Are International Stocks worth it?

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Buy_N_Hold
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Are International Stocks worth it?

Post by Buy_N_Hold »

Hello,

I am 27 y/0 and have $94k across my 401(k) and IRA accounts. I am currently invested 100% in US Equities through index funds (VFIAX, VTSAX), but have been reluctant to add international exposure for the following reasons:

1) Over the very long run, the US has been one of the top-performing countries for equities, and I am hesitant to dilute my returns needlessly.

2) I like the security of avoiding exchange rate risk by keeping all the investments in USD.

3) I am also concerned about the regulatory and accounting standards internationally. The Wirecard and Luckin Coffee debacles are illustrative of this concern for me. I feel hesitant to commit my funds into countries that could end up with illusory profits.

I also don't want to make a huge mistake with my portfolio, so I thought I would ask for some counter-points. I have a very high risk tolerance and could handle a 50%+ down turn without going to cash.

Thanks in advance for anyone that wants to weigh in!
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
asif408
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Re: Are International Stocks worth it?

Post by asif408 »

I don't want to beat a dead horse, and I'm sure others will be happy to beat the dead horse, so before they get in and start beating the dead horse I would suggest using the search toolbox and typing something like "why international" or "is international necessary", and you'll get some good discussions like this: viewtopic.php?t=255757

The points you made have been addressed in other topics on the subject. Only one I will highlight is this from the Bogleheads wiki, where international outperformed US stocks over the 38 year period from 1970 to 2007: https://www.bogleheads.org/wiki/File:US ... erging.png. Note that you said over the very long run, the US has been one of the top performing countries. Yet there have been period of up to 60 years where international outperformed. So keep that in mind if you decide to leave it out completely and you wake up at 87 years old one day and see that the US has underperformed the rest of the world.

In my mind, the path of least regret would be 50/50, but it's a hard sell right now because of recent past performance. Ask yourself if today was 2007 would you want to leave international out after it's performance in the mid-2000s.
burritoLover
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Re: Are International Stocks worth it?

Post by burritoLover »

Buy_N_Hold wrote: Thu Aug 27, 2020 12:41 pm 3) I am also concerned about the regulatory and accounting standards internationally. The Wirecard and Luckin Coffee debacles are illustrative of this concern for me. I feel hesitant to commit my funds into countries that could end up with illusory profits.
like Enron?
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
burritoLover
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Re: Are International Stocks worth it?

Post by burritoLover »

Seriously, though, you're 27. If you keep investing on a regular basis for the next 37 years (even if only in U.S. stocks) and then diversify into international and add a bond glide path for the last 10 years before retirement, you'll be beyond golden.
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
sycamore
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Re: Are International Stocks worth it?

Post by sycamore »

First off I'll second asif408's idea of looking up old threads on this subject.
Buy_N_Hold wrote: Thu Aug 27, 2020 12:41 pm 3) I am also concerned about the regulatory and accounting standards internationally. The Wirecard and Luckin Coffee debacles are illustrative of this concern for me. I feel hesitant to commit my funds into countries that could end up with illusory profits.
But I can't resist beating at least one dead horse. Regarding illusory profits ^^ , ever hear of Enron and WorldCom? :) I'd like to think US companies won't engage in accounting shenanigans but certainly a few of them have. Might make you rethink using Wirecard and Luckin Coffee as reasons to avoid international stocks.
Topic Author
Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

burritoLover wrote: Thu Aug 27, 2020 1:23 pm Seriously, though, you're 27. If you keep investing on a regular basis for the next 37 years (even if only in U.S. stocks) and then diversify into international and add a bond glide path for the last 10 years before retirement, you'll be beyond golden.
Point taken about Enron. :) I do feel like I'm on the right track, but my home country bias is hard to overcome. I do plan on diversifying into international stocks eventually, once I shift more into a preservation of capital phase, but right now growth is my main objective. I will take some time to read through previous threads also. In any case, thanks for the response everyone!
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
zlandar
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Re: Are International Stocks worth it?

Post by zlandar »

Vanguard target funds do a 60/40 US to international equity ratio. I use 65/35. Seen enough arguments both ways. Do whatever you feel comfortable with.
asif408
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Re: Are International Stocks worth it?

Post by asif408 »

Buy_N_Hold wrote: Thu Aug 27, 2020 1:35 pm I do plan on diversifying into international stocks eventually, once I shift more into a preservation of capital phase, but right now growth is my main objective. I will take some time to read through previous threads also. In any case, thanks for the response everyone!
Good luck! If you still have some specific questions that haven't been answered in the threads I'm sure you'll find people here willing to discuss. Once you learn more about the history of international investment performance you might come to the conclusion that international investing is not just for preservation. There have certainly been periods of time spanning decades where the opposite of what you said in bold above was the case.
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arcticpineapplecorp.
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Re: Are International Stocks worth it?

