It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

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CraigTester
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by CraigTester » Tue Aug 14, 2018 12:09 pm

VEA Stats:

Top holdings include: Nestle, Toyota, Shell, BP

P/E TTM = 14.6

SEC Yield = 2.4%

As a “valuation” guy, what’s not to like?

P.S. Does anyone know of a place (similar to Shillers website for SP500) to find historical data on “International stocks”...

kosomoto
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Tue Aug 14, 2018 12:10 pm

BogleMelon wrote:
Tue Aug 14, 2018 12:03 pm
michaeljc70 wrote:
Tue Aug 14, 2018 11:42 am
Bonds have been underperforming lately. Are you cutting back on those too? Perhaps you should consider buying only the top performing asset classes in the last 10 years and report back in 10 years how you did.
+1
OP: How about buying Bitcoins? :twisted:
I know you're being sarcastic, but all the people using the argument of other things have done better, why not invest in that are flawed arguments. None of these other options are nearly as diversified as an entire stock market with thousands of different companies with a long historic track record of providing good returns.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Tue Aug 14, 2018 12:10 pm

CraigTester wrote:
Tue Aug 14, 2018 12:09 pm
VEA Stats:

Top holdings include: Nestle, Toyota, Shell, BP

P/E TTM = 14.6

SEC Yield = 2.4%

As a “valuation” guy, what’s not to like?

P.S. Does anyone know of a place (similar to Shillers website for SP500) to find historical data on “International stocks”...
Is it really a "value" if the PE for international is always low?

CraigTester
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by CraigTester » Tue Aug 14, 2018 12:13 pm

kosomoto wrote:
Tue Aug 14, 2018 12:10 pm
CraigTester wrote:
Tue Aug 14, 2018 12:09 pm
VEA Stats:

Top holdings include: Nestle, Toyota, Shell, BP

P/E TTM = 14.6

SEC Yield = 2.4%

As a “valuation” guy, what’s not to like?

P.S. Does anyone know of a place (similar to Shillers website for SP500) to find historical data on “International stocks”...
Is it really a "value" if the PE for international is always low?
Does your question imply that a P/E = 14.6 is low for international?

Questions like these are why I'd like to find a source for historical data on International - similar to what Shiller has published for SP500....

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stemikger
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by stemikger » Tue Aug 14, 2018 12:16 pm

Grt2bOutdoors wrote:
Tue Aug 14, 2018 9:32 am
stemikger wrote:
Tue Aug 14, 2018 8:41 am
I never invested in international, but not because it is not doing well it is because years ago I read Common Sense on Mutual Funds and John Bogle's chapter on that subject resonated with me so much that I felt it wasn't necessary.

Having said that, just when you stop investing in it, it will do better than the U.S. I will not invest in international even if that is the case because I just don't feel it is worth it and also believe the U.S. has a fair amount of built in international without the currency risk, the sovereign risk and the lack of regulation.

Don't chase the market returns, if you are a long term investor, and really thought about why you are doing things, it is easier to stay the course. On the other hand if you don't like international for other reasons, it may be time to do what I did and go all U.S. because that is what helps you stay the course.

For most long term investors there will be times when you will hate one or more of your assets because it is not doing well, but that is the point of a diversified portfolio and not a reason to change your strategy.

For the record, 3 very smart men don't think international is necessary for regular folks saving for the long term. John Bogle, Warren Buffett and Jim Collins.

Good Luck!
Look more closely, Warren owns foreign companies.
Yes, he does, but that is for Berkshire. When he talks to the Know-Nothing Investor (his words), he simply says 10% in cash and 90% in the S&P. That is what he is doing for his wife when he dies. Everyone here already knows this, but when I quote it, they look at what he is doing for Berkshire, but who among us can do what Warren does when it comes to Berkshire?
Last edited by stemikger on Tue Aug 14, 2018 12:24 pm, edited 1 time in total.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by asif408 » Tue Aug 14, 2018 12:16 pm

Just curious, why are people not surprised when an investment in one country (US) beats an investment which includes a basket of almost 45 countries (which is what they are doing when comparing US to Int'l)? It shouldn't be surprising that individual markets beat a basket of markets for long stretches of time.

For example, looking at the Credit Suisse Annual Returns Yearbook (https://realestateforums.net/uploads/de ... 30d40f.pdf) from 1900-2016, South Africa and Australia have had higher returns than the US and World portfolio. Why not invest in those countries and just avoid the rest? Or, if we look more recently, from 2000-2016, Sweden, Switzerland, Norway, New Zealand, South Africa, Denmark, Canada, Austria, and Australia all had higher returns than the US and the World portfolio. Why not buy a basket of country ETFs in those countries?

If your goal is to maximize return, there is no point in owning a diversified international mutual fund. Just pick the best countries on your own.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by oldzey » Tue Aug 14, 2018 12:22 pm

kosomoto wrote:
Tue Aug 14, 2018 11:37 am
oldzey wrote:
Tue Aug 14, 2018 9:38 am
The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VGTSX) was 4/29/1996.

