How much to hold in international equities (VTIAX)?

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watchnerd
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Re: How much to hold in international equities (VTIAX)?

Post by watchnerd »

bltn wrote: Mon Jan 20, 2020 9:01 pm
I ll let American companies with their overseas interests provide my foreign diversification in the future. And , out of academic interest, I ll watch my small stake in the international stock index fund to see if it ever outperforms on a consistent basis.
Swap and replace "American" in the above sentence with "Australian / British / Canadian / Japanese" and you get the well-researched phenomenon known as "home country bias":

Image


"If you’re investing 80% that means you are making a massive active bet that that US stock market will outperform the rest of the world. (Pat yourself on the back if you’ve been lucky and done this the past 10 years). So why am I pounding the table that this is such a bad idea?"


https://mebfaber.com/2019/07/08/i-dont-feel-overweight/
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Re: How much to hold in international equities (VTIAX)?

Post by visualguy »

watchnerd wrote: Tue Jan 21, 2020 1:27 am "If you’re investing 80% that means you are making a massive active bet that that US stock market will outperform the rest of the world. (Pat yourself on the back if you’ve been lucky and done this the past 10 years). So why am I pounding the table that this is such a bad idea?"


https://mebfaber.com/2019/07/08/i-dont-feel-overweight/
Or past 20 years, or 30, or 50, or 100...
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watchnerd
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Re: How much to hold in international equities (VTIAX)?

Post by watchnerd »

visualguy wrote: Tue Jan 21, 2020 2:17 am
watchnerd wrote: Tue Jan 21, 2020 1:27 am "If you’re investing 80% that means you are making a massive active bet that that US stock market will outperform the rest of the world. (Pat yourself on the back if you’ve been lucky and done this the past 10 years). So why am I pounding the table that this is such a bad idea?"


https://mebfaber.com/2019/07/08/i-dont-feel-overweight/
Or past 20 years, or 30, or 50, or 100...
"Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks. Want to know how much of that outperformance has come since 2009?

All of it!"
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lostdog
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Re: How much to hold in international equities (VTIAX)?

Post by lostdog »

watchnerd wrote: Tue Jan 21, 2020 2:21 am
visualguy wrote: Tue Jan 21, 2020 2:17 am
watchnerd wrote: Tue Jan 21, 2020 1:27 am "If you’re investing 80% that means you are making a massive active bet that that US stock market will outperform the rest of the world. (Pat yourself on the back if you’ve been lucky and done this the past 10 years). So why am I pounding the table that this is such a bad idea?"


https://mebfaber.com/2019/07/08/i-dont-feel-overweight/
Or past 20 years, or 30, or 50, or 100...
"Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks. Want to know how much of that outperformance has come since 2009?

All of it!"
This is great for the novice investor to see. The U.S. only crowd's arguments are weak at best. Most of the time it's personal beliefs, politics, biases, based on authority, under educated, past performance, market timing, crystal ball future predictions, etc...
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Stef
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Re: How much to hold in international equities (VTIAX)?

Post by Stef »

watchnerd wrote: Tue Jan 21, 2020 2:21 am"Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks. Want to know how much of that outperformance has come since 2009?

All of it!"
So what was the return or end value by 2009?
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Re: How much to hold in international equities (VTIAX)?

Post by visualguy »

watchnerd wrote: Tue Jan 21, 2020 2:21 am
visualguy wrote: Tue Jan 21, 2020 2:17 am
watchnerd wrote: Tue Jan 21, 2020 1:27 am "If you’re investing 80% that means you are making a massive active bet that that US stock market will outperform the rest of the world. (Pat yourself on the back if you’ve been lucky and done this the past 10 years). So why am I pounding the table that this is such a bad idea?"


https://mebfaber.com/2019/07/08/i-dont-feel-overweight/
Or past 20 years, or 30, or 50, or 100...
"Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks. Want to know how much of that outperformance has come since 2009?

All of it!"
That would be nice, but US out-performed in the long run even if you wiped out the last decade. You really need to look at the Credit Suisse Global Investment Returns Yearbooks to see how bad ex-US has been. There were some periods of out-performance, but in the long run the returns were weak, and the volatility high.

The last decade just added a big insult to injury, and eliminated any hope of even remotely catching up. Even ignoring all that (which makes no sense to ignore), going with a large allocation to ex-US essentially means betting on the future of the stock markets of Europe and Japan. I think I'll continue to pass on that one - no hope of that taking off in my limited lifetime - the issues there are overwhelming when compared to the US. I'd love a stake in the growth of China and India, but their stock markets don't provide a way for us to get that, unfortunately, and, again, I don't think I'll live long enough to see them change their system and benefit from it.
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Re: How much to hold in international equities (VTIAX)?

Post by lazyday »

visualguy wrote: Tue Jan 21, 2020 4:13 amThe last decade just added a big insult to injury, and eliminated any hope of even remotely catching up.
Ex-US is not one country, it is many.

Microsoft has outperformed the S&P 500 by so much, the S&P will never catch up. It’s foolish to put money in the lagging S&P when Microsoft has much better returns.

Choosing US because it has done better than the weighted average country is like choosing Microsoft because it has done better than the avg company.

....Europe and Japan. I think I'll continue to pass on that one - no hope of that taking off in my limited lifetime - the issues there are overwhelming when compared to the US
If you're just going to buy the best country, why not just buy the best stock? Why buy garbage companies in Financials or Durables?

If you need more diversification, you could just own the US Tech sector. It gets plenty of revenue from other sectors, and from other countries.