Post by arcticpineapplecorp. »

Buy_N_Hold wrote: Thu Aug 27, 2020 12:41 pm Hello,

I am 27 y/0 and have $94k across my 401(k) and IRA accounts. I am currently invested 100% in US Equities through index funds (VFIAX, VTSAX), but have been reluctant to add international exposure for the following reasons:

1) Over the very long run, the US has been one of the top-performing countries for equities, and I am hesitant to dilute my returns needlessly.

2) I like the security of avoiding exchange rate risk by keeping all the investments in USD.

3) I am also concerned about the regulatory and accounting standards internationally. The Wirecard and Luckin Coffee debacles are illustrative of this concern for me. I feel hesitant to commit my funds into countries that could end up with illusory profits.
sure like that never happened in the U.S. before:
Enron
World Com
Tyco
HealthSouth
Centennial Technologies (once a Wall Street "Darling")

There, I just named five (U.S.) fraudulent companies, which is three more than the two international companies you named. Afraid of U.S. now?

Returns aren't the only reason to own international (times of outperformance) but also volatility reduction:
https://www.vanguard.com/pdf/ISGGEB.pdf
https://www.bogleheads.org/wiki/Domestic/International

Also the exchange rate doesn't always hurt. Sometimes it helps:
Image
Image

The US was only top dog just 1 out of last 20 years. Which did better? Finland (in top spot 4 times). Take that U.S.

Image
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Kookaburra
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Re: Are International Stocks worth it?

Post by Kookaburra »

asif408 wrote: Thu Aug 27, 2020 1:55 pm
Buy_N_Hold wrote: Thu Aug 27, 2020 1:35 pm I do plan on diversifying into international stocks eventually, once I shift more into a preservation of capital phase, but right now growth is my main objective. I will take some time to read through previous threads also. In any case, thanks for the response everyone!
Good luck! If you still have some specific questions that haven't been answered in the threads I'm sure you'll find people here willing to discuss. Once you learn more about the history of international investment performance you might come to the conclusion that international investing is not just for preservation. There have certainly been periods of time spanning decades where the opposite of what you said in bold above was the case.
Vanguard rates International equities a 5/5 on its risk scale, vs 4/5 for US Equities. How exactly do you envision International equities serving a preservation role in retirement?
stocknoob4111
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Re: Are International Stocks worth it?

Post by stocknoob4111 »

I started buying International in 2018. I've yet to see a cent of gain in what is supposed to be a raging bull market. Infact I have a good chunk of losses. If this is how International performs in a bull I'm afraid to know what it's going to do in a bear!
long_drink
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Re: Are International Stocks worth it?

Post by long_drink »

arcticpineapplecorp. wrote: Thu Aug 27, 2020 2:00 pm The US was only top dog just 1 out of last 20 years. Which did better? Finland (in top spot 4 times). Take that U.S.
Interesting graphic, but an individual international country's performance doesn't really matter. Some individual international countries may do well, but not many would advocate that any of those by themselves are diversified enough. The question is U.S. vs international as a whole. Over long periods, the U.S. dominates. Will that continue? Nobody knows.

Some questions that I think about for the "main" countries are:
- What's the GDP per capita and government spending as a ratio GDP?
- How's the government and its transparency?
- How's the population (growth, worth ethic, etc)?
- How's the business landscape of the country?

Considering all of those, I don't think many countries are as appealing for investment as the U.S. With that said, I don't have a strong opinion on the matter yet. I'm about 35% international currently.

By the way, Finland was also dead last 3 times, while the U.S. was never last.
Last edited by long_drink on Thu Aug 27, 2020 3:02 pm, edited 1 time in total.
asif408
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Re: Are International Stocks worth it?

Post by asif408 »

Kookaburra wrote: Thu Aug 27, 2020 2:26 pm Vanguard rates International equities a 5/5 on its risk scale, vs 4/5 for US Equities. How exactly do you envision International equities serving a preservation role in retirement?
Because history has shown that to be the case. There have been several decades where international equities (1930s, 1970s, 2000s) have given positive real returns while US equities have not.