Per Morningstar, as of 8/13/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,648 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $28,165 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image
I find it amusing everyone here is ignoring your post. This is not an arbitrary data set you provided. It's literally providing data since inception of funds you could actually invest in, not theoretical indexes. You would have more than DOUBLE the funds from US only vs international after investing since inception of the funds.
Yep. 0% International works for me! :beer
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stemikger
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by stemikger » Tue Aug 14, 2018 12:22 pm

Posted by ValueThinker
There are plenty of badly governed companies that Buffett avoids in the USA - his approach is about the rifle shot, not about the geographic location (he made the largest acquisition of an Israeli company by a foreign one).
When I quote Warren about not investing in foreign funds, I am not saying this is how Berkshire invests, this is what he talked about for the last decade and more recently at the last 3 Berkshire meetings. He said the average Know-Nothing Investor should simply hold enough cash to feel secure and put the rest in the Vanguard 500 Index. This is exactly what he is doing for his wife when he dies. He follows that with "No one who has bet against America in the last 200 years has won" and that won't change for the next 200 years.

I highly doubt anyone here can invest like Warren does for Berkshire and he knows that. That is why he gives us this alternative and he never once said you need international.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by ReformedSpender » Tue Aug 14, 2018 12:23 pm

CraigTester wrote:
Tue Aug 14, 2018 12:09 pm
VEA Stats:

Top holdings include: Nestle, Toyota, Shell, BP

P/E TTM = 14.6

SEC Yield = 2.4%

As a “valuation” guy, what’s not to like?

P.S. Does anyone know of a place (similar to Shillers website for SP500) to find historical data on “International stocks”...
I'd also like to hear. I resort to annual reports found here

https://www.sec.gov/cgi-bin/browse-edga ... cd=filings

From that data, Vanguard Total International Stock saw a P/E of 12 in 2011 during the European debt crisis to a high of 20.8 in 2016. Interestingly enough, the yield hovered around 2.8% through those years with the exception of 2012 where it hit 3.3%

:beer
Last edited by ReformedSpender on Tue Aug 14, 2018 12:32 pm, edited 2 times in total.
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Whakamole » Tue Aug 14, 2018 12:23 pm

stemikger wrote:
Tue Aug 14, 2018 12:16 pm
Yes, he does, but that is for Berkshire. When he talks to the Know-Nothing Investor (his words), he simply says 10% in cash and 90% in the S&P. That is what he is doing for his wife when he dies.
Would you recommend a 90% S&P 500/10% bond portfolio for the average retiree? His wife is now 72.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by NYCPete » Tue Aug 14, 2018 12:24 pm

It's really fascinating to be in a position to distinctly remember what the tone and tenor of the Bogleheads forum was 10 years ago, and to remember conversations from back on the M* forums. It was all about how Int'l had outperformed U.S., and whether it was appropriate to hold less than 50% of stock in U.S. Multiple threads going on every week about this topic. Here's one example:

viewtopic.php?t=70974

There were also comments on lots of "Help with investments/portfolio" type threads where you could read the writing on wall, which was 20% of stocks in Int'l was insanely low, and people were using the global market cap as a starting point for comparing what allocation they were personally comfortable with. And why not? Int'l had solidly outperformed the U.S. from about 2000. Throughout this period, the stalwarts (many active posters who are still around) argued that somewhere between 20-30% of stocks in Int'l was reasonable, and that no one should get carried away. But everyone's human, and discipline is tough.

Fast forward almost a decade later...

Now, I feel like I'm seeing echoes from conversations and threads from long ago. There's really not much different about the arguments. It's just that we switch the names. Statistics get squeezed, specifically framed, and presented to prove one's point. Now it's because U.S. stocks have solidly outperformed Int'l over the course of the current bull market.

I was a pretty young kid when I started reading Bogleheads, over on Morningstar forums. Once I "got it" I checked in far less frequently. Maybe a couple times a month. Now, I'm approaching middle age, and I have some real money saved. So I come back a little more. Now, when I come to the forum, everything has changed...nothing has changed. It helps to have a long memory.

Good luck, OP.

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha

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stemikger
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by stemikger » Tue Aug 14, 2018 12:26 pm

Whakamole wrote:
Tue Aug 14, 2018 12:23 pm
stemikger wrote:
Tue Aug 14, 2018 12:16 pm
Yes, he does, but that is for Berkshire. When he talks to the Know-Nothing Investor (his words), he simply says 10% in cash and 90% in the S&P. That is what he is doing for his wife when he dies.
Would you recommend a 90% S&P 500/10% bond portfolio for the average retiree? His wife is now 72.
No, because many of us probably can't stomach that loss and let's face it I'm sure Warren is leaving his wife many millions so even if it goes down by half she will have no worries, but the idea is still there. I would not hesitate to hold 60% in the S&P and 40% in the Total Bond Market. I am 54 and I plan to hold that allocation until I die. I was simply retelling what he said and the fact still remains, he does not tell us to hold an international fund.

