Should I be investing in International Mutual Funds?

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BogleGoggle
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Should I be investing in International Mutual Funds?

Post by BogleGoggle »

I am 30 and am wondering if I should be getting more international exposure in my ROTH IRA and/or 401k or stick with my Total Market and SP500 mutual funds. If I should be buying mutual funds with a lot of international exposure, what are some good ones? I use Fidelity and according to the Asset Allocation pie, I only have around 2-3% Foreign Stock overall. Thanks.
000
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Re: Should I be investing in International Mutual Funds?

Post by 000 »

I would. Something like 25% to 40% is about right for me. I only use the Developed Markets fund.
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Hookem_1
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Re: Should I be investing in International Mutual Funds?

Post by Hookem_1 »

I use VTIAX and VWILX. The latter has done very well. Both are not very tax efficient

I keep about 20% international as a percent of total stocks
Last edited by Hookem_1 on Tue Jan 12, 2021 6:30 pm, edited 1 time in total.
000
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Re: Should I be investing in International Mutual Funds?

Post by 000 »

Fidelity has a variety of low cost international index funds as does Vanguard.
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Noobvestor
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Re: Should I be investing in International Mutual Funds?

Post by Noobvestor »

VTWAX has it all - also, your (presumably US) total-market and 500-index funds are mostly the same, lots of overlap (the latter is redundant)
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
Fclevz
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Re: Should I be investing in International Mutual Funds?

Post by Fclevz »

BogleGoggle wrote: Tue Jan 12, 2021 6:19 pm...what are some good ones? I use Fidelity...
FTIHX is the Fidelity Total International Index Fund, which would pair nicely with their Total U.S. Market Index Fund (FSKAX).
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Taylor Larimore
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Re: Should I be investing in International Mutual Funds?

Post by Taylor Larimore »

BogleGoggle wrote: Tue Jan 12, 2021 6:19 pm I am 30 and am wondering if I should be getting more international exposure in my ROTH IRA and/or 401k or stick with my Total Market and SP500 mutual funds. If I should be buying mutual funds with a lot of international exposure, what are some good ones? I use Fidelity and according to the Asset Allocation pie, I only have around 2-3% Foreign Stock overall. Thanks.
BogleGoggle:

I suggest 20% of stocks should be international stocks. You can read my reasons here.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "I'd approach this relatively new wave of international investing with caution, and stick to my recommendation that international funds--including BRIC funds--do not exceed one-fifth (20%) of an investor's equity position."
"Simplicity is the master key to financial success." -- Jack Bogle
todaysBob
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Re: Should I be investing in International Mutual Funds?

Post by todaysBob »

US Stocks returned 15%/year over last 12 years while international struggled. Next decade might be different but who knows?

I have only setup my portfolio as a Boglehead portfolio(i.e just index funds) since Feb 19 2020 after many misfirings with individual stocks, private equity, options and crypto over previous years. So I am hoping by having 50:50 allocation to US and international and international catching up to US, I can make up some of those lost years in next decade :sharebeer

My exact allocations are VTI:VXUS:VWO as 50:33:17 - wanted 50% emerging and 50% developed in my international allocation. Could have done VEA and VWO as well but that would have required selling already bought VXUS and trigger capital gains.
jhsu802701
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Re: Should I be investing in International Mutual Funds?

Post by jhsu802701 »

Say "Yes!" to international stocks! While large cap US stocks are overvalued, international stocks are undervalued.

That said, ETFs are better than mutual funds. The reasons:
1. There's a MUCH wider variety of ETFs available than mutual funds.
2. ETFs tend to have MUCH lower expense ratios than mutual funds. This is important for international investing, because foreign funds have higher expense ratios than US-only funds, and emerging markets funds have higher expense ratio than developed markets funds.
tomsense76
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Re: Should I be investing in International Mutual Funds?

Post by tomsense76 »

Idk if I'd use the word "should", but it is worth considering :happy

Some folks here do 0% (the US has very good representation of all sectors; Bogle and Buffet both think this is reasonable). Some do 20% (Bogle suggested no more than 20%; Taylor has a good rationale linked above as well). Some do 30% as 70% US / 30% ex-US was the efficient frontier in recent history (though this may change in the future). Others do ~40% (which is about global market weight).

The main thing that is worth considering with international is one is accepting currency risk (there are also some other risks like how other countries handle foreign investments). In the short to medium term, currency risk can matter a lot. A weakening dollar can improve ex-US returns even if nothing has changed about those companies abroad and vice versa. In the long term it would seem this would average out. If one follows Bogle's logic, currency risk is one of the things he worries about along with being less hopeful about other countries prospects (though he admits national pride may be swaying him as well).

Personally I'm a young investor and am holding everything at global weight. I wouldn't be surprised in my lifetime to see more countries to become more equal in market cap with the US. Also great companies can move around a bit due to acquisitions by other companies in different countries or relocation to take advantage of certain cashflow efficiency. So being able to continue to hold these in my portfolio (even with these changes) is a great asset. Finally the US and ex-US tend to "take turns" leading returns for some period of time. So it is useful to have both so at least one is driving returns (though that also means the other is lagging too).

Would suggest reading a few threads here to learn about how others think about international and reflect on what you think makes sense for you. Then make a choice that makes sense to you. At the end of the day having a plan and sticking to it matters much more than exactly how much international you hold. HTH :beer
Buy_N_Hold
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Re: Should I be investing in International Mutual Funds?