Vanguard's risk scale is primarily based on day-to-day volatility, and is useless as a way to measure long-term risk. In the same way precious metals equities can be part of wealth preservation strategy yet be much more volatile. For instance, emerging markets equities, which are also ranked a 5/5 on Vanguard's risk scale, and precious metals equities (which are also highly volatile) did a much better job of wealth appreciation than US stocks did in the 2000s: https://www.portfoliovisualizer.com/bac ... ion3_3=100

Having some allocation to these extremely "risky" assets would have helped a retiree preserve wealth starting in 2000 through today, even with the terrible returns of emerging markets and precious metals equities in the 2010s decade: https://www.portfoliovisualizer.com/bac ... tion3_2=10. Admittedly the benefit of international developed equities was less than emerging markets last decade but was still present, so someone who is risk averse from the perspective of long-term wealth preservation would include at least some percentage of foreign equities. The riskiest portfolio from a long-term risk perspective is one that invests in a single country.
Luckywon
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Re: Are International Stocks worth it?

Post by Luckywon »

asif408 wrote: Thu Aug 27, 2020 1:09 pm I don't want to beat a dead horse, and I'm sure others will be happy to beat the dead horse, so before they get in and start beating the dead horse
A bit late, turned into glue already :beer
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arcticpineapplecorp.
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Re: Are International Stocks worth it?

Post by arcticpineapplecorp. »

long_drink wrote: Thu Aug 27, 2020 3:01 pm
arcticpineapplecorp. wrote: Thu Aug 27, 2020 2:00 pm The US was only top dog just 1 out of last 20 years. Which did better? Finland (in top spot 4 times). Take that U.S.
Interesting graphic, but an individual international country's performance doesn't really matter. Some individual international countries may do well, but not many would advocate that any of those by themselves are diversified enough. The question is U.S. vs international as a whole. Over long periods, the U.S. dominates. Will that continue? Nobody knows.

Considering all of those, I don't think many countries are as appealing for investment as the U.S. With that said, I don't have a strong opinion on the matter yet. I'm about 35% international currently.

By the way, Finland was also dead last 3 times, while the U.S. was never last.
has dominated, don't know if it will dominate. Britain once dominated when the U.S. was a backwater, emerging market country.

Just because Finland was dead last 3 years and U.S. doesn't tell you the "whole" story:

Finland's Worst years vs U.S.
2001 Finland -38.2% vs U.S. -12.4%
2003 Finland +19.4% vs U.S. +28.4%
2004 Finland +6.1% vs U.S. +10.1%

Finland's Best years vs. U.S.
1999 Finland +152.6% vs. +21.9%
2007 Finland +48.7% vs. +5.4%
2013 Finland +46% vs +31.8%
2018 Finland -3.4% vs -5.0%

I'm 30% international in Roth and 40% in 457b.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
bloom2708
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Re: Are International Stocks worth it?

Post by bloom2708 »

Do what you want to do. 0% to 100%. You will hear rationale for all mixes.

Holding at 2% International here.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
Kookaburra
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Re: Are International Stocks worth it?

Post by Kookaburra »

asif408 wrote: Thu Aug 27, 2020 3:02 pm
Kookaburra wrote: Thu Aug 27, 2020 2:26 pm Vanguard rates International equities a 5/5 on its risk scale, vs 4/5 for US Equities. How exactly do you envision International equities serving a preservation role in retirement?
Because history has shown that to be the case. There have been several decades where international equities (1930s, 1970s, 2000s) have given positive real returns while US equities have not.

Vanguard's risk scale is primarily based on day-to-day volatility, and is useless as a way to measure long-term risk. In the same way precious metals equities can be part of wealth preservation strategy yet be much more volatile. For instance, emerging markets equities, which are also ranked a 5/5 on Vanguard's risk scale, and precious metals equities (which are also highly volatile) did a much better job of wealth appreciation than US stocks did in the 2000s: https://www.portfoliovisualizer.com/bac ... ion3_3=100

Having some allocation to these extremely "risky" assets would have helped a retiree preserve wealth starting in 2000 through today, even with the terrible returns of emerging markets and precious metals equities in the 2010s decade: https://www.portfoliovisualizer.com/bac ... tion3_2=10. Admittedly the benefit of international developed equities was less than emerging markets last decade but was still present, so someone who is risk averse from the perspective of long-term wealth preservation would include at least some percentage of foreign equities. The riskiest portfolio from a long-term risk perspective is one that invests in a single country.
What you call “preservation”, I call “diversification.” And that is a benefit throughout one’s investing lifetime, not just in retirement.
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Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

asif408 wrote: Thu Aug 27, 2020 1:09 pm I don't want to beat a dead horse, and I'm sure others will be happy to beat the dead horse, so before they get in and start beating the dead horse I would suggest using the search toolbox and typing something like "why international" or "is international necessary", and you'll get some good discussions like this: viewtopic.php?t=255757

The points you made have been addressed in other topics on the subject. Only one I will highlight is this from the Bogleheads wiki, where international outperformed US stocks over the 38 year period from 1970 to 2007: https://www.bogleheads.org/wiki/File:US ... erging.png. Note that you said over the very long run, the US has been one of the top performing countries. Yet there have been period of up to 60 years where international outperformed. So keep that in mind if you decide to leave it out completely and you wake up at 87 years old one day and see that the US has underperformed the rest of the world.