(or you could diversify company risk, sector risk, and country risk with Total World Stock)
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Re: How much to hold in international equities (VTIAX)?

Post by lazyday »

palanzo wrote: Mon Jan 20, 2020 4:13 pm30% which is close enough to 1/3 was the point that resulted in maximum reduction in total portfolio volatility according the the Vanguard white paper.
In the latest VG paper, it was ~40% for equity.

(not saying 30% is bad, just not the lowest volatility point according to Vanguard)
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Re: How much to hold in international equities (VTIAX)?

Post by bogledogle87 »

lazyday wrote: Tue Jan 21, 2020 7:49 am If you're just going to buy the best country, why not just buy the best stock? Why buy garbage companies in Financials or Durables?
If you need more diversification, you could just own the US Tech sector. It gets plenty of revenue from other sectors, and from other countries.
Sounds like a job for TQQQ! After all, it has obliterates just about every other etf available :sharebeer
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Re: How much to hold in international equities (VTIAX)?

Post by Triple digit golfer »

lazyday wrote: Tue Jan 21, 2020 7:54 am
palanzo wrote: Mon Jan 20, 2020 4:13 pm30% which is close enough to 1/3 was the point that resulted in maximum reduction in total portfolio volatility according the the Vanguard white paper.
In the latest VG paper, it was ~40% for equity.

(not saying 30% is bad, just not the lowest volatility point according to Vanguard)
I'm at 30% and have been for my entire almost 13 year investing career. Considering bumping to 1/3, but with 20% bonds would make my allocation to 53.33/26.67/20 and that is ugly. 56/24/20 looks much nicer to me, an accountant who enjoys even numbers.

35% would be nice and clean. 52/28/20. But 35 is an odd number. I don't like that.

40% would be the next one that is an even integer and keeps my allocation all even. 48/32/20. Hmm.

Maybe I will redirect all equity contributions to international until I'm there. But then I'd have odd number allocations throughout the process. Okay, maybe I exchange now. I would have to exchange about 64k. A nice even number!
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Re: How much to hold in international equities (VTIAX)?

Post by bogledogle87 »

lazyday wrote: Tue Jan 21, 2020 7:54 am
palanzo wrote: Mon Jan 20, 2020 4:13 pm30% which is close enough to 1/3 was the point that resulted in maximum reduction in total portfolio volatility according the the Vanguard white paper.
In the latest VG paper, it was ~40% for equity.

(not saying 30% is bad, just not the lowest volatility point according to Vanguard)
I assume the 30% reference is to this Vanguard paper from 2012 that is often cited to support the 70% US / 30% International allocation

Considerations for investing in non-U.S. equities
https://personal.vanguard.com/pdf/icriecr.pdf

Investors love to cite the part on page 6 for a forever allocation of 70/30
"Allocating 30% to non-U.S. stocks would have captured about 99% of the maximum possible benefit."

... But shamelessly ignore the very next paragraph that says
"A significant weakness of this analysis is that it is backward-looking and particularly dependent on the time period examined. For example, at different observation dates, the “optimal” allocation to non U.S stocks has been as low as 20% or as high as 70%."

What's funny is that the current world cap weight of 45% is exactly in the middle of the period-dependent optimal ranges of 20-70% . Who is to say that 45% today or just holding World Market Cap won't be optimal going forward? Who can say that 1970-2008 is the best predictor of the next 40 years? No one knows.

For me, VTWAX and forget about it
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Re: How much to hold in international equities (VTIAX)?

Post by lazyday »

bogledogle87 wrote: Tue Jan 21, 2020 8:06 am[2012 paper] "A significant weakness of this analysis is that it is backward-looking and particularly dependent on the time period examined. For example, at different observation dates, the “optimal” allocation to non U.S stocks has been as low as 20% or as high as 70%."
I don't think Vanguard gave a lot of detail on how they came up with the more recent 40% figure, but I suspect they tried to reduce the problem of dependance on start and end dates. Maybe with a simulation?

Also in that paper or in another, they came up with a minimum volatility estimate for three other countries, and as I recall the estimates ranged from something like 40% to 50% foreign stocks for UK, Canada, or Australia investors.

To me, getting a similar result in other countries gives more confidence than a backtest or simulation in one country. But we'd have to just trust Vanguard, since they don't give full details.
For me, VTWAX and forget about it
Sounds good to me. Today it's close to the Vanguard suggestion, it could make it easy to stay the course, and it aligns with Sharpe's ideas.

(my own portfolio has big bets, but I don't suggest that for others)
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Re: How much to hold in international equities (VTIAX)?

Post by watchnerd »

Stef wrote: Tue Jan 21, 2020 3:51 am
watchnerd wrote: Tue Jan 21, 2020 2:21 am"Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks. Want to know how much of that outperformance has come since 2009?

All of it!"
So what was the return or end value by 2009?
You'll have to ask Mebane Faber, the article's author.
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Re: How much to hold in international equities (VTIAX)?

Post by watchnerd »

visualguy wrote: Tue Jan 21, 2020 4:13 am
watchnerd wrote: Tue Jan 21, 2020 2:21 am
visualguy wrote: Tue Jan 21, 2020 2:17 am
watchnerd wrote: Tue Jan 21, 2020 1:27 am "If you’re investing 80% that means you are making a massive active bet that that US stock market will outperform the rest of the world. (Pat yourself on the back if you’ve been lucky and done this the past 10 years). So why am I pounding the table that this is such a bad idea?"


https://mebfaber.com/2019/07/08/i-dont-feel-overweight/
Or past 20 years, or 30, or 50, or 100...
"Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks. Want to know how much of that outperformance has come since 2009?

