Increase international percentage a good idea?

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masonstone
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Increase international percentage a good idea?

Post by masonstone » Tue Apr 28, 2020 9:18 am

I'm planning on increasing my international asset allocation from 20% to 30%. That's going from 20% VTIAX to 30% VTIAX. Any thoughts on this plan? According to bloomberg the international market is undervalued as compared to the domestic market.

livesoft
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Re: Increase international percentage a good idea?

Post by livesoft » Tue Apr 28, 2020 9:24 am

No one can predict the future. VTIAX has been trailing significantly since the March lows. Is that because of something fundamental in the structure of non-US economies or something else? Who knows? But I can say that I don't think any other governments have dropped about three trillion dollars into the laps of their companies.
Last edited by livesoft on Tue Apr 28, 2020 9:26 am, edited 1 time in total.
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vipertom1970
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Re: Increase international percentage a good idea?

Post by vipertom1970 » Tue Apr 28, 2020 9:26 am

I am based on valuation.

retired@50
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Re: Increase international percentage a good idea?

Post by retired@50 » Tue Apr 28, 2020 9:27 am

masonstone wrote:
Tue Apr 28, 2020 9:18 am
I'm planning on increasing my international asset allocation from 20% to 30%. That's going from 20% VTIAX to 30% VTIAX. Any thoughts on this plan? According to bloomberg the international market is undervalued as compared to the domestic market.
You can see what Vanguard thinks about the topic of international investing in this paper. See link. http://www.vanguard.com/pdf/ISGGEB.pdf

At a minimum, you might increase the diversification benefit.

Regards,
This is one person's opinion. Nothing more.

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JoMoney
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Re: Increase international percentage a good idea?

Post by JoMoney » Tue Apr 28, 2020 9:28 am

It's not just Bloomberg saying international is relatively "undervalued" compared to the U.S.
This isn't a new phenomenon. People have been saying that for a decade now, relative returns have continued to languish.
At some point, international will have a period of better performance.
Personally, I don't have a foreign/ex-US allocation, and have no plans on adding one. There are risks, expenses, tax considerations, and additional complexity that I just don't think are necessary. Despite my strong belief that international will at some point have higher returns, trying to time that is a game that's more difficult than it looks, and not a game I'm willing to play.

I would also point out, that there are sectors and styles in the U.S. market that are relatively, persistently even, "undervalued" compared to the broader U.S. market... buying on the belief that the valuation is mis-priced relative to its expected growth hasn't worked the way some believe it should.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

ginrummy
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Re: Increase international percentage a good idea?

Post by ginrummy » Tue Apr 28, 2020 10:14 am

I've been reluctant to buy more but if the assumption is that post virus the global supply chains begin a decoupling, perhaps these international markets begin to show their own value versus a value that is interwoven with a dominant US market. I'm currently have 16% of equities in ex-US and emerging mkts.

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galeno
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Re: Increase international percentage a good idea?

Post by galeno » Tue Apr 28, 2020 10:27 am

VTWAX / VT = 55% USA + 45% non-USA.

Even at 30% non-USA you still tilt significantly towards the USA.

We hold 50% USA + 50% non-USA. We tilt slightly toward non-USA.

Calhoon
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Re: Increase international percentage a good idea?

Post by Calhoon » Tue Apr 28, 2020 10:28 am

I'm in the same place. Am considering buying VTWAX and being done with it.

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nisiprius
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Re: Increase international percentage a good idea?

Post by nisiprius » Tue Apr 28, 2020 10:30 am

masonstone wrote:
Tue Apr 28, 2020 9:18 am
I'm planning on increasing my international asset allocation from 20% to 30%. That's going from 20% VTIAX to 30% VTIAX. Any thoughts on this plan? According to bloomberg the international market is undervalued as compared to the domestic market.
I would say don't do it for that reason. Maybe do it for some other reason, but not that reason. There might be reasons why you should do it, but "Bloomberg says they are undervalued" is not one of them.

When you chose 20% as your allocation, did you write down, or can you remember, why you chose that amount? Did you write down what would be the conditions under which you would change it? At the time you chose 20%, do you remember what Bloomberg was saying about them? I doubt it.

To put it another way, which is closest to your plan? Was your plan a) Keep it simple, choose something reasonable, then stay the course? Or was it b) review every six months, nimbly adjusting your portfolio to optimize to the ever-changing risks and opportunities of a dynamic, vibrant market, guided by Bloomberg articles?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

jhsu802701
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Re: Increase international percentage a good idea?

Post by jhsu802701 » Tue Apr 28, 2020 10:38 am

YES! I'm aggressively bullish on international stocks because they're so cheap. My favorite international stock fund ETFs are MOTI, DGRE, DFJ, DGS, IQIN, GWX, and FNDC. Not only are international stock market valuations cheap, the Big Mac Index shows nearly every currency to be undervalued against the US dollar. Valuations alone make international stocks as cheap as the DJIA and S&P 500 in 1974 and 1982. When you take the undervalued currencies into account, you're looking at a level of undervaluation that US large caps haven't provided since the 1930s and 1940s.

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masonstone
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Re: Increase international percentage a good idea?

Post by masonstone » Tue Apr 28, 2020 10:39 am

nisiprius wrote:
Tue Apr 28, 2020 10:30 am
masonstone wrote:
Tue Apr 28, 2020 9:18 am
I'm planning on increasing my international asset allocation from 20% to 30%. That's going from 20% VTIAX to 30% VTIAX. Any thoughts on this plan? According to bloomberg the international market is undervalued as compared to the domestic market.
I would say don't do it for that reason. Maybe do it for some other reason, but not that reason. There might be reasons why you should do it, but "Bloomberg says they are undervalued" is not one of them.