In my mind, the path of least regret would be 50/50, but it's a hard sell right now because of recent past performance. Ask yourself if today was 2007 would you want to leave international out after it's performance in the mid-2000s.
I read through the links you provided and some other articles that I found. If I was to implement some international exposure I think I would go about 20% in VTIAX. Are there any other funds that are commonly recommended to serve this purpose? Thanks again for the time.
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
Topic Author
Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

Kookaburra wrote: Thu Aug 27, 2020 2:26 pm
asif408 wrote: Thu Aug 27, 2020 1:55 pm
Buy_N_Hold wrote: Thu Aug 27, 2020 1:35 pm I do plan on diversifying into international stocks eventually, once I shift more into a preservation of capital phase, but right now growth is my main objective. I will take some time to read through previous threads also. In any case, thanks for the response everyone!
Good luck! If you still have some specific questions that haven't been answered in the threads I'm sure you'll find people here willing to discuss. Once you learn more about the history of international investment performance you might come to the conclusion that international investing is not just for preservation. There have certainly been periods of time spanning decades where the opposite of what you said in bold above was the case.
Vanguard rates International equities a 5/5 on its risk scale, vs 4/5 for US Equities. How exactly do you envision International equities serving a preservation role in retirement?
In addition to asif408's comments, I would add that the risk of a catastrophic decline in the US markets relative to the rest of the world is the main risk. Similar to Japan in the 90's. To me that risk is substantial enough to pass on some upside for the security of broad-based global diversification.
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
Topic Author
Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

Kookaburra wrote: Thu Aug 27, 2020 3:23 pm
asif408 wrote: Thu Aug 27, 2020 3:02 pm
Kookaburra wrote: Thu Aug 27, 2020 2:26 pm Vanguard rates International equities a 5/5 on its risk scale, vs 4/5 for US Equities. How exactly do you envision International equities serving a preservation role in retirement?
Because history has shown that to be the case. There have been several decades where international equities (1930s, 1970s, 2000s) have given positive real returns while US equities have not.

Vanguard's risk scale is primarily based on day-to-day volatility, and is useless as a way to measure long-term risk. In the same way precious metals equities can be part of wealth preservation strategy yet be much more volatile. For instance, emerging markets equities, which are also ranked a 5/5 on Vanguard's risk scale, and precious metals equities (which are also highly volatile) did a much better job of wealth appreciation than US stocks did in the 2000s: https://www.portfoliovisualizer.com/bac ... ion3_3=100

Having some allocation to these extremely "risky" assets would have helped a retiree preserve wealth starting in 2000 through today, even with the terrible returns of emerging markets and precious metals equities in the 2010s decade: https://www.portfoliovisualizer.com/bac ... tion3_2=10. Admittedly the benefit of international developed equities was less than emerging markets last decade but was still present, so someone who is risk averse from the perspective of long-term wealth preservation would include at least some percentage of foreign equities. The riskiest portfolio from a long-term risk perspective is one that invests in a single country.
What you call “preservation”, I call “diversification.” And that is a benefit throughout one’s investing lifetime, not just in retirement.
Just saw your response. The trade-off between diversification and dilution of returns is something that I am still exploring. Broadly speaking, it makes sense to me to stick to the US markets during the accumulation and growth phase of my investing life, as a concentrated bet on higher relative performance vis-a-vis the rest of the world. However, at a certain point growth as the investing objective gives way to preservation of capital through diversification, hence my thought process. Just musing and building strategy for now though. Thanks for the input.
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
Ed 2
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Re: Are International Stocks worth it?

Post by Ed 2 »

Buy_N_Hold wrote: Thu Aug 27, 2020 12:41 pm Hello,

I am 27 y/0 and have $94k across my 401(k) and IRA accounts. I am currently invested 100% in US Equities through index funds (VFIAX, VTSAX), but have been reluctant to add international exposure for the following reasons:

1) Over the very long run, the US has been one of the top-performing countries for equities, and I am hesitant to dilute my returns needlessly.

2) I like the security of avoiding exchange rate risk by keeping all the investments in USD.

3) I am also concerned about the regulatory and accounting standards internationally. The Wirecard and Luckin Coffee debacles are illustrative of this concern for me. I feel hesitant to commit my funds into countries that could end up with illusory profits.