All of it!"
That would be nice, but US out-performed in the long run even if you wiped out the last decade.
Mebane Faber is saying the opposite.

If you think his data is wrong, perhaps you can comment on his article or reach out to him.
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Re: How much to hold in international equities (VTIAX)?

Post by bck63 »

I have zero confidence in the transparency and regulatory laws of countries like China, Saudi Arabia, India, Brazil, Russia (RUSSIA!!), Mexico, etcetera, etcetera, etcetera.

US has the soundest financial institutions, the best governance, and still has a well-diversified economy. I'm not betting my money on a bunch of banana-republic foreign-government shysters playing shell games with their companies and stock markets. Plus, international stocks are just plain riskier (so says Vanguard).

I'll just keep buying US stocks till they crash, then valuations will normalize and I'll just keep buying. Done it before, will do it again. And on it goes, this thing of ours (to quote Paulie Walnuts).
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Re: How much to hold in international equities (VTIAX)?

Post by BalancedJCB19 »

0 to 20%. I hold zero
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Re: How much to hold in international equities (VTIAX)?

Post by sschoe2 »

Since my 401k is in Vanguard Target 2045 and they have 40% of stocks in VTIAX I buy 100% US stock index in my IRA to bring it down to about 20%. I am not as bullish on international as Vanguard I believe about 20 to 25 is ideal.
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Re: How much to hold in international equities (VTIAX)?

Post by sometimesinvestor »

Somewhere between 5% and 40% is probably right. If one of the people who commented in this thread sounded very good to you go with that. If it all seemed noise throw a dart . While you decision will make a difference none of us have any idea what will prove best over the next 10 years.
If I seem brilliant to you (I think I should not) my allocation is somewhere between 10 and 15
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Re: How much to hold in international equities (VTIAX)?

Post by palanzo »

lazyday wrote: Tue Jan 21, 2020 7:54 am
palanzo wrote: Mon Jan 20, 2020 4:13 pm30% which is close enough to 1/3 was the point that resulted in maximum reduction in total portfolio volatility according the the Vanguard white paper.
In the latest VG paper, it was ~40% for equity.

(not saying 30% is bad, just not the lowest volatility point according to Vanguard)
I think you will find that is not the case. "Allocating 30% to non-U.S. stocks would have captured about 99% of the maximum possible benefit." If you are concerned about the 1% then by all means go to 40% but the data is just not extensive enough to support that.
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Re: How much to hold in international equities (VTIAX)?

Post by watchnerd »

bck63 wrote: Tue Jan 21, 2020 3:42 pm I have zero confidence in the transparency and regulatory laws of countries like China, Saudi Arabia, India, Brazil, Russia (RUSSIA!!), Mexico, etcetera, etcetera, etcetera.
Those are all emerging markets countries, which are ~11% of the FTSE indexes.

What about the other 39% ex-US in UK, Canada, Australia, Germany, Switzerland, etc? Do you think they have significant flaws in transparency and regulations, too?
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Re: How much to hold in international equities (VTIAX)?

Post by palanzo »

bogledogle87 wrote: Tue Jan 21, 2020 8:06 am
lazyday wrote: Tue Jan 21, 2020 7:54 am
palanzo wrote: Mon Jan 20, 2020 4:13 pm30% which is close enough to 1/3 was the point that resulted in maximum reduction in total portfolio volatility according the the Vanguard white paper.
In the latest VG paper, it was ~40% for equity.

(not saying 30% is bad, just not the lowest volatility point according to Vanguard)
I assume the 30% reference is to this Vanguard paper from 2012 that is often cited to support the 70% US / 30% International allocation

Considerations for investing in non-U.S. equities
https://personal.vanguard.com/pdf/icriecr.pdf

Investors love to cite the part on page 6 for a forever allocation of 70/30
"Allocating 30% to non-U.S. stocks would have captured about 99% of the maximum possible benefit."

... But shamelessly ignore the very next paragraph that says
"A significant weakness of this analysis is that it is backward-looking and particularly dependent on the time period examined. For example, at different observation dates, the “optimal” allocation to non U.S stocks has been as low as 20% or as high as 70%."

What's funny is that the current world cap weight of 45% is exactly in the middle of the period-dependent optimal ranges of 20-70% . Who is to say that 45% today or just holding World Market Cap won't be optimal going forward? Who can say that 1970-2008 is the best predictor of the next 40 years? No one knows.

For me, VTWAX and forget about it
I'm certainly not shamelessly ignoring the following paragraph. Figure 3 is from 1970 through 2012. It would be nice to have more data but that is what we have. While it is true the minimal volatility portfolio ex-USA percentage has varied and is time period dependent, this is also true for other financial data. Also note the last sentence of that paragraph "This is the reason we do not focus solely on such optimization techniques to form portfolios, but, instead, combine an evaluation of the investment trade-offs with factors such as cost and behavioral realities."

No one knows if 45% will be optimal going forward but this does not invalidate deciding to use 30% and as Vanguard pointed out "through both year-end 2008 and year-end 2011, however, the curve clearly bottomed out between 30% and 40%"
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Re: How much to hold in international equities (VTIAX)?