Actually when I retire I plan to put it all in the Vanguard Balanced Index Fund.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by BogleMelon » Tue Aug 14, 2018 12:32 pm

kosomoto wrote:
Tue Aug 14, 2018 12:10 pm
BogleMelon wrote:
Tue Aug 14, 2018 12:03 pm
michaeljc70 wrote:
Tue Aug 14, 2018 11:42 am
Bonds have been underperforming lately. Are you cutting back on those too? Perhaps you should consider buying only the top performing asset classes in the last 10 years and report back in 10 years how you did.
+1
OP: How about buying Bitcoins? :twisted:
I know you're being sarcastic, but all the people using the argument of other things have done better, why not invest in that are flawed arguments. None of these other options are nearly as diversified as an entire stock market with thousands of different companies with a long historic track record of providing good returns.
I don't see that the US market by itself without international market is that much diversified, but of course you right, we can't be compare it to a gambling thing like Bitcoin, but it is still one single country with one single currency. Historically, no nation remained the strongest forever! No one can guarantee that this one single market won't collapse the next 30 years while the rest of the world outperform.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Whakamole » Tue Aug 14, 2018 12:38 pm

stemikger wrote:
Tue Aug 14, 2018 12:26 pm
Whakamole wrote:
Tue Aug 14, 2018 12:23 pm
stemikger wrote:
Tue Aug 14, 2018 12:16 pm
Yes, he does, but that is for Berkshire. When he talks to the Know-Nothing Investor (his words), he simply says 10% in cash and 90% in the S&P. That is what he is doing for his wife when he dies.
Would you recommend a 90% S&P 500/10% bond portfolio for the average retiree? His wife is now 72.
No, because many of us probably can't stomach that loss and let's face it I'm sure Warren is leaving his wife many millions so even if it goes down by half she will have no worries, but the idea is still there. I would not hesitate to hold 60% in the S&P and 40% in the Total Bond Market. I am 54 and I plan to hold that allocation until I die.
I agree with that part of your statement. She will be so wealthy that allocation won't matter all that much. That's my problem with people quoting Buffett about his wife's future portfolio - where even a Great Depression-era drop in stock prices would still leave her rich - and using that as guidance. I don't think Buffett ever recommended that the average retiree using a 90/10 split. (As an aside, the 10% were short-term government bonds, not cash, certainly not Total Bond.)

I don't get why you'd quote Warren Buffett saying his advice is 90% S&P 500 and 10% short-term government bonds, presumably this being good advice, and then say you'd reduce the stock exposure and buy Total Bond (which includes corporates and MBSs) instead of short-term government bonds. You're already picking and choosing.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by CraigTester » Tue Aug 14, 2018 12:48 pm

ReformedSpender wrote:
Tue Aug 14, 2018 12:23 pm
CraigTester wrote:
Tue Aug 14, 2018 12:09 pm
VEA Stats:

Top holdings include: Nestle, Toyota, Shell, BP

P/E TTM = 14.6

SEC Yield = 2.4%

As a “valuation” guy, what’s not to like?

P.S. Does anyone know of a place (similar to Shillers website for SP500) to find historical data on “International stocks”...
I'd also like to hear. I resort to annual reports found here

https://www.sec.gov/cgi-bin/browse-edga ... cd=filings

From that data, Vanguard Total International Stock saw a P/E of 12 in 2011 during the European debt crisis to a high of 20.8 in 2016. Interestingly enough, the yield hovered around 2.8% through those years with the exception of 2012 where it hit 3.3%

:beer
Cheers for the couple of calibrating data points. I'll circle back if I stumble on a good place to find more extensive data....

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by cj2018 » Tue Aug 14, 2018 12:51 pm

HuckFinn wrote:
Tue Aug 14, 2018 10:28 am
Abe wrote:
Tue Aug 14, 2018 9:40 am
HuckFinn, I liked your monkey story. :happy
Thanks Abe, I cannot tell you how many times that silly story pops up into my head through so many variable situations in life.
HuckFinn - i liked the monkey story you shared too. A good illustration of "herd mentality" or "group thinking". It happens all the time around us and it's good that you like to understand the "why" more often than simply following convention.

Now regarding the international allocation discussion, if you are U.S. based investors, international hopefully means Europe and major Asian economies. If you are a Chinese or Japanese investor however, international actually means including U.S.! So in that sense, i think having international exposure has merit as it simply provides more diversification.

Are you in the wealth accumulating stage or preservation stage (not your age)? Because that will largely dictate how you might think about asset allocation. For me, I personally have 0% in international and 0% in bonds as an U.S. based investor in accumulating stage. As i continue to build up my wealth and step into meaningfully large portfolio size, i have no doubt in my mind that my AA will shift to more bonds and international, not because they might boost my returns, but because my greater desire to protect my portfolio and not loose it and it can help me achieve that through diversification (international) and lower volatility (bonds).

I think you should simply reevaluate your AA and see if it still make sense to have international and how that might impact your ability to stay the course. If you just can't stomach it for whatever reason, shift more money to US if it helps you sleep better at night and not have to worry about making too many irrational trading decisions.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by whodidntante » Tue Aug 14, 2018 12:55 pm

These discussions go round and round and no one seems convinceable (is that a word?).

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by asif408 » Tue Aug 14, 2018 12:58 pm

NYCPete wrote:
Tue Aug 14, 2018 12:24 pm
I was a pretty young kid when I started reading Bogleheads, over on Morningstar forums. Once I "got it" I checked in far less frequently. Maybe a couple times a month. Now, I'm approaching middle age, and I have some real money saved. So I come back a little more. Now, when I come to the forum, everything has changed...nothing has changed. It helps to have a long memory.

Good luck, OP.

Best,
Peter
You can still browse the old Diehards forums here: http://discuss.morningstar.com/NewSocia ... Index=1339. I'd definitely suggest to others to look at the posts from the late 90s to early 2000s. A lot of similarities to today.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by miles monroe » Tue Aug 14, 2018 1:02 pm

after this period of underperformance seems like it's time to increase international rather than decrease.

that's a decision i made about a year or so ago.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Steadfast » Tue Aug 14, 2018 1:02 pm

Plenty of good advice in this thread.