I also don't want to make a huge mistake with my portfolio, so I thought I would ask for some counter-points. I have a very high risk tolerance and could handle a 50%+ down turn without going to cash.

Thanks in advance for anyone that wants to weigh in!
Not worth it. Jack was right about International investing. I have around 15% in International since 2002 and still asking myself Why?
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
dru808
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Re: Are International Stocks worth it?

Post by dru808 »

Buy_N_Hold wrote: Thu Aug 27, 2020 12:41 pm Hello,

I am 27 y/0 and have $94k across my 401(k) and IRA accounts. I am currently invested 100% in US Equities through index funds (VFIAX, VTSAX), but have been reluctant to add international exposure for the following reasons:

1) Over the very long run, the US has been one of the top-performing countries for equities, and I am hesitant to dilute my returns needlessly.

2) I like the security of avoiding exchange rate risk by keeping all the investments in USD.

3) I am also concerned about the regulatory and accounting standards internationally. The Wirecard and Luckin Coffee debacles are illustrative of this concern for me. I feel hesitant to commit my funds into countries that could end up with illusory profits.

I also don't want to make a huge mistake with my portfolio, so I thought I would ask for some counter-points. I have a very high risk tolerance and could handle a 50%+ down turn without going to cash.

Thanks in advance for anyone that wants to weigh in!
Could you handle a 50% downturn and wait 20+ years to recover, if it even recovers?
Sptm | Vigi | Blv | Btc/Eth
sycamore
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Re: Are International Stocks worth it?

Post by sycamore »

Buy_N_Hold wrote: Thu Aug 27, 2020 3:25 pm ...
I read through the links you provided and some other articles that I found. If I was to implement some international exposure I think I would go about 20% in VTIAX. Are there any other funds that are commonly recommended to serve this purpose? Thanks again for the time.
20% is reasonable.

Other commonly used funds include (1) Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX)
and (2) iShares Core MSCI Total International Stock ETF (IXUS)

For some additional info see https://www.bogleheads.org/wiki/FAQ_on_ ... onal_funds.
Robot Monster
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Re: Are International Stocks worth it?

Post by Robot Monster »

asif408 wrote: Thu Aug 27, 2020 1:09 pm I don't want to beat a dead horse, and I'm sure others will be happy to beat the dead horse...
"Why It Makes Sense to Beat a Dead Horse" by Errol Morris

1. Sets an example for other horses that might be watching.
2. Aerobic workout.
3. Horse might not be really dead. (Isn't it better to be safe than sorry?)
4. Tenderizes the meat.
5. Horse is unable to fight back.
6. Provides a welcome relief for tension or anxiety. (Makes you feel good.)
“There are no answers, only choices.” ― Stanislav Lem, Solaris
Topic Author
Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

sycamore wrote: Thu Aug 27, 2020 3:38 pm
Buy_N_Hold wrote: Thu Aug 27, 2020 3:25 pm ...
I read through the links you provided and some other articles that I found. If I was to implement some international exposure I think I would go about 20% in VTIAX. Are there any other funds that are commonly recommended to serve this purpose? Thanks again for the time.
20% is reasonable.

Other commonly used funds include (1) Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX)
and (2) iShares Core MSCI Total International Stock ETF (IXUS)

For some additional info see https://www.bogleheads.org/wiki/FAQ_on_ ... onal_funds.
Very helpful. Thanks!
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
lostdog
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Re: Are International Stocks worth it?

Post by lostdog »

Serious question:

What are you going to do when the international index outperforms the US index for a few years to a decade or more?
Brokerage: VTI+VXUS || Retirement: VTWAX || Short-Term: Cash+BSV || 33x Expenses
visualguy
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Re: Are International Stocks worth it?

Post by visualguy »

lostdog wrote: Thu Aug 27, 2020 4:22 pm Serious question:

What are you going to do when the international index outperforms the US index for a few years to a decade or more?
It happened before, but this out-performance of ex-US during limited time periods was dwarfed in comparison with its under-performance at other times. A 2%/year under-performance over the last 120 years is a huge difference.
lostdog
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Re: Are International Stocks worth it?

Post by lostdog »

visualguy wrote: Thu Aug 27, 2020 4:29 pm
lostdog wrote: Thu Aug 27, 2020 4:22 pm Serious question:

What are you going to do when the international index outperforms the US index for a few years to a decade or more?
It happened before, but this out-performance of ex-US during limited time periods was dwarfed in comparison with its under-performance at other times. A 2%/year under-performance over the last 120 years is a huge difference.