Post by bck63 »

watchnerd wrote: Tue Jan 21, 2020 4:48 pm
bck63 wrote: Tue Jan 21, 2020 3:42 pm I have zero confidence in the transparency and regulatory laws of countries like China, Saudi Arabia, India, Brazil, Russia (RUSSIA!!), Mexico, etcetera, etcetera, etcetera.
Those are all emerging markets countries, which are ~11% of the FTSE indexes.

What about the other 39% ex-US in UK, Canada, Australia, Germany, Switzerland, etc? Do you think they have significant flaws in transparency and regulations, too?
Or France? France went on strike when they tried to institute a 35-work week. Not much much confidence there either, no.

I am NO economist. But I don't really see anything about European economies that make me think they'll do better than the US over the next century or so, which is longer than my lifetime.
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Re: How much to hold in international equities (VTIAX)?

Post by Wanderingwheelz »

Triple digit golfer wrote: Tue Jan 21, 2020 8:05 am
lazyday wrote: Tue Jan 21, 2020 7:54 am
palanzo wrote: Mon Jan 20, 2020 4:13 pm30% which is close enough to 1/3 was the point that resulted in maximum reduction in total portfolio volatility according the the Vanguard white paper.
In the latest VG paper, it was ~40% for equity.

(not saying 30% is bad, just not the lowest volatility point according to Vanguard)
I'm at 30% and have been for my entire almost 13 year investing career. Considering bumping to 1/3, but with 20% bonds would make my allocation to 53.33/26.67/20 and that is ugly. 56/24/20 looks much nicer to me, an accountant who enjoys even numbers.

35% would be nice and clean. 52/28/20. But 35 is an odd number. I don't like that.

40% would be the next one that is an even integer and keeps my allocation all even. 48/32/20. Hmm.

Maybe I will redirect all equity contributions to international until I'm there. But then I'd have odd number allocations throughout the process. Okay, maybe I exchange now. I would have to exchange about 64k. A nice even number!
I did an exchange of a number that wasn’t too far off of your $64k, today. And like you mentioned, all of my stock purchases will be VXUS until I’m at 30% in my stock allocation- probably by this point next year. To me, I’m seeing some (mild) individual stock risk at the very top of the US TSM/S&P500 and that’s one risk I’ve always avoided at all costs by avoiding individual stocks, so why should I expose myself to it in my index funds?
Last edited by Wanderingwheelz on Wed Jan 22, 2020 6:58 am, edited 1 time in total.
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Re: How much to hold in international equities (VTIAX)?

Post by watchnerd »

bck63 wrote: Tue Jan 21, 2020 4:56 pm

Or France? France went on strike when they tried to institute a 35-work week. Not much much confidence there either, no.

I am NO economist. But I don't really see anything about European economies that make me think they'll do better than the US over the next century or so, which is longer than my lifetime.
It's not about the countries, per se.

It's just where the stocks happened to be domiciled.

Roche is HQ'ed in Switzerland. It's revenue stream is worldwide.

Airbus does not sell planes exclusively to Europe.

Toyota gets half of its revenue from the US.

etc.
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Re: How much to hold in international equities (VTIAX)?

Post by apex84 »

There have been a lot of questions raised about specific non-US countries and their financial/legal/political/market/accounting systems. All of this is known and should be reflected in the market price. Being diversified means that no country (other than the US) will make a giant impact on your portfolio. Personally, I don't let these concerns determine my investment choices. As countries grow their economies and world market cap, there is greater financial scrutiny from market forces as well.

Consider an example portfolio with a 60% equity/40% bond allocation that has the equity portion split at 60% US & 40% foreign.

The largest ex-US holding is Japan, which would be 16.7% x 0.6 x 0.4 = 4% of your portfolio. That is for a whole country with a well-developed economy. For China, it would be 2% of your portfolio, that is $2000 per $100,000 invested. I'm comfortable making that "bet" on a country with a ~$14 trillion GDP economy.

https://investor.vanguard.com/mutual-fu ... olio/vtiax

Tot Intl Stock Ix Admiral
Market allocation (% of common stock) 
as of 12/31/2019

Japan  16.70%
United Kingdom  11.10%
China  8.30%
Canada  6.60%
France  6.60%
Switzerland  5.70%
Germany  5.50%
Australia  4.70%
Taiwan  3.50%
Korea  3.20%
India  2.50%
Netherlands  2.50%
Hong Kong  2.40%
Brazil  2.10%
Sweden  2.00%
Italy  1.70%
Spain  1.60%
South Africa  1.30%
Denmark  1.20%
Russia  1.00%
Belgium  0.70%
Finland  0.80%
Singapore  0.80%
Thailand  0.80%
Mexico  0.70%
Malaysia  0.60%
Norway  0.60%
Other  0.60%
Indonesia  0.50%
Saudi Arabia  0.50%
Israel  0.40%
Ireland  0.20%
New Zealand  0.30%
Philippines  0.30%
Poland  0.20%
Qatar  0.30%
Austria  0.20%
Chile  0.20%
Kuwait  0.20%
Turkey  0.20%
United Arab Emirates  0.20%
Colombia  0.10%
Egypt  0.10%
Greece  0.10%
Hungary  0.10%
Portugal  0.10%
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Re: How much to hold in international equities (VTIAX)?

Post by bck63 »

watchnerd wrote: Tue Jan 21, 2020 5:04 pm
bck63 wrote: Tue Jan 21, 2020 4:56 pm

Or France? France went on strike when they tried to institute a 35-work week. Not much much confidence there either, no.

I am NO economist. But I don't really see anything about European economies that make me think they'll do better than the US over the next century or so, which is longer than my lifetime.
It's not about the countries, per se.