But, I hold the global equity market in market proportions, because I don't have a good reason to do anything else. So if you're selling international, I'm buying.
We don't see things as they are, we see things as we are.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by grayfox » Tue Aug 14, 2018 1:13 pm

I would like to de-construct the return for U.S. and International into dividend + growth of warnings + valuation change. I can do this for U.S. using ONLINE DATA ROBERT SHILLER. I don't know where to get all the price, earnings and dividend for International stocks. Then we can see where the return came from.

Oh, and by the way, That “Five Monkeys Experiment” Never Happened

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by CraigTester » Tue Aug 14, 2018 1:17 pm

asif408 wrote:
Tue Aug 14, 2018 12:58 pm
NYCPete wrote:
Tue Aug 14, 2018 12:24 pm
I was a pretty young kid when I started reading Bogleheads, over on Morningstar forums. Once I "got it" I checked in far less frequently. Maybe a couple times a month. Now, I'm approaching middle age, and I have some real money saved. So I come back a little more. Now, when I come to the forum, everything has changed...nothing has changed. It helps to have a long memory.

Good luck, OP.

Best,
Peter
You can still browse the old Diehards forums here: http://discuss.morningstar.com/NewSocia ... Index=1339. I'd definitely suggest to others to look at the posts from the late 90s to early 2000s. A lot of similarities to today.
Thanks for posting this....I just browsed a discussion in late 1999 about what a son should do to help his 90+ year old mother invest....Some suggested stock index funds in a way that made it sound like good advice...

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Tue Aug 14, 2018 1:17 pm

HuckFinn wrote:
Tue Aug 14, 2018 9:26 am

Reminder… Jack Bogle was… and still is a rebel.

[Article]
Have you ever wonder why certain things are as they are in your work environment? I often share the story of five monkeys and a banana. An experiment is conducted in which five rhesus monkeys were placed in a cage together with a banana hanging high on a rope outside the reach of the monkeys. A step ladder was placed in the cage that would enable the monkeys to reach the banana. Whenever one of the monkeys attempted to climb and reach for the banana, ALL monkeys were sprayed with freezing cold water.
After a few attempts, all the monkeys learned the association between reaching for the banana and the group collective punishment of being sprayed with freezing water. There was no longer need for the water; no monkeys would attempt to reach the banana.
The researcher then replaced one of the five monkeys with a new monkey. The new monkey, not aware of the icy water treatment, tried to reach for the banana. Within a fraction of a second the other four monkeys attacked him again and again, until he no longer tried to reach the banana. One by one, the monkeys who had experienced the original icy water treatment were replaced by a new monkey. With the introduction of each new monkey, the other monkeys would attack him until he quit trying for the banana.
Eventually, the cage was populated by five new monkeys, none who had experienced the icy water treatment. The experimenter then introduced a new monkey to the cage. When this monkey tried to reach for the banana, all five monkeys attacked him.
The story goes that even though none of these monkeys knew about the collective punishment of icy water, somewhat along the way they learnt that reaching for the banana is not allowed. They become the guardians of this rule without knowing its purpose.
Culture is created over time, and often habits and practices are instilled and repeated without anyone knowing the origin of the behavior. But to be accepted, most people diligently follow the behaviors or the others in the group will work to reinforce and maintain the current culture.

Next time someone says, “That isn’t how we do things here,” ask the question “Why?”
I think that is a great story. Funnily, I read the same story and feel like it makes a case for NOT listening to the John Bogle's and Warren Buffet's of the world and using my own thinking instead of heeding them. It feels like the fear of investing in international markets is being perpetuated for no good reason!

Here are my thoughts on why you should not listen to the old guard and try to go reach for that banana: :happy
Why is it okay to divide the Total World stock market by country, but then not divide the market by sector? Also, Why hold any of the under performing stocks in sector, why not just hold the best performing ones?

I think the fallacy is in the US vs exUS dichotomy. It misleads you into thinking that they are two separate bundles. They are not. There is only the total world stock market, and the US is a part of it. Much like Japan, Turkey or France are a part of it. The US is of course a much bigger part, and that is reflected in the allocations. Some countries perform better than others. Some sectors perform better than others. Some companies perform better than others. Just like you don't pick companies, or sectors .. don't pick countries. Just like companies that are flying high can come crashing to the ground, entire sectors can get disrupted by innovation or regulation, entire countries can undergo political, cultural, social and economic shifts. Just own the whole basket and stop looking at bits of your basket and saying "Look! this bit is doing better than the other bit! I should've put more money into that bit! Ugh!"
Last edited by bligh on Tue Aug 14, 2018 1:21 pm, edited 1 time in total.

cj2018
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by cj2018 » Tue Aug 14, 2018 1:21 pm

grayfox wrote:
Tue Aug 14, 2018 1:13 pm
Oh, and by the way, That “Five Monkeys Experiment” Never Happened


What! no way! lol.

Whether the experiment were real or not, didn't the fact it's widespread already proved its point?