Since when should he invest based on past performance?
Brokerage: VTI+VXUS || Retirement: VTWAX || Short-Term: Cash+BSV || 33x Expenses
visualguy
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Re: Are International Stocks worth it?

Post by visualguy »

One thing that isn't often pointed out in these threads is that "international" doesn't necessarily mean the ex-US index. Many here who are invested in "international" actually have different investments for that. The poor historical performance of the ex-US index has motivated many who want to invest in foreign stock markets to look at other options.
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Re: Are International Stocks worth it?

Post by Grt2bOutdoors »

Buy_N_Hold wrote: Thu Aug 27, 2020 1:35 pm
burritoLover wrote: Thu Aug 27, 2020 1:23 pm Seriously, though, you're 27. If you keep investing on a regular basis for the next 37 years (even if only in U.S. stocks) and then diversify into international and add a bond glide path for the last 10 years before retirement, you'll be beyond golden.
Point taken about Enron. :) I do feel like I'm on the right track, but my home country bias is hard to overcome. I do plan on diversifying into international stocks eventually, once I shift more into a preservation of capital phase, but right now growth is my main objective. I will take some time to read through previous threads also. In any case, thanks for the response everyone!
Why not listen to a couple of podcasts from industry experts? I recommend Morningstar The Long View- listen to the one from Burton Malkiel and the one November 20 2019 Charles De Vaulx - a noted international investment manager. See if you might gain a better understanding on international equities before completely giving up on it. FWIW, I hold 30 percent in international and yes, it’s be nice if all assets moved in lockstep but you don’t really want that because when they decline it will be brutal instead you want a smoother ride, diversifying your assets can help in that respect. Anywhere from 20-40 percent would be good.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
seratoninman
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Re: Are International Stocks worth it?

Post by seratoninman »

Buy_N_Hold wrote: Thu Aug 27, 2020 12:41 pm Hello,

I am 27 y/0 and have $94k across my 401(k) and IRA accounts. I am currently invested 100% in US Equities through index funds (VFIAX, VTSAX), but have been reluctant to add international exposure for the following reasons:

1) Over the very long run, the US has been one of the top-performing countries for equities, and I am hesitant to dilute my returns needlessly.

2) I like the security of avoiding exchange rate risk by keeping all the investments in USD.

3) I am also concerned about the regulatory and accounting standards internationally. The Wirecard and Luckin Coffee debacles are illustrative of this concern for me. I feel hesitant to commit my funds into countries that could end up with illusory profits.

I also don't want to make a huge mistake with my portfolio, so I thought I would ask for some counter-points. I have a very high risk tolerance and could handle a 50%+ down turn without going to cash.

Thanks in advance for anyone that wants to weigh in!
There are about 2 thousand threads on this very subject. I think I may be able to provide a cliffs notes version:

1) some argue (like Jack Bogle) US market indexes are essentially Full of multi national companies.So “international” funds are not necessary.
2) while US equities have had great historic returns, who knows what the future holds? Assuming the US will outperform is just a guess.
3) Japan was once envied, and has had a terrible multi decade run. You just never know.
Last edited by seratoninman on Thu Aug 27, 2020 4:42 pm, edited 1 time in total.
visualguy
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Re: Are International Stocks worth it?

Post by visualguy »

lostdog wrote: Thu Aug 27, 2020 4:30 pm
visualguy wrote: Thu Aug 27, 2020 4:29 pm
lostdog wrote: Thu Aug 27, 2020 4:22 pm Serious question:

What are you going to do when the international index outperforms the US index for a few years to a decade or more?
It happened before, but this out-performance of ex-US during limited time periods was dwarfed in comparison with its under-performance at other times. A 2%/year under-performance over the last 120 years is a huge difference.

Since when should he invest based on past performance?
The whole strategy of buying and holding long-term a passive low-cost broad index fund is based on past performance, not to mention SWR studies, etc. That's all we have. If the past performance of this strategy had been poor, I doubt any of us would be Bogleheads. For example, if the long-term past results of US indexing had been the same as what we got with ex-US indexing, I don't think this forum would exist. Not many appreciate the combination of long-term low returns coupled with high volatility.
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jason2459
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Re: Are International Stocks worth it?

Post by jason2459 »

visualguy wrote: Thu Aug 27, 2020 4:43 pm
lostdog wrote: Thu Aug 27, 2020 4:30 pm
visualguy wrote: Thu Aug 27, 2020 4:29 pm
lostdog wrote: Thu Aug 27, 2020 4:22 pm Serious question:

What are you going to do when the international index outperforms the US index for a few years to a decade or more?
It happened before, but this out-performance of ex-US during limited time periods was dwarfed in comparison with its under-performance at other times. A 2%/year under-performance over the last 120 years is a huge difference.

