seems to be a theory.

So, does this mean a pure EM fund is a better better diversification bet than Total International? Or perhaps hold International allocation as 70% EM/30% Total? I know Total holds some EM but I believe it's only 10-15%. Thoughts?
VTWAX composition reflects the collective wisdom of the world's investing public.

Do you think Ford is an inherently better long term investment than Toyota?
Boeing than Airbus?
Merck than Sanofi?
...shall I go on?
Last edited by Vulcan on Wed Apr 24, 2019 4:16 pm, edited 1 time in total.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
cj2018
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Re: Dump international?

Post by cj2018 »

bogledogle87 wrote: Wed Apr 24, 2019 3:54 pm
visualguy wrote: Wed Apr 24, 2019 2:48 pm
bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
I concede this point, fair enough. There are some missing pieces not currently available - like China’s A Shares. I still don’t have a reason to say that US only haystack is a better bet than the current world’s investible stocks going forward. This is as close as I can get to an ideal and neutral portfolio at present day and I’m more than happy with it.
1 minor correction - Replace 'World' with '10 Countries' and now I agree with everything else you said.

For the record, can we please stop saying "World" or "Global" when we are really just taking about a handful of countries?

Like, the World has 180+ countries. Sorry guys, let's get the technicality right here.
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Re: Dump international?

Post by cj2018 »

Vulcan wrote: Wed Apr 24, 2019 3:55 pm
cj2018 wrote: Wed Apr 24, 2019 3:53 pm OK! I just pulled this country allocation % for VTWAX (Vanguard Total World Stock).

I actually don't see anything wrong with this fund given the ER is only 10 basis point (0.1%).

What are we arguing here? Vanguard's VTWAX is fundamentally not that different from VTSAX. I thought it was some outrageous allocation to developing countries.
I don't know what you are arguing.
I am arguing in favor of global market cap investing. ;)
OP - case's closed. You can invest in either VTWAX or VTSAX wouldn't make much difference to your return 30-50 years down the road.
You don't know that. Maybe it will, maybe it won't.
In my defense, VTWAX only launched on 02/07/2019 so clearly even Vanguard has only figured this out very recently.

I don't know how they are able to implement this fund and meet its benchmark requirement while keeping ER at only 0.1%. From a portfolio management perspective it might be a lot of overhead to make this work but I'm glad they are making this possible. It's amazing we have this vehicle now at our disposal!
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Re: Dump international?

Post by Vulcan »

cj2018 wrote: Wed Apr 24, 2019 4:02 pm
bogledogle87 wrote: Wed Apr 24, 2019 3:54 pm
visualguy wrote: Wed Apr 24, 2019 2:48 pm
bogledogle87 wrote: Wed Apr 24, 2019 2:32 pm My only expectation is that the World as a whole will continue to develop, grow, prosper as it always does. VTWAX will capture anything and everything that happens in that regard.
This is exactly where you are wrong, though... You are extrapolating from the way things work in the US to the world. Indexing the Chinese stock market hasn't captured what happened to their economy, for example.
I concede this point, fair enough. There are some missing pieces not currently available - like China’s A Shares. I still don’t have a reason to say that US only haystack is a better bet than the current world’s investible stocks going forward. This is as close as I can get to an ideal and neutral portfolio at present day and I’m more than happy with it.
1 minor correction - Replace 'World' with '10 Countries' and now I agree with everything else you said.

For the record, can we please stop saying "World" or "Global" when we are really just taking about a handful of countries?

Like, the World has 180+ countries. Sorry guys, let's get the technicality right here.
Actually, there are over 40 countries' equities in VTWAX.
Yes, the it's top heavy, but those are current valuations of publicly traded companies.

If there was a way to capture the privately held (not publicly traded) economy of the world, it may be an interesting alternative, but this is not possible even speculatively, by definition of publicly traded vs privately held assets.

So the bet, then, is that the global publicly traded equities are about as good a proxy for the world economy as VTSAX is for the US one.

Yes, in the case of China only a small portion of its economy is represented in VTWAX. But is it worse than none?
Last edited by Vulcan on Wed Apr 24, 2019 4:26 pm, edited 1 time in total.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: Dump international?

Post by Vulcan »

cj2018 wrote: Wed Apr 24, 2019 4:18 pm In my defense, VTWAX only launched on 02/07/2019 so clearly even Vanguard has only figured this out very recently.
Its investors share class (VTWSX) has been around since 2008
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: Dump international?

Post by willthrill81 »

Finding an investment strategy that you can stick with through thick and thin seems very likely to be more important than whether you have a 15% or 0% allocation to ex-U.S. equities.
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Re: Dump international?

Post by patrick »

cj2018 wrote: Wed Apr 24, 2019 4:02 pm 1 minor correction - Replace 'World' with '10 Countries' and now I agree with everything else you said.

For the record, can we please stop saying "World" or "Global" when we are really just taking about a handful of countries?

Like, the World has 180+ countries. Sorry guys, let's get the technicality right here.
The top 10 countries account for most of total world because they have much larger (float adjusted) market caps -- there are about 40 countries in the total world index. This isn't very different from total (US) market indexes which include thousands of companies but give the smallest ones minimal weights -- there is still broad inclusion, but the market gives some components small weights. As for the 150 or so countries that aren't even in the total world index, their markets are so tiny (if they exist at all) that including them at market weight would have a negligible impact.
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Re: Dump international?

Post by bogledogle87 »

Vulcan wrote: Wed Apr 24, 2019 3:57 pm Don't concede too soon! I just got them pinned down on VTSAX as US GDP proxy issue;)
I’ll never concede on VTWAX! Maybe just the word “everything” as 100% absolute. 8-)
VTWAX and chill
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