When you chose 20% as your allocation, did you write down, or can you remember, why you chose that amount? Did you write down what would be the conditions under which you would change it? At the time you chose 20%, do you remember what Bloomberg was saying about them? I doubt it.

To put it another way, which is closest to your plan? Was your plan a) Keep it simple, choose something reasonable, then stay the course? Or was it b) review every six months, nimbly adjusting your portfolio to optimize to the ever-changing risks and opportunities of a dynamic, vibrant market, guided by Bloomberg articles?
It’s not just because of Bloomberg but my confidence in the United States has also decreased and I want more diversification.

Coltrane75
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Re: Increase international percentage a good idea?

Post by Coltrane75 » Tue Apr 28, 2020 10:44 am

masonstone wrote:
Tue Apr 28, 2020 10:39 am
As another poster once said in this forum, I would go with VTWAX and relax.

Just be aware, if you weren't already, that US vs Intl is a very divisive issue here.

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TomatoTomahto
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Re: Increase international percentage a good idea?

Post by TomatoTomahto » Tue Apr 28, 2020 10:48 am

I don’t rebalance per se, but new equity money is going to international (and sometimes World, depending on my mood). I know it’s not Bogleheady to do things based on mood, but hey! it’s my portfolio.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: Increase international percentage a good idea?

Post by pokebowl » Tue Apr 28, 2020 10:57 am

Calhoon wrote:
Tue Apr 28, 2020 10:28 am
I'm in the same place. Am considering buying VTWAX and being done with it.
I came to the same conclusion years ago. However since I have significant holdings in taxable I can't hold VT and instead its split between total U.S and total Ex-US funds.

Good news is no re-balancing needed once you set it at a global allocation until new money is added in, and that too is very easy to manage. If U.S out performs, my portfolio will automatically reflect that and vice versa for ex-US. :beer

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galeno
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Re: Increase international percentage a good idea?

Post by galeno » Tue Apr 28, 2020 11:22 am

"It’s not just because of Bloomberg but my confidence in the United States has also decreased and I want more diversification."

I agree. Two giant economies playing power geopolitics. One is rising. The other is declining and trying to check the the rising power.

Both countries are full of problems. I wouldn't want to live in either.

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oneleaf
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Re: Increase international percentage a good idea?

Post by oneleaf » Tue Apr 28, 2020 11:32 am

jhsu802701 wrote:
Tue Apr 28, 2020 10:38 am
YES! I'm aggressively bullish on international stocks because they're so cheap. My favorite international stock fund ETFs are MOTI, DGRE, DFJ, DGS, IQIN, GWX, and FNDC. Not only are international stock market valuations cheap, the Big Mac Index shows nearly every currency to be undervalued against the US dollar. Valuations alone make international stocks as cheap as the DJIA and S&P 500 in 1974 and 1982. When you take the undervalued currencies into account, you're looking at a level of undervaluation that US large caps haven't provided since the 1930s and 1940s.
Yep, I'm happily buying. And quite frankly, I am in no rush to earn any (if any) multiple expansion speculative returns. I moved my international stocks mostly to IRA's/401k's due to their increasing yield, and I'll happily reinvest them whether valuations stay depressed. It might mean it takes longer to realize profits, but the lower valuations and higher expected return is hard to deny at this point and I am in this for the long haul.

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Re: Increase international percentage a good idea?

Post by whereskyle » Tue Apr 28, 2020 11:37 am

VTSAX in my tIRA, VT in my Roth. I am starting to up my contributions to VT given the U.S.'s "handling" of this crisis and the recent run of U.S. outperformance.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

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Re: Increase international percentage a good idea?

Post by whereskyle » Tue Apr 28, 2020 11:43 am

masonstone wrote:
Tue Apr 28, 2020 9:18 am
I'm planning on increasing my international asset allocation from 20% to 30%. That's going from 20% VTIAX to 30% VTIAX. Any thoughts on this plan? According to bloomberg the international market is undervalued as compared to the domestic market.
20% in my view is the gold standard in that it is the figure that those who disagree about ex-us allocation can agree on. Bogle says no more than 20%. Vanguard and other sources say no less than 20%. Taylor should be around shortly to drop his line in support of it. 20% ex-us is the porridge for everyone. I could see engaging in a bit of market timing and adding to ex-us right now after this great u.s. bull run, but it would be market timing and might not pay off while increasing behavioral risk. All that said, I think 20% is the perfect allocation in that it can assuage virtually every one. Not too hot and not too cold so to speak.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

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galeno
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Re: Increase international percentage a good idea?

Post by galeno » Tue Apr 28, 2020 1:04 pm

The world equity market cap index = 55% USA + 45% non-USA. That's what the world equity markets have decided.

VT = 55% USA + 35% non-USA dev + 10% EM = par.

Any deviation is tilting. And we're guilty. But away from the USA. Our split is 50/34/16.

Par China = 4%. We like 7%.

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masonstone
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Re: Increase international percentage a good idea?

Post by masonstone » Tue Apr 28, 2020 1:08 pm

galeno wrote:
Tue Apr 28, 2020 1:04 pm
The world equity market cap index = 55% USA + 45% non-USA. That's what the world equity markets have decided.

VT = 55% USA + 35% non-USA dev + 10% EM = par.

Any deviation is tilting. And we're guilty. But away from the USA. Our split is 50/34/16.

Par China = 4%. We like 7%.
I don't trust the developing worlds equity market due to corruption.

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