Since when should he invest based on past performance?
The whole strategy of buying and holding long-term a passive low-cost broad index fund is based on past performance, not to mention SWR studies, etc. That's all we have. If the past performance of this strategy had been poor, I doubt any of us would be Bogleheads. For example, if the long-term past results of US indexing had been the same as what we got with ex-US indexing, I don't think this forum would exist. Not many appreciate the combination of long-term low returns coupled with high volatility.
Keep in mind that even though the returns of a two fund or 3 fund or core 4 etc strategy have not been poor they have also not been great. They have been average. That's the goal of these strategies. And its not just based on past returns but also a forward looking strategy to remain getting the average return of the market. Not to best it.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
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UpsetRaptor
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Re: Are International Stocks worth it?

Post by UpsetRaptor »

lostdog wrote: Thu Aug 27, 2020 4:30 pm
visualguy wrote: Thu Aug 27, 2020 4:29 pm
lostdog wrote: Thu Aug 27, 2020 4:22 pm Serious question:

What are you going to do when the international index outperforms the US index for a few years to a decade or more?
It happened before, but this out-performance of ex-US during limited time periods was dwarfed in comparison with its under-performance at other times. A 2%/year under-performance over the last 120 years is a huge difference.

Since when should he invest based on past performance?
To a large degree, many of the premises we all use for our investing principles are based on the historical record, or the longer-term "past performance" if you will. E.G. the assumption that equities are risker than bonds, low cost passive tends to beat expensive active, etc.

OP, 20% international is fine. Your original notion of 100% US until later in life is fine. Global market cap is fine. More important that letting the ardent proponents of a particular side brow-beat you into their way of thinking, is to determine the asset allocation that you're the most comfortable with, and thus are most likely to stick with for the long run.
Robot Monster
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Re: Are International Stocks worth it?

Post by Robot Monster »

Buy_N_Hold wrote: Thu Aug 27, 2020 3:27 pm
Kookaburra wrote: Thu Aug 27, 2020 2:26 pm
asif408 wrote: Thu Aug 27, 2020 1:55 pm
Buy_N_Hold wrote: Thu Aug 27, 2020 1:35 pm I do plan on diversifying into international stocks eventually, once I shift more into a preservation of capital phase, but right now growth is my main objective. I will take some time to read through previous threads also. In any case, thanks for the response everyone!
Good luck! If you still have some specific questions that haven't been answered in the threads I'm sure you'll find people here willing to discuss. Once you learn more about the history of international investment performance you might come to the conclusion that international investing is not just for preservation. There have certainly been periods of time spanning decades where the opposite of what you said in bold above was the case.
Vanguard rates International equities a 5/5 on its risk scale, vs 4/5 for US Equities. How exactly do you envision International equities serving a preservation role in retirement?
In addition to asif408's comments, I would add that the risk of a catastrophic decline in the US markets relative to the rest of the world is the main risk. Similar to Japan in the 90's. To me that risk is substantial enough to pass on some upside for the security of broad-based global diversification.
The risk of a catastrophic and sustained in US markets is why I'm leery of putting so many eggs in the US-country-basket. The Economist article, "Should investors diversify away from America?" points out that even global indices are still heavily exposed to the US market, and says:

"A good investment rule, then, might be to allocate a third of an equity portfolio to American stocks, a third to an index of stocks listed in other rich countries and a third to emerging-market shares."
https://www.economist.com/finance-and-e ... om-america
“There are no answers, only choices.” ― Stanislav Lem, Solaris
Wanderingwheelz
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Re: Are International Stocks worth it?

Post by Wanderingwheelz »

In 1980 eight of the ten largest companies in the world called Japan home.

In 2020 The story is the same, with US stocks garnering 8 of the top 10 slots.

Things change.
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Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

dru808 wrote: Thu Aug 27, 2020 3:33 pm
Buy_N_Hold wrote: Thu Aug 27, 2020 12:41 pm Hello,

I am 27 y/0 and have $94k across my 401(k) and IRA accounts. I am currently invested 100% in US Equities through index funds (VFIAX, VTSAX), but have been reluctant to add international exposure for the following reasons:

1) Over the very long run, the US has been one of the top-performing countries for equities, and I am hesitant to dilute my returns needlessly.

2) I like the security of avoiding exchange rate risk by keeping all the investments in USD.

3) I am also concerned about the regulatory and accounting standards internationally. The Wirecard and Luckin Coffee debacles are illustrative of this concern for me. I feel hesitant to commit my funds into countries that could end up with illusory profits.