It's just where the stocks happened to be domiciled.

Roche is HQ'ed in Switzerland. It's revenue stream is worldwide.

Airbus does not sell planes exclusively to Europe.

Toyota gets half of its revenue from the US.

etc.
I hear you. It's a constant struggle for me. I do have international in my tax deferred in vanguard funds. I've never settled within myself what the right thing to do is.
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Re: How much to hold in international equities (VTIAX)?

Post by abuss368 »

averagedude wrote: Sun Jan 19, 2020 10:07 pm
abuss368 wrote: Sun Jan 19, 2020 5:09 pm Nothing brings out the responses and debate like a good old fashioned domestic v.international debate! Always has. Always will.
You sure are right. Look for a thread on this forum that has over 100 posts, and it is likely that it is a debate about domestic vs international. I know alot of people hate it, but it is a worthy topic to talk about. Me personally, it is the toughest investment decision to make.
I would agree. Domestic v. International is a tough decision to make and stay the course with.
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Re: How much to hold in international equities (VTIAX)?

Post by spdoublebass »

abuss368 wrote: Tue Jan 21, 2020 7:54 pm
averagedude wrote: Sun Jan 19, 2020 10:07 pm
abuss368 wrote: Sun Jan 19, 2020 5:09 pm Nothing brings out the responses and debate like a good old fashioned domestic v.international debate! Always has. Always will.
You sure are right. Look for a thread on this forum that has over 100 posts, and it is likely that it is a debate about domestic vs international. I know alot of people hate it, but it is a worthy topic to talk about. Me personally, it is the toughest investment decision to make.
I would agree. Domestic v. International is a tough decision to make and stay the course with.
I wish I could remember where I heard it, it was a TV interview I know that much. Bogle himself states that while he advocates for a US portfolio, if an investor already has international in their portfolio at a certain percentage, he adamantly advised that they stay the course with it forever. He said staying the course is more important than if you should hold international or not once you already have it in your portfolio.

Meaning that if you hold international and throw in the towel when it's down it's probably a bad idea.
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Re: How much to hold in international equities (VTIAX)?

Post by Huberpc27 »

I still dont see the rationale of international stocks, and would love to get deeper into the minds of those that say "40% feels right" to see the drivers behind that.
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Re: How much to hold in international equities (VTIAX)?

Post by dru808 »

Razasharpz wrote: Sun Jan 19, 2020 10:28 am I do 20%. I would never consider more. If anything I'd go less.
Well, you’d better cut down. According to your sig you’re higher than a 20% int equity allocation.
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Re: How much to hold in international equities (VTIAX)?

Post by jhfenton »

Huberpc27 wrote: Tue Jan 21, 2020 8:46 pm I still dont see the rationale of international stocks, and would love to get deeper into the minds of those that say "40% feels right" to see the drivers behind that.
Different perspectives and personal biases are always interesting to consider. I can't understand why someone wouldn't invest in international stocks. If I could only invest in US stocks or ex-US stocks, it would be a really easy choice to pick ex-US. It's one market versus dozens.

We're 50%/50% because I like round numbers.
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Re: How much to hold in international equities (VTIAX)?

Post by Huberpc27 »

I appreciate that
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Re: How much to hold in international equities (VTIAX)?

Post by Taylor Larimore »

spdoublebass wrote:Bogle himself states that while he advocates for a US portfolio, if an investor already has international in their portfolio at a certain percentage, he adamantly advised that they stay the course with it forever.
spdoublebass:

I read everything I can by Mr. Bogle and I also knew him personally. I cannot imagine him recommending that an investor should hang-on to a certain percentage of a fund (except for taxes) when the percentage is no longer suitable. One of Mr. Bogle's earliest rules was that investors should change their allocation as they age.

Please try and find your memory quote. Google should help. I strongly doubt you will find that quote.

Best wishes
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Re: How much to hold in international equities (VTIAX)?

Post by spdoublebass »

Taylor Larimore wrote: Tue Jan 21, 2020 9:29 pm
spdoublebass wrote:Bogle himself states that while he advocates for a US portfolio, if an investor already has international in their portfolio at a certain percentage, he adamantly advised that they stay the course with it forever.
spdoublebass:

I read everything I can by Mr. Bogle and I also knew him personally. I cannot imagine him recommending that an investor should hang-on to a certain percentage of a fund (except for taxes) when the percentage is no longer suitable. One of Mr. Bogle's earliest rules was that investors should change their allocation as they age.

Please try and find your memory quote. Google should help. I strongly doubt you will find that quote.

Best wishes

Will do. I'll keep looking. But to be clear, he wasn't talking about the stock bond relationship. I want to say he said something like while he advised no more than 20% in International, it's not needed, but if you already have it stay the course.

I'll keep looking. I tried really hard to find it. I believe it was from 2016 or 2017. Of course I could also be remembering it wrong, which Is why I stated up front I can't find the video.


Taylor
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Re: How much to hold in international equities (VTIAX)?

Post by spdoublebass »

spdoublebass wrote: Tue Jan 21, 2020 9:48 pm
Taylor Larimore wrote: Tue Jan 21, 2020 9:29 pm
spdoublebass wrote:Bogle himself states that while he advocates for a US portfolio, if an investor already has international in their portfolio at a certain percentage, he adamantly advised that they stay the course with it forever.
spdoublebass:

I read everything I can by Mr. Bogle and I also knew him personally. I cannot imagine him recommending that an investor should hang-on to a certain percentage of a fund (except for taxes) when the percentage is no longer suitable. One of Mr. Bogle's earliest rules was that investors should change their allocation as they age.

