Jack Bogle on International Investing at Bogleheads 11

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galeno
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Re: Jack Bogle on International Investing at Bogleheads 11

Postby galeno » Fri Jul 15, 2016 10:38 am

+1

dnaumov wrote:Own Vanguard Total World Stock (VT) and forget about it.
AA = 60/35/5. Expected CAGR = 5.7%. GSD = 16%. USD inflation = 2.0%. AWR = 3.0%. TER = 0.5%. Net Port Yield = 1.9%. Term = 37 yr. FI Duration = 4.7 yr. Portfolio survival probability = 88%.

Engineer250
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Re: Jack Bogle on International Investing at Bogleheads 11

Postby Engineer250 » Fri Jul 15, 2016 12:00 pm

staythecourse wrote:I am sure I will get some flak for this, but I see definite xenophobia in international investing based on two factors: 1. Age of the investor (the older folks are brought up as patriots and ideally believe America is special) and 2. If they are U.S. or foreign in heritage. Folks who are not U.S. born have a more natural world view vs. those who have never lived outside the confines of the U.S.


I'm not sure this is so black and white. I am a youngin' but consider myself a strong patriot and absolutely believe in American exceptionalism. Maybe the thing I don't believe in is perfect markets. Why did the S&P500 drop the two days after Brexit? Why did the US housing market collapse in 2007 cause foreign banks to go under? I entirely agree % of international is a personal decision like Mr. Bogle states. Same as your stock v. bond allocation, it has to work for you. You could make two arguments with globalization 1) US companies are incredibly globalized these days, and owning pure US stock will still get you exposure to the international market -OR- 2) Due to globalization, an investor shouldn't limit themselves to their home market and should consider owning international as a part of their portfolio to increase diversification and reduce overall volatility.

I also notice a lot of the numbers being brought up include the MSCI EAFE index only. Since this is developed countries only (and missing Canada and Korea) investing in just that and just the US market means you have no international small cap, and no emerging markets. This is a familiar problem for me since I am in the TSP I-Fund which mirrors the MSCI EAFE. I grab international small cap and emerging markets in my Roth IRA, but since Vanguard thinks South Korea is developed I'm still missing it (and Canada) in my portfolio. Oh well.

clip651
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Re: Jack Bogle on International Investing at Bogleheads 11

Postby clip651 » Fri Jul 15, 2016 1:35 pm

Engineer250 wrote:
I also notice a lot of the numbers being brought up include the MSCI EAFE index only. Since this is developed countries only (and missing Canada and Korea) investing in just that and just the US market means you have no international small cap, and no emerging markets. This is a familiar problem for me since I am in the TSP I-Fund which mirrors the MSCI EAFE. I grab international small cap and emerging markets in my Roth IRA, but since Vanguard thinks South Korea is developed I'm still missing it (and Canada) in my portfolio. Oh well.


I don't know about the TSP-I fund, but Vanguard's developed markets fund (VTMGX for admiral, VEA for the ETF) is now all caps and does include Canada. That's a recent change in the past year or so. Korea also shows up at 4%:
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

cj

Engineer250
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Re: Jack Bogle on International Investing at Bogleheads 11

Postby Engineer250 » Fri Jul 15, 2016 4:00 pm

clip651 wrote:
Engineer250 wrote:
I also notice a lot of the numbers being brought up include the MSCI EAFE index only. Since this is developed countries only (and missing Canada and Korea) investing in just that and just the US market means you have no international small cap, and no emerging markets. This is a familiar problem for me since I am in the TSP I-Fund which mirrors the MSCI EAFE. I grab international small cap and emerging markets in my Roth IRA, but since Vanguard thinks South Korea is developed I'm still missing it (and Canada) in my portfolio. Oh well.


I don't know about the TSP-I fund, but Vanguard's developed markets fund (VTMGX for admiral, VEA for the ETF) is now all caps and does include Canada. That's a recent change in the past year or so. Korea also shows up at 4%:
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

cj


Correct if you are all-in at Vanguard their definitions for developed vs emerging all match one another. Since the vast majority of my money is in my TSP I'm not going to buy the developed markets fund at Vanguard and overweight that just to get a little bit of Canada and Korea. I mostly wanted to point out all the returns on various scenarios above did not include emerging markets since they were using the MSCI EAFE fund and either the S&P 500 or a total US stock market fund for comparison.

On a side note, let me know if anyone would like to start a hedge fund or index fund company with me where one of the first indicies will be the Canada & Korea Large Cap Fund that contains only large cap funds from Canada and Korea, market weighted to one another of course. There are a lot of federal employees out there who are missing this crucial piece of the world market, just need to get the word out.

hoops777
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Re: Jack Bogle on International Investing at Bogleheads 11

Postby hoops777 » Fri Jul 15, 2016 4:27 pm

I can think of a lot of reasons why one would prefer to invest only in the US.The US has been blessed with so many advantages in terms of location natural resources,waterways for shipping and diversity of people,combined with so many wanting to move and work here.No country in the world has these advantages and they cannot be created or duplicated.Luck of the draw.I will gladly place my bets here.I would also add it is not like we live in a vacuum in this global economy,which I understand is not the same as investing in Europe or wherever.
K.I.S.S........so easy to say so difficult to do.

soboggled
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Re: Jack Bogle on International Investing at Bogleheads 11

Postby soboggled » Fri Jul 15, 2016 4:44 pm

To me it's got nothing to do with the innate superiority of the US.
Some pertinent questions: Is it desirable to decouple your investing prospects from the US economy? Why expose yourself to extraneous risks in the hopes of gaining an edge over other US investors? Are foreign governments and the companies themselves for that matter who are run by foreigners more likely to make decisions based on what is good for their native investor class or those in the US? How effective are the dollar hedging strategies employed by US international mutual funds? To what degree does investment in US companies provide exposure to international markets?
PS: For diversification, I hold international about 20% of equities but I am not at all convinced it is desirable, especially after seeing the 10 year CAGR of US markets 5 times that of international. Hoping for long term reversion to mean but not about to bet big on it.


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