Cheers :sharebeer

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by MJW » Tue Aug 14, 2018 1:22 pm

whodidntante wrote:
Tue Aug 14, 2018 12:55 pm
These discussions go round and round and no one seems convinceable (is that a word?).
Such is the way of the world, and seemingly more and more the way of this forum.

I think the OP made an honest, well-intended post and it's unfortunate that some chose to respond with sarcasm and ridicule. If someone is going to bother to offer a rebuttal why not do it in a way where there is actually something to be learned? I get that people roll their eyes when they see another "why bother with International?" thread, but it's really easy to refrain from opening in the first place rather than making a snarky remark.

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Taylor Larimore
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"How Much International Stock? A Suggestion"

Post by Taylor Larimore » Tue Aug 14, 2018 1:32 pm

Bogleheads:

This is a post I made two years ago which may be helpful:

How Much International Stock? A Suggestion.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by UpsetRaptor » Tue Aug 14, 2018 1:38 pm

Looking at most of the charts people have posted on the first couple pages in this thread, the first thing I notice is the strong (and trending stronger) correlation between US and ex-US.

Whatever ratio you decide, don't sweat it much.

cj2018
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by cj2018 » Tue Aug 14, 2018 1:39 pm

bligh wrote:
Tue Aug 14, 2018 1:17 pm
HuckFinn wrote:
Tue Aug 14, 2018 9:26 am

Reminder… Jack Bogle was… and still is a rebel.

[Article]
Have you ever wonder why certain things are as they are in your work environment? I often share the story of five monkeys and a banana. An experiment is conducted in which five rhesus monkeys were placed in a cage together with a banana hanging high on a rope outside the reach of the monkeys. A step ladder was placed in the cage that would enable the monkeys to reach the banana. Whenever one of the monkeys attempted to climb and reach for the banana, ALL monkeys were sprayed with freezing cold water.
After a few attempts, all the monkeys learned the association between reaching for the banana and the group collective punishment of being sprayed with freezing water. There was no longer need for the water; no monkeys would attempt to reach the banana.
The researcher then replaced one of the five monkeys with a new monkey. The new monkey, not aware of the icy water treatment, tried to reach for the banana. Within a fraction of a second the other four monkeys attacked him again and again, until he no longer tried to reach the banana. One by one, the monkeys who had experienced the original icy water treatment were replaced by a new monkey. With the introduction of each new monkey, the other monkeys would attack him until he quit trying for the banana.
Eventually, the cage was populated by five new monkeys, none who had experienced the icy water treatment. The experimenter then introduced a new monkey to the cage. When this monkey tried to reach for the banana, all five monkeys attacked him.
The story goes that even though none of these monkeys knew about the collective punishment of icy water, somewhat along the way they learnt that reaching for the banana is not allowed. They become the guardians of this rule without knowing its purpose.
Culture is created over time, and often habits and practices are instilled and repeated without anyone knowing the origin of the behavior. But to be accepted, most people diligently follow the behaviors or the others in the group will work to reinforce and maintain the current culture.

Next time someone says, “That isn’t how we do things here,” ask the question “Why?”
I think that is a great story. Funnily, I read the same story and feel like it makes a case for NOT listening to the John Bogle's and Warren Buffet's of the world and using my own thinking instead of heeding them. It feels like the fear of investing in international markets is being perpetuated for no good reason!

Here are my thoughts on why you should not listen to the old guard and try to go reach for that banana: :happy
Why is it okay to divide the Total World stock market by country, but then not divide the market by sector? Also, Why hold any of the under performing stocks in sector, why not just hold the best performing ones?

I think the fallacy is in the US vs exUS dichotomy. It misleads you into thinking that they are two separate bundles. They are not. There is only the total world stock market, and the US is a part of it. Much like Japan, Turkey or France are a part of it. The US is of course a much bigger part, and that is reflected in the allocations. Some countries perform better than others. Some sectors perform better than others. Some companies perform better than others. Just like you don't pick companies, or sectors .. don't pick countries. Just like companies that are flying high can come crashing to the ground, entire sectors can get disrupted by innovation or regulation, entire countries can undergo political, cultural, social and economic shifts. Just own the whole basket and stop looking at bits of your basket and saying "Look! this bit is doing better than the other bit! I should've put more money into that bit! Ugh!"
Solid response.

To play devil's advocate, contrary to company or industry diversification, diversify at a country-level is sound in theory but hard in practice for the following reasons:
  • Most likely, you are born and have lived in the same country in your whole life
  • The friction or uprooting and moving to a new country in case of political or economic shift is challenging
  • You don't care if 1 or 10 out of your 1000 company stocks in your portfolio get wiped out, but you sure as hell will care more if your country gets toasted for whatever reason
  • Most likely, your bank account, brokerage, passport, house, car, friends, family, everything you own and cherish are in one country and how do you diversify from that?
For those reasons, that's why i suspect Bogle or Warren don't bother recommending international portfolio for U.S. based investors since the perceived tangible benefit is hard to realize and in the case you need it, how can you attain it when you can't flee the country and your bank account is frozen?

Having said that, i think if ones get pass the emotions and patriotism, and focus purely on the analytical aspect of investing, then having international exposure for U.S. based investors are just numbers game and it make sense (15% to 20% of total equity exposure).
Last edited by cj2018 on Tue Aug 14, 2018 1:41 pm, edited 1 time in total.

xenochrony
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by xenochrony » Tue Aug 14, 2018 1:41 pm

I thought long and hard before establishing developed markets as 20% of my total equity exposure in my IPS. This choice was based on much reading and analysis. The OPs argument unconvincingly makes me question my choice.

xenochrony

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by TomCat96 » Tue Aug 14, 2018 1:43 pm

0% international here. By international, I mean ex-US.

Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.

Whatever you are getting with international, you are not getting a different flavor of the same thing. There seems to be this implicit assumption that the US has great companies, and International has great companies. Wouldn't you want to diversify then? Like Chocolate ice cream to vanilla ice cream. Wouldn't you want to diversify if that were the case? Yes, I probably would.

But that implicit assumption is simply wrong. International is not, nor can it be, the same thing as "another version" of US stocks. I don't care how good the companies are, the entire legal edifice and trade barriers render it such that moving capital from losers to winners cannot be guaranteed. There are significant impediments to allocative efficiency that exist in the international market, that do not exist in a unified market.

In the United States, capital outflows from one industry due to lack of competitiveness can quickly be taken over by another. The same cannot be said of international necessarily because you're talking about different parts of the world. Just because a british company is inefficient doesn't mean some hot new startup in Malaysia can take its place. There are trade barriers, tariffs, differences in tax systems, differences in legal systems, currency risks, and frankly just limits to globalization. The Malaysian company cannot readily take over the trade in Britain the same way a texas company can take over production for a detroit factory.

There are so many legal and practical barriers between the disparate elements of the international market, that its impossible for any single person to understand it all. The next best thing is to look at the data. 4.84% for 22 years. On the other hand, the US market has averaged about 10% in the same time.

That difference is too much. There is something fundamentally different going on. It may be for the reasons I ascribed. But those looking to invest in international because it is the global allocation is not alone a good enough reason.

Let me put things another way to the international folk.

Consider your international investments right now, their performance, and their character.

Now consider if "international" became this monolithic entity, without national borders, tariffs, legal or other trade barriers.

Would your international investments change? Or would it stay exactly the same?

To me it seems indisputable that if the world were to unify in such a way, call it "the international zone", that the international market would change fundamentally in character, and could reach a level of efficiency it never could before. It seems impossible that there would be no difference from international as we see it today.

It would be equivalent to calling the Eurozone pointless--that an diversified allocation of companies across Europe would have grown exactly the same way if Europe remained separate as it did unified.
Last edited by TomCat96 on Tue Aug 14, 2018 1:48 pm, edited 1 time in total.

cj2018
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by cj2018 » Tue Aug 14, 2018 1:44 pm

xenochrony wrote:
Tue Aug 14, 2018 1:41 pm
I thought long and hard before establishing developed markets as 20% of my total equity exposure in my IPS. This choice was based on much reading and analysis. The OPs argument unconvincingly makes me question my choice.

xenochrony
Curious to know, do you use VTIAX (which includes emerging markets), or just the European total stock fund (VEUSX) plus the Pacific total stock fund (VPADX) which capture most of the developed markets minus emerging markets? Thanks.

coupleofcents
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by coupleofcents » Tue Aug 14, 2018 1:51 pm

Nothing gets Bogleheads as fired up as using past performance through select time periods to determine ones current asset allocation. Lol. 3 pages of replies so far... oh i'm adding to it. Darn it.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Jags4186 » Tue Aug 14, 2018 1:52 pm

You can take this logic and apply as granularly as you’d like it.

Why invest in Int’l when US has performed so well?
Why invest in the TSM when and when Mid Cap and Small cap have outperformed large cap for decades?
Why invest in Mid Cap and Small Cap Blend when Mid Cap and Small Cap value have outperformed growth for decades?
Why invest in Small Cap Value when Apple has outperformed everything over the last 30 years?

You either own a piece of everything and at any point in time you have some winners and some losers, or you double down on a particular asset class/sector/size/stock/geographic location and hope for the best.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by wolf359 » Tue Aug 14, 2018 1:55 pm

HEDGEFUNDIE wrote:
Tue Aug 14, 2018 12:00 pm
wolf359 wrote:
Tue Aug 14, 2018 11:49 am

- While you're at it, look at the relative performance of bonds. Spoiler: We're in a 10 year bull market. Bonds stink even worst than international. Have you gotten rid of your bonds already?
This is not a good comparison. People hold equities for growth, bonds for safety. When you look back at the performance of VTIAX over the past 10 years and see that it's only returned 3% CAGR (same as bonds but much higher risk) I think people have a right to be concerned.

The sophisticated answer here is to hold International, but to hedge out some of the currency risk. I.e. hold half VTIAX and half DBEF.
I agree that it is not a good comparison. Bonds are not equities, and are held for different reasons. That was my point.

Someone who is holding bonds for diversification shouldn't drop them just because they are underperforming.

If you're holding international equities for diversification, you shouldn't drop them, either, just because they are underperforming at the moment.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by visualguy » Tue Aug 14, 2018 2:00 pm

TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.
Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.

The rest of your post is excellent as well.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Tue Aug 14, 2018 2:14 pm

visualguy wrote:
Tue Aug 14, 2018 2:00 pm
TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.

Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.