Post by Buy_N_Hold »

This is a hotly debated topic on the forum, and for good reason. There are good arguments for and against international exposure, so don’t go looking for an easy answer.

That said, to me having at least some money allocated to international helps me sleep at night. If there is one thing I know for sure with investing, it’s that there will always be situations that NO one can see coming. Having that extra diversification against a risk specific to the US markets is encouraging to me.

To each their own though. What is most important is that you make a well thought out plan and stick with it through thick and thin.

All the best!
“To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.” -Edgar Bronfman
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Re: Should I be investing in International Mutual Funds?

Post by abuss368 »

BogleGoggle wrote: Tue Jan 12, 2021 6:19 pm I am 30 and am wondering if I should be getting more international exposure in my ROTH IRA and/or 401k or stick with my Total Market and SP500 mutual funds. If I should be buying mutual funds with a lot of international exposure, what are some good ones? I use Fidelity and according to the Asset Allocation pie, I only have around 2-3% Foreign Stock overall. Thanks.
If you are comfortable and will sleep at night, then sure. Vanguard recommends 40% of stock and 30% of bonds to international.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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vineviz
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Re: Should I be investing in International Mutual Funds?

Post by vineviz »

BogleGoggle wrote: Tue Jan 12, 2021 6:19 pm I am 30 and am wondering if I should be getting more international exposure in my ROTH IRA and/or 401k or stick with my Total Market and SP500 mutual funds. If I should be buying mutual funds with a lot of international exposure, what are some good ones? I use Fidelity and according to the Asset Allocation pie, I only have around 2-3% Foreign Stock overall. Thanks.
For sure you should be globally diversified. At least 25% of your portfolio should be in international stocks, and possibly up to 50%.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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galawdawg
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Re: Should I be investing in International Mutual Funds?

Post by galawdawg »

tomsense76 wrote: Tue Jan 12, 2021 7:54 pm Idk if I'd use the word "should", but it is worth considering :happy

Some folks here do 0% (the US has very good representation of all sectors; Bogle and Buffet both think this is reasonable). Some do 20% (Bogle suggested no more than 20%; Taylor has a good rationale linked above as well). Some do 30% as 70% US / 30% ex-US was the efficient frontier in recent history (though this may change in the future). Others do ~40% (which is about global market weight).

The main thing that is worth considering with international is one is accepting currency risk (there are also some other risks like how other countries handle foreign investments). In the short to medium term, currency risk can matter a lot. A weakening dollar can improve ex-US returns even if nothing has changed about those companies abroad and vice versa. In the long term it would seem this would average out. If one follows Bogle's logic, currency risk is one of the things he worries about along with being less hopeful about other countries prospects (though he admits national pride may be swaying him as well).

Personally I'm a young investor and am holding everything at global weight. I wouldn't be surprised in my lifetime to see more countries to become more equal in market cap with the US. Also great companies can move around a bit due to acquisitions by other companies in different countries or relocation to take advantage of certain cashflow efficiency. So being able to continue to hold these in my portfolio (even with these changes) is a great asset. Finally the US and ex-US tend to "take turns" leading returns for some period of time. So it is useful to have both so at least one is driving returns (though that also means the other is lagging too).

Would suggest reading a few threads here to learn about how others think about international and reflect on what you think makes sense for you. Then make a choice that makes sense to you. At the end of the day having a plan and sticking to it matters much more than exactly how much international you hold. HTH :beer
+1
Triple digit golfer
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Re: Should I be investing in International Mutual Funds?

Post by Triple digit golfer »

Yes, in my opinion you should.
totality
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Re: Should I be investing in International Mutual Funds?

Post by totality »

I think it's reasonable to say that you should have some international exposure.

How much is a matter of debate. The target date funds that I invest in (Vanguard's in my 401k, Fidelity's in my Roth) both allocate 40% of equities to international.
Broken Man 1999
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Re: Should I be investing in International Mutual Funds?

Post by Broken Man 1999 »

I am increasing my international fund holdings. I was reluctant to increase my Total Intl. Stock Index, so I switched into Developed Markets Index ETF (VEA) I find my new ETF much more palatable, without China holdings.

I will probably go up to 25%-30%.

Broken Man 1999
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backpacker61
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Re: Should I be investing in International Mutual Funds?

Post by backpacker61 »

I also will not say "should" (you would have been money ahead by not having it over the last decade).

One consideration is that you may want to have exposure to international stocks that have a large business exposure to the United States; for example Royal Dutch Shell, Samsung, Toyota, and Nestle. Can't do that without having International funds.

I use VTIAX, but Fidelity has some equally good funds.

My equity exposure is 60% US/40% International.
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dmcmahon
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Re: Should I be investing in International Mutual Funds?

Post by dmcmahon »

abuss368 wrote: Wed Jan 13, 2021 6:28 pm
BogleGoggle wrote: Tue Jan 12, 2021 6:19 pm I am 30 and am wondering if I should be getting more international exposure in my ROTH IRA and/or 401k or stick with my Total Market and SP500 mutual funds. If I should be buying mutual funds with a lot of international exposure, what are some good ones? I use Fidelity and according to the Asset Allocation pie, I only have around 2-3% Foreign Stock overall. Thanks.
If you are comfortable and will sleep at night, then sure. Vanguard recommends 40% of stock and 30% of bonds to international.

Tony
FWIW I agree with Taylor, 20% is sufficient for international stocks, and I agree with other posters about using ETFs. I see no reason to add international bonds, given the purpose of bonds in the portfolio (stability).
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