Please try and find your memory quote. Google should help. I strongly doubt you will find that quote.

Best wishes


Taylor
Jack Bogle's Words of Wisdom: "We say stay the course. But before you stay the course, make sure you're on the right course."

Will do. I'll keep looking. But to be clear, he wasn't talking about the stock bond relationship. I want to say he said something like while he advised no more than 20% in International, it's not needed, but if you already have it stay the course.

I'll keep looking. I tried really hard to find it. I believe it was from 2016 or 2017. Of course I could also be remembering it wrong, which Is why I stated up front I can't find the video.
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Re: How much to hold in international equities (VTIAX)?

Post by visualguy »

watchnerd wrote: Tue Jan 21, 2020 5:04 pm
bck63 wrote: Tue Jan 21, 2020 4:56 pm

Or France? France went on strike when they tried to institute a 35-work week. Not much much confidence there either, no.

I am NO economist. But I don't really see anything about European economies that make me think they'll do better than the US over the next century or so, which is longer than my lifetime.
It's not about the countries, per se.

It's just where the stocks happened to be domiciled.

Roche is HQ'ed in Switzerland. It's revenue stream is worldwide.

Airbus does not sell planes exclusively to Europe.

Toyota gets half of its revenue from the US.

etc.
True, but there are differences in management philosophy and culture between European, Japanese, and American companies, as well as differences in roles played by the government.

American companies have a stronger emphasis on maximizing share value. It is not quite like this in European companies which tend to have a broader view, and tend to take into account the impact of strategies on more stakeholders (such as employees). Overall, it seems like the American more brutal and shareholder-fixated approach is beneficial to shareholders (no surprise, really).

Japanese corporate management is also different, and there are even factors beyond that. For example, the Bank of Japan is actually the top shareholder there. This creates a distortion which doesn't exist in the US. It's distorting because their top investor isn't an investor who is chasing high returns. This ownership is used to serve other purposes like maintaining inflation at a certain level, and increasing stability.

In other words, you can't really view in a similar fashion US-listed companies and foreign-listed companies even if they're in the same industries and selling globally. There are pretty fundamental differences. Once you look at China, India, etc. the differences are even more stark, of course.
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Re: How much to hold in international equities (VTIAX)?

Post by JBTX »

I’ve posted this before.

https://madison.com/business/investment ... 84ca1.html

While there are big differences, there are enough similarities between Japan stocks late 80s and US stocks now to a least give one pause. Japan was almost half of the world market cap. The best companies on the world were Japanese companies. Most of these companies had large international business revenues (so much for that argument). US business in the late 70s and early 80s was mostly considered a joke. Planned obsolescence. Labor fighting management. A not terribly friendly business political or regulatory environment. Japan with their quality processes was reinventing how businesses succeed, largely by implementing US academic theories (Demming) that US scoffed at. The US markets had done pretty much nothing for 15 years.

It wouldn't have been illogical to conclude that the US was just not where you want to put your money.

Fast forward to today. At this point, it is hard to see how Europe or Japan could ever outperform the US. But that is the problem. History rarely plays out like we expect. In 2000 serious economists (Greenspan, et al) were really worried about what would happen WHEN we paid off the entire national debt, sometime between 2008-2012. What would the Fed do?? How did that work out? Decades ago who would have thought that negative interest rates would be "a thing"? And flying cars!! Where are the flying cars??!!

Our well being is highly correlated with our home economy. If the US outperforms, we will likely be OK, whether we have 100% US stocks, 80% US stocks or 50% US stocks. If the US tanks, at this point it seems likely, or at least is conventional wisdom, that the rest of the world tanks too. But there is a scenario where the US significantly under performs. It could be economic events. Political forces. War. Who knows. In that scenario, having that 30-50% international allocation will mean a lot more than having it all in US stocks if you are otherwise doing well anyway.
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Re: How much to hold in international equities (VTIAX)?

Post by visualguy »

JBTX,

Ultimately, we are all assessing probabilities. You have to think about the probability that the US economy is decimated by political forces/war/whatever AND the European/Japanese economies aren't impacted as badly or worse AND all this happens within our investment time horizon.

If you think this probability is high-enough to own ex-US, then it makes sense, but it's also reasonable to assess this probability as being way too remote for that.
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Re: How much to hold in international equities (VTIAX)?

Post by MotoTrojan »

I’m at 30% with most of it in small-value developed international funds.
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Re: How much to hold in international equities (VTIAX)?

Post by 1789 »

spdoublebass wrote: Tue Jan 21, 2020 9:49 pm
spdoublebass wrote: Tue Jan 21, 2020 9:48 pm
Taylor Larimore wrote: Tue Jan 21, 2020 9:29 pm
spdoublebass wrote:Bogle himself states that while he advocates for a US portfolio, if an investor already has international in their portfolio at a certain percentage, he adamantly advised that they stay the course with it forever.
spdoublebass:

I read everything I can by Mr. Bogle and I also knew him personally. I cannot imagine him recommending that an investor should hang-on to a certain percentage of a fund (except for taxes) when the percentage is no longer suitable. One of Mr. Bogle's earliest rules was that investors should change their allocation as they age.

Please try and find your memory quote. Google should help. I strongly doubt you will find that quote.

Best wishes


Taylor
Jack Bogle's Words of Wisdom: "We say stay the course. But before you stay the course, make sure you're on the right course."