The rest of your post is excellent as well.
I concur, after 22 years the equity premium needs to show up. Why invest internationally if you can get higher returns from preferred stocks or high yield bonds? Both of which have less volatility.
Last edited by kosomoto on Tue Aug 14, 2018 2:16 pm, edited 1 time in total.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by HEDGEFUNDIE » Tue Aug 14, 2018 2:15 pm

visualguy wrote:
Tue Aug 14, 2018 2:00 pm
TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.
Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.

The rest of your post is excellent as well.
Which is why every international investor should consider (1) adding a hedged currency index fund (e.g. DBAW) and (2) tilting small (e.g. SCZ)

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Tue Aug 14, 2018 2:23 pm

HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:15 pm
visualguy wrote:
Tue Aug 14, 2018 2:00 pm
TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.
Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.

The rest of your post is excellent as well.
Which is why every international investor should consider (1) adding a hedged currency index fund (e.g. DBAW) and (2) tilting small (e.g. SCZ)

Does international hedging really make a difference? Hedged returns for the last 25 years have been worse than unhedged.

Image

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by HEDGEFUNDIE » Tue Aug 14, 2018 2:30 pm

kosomoto wrote:
Tue Aug 14, 2018 2:23 pm
HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:15 pm
visualguy wrote:
Tue Aug 14, 2018 2:00 pm
TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.
Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.

The rest of your post is excellent as well.
Which is why every international investor should consider (1) adding a hedged currency index fund (e.g. DBAW) and (2) tilting small (e.g. SCZ)

Does international hedging really make a difference? Hedged returns for the last 25 years have been worse than unhedged.

Image
Looking at that chart, what do you see at 20 years?

The point is in the long term currency fluctuations add risk but no extra return. When the dollar goes up (like for the past 20 years!) a hedged fund does better, when the dollar goes down a unhedged fund does better. Why not smooth out the ride and invest 50/50 in hedged/unhedged?

Hedged funds have relatively low expense ratios so there's really no excuse.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Nate79 » Tue Aug 14, 2018 2:32 pm

I did a quick comparison using the annual return data in Portfolio Visualizer of both US stock market and Global ex-US Stock market assets for rolling 10 and 15 year periods from 1986 to 2018.

During this period US stock market outperformed International in 17 out of 23 rolling 10 year periods and 17 out of 18 15 year periods.

During this period US stock market outperformed a US/International 60/40 portfolio in 16 out of 23 periods. So the diversification from holding international was very minor.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Tue Aug 14, 2018 2:34 pm

HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:30 pm
kosomoto wrote:
Tue Aug 14, 2018 2:23 pm
HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:15 pm
visualguy wrote:
Tue Aug 14, 2018 2:00 pm
TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.
Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.

The rest of your post is excellent as well.
Which is why every international investor should consider (1) adding a hedged currency index fund (e.g. DBAW) and (2) tilting small (e.g. SCZ)

Does international hedging really make a difference? Hedged returns for the last 25 years have been worse than unhedged.

Image
Looking at that chart, what do you see at 20 years?

The point is in the long term currency fluctuations add risk but no extra return. When the dollar goes up (like for the past 20 years!) a hedged fund does better, when the dollar goes down a unhedged fund does better. Why not smooth out the ride and invest 50/50 in hedged/unhedged?

Hedged funds have relatively low expense ratios so there's really no excuse.
Is the cost of hedging included in the expense ratio?

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Vulcan
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Vulcan » Tue Aug 14, 2018 2:40 pm

It's all priced in. Invest in Total World Stock and don't look at what's inside.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Tue Aug 14, 2018 2:40 pm

visualguy wrote:
Tue Aug 14, 2018 2:00 pm
TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.
Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.
The devil is in the details, I guess.

An investor who decided to be 100% international stocks in 1996 would have had a rocky ride, but a more typical investor who put 20% of their stocks in VGTSX actually experienced LESS volatility than an investor who was US-only.

Furthermore, an investor who was routinely investing during that period (say, putting away $400 a month into this 80% US/20% intl portfolio) got the benefit of that lower volatility without much sacrifice in return.

Image

And an investor who had the same 80% US/20% intl portfolio starting 22 years before THAT with routine investment had a similar experience: virtually identical returns with lower volatility.

Image

In other words, even during periods of low relative performance the experience of owning international stocks wasn't ACTUALLY more volatile than not owning them. The opposite, actually.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by triceratop » Tue Aug 14, 2018 2:41 pm

kosomoto wrote:
Tue Aug 14, 2018 2:34 pm
Is the cost of hedging included in the expense ratio?
no.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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vineviz
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Tue Aug 14, 2018 2:43 pm

HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:30 pm
The point is in the long term currency fluctuations add risk but no extra return. When the dollar goes up (like for the past 20 years!) a hedged fund does better, when the dollar goes down a unhedged fund does better. Why not smooth out the ride and invest 50/50 in hedged/unhedged?
The currency fluctuations are relatively uncorrelated with stocks and bonds, so hedging basically amounts to the investor paying to reduce the diversification of their portfolio.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by stemikger » Tue Aug 14, 2018 2:45 pm