I also don't want to make a huge mistake with my portfolio, so I thought I would ask for some counter-points. I have a very high risk tolerance and could handle a 50%+ down turn without going to cash.

Thanks in advance for anyone that wants to weigh in!
Could you handle a 50% downturn and wait 20+ years to recover, if it even recovers?
I honestly think I could, especially due to the fact that the new lower prices would allow me to dollar cost average down into a much lower cost basis. Let's hope it doesn't come to this though!
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
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Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

lostdog wrote: Thu Aug 27, 2020 4:22 pm Serious question:

What are you going to do when the international index outperforms the US index for a few years to a decade or more?
If that were to happen, I am honestly not sure what I would do. I might end up adding the international stocks at that point due to FOMO moving forward, but on the other hand I hope I would just stick with my original strategy and let mean reversion take its course. I guess only time will tell. :D
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
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Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

Grt2bOutdoors wrote: Thu Aug 27, 2020 4:38 pm
Buy_N_Hold wrote: Thu Aug 27, 2020 1:35 pm
burritoLover wrote: Thu Aug 27, 2020 1:23 pm Seriously, though, you're 27. If you keep investing on a regular basis for the next 37 years (even if only in U.S. stocks) and then diversify into international and add a bond glide path for the last 10 years before retirement, you'll be beyond golden.
Point taken about Enron. :) I do feel like I'm on the right track, but my home country bias is hard to overcome. I do plan on diversifying into international stocks eventually, once I shift more into a preservation of capital phase, but right now growth is my main objective. I will take some time to read through previous threads also. In any case, thanks for the response everyone!
Why not listen to a couple of podcasts from industry experts? I recommend Morningstar The Long View- listen to the one from Burton Malkiel and the one November 20 2019 Charles De Vaulx - a noted international investment manager. See if you might gain a better understanding on international equities before completely giving up on it. FWIW, I hold 30 percent in international and yes, it’s be nice if all assets moved in lockstep but you don’t really want that because when they decline it will be brutal instead you want a smoother ride, diversifying your assets can help in that respect. Anywhere from 20-40 percent would be good.
I will check those podcasts out. I have read "Random Walk" and really enjoyed it. I also discovered The Long View podcast recently and really like their content. Thanks for the recommendations.
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
000
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Re: Are International Stocks worth it?

Post by 000 »

FWIW ~50% of my non-REIT stocks are in VEA, the Developed Markets ETF.
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Buy_N_Hold
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Re: Are International Stocks worth it?

Post by Buy_N_Hold »

UpsetRaptor wrote: Thu Aug 27, 2020 5:09 pm

OP, 20% international is fine. Your original notion of 100% US until later in life is fine. Global market cap is fine. More important that letting the ardent proponents of a particular side brow-beat you into their way of thinking, is to determine the asset allocation that you're the most comfortable with, and thus are most likely to stick with for the long run.
This seems so right to me. Thanks for the wise words. Sticking to the plan is indeed most important for long-run investment success. Buy and Hold!!
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
asif408
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Re: Are International Stocks worth it?

Post by asif408 »

Buy_N_Hold wrote: Thu Aug 27, 2020 3:25 pm I read through the links you provided and some other articles that I found. If I was to implement some international exposure I think I would go about 20% in VTIAX. Are there any other funds that are commonly recommended to serve this purpose? Thanks again for the time.
That is perfectly fine. If you want to overweight emerging markets you could use a combination of the developed markets fund VTMGX and the emerging markets fund VEMAX (emerging markets are about 20% of VTIAX). If you are ok with the amount of emerging markets in VTIAX, though, I'd just stick with that.
snowman
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Re: Are International Stocks worth it?

Post by snowman »

So you are 27 with almost $100K saved already. You will do very well no matter what. US vs. international split is not going to make much of a difference over the long term, assuming you keep saving and investing regularly over the next few decades. The most important thing is to pick AA you are comfortable sticking with over the long term. I suggest anywhere between 20-40%. Just pick a number, don't over-analyze it. As long as you stick to it, you will do well.
AB609
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Re: Are International Stocks worth it?

Post by AB609 »

I've worked for two multinationals that are US based but got more than half their revenues from outside the US. You are getting a good bit of international exposure just holding US Large Cap stocks. Likewise, most foreign multinationals do a lot of business in the US. I have had small holding in international funds off and on over the years but they never seemed to perform as well as US. Bad timing I guess. Currently have a small holding in VXUS and it's done nothing in the 3 yrs I've had it.
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Chrono Triggered
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Re: Are International Stocks worth it?

Post by Chrono Triggered »

Take a look at this chart:
Image
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