Will do. I'll keep looking. But to be clear, he wasn't talking about the stock bond relationship. I want to say he said something like while he advised no more than 20% in International, it's not needed, but if you already have it stay the course.

I'll keep looking. I tried really hard to find it. I believe it was from 2016 or 2017. Of course I could also be remembering it wrong, which Is why I stated up front I can't find the video.
Yes he said no more than 20% of stock allocation. This is in foreword in Taylor’s 3 fund portfolio book.
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Re: How much to hold in international equities (VTIAX)?

Post by Stef »

There is absolutely no point in a fixed % number.
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Re: How much to hold in international equities (VTIAX)?

Post by JBTX »

visualguy wrote: Tue Jan 21, 2020 11:13 pm JBTX,

Ultimately, we are all assessing probabilities. You have to think about the probability that the US economy is decimated by political forces/war/whatever AND the European/Japanese economies aren't impacted as badly or worse AND all this happens within our investment time horizon.

If you think this probability is high-enough to own ex-US, then it makes sense, but it's also reasonable to assess this probability as being way too remote for that.
You don't have to be decimated to have poor long term returns. Japan wasn't decimated. The markets were, but they continued to develop standard of living wise. The US wasn't decimated from the late 60s to early 80s. We put a man on the moon and everyday life was mostly normal.

I have heard over and over, here, that if US markets do really badly, then it will be so bad that the economy has collapsed, completely, zombie apocalypse style, and all investment scenarios become irrelevant. Anything is possible but you can have long protracted poor returns and otherwise have seeming normal everyday life.

The default assumption among some here is things will be like they are now. The arguments I am hearing here are past performance is indicative of future results. Growth (US) will always trump value (international). The markets are inefficient and incapable of correctly valuing US vs international. We CAN predict the future. The future is now and will always be like now.

The logical extension of this would be to put all of your money in QQQ.

These are very strange arguments to be advanced on Bogleheads.
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Re: How much to hold in international equities (VTIAX)?

Post by jibantik »

bck63 wrote: Tue Jan 21, 2020 4:56 pm Or France? France went on strike when they tried to institute a 35-work week. Not much much confidence there either, no.

I am NO economist. But I don't really see anything about European economies that make me think they'll do better than the US over the next century or so, which is longer than my lifetime.
Incredible. Because France has a 35 hour work week, you are able to predict how tens of thousands of global companies will perform a century into the future? I am going to have to get you to pick my next lottery numbers if you can do that.
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Re: How much to hold in international equities (VTIAX)?

Post by visualguy »

JBTX wrote: Wed Jan 22, 2020 12:32 am
visualguy wrote: Tue Jan 21, 2020 11:13 pm JBTX,

Ultimately, we are all assessing probabilities. You have to think about the probability that the US economy is decimated by political forces/war/whatever AND the European/Japanese economies aren't impacted as badly or worse AND all this happens within our investment time horizon.

If you think this probability is high-enough to own ex-US, then it makes sense, but it's also reasonable to assess this probability as being way too remote for that.
You don't have to be decimated to have poor long term returns. Japan wasn't decimated. The markets were, but they continued to develop standard of living wise. The US wasn't decimated from the late 60s to early 80s. We put a man on the moon and everyday life was mostly normal.

I have heard over and over, here, that if US markets do really badly, then it will be so bad that the economy has collapsed, completely, zombie apocalypse style, and all investment scenarios become irrelevant. Anything is possible but you can have long protracted poor returns and otherwise have seeming normal everyday life.

The default assumption among some here is things will be like they are now. The arguments I am hearing here are past performance is indicative of future results. Growth (US) will always trump value (international). The markets are inefficient and incapable of correctly valuing US vs international. We CAN predict the future. The future is now and will always be like now.

The logical extension of this would be to put all of your money in QQQ.

These are very strange arguments to be advanced on Bogleheads.
Investing just in one sector (QQQ) is not the same as investing just in the US. This reduction from a huge, diversified, shareholder-centric economy to one sector of the economy is pointless. Arguing that not wanting to invest in the European and Japanese stock markets is like not wanting to invest in anything other than QQQ is arguing for a false analogy.

I'm all in favor of diversification, but there is no real peer for the US these days that you could diversify to. Japan is in a demographic death spiral, and they've been losing leadership in industry after industry (including even consumer electronics where they used to be kings). As I mentioned above, the top shareholder in their stock market now is their central bank. The EU isn't holding together well, it also suffers from demographic problems, it has widespread stagnation, onerous taxation and regulation, and policies that may be good for the population in some ways, but not for share value or economic growth.

None of these aspects of Japan and Europe can change quickly. Who knows what the world will look like century from now, but if you are, say, middle aged now (like most of us who have significant stock market investments), the future that's actually still relevant to you is extremely likely to look like the present in terms of the US/Japanese/EU stock markets. What could possibly happen in Japan and the EU over the next 2-3 decades to turn the tables? China and India are where the real growth is happening outside the US, but their stock markets don't provide an effective avenue to participate.
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Re: How much to hold in international equities (VTIAX)?

Post by bck63 »

jibantik wrote: Wed Jan 22, 2020 12:35 am
bck63 wrote: Tue Jan 21, 2020 4:56 pm Or France? France went on strike when they tried to institute a 35-work week. Not much much confidence there either, no.