Whakamole wrote:
Tue Aug 14, 2018 12:38 pm
stemikger wrote:
Tue Aug 14, 2018 12:26 pm
Whakamole wrote:
Tue Aug 14, 2018 12:23 pm
stemikger wrote:
Tue Aug 14, 2018 12:16 pm
Yes, he does, but that is for Berkshire. When he talks to the Know-Nothing Investor (his words), he simply says 10% in cash and 90% in the S&P. That is what he is doing for his wife when he dies.
Would you recommend a 90% S&P 500/10% bond portfolio for the average retiree? His wife is now 72.
No, because many of us probably can't stomach that loss and let's face it I'm sure Warren is leaving his wife many millions so even if it goes down by half she will have no worries, but the idea is still there. I would not hesitate to hold 60% in the S&P and 40% in the Total Bond Market. I am 54 and I plan to hold that allocation until I die.
I agree with that part of your statement. She will be so wealthy that allocation won't matter all that much. That's my problem with people quoting Buffett about his wife's future portfolio - where even a Great Depression-era drop in stock prices would still leave her rich - and using that as guidance. I don't think Buffett ever recommended that the average retiree using a 90/10 split. (As an aside, the 10% were short-term government bonds, not cash, certainly not Total Bond.)

I don't get why you'd quote Warren Buffett saying his advice is 90% S&P 500 and 10% short-term government bonds, presumably this being good advice, and then say you'd reduce the stock exposure and buy Total Bond (which includes corporates and MBSs) instead of short-term government bonds. You're already picking and choosing.
We all have to make our own decisions and what works for us, but all you have to do is go through You Tube and the Berkshire annual letters and Warren Buffett does indeed tell retirees that this is the way to go. I didn't make that part up. Yes, I do know he does use treasuries but he looks at that as Cash. If you want me to, I'll get all the YouTube videos and quotes from Warren for you. He has been saying this for years and it is meant for all ages. Is it good for me, No, I would have a problem sleeping at that night with that much in stocks. I simply quote this from Warren to show he does not think international is necessary, not for the 90/10 advice.
Last edited by stemikger on Tue Aug 14, 2018 2:49 pm, edited 2 times in total.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by columbia » Tue Aug 14, 2018 2:46 pm

MichCPA wrote:
Tue Aug 14, 2018 9:52 am
One of the most dangerous things we are going to start seeing for investors is that 2008 is falling off of the 10 years look back period most people consider long term. Keep in mind this means we aren't capturing a complete economic cycle. As far as the whole international is a disaster thing, if you look at developed only vs submerging markets the calculation changes a bit. We should be looking at the fundamental characteristics of international stocks as an asset class, not chasing past performance. Developed international has attractive P/E ratios, and has been hammered by forex changes which tend to normalize over time.
The general consensus is that how much international a US investor owns probably won’t much of a difference in the long run, so using the word “dangerous” seems excessive.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by HEDGEFUNDIE » Tue Aug 14, 2018 2:47 pm

vineviz wrote:
Tue Aug 14, 2018 2:43 pm
HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:30 pm
The point is in the long term currency fluctuations add risk but no extra return. When the dollar goes up (like for the past 20 years!) a hedged fund does better, when the dollar goes down a unhedged fund does better. Why not smooth out the ride and invest 50/50 in hedged/unhedged?
The currency fluctuations are relatively uncorrelated with stocks and bonds, so hedging basically amounts to the investor paying to reduce the diversification of their portfolio.
You gotta think behaviorally.

What is worse in terms of diversification, an investor going through a 10-year international drought and reducing his allocation to international, or reducing currency exposure & getting a moderately higher return over the same 10 years, just enough not to panic?

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by triceratop » Tue Aug 14, 2018 2:50 pm

HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:47 pm
vineviz wrote:
Tue Aug 14, 2018 2:43 pm
HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:30 pm
The point is in the long term currency fluctuations add risk but no extra return. When the dollar goes up (like for the past 20 years!) a hedged fund does better, when the dollar goes down a unhedged fund does better. Why not smooth out the ride and invest 50/50 in hedged/unhedged?
The currency fluctuations are relatively uncorrelated with stocks and bonds, so hedging basically amounts to the investor paying to reduce the diversification of their portfolio.
You gotta think behaviorally.

What is worse in terms of diversification, an investor going through a 10-year international drought and reducing his allocation to international, or reducing currency exposure & getting a moderately higher return over the same 10 years, just enough not to panic?
There is another option: become educated enough as an investor so that asset allocation and investor behavior are decorrelated and one can make proper decisions in each regime.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by HEDGEFUNDIE » Tue Aug 14, 2018 2:58 pm

triceratop wrote:
Tue Aug 14, 2018 2:50 pm
HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:47 pm
vineviz wrote:
Tue Aug 14, 2018 2:43 pm
HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:30 pm
The point is in the long term currency fluctuations add risk but no extra return. When the dollar goes up (like for the past 20 years!) a hedged fund does better, when the dollar goes down a unhedged fund does better. Why not smooth out the ride and invest 50/50 in hedged/unhedged?
The currency fluctuations are relatively uncorrelated with stocks and bonds, so hedging basically amounts to the investor paying to reduce the diversification of their portfolio.
You gotta think behaviorally.

What is worse in terms of diversification, an investor going through a 10-year international drought and reducing his allocation to international, or reducing currency exposure & getting a moderately higher return over the same 10 years, just enough not to panic?
There is another option: become educated enough as an investor so that asset allocation and investor behavior are decorrelated and one can make proper decisions in each regime.
Yeah, well, no matter how many times you tell people not to Buy High and Sell Low, they do it anyway.

Adding structural behavioral guardrails [at a moderate cost] should not be dismissed out of hand.

Locked