I am NO economist. But I don't really see anything about European economies that make me think they'll do better than the US over the next century or so, which is longer than my lifetime.
Incredible. Because France has a 35 hour work week, you are able to predict how tens of thousands of global companies will perform a century into the future? I am going to have to get you to pick my next lottery numbers if you can do that.
Show us how the US market has performed against the entire remainder of the world over the last two centuries. Take the time, get the data, then share it. If you then want to call the position of ex-U stocks home bias, or recency bias, or whatever other name you wish to conjure up in your head, that's fine. But please get the data and share it with us. Then defend your proposition that I should invest in something that has, over the long run, pathetically outperformed.

Looking forward to you sharing this information. Thanks.
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Re: How much to hold in international equities (VTIAX)?

Post by happyisland »

jibantik wrote: Wed Jan 22, 2020 12:35 am
bck63 wrote: Tue Jan 21, 2020 4:56 pm Or France? France went on strike when they tried to institute a 35-work week. Not much much confidence there either, no.

I am NO economist. But I don't really see anything about European economies that make me think they'll do better than the US over the next century or so, which is longer than my lifetime.
Incredible. Because France has a 35 hour work week, you are able to predict how tens of thousands of global companies will perform a century into the future? I am going to have to get you to pick my next lottery numbers if you can do that.
Maybe France is about to unlock a huge amount of human potential with this shorter work week: https://www.npr.org/2019/11/04/77616385 ... vity-by-40
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Re: How much to hold in international equities (VTIAX)?

Post by lostdog »

JBTX wrote: Wed Jan 22, 2020 12:32 am
visualguy wrote: Tue Jan 21, 2020 11:13 pm JBTX,

Ultimately, we are all assessing probabilities. You have to think about the probability that the US economy is decimated by political forces/war/whatever AND the European/Japanese economies aren't impacted as badly or worse AND all this happens within our investment time horizon.

If you think this probability is high-enough to own ex-US, then it makes sense, but it's also reasonable to assess this probability as being way too remote for that.
You don't have to be decimated to have poor long term returns. Japan wasn't decimated. The markets were, but they continued to develop standard of living wise. The US wasn't decimated from the late 60s to early 80s. We put a man on the moon and everyday life was mostly normal.

I have heard over and over, here, that if US markets do really badly, then it will be so bad that the economy has collapsed, completely, zombie apocalypse style, and all investment scenarios become irrelevant. Anything is possible but you can have long protracted poor returns and otherwise have seeming normal everyday life.

The default assumption among some here is things will be like they are now. The arguments I am hearing here are past performance is indicative of future results. Growth (US) will always trump value (international). The markets are inefficient and incapable of correctly valuing US vs international. We CAN predict the future. The future is now and will always be like now.

The logical extension of this would be to put all of your money in QQQ.

These are very strange arguments to be advanced on Bogleheads.
+1

The same argument plus many others. Very absurd arguments.

It's a very good thing we can argue so novice investors can see this and make a decision for themselves. Crystal ball predictions, past performance and now corruption drag??? :oops:
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Re: How much to hold in international equities (VTIAX)?

Post by lostdog »

bck63 wrote: Wed Jan 22, 2020 6:48 am
jibantik wrote: Wed Jan 22, 2020 12:35 am
bck63 wrote: Tue Jan 21, 2020 4:56 pm Or France? France went on strike when they tried to institute a 35-work week. Not much much confidence there either, no.

I am NO economist. But I don't really see anything about European economies that make me think they'll do better than the US over the next century or so, which is longer than my lifetime.
Incredible. Because France has a 35 hour work week, you are able to predict how tens of thousands of global companies will perform a century into the future? I am going to have to get you to pick my next lottery numbers if you can do that.
Show us how the US market has performed against the entire remainder of the world over the last two centuries. Take the time, get the data, then share it. If you then want to call the position of ex-U stocks home bias, or recency bias, or whatever other name you wish to conjure up in your head, that's fine. But please get the data and share it with us. Then defend your proposition that I should invest in something that has, over the long run, pathetically outperformed.

Looking forward to you sharing this information. Thanks.
You invest based on past performance? At least you're honest about it...

Please let us know if this will continue and if you're able to time travel into the future and get the data for us.
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Re: How much to hold in international equities (VTIAX)?

Post by lazyday »

JBTX wrote: Wed Jan 22, 2020 12:32 ampast performance is indicative of future results. Growth (US) will always trump value (international). The markets are inefficient and incapable of correctly valuing US vs international. We CAN predict the future.
....
These are very strange arguments to be advanced on Bogleheads.
JBTX, good posts.

To me it’s not strange that many Bogleheads think future returns = past returns. Just human nature, and part of how we get extreme stock markets like 1990 Japan vs ex-Japan, 2000 US Large Growth vs US Small, and 2020 US vs ex-US.

What I can’t understand is owning the entire S&P 500 including lousy sectors and terrible companies, but choosing only the best country.
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Re: How much to hold in international equities (VTIAX)?

Post by lazyday »

visualguy wrote: Wed Jan 22, 2020 1:19 amArguing that not wanting to invest in the European and Japanese stock markets is like not wanting to invest in anything other than QQQ is arguing for a false analogy.
You demonstrate below that it's a good analogy.
I'm all in favor of diversification, but there is no real peer for the US these days that you could diversify to. Japan is in a demographic death spiral, and they've been losing leadership in industry after industry
The EU isn't holding together well, it also suffers from demographic problems, it has widespread stagnation, onerous taxation and regulation
None of these aspects of Japan and Europe can change quickly.
How is this different than investing only in Tech while rejecting Financials and Energy?
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