Split the Equity allocation 50% US / 50% International

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A 50% US and 50% International equity allocation:

1) Presently allocate equities 50% US / 50% International.
75
41%
2) Plan on moving to a 50% US / 50% International equity allocation in the future.
5
3%
3) Allocate a difference percentage to International equities.
81
45%
4) No way! Too agressive!
9
5%
5) Do not allocate any equities to International.
11
6%
 
Total votes: 181

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Split the Equity allocation 50% US / 50% International

Post by abuss368 » Thu Jun 20, 2013 10:40 am

How many Bogleheads have developed or are developing the thought process of just saying "the heck with it" and allocating equities 50% US / 50% International? Some of the responses to other threads I started noted a 50% US / 50% International allocation. A handful responded positive feedback for the new Total World fund.

We were 70% US / 30% International for many years and recently allocated to a 60% US / 40% International.

At the end of the day, a 50% US / 50% International must be the easiest asset allocation available. Everything gets split right down the middle. No taking bets if one or the other will out perform. No wasting time with 10% of equity this way or that way. It apepars Vanguard is slowly moving in the direction of an increased International allocation considering their webcasts and documentation now noting "30% of equity is a starting point", and the inclusion of the new Total International Bond Fund in the Target and Life Strategy offerings.

From my understanding, US and International markets have been and are becoming highly correlated. REITs still provide additional diversification and are uncorrelated to each other and stocks in general (i.e. excluding the financial meltdowns).

Had me thinking of a model portfolio of say $1,000,000 in an account with a 40% equity / 60% bond allocation:

Equity - $400,000
* Total Stock Index - $140,000
* Total International- $140,000
* US REIT Index - $60,000
* International REIT Index - $60,000

Bonds - Total Bond Index - $600,000


Note: Let's ignore bonds for the moment (i.e. pass on a discussion of adding TIPS for the time being and leave it at Total Bond).

Appears very simple and easy to manage for me and spouse, heirs, etc. Diversified. Low costs. Very easy to rebalance.

From the looks of it, the advantages are looking a little overwhelming and very difficult to pass up.

Very interested in others thoughts and view points.
Last edited by abuss368 on Thu Jun 20, 2013 2:45 pm, edited 2 times in total.
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Re: Split the Equity allocation 50% US / 50% International

Post by Quidnam » Thu Jun 20, 2013 10:43 am

I try to keep my allocation at market weight (currently about 45% US / 55% international), but I voted "50/50" in your poll since it's the closest option available.

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Re: Split the Equity allocation 50% US / 50% International

Post by MnD » Thu Jun 20, 2013 10:56 am

Quidnam wrote:I try to keep my allocation at market weight (currently about 45% US / 55% international), but I voted "50/50" in your poll since it's the closest option available.
Same here. Came to this conclusion several years ago and have no intention of changing it. I also use a market weight allocations for international developed/emerging market/small cap allocation.
70/30 AA, Global market cap equity. Rebalance if FI <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

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Re: Split the Equity allocation 50% US / 50% International

Post by gkaplan » Thu Jun 20, 2013 11:07 am

40/50 Domestic/International
Gordon

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Re: Split the Equity allocation 50% US / 50% International

Post by ray.james » Thu Jun 20, 2013 11:07 am

I am 50/50 today but of the 50% international, 15% is small cap. International REIT(consider as international stock) and international small cap are pretty attractive at current valuations.

Since recession, for internationals there are currency risks, high inflation in few countries, high unemployment in some countries, federal burden in some others. Due to this, different countries are deploying at varying scale - export measures, tax measures, scaled down pensions, currency protections, import taxes and deleverage. I believe in 5-10 years, this will make real good winners and some losers; based on what we do not know as a probable right policy. I do not tilt/willing to consider emerging/frontier/international bonds.
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Re: Split the Equity allocation 50% US / 50% International

Post by Quidnam » Thu Jun 20, 2013 11:15 am

gkaplan wrote:40/50 Domestic/International
Is the other 10% in Virgin Galactic? :)

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Re: Split the Equity allocation 50% US / 50% International

Post by abuss368 » Thu Jun 20, 2013 12:15 pm

In addition to my original question regarding a 50/50 allocation, does the above sample portfolio appear reasonable?
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Re: Split the Equity allocation 50% US / 50% International

Post by Quidnam » Thu Jun 20, 2013 12:27 pm

Is there adequate tax-advantaged space to hold the REIT positions? If not, I'd consider skipping them.

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Re: Split the Equity allocation 50% US / 50% International

Post by IlliniDave » Thu Jun 20, 2013 1:24 pm

I posted this in a similar thread this morning. I'm more "cautious" I guess and don't see myself ever getting that high in International

"Reversion to the mean" is what makes me leery of globalization. Maybe I pay too much attention to history history rather than just recent financial history. It could be we've reached some tipping point where we're on an inevitable path to a "one-world" financial culture, but throughout history cultures expand for a time then splinter apart only to expand again and fracture again. With free-market capitalism, maybe this time it's different. In the last 100 years we've had 2 "world wars" and a 40+ year "cold war" that would have substantially affected a "global" investor positioned as such in 1900. It's rare to see data for the "ex-US" equity category going back earlier than the 1950s. These are things guys like Bogle probably remember very clearly having lived through a number of them.

I don't shun non-US equities, there's great businesses and people everywhere, but I certainly tilt towards the home team. Probably over time I'll slowly increase my ex-US exposure if the last 50-60 years don't prove to be just a brief exception to the historic norm. And if/when I begin to expand (I'm in the 25-30% ex US range now) I'll likely be careful where any additional allocation goes.

I know this is slightly off topic, but do those who follow a policy of (at least semi-strict) global market cap weighting for stocks, do you do the same for bonds (US vs. ex-US)? Between stocks and bonds? Seems like the same logic would apply, but bonds don't seem to enter the discussion. I've never seriously considered ex-US bonds, even when VG rolled them out.
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Re: Split the Equity allocation 50% US / 50% International

Post by Quidnam » Thu Jun 20, 2013 1:56 pm

IlliniDave wrote:I know this is slightly off topic, but do those who follow a policy of (at least semi-strict) global market cap weighting for stocks, do you do the same for bonds (US vs. ex-US)? Between stocks and bonds? Seems like the same logic would apply, but bonds don't seem to enter the discussion. I've never seriously considered ex-US bonds, even when VG rolled them out.
I think asset allocation should be determined by an investor's objectives and risk tolerance. If you wanted to weight your allocation according to the total amounts of equities and bonds outstanding in the global capital markets, I believe you would be stuck with something like a 25/75 (stock/bond) allocation, if I recall correctly.

As for whether the bond side of the portfolio should really be "global," I'm not so sure. I'm inclined to treat them differently than I do stocks (which I'm inclined to weight globally). I'd say this is because the inherent characteristics of bonds are a bit more prosaic than those of equities (particularly for high-quality bonds), and on the bond side of the portfolio certain systemic factors such as varying tax treatments and transactional costs appear to be relatively more important than the abstract objective of obtaining the widest possible diversification.

For instance, consider a taxable investor in the U.S. While they might otherwise be inclined to use Total Bond Index (or a mix with Total International Bond Index) for their bond allocation, most of these investors will probably be in munis (and possibly just a single-state fund). While they might prefer broader diversification of issuers, the significant tax implications easily override any potential benefits of diversification in their decision process.

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Re: Split the Equity allocation 50% US / 50% International

Post by YDNAL » Thu Jun 20, 2013 2:14 pm

abuss368 wrote:How many Bogleheads have developed or are developing the thought process of just saying "the heck with it" and allocating equities 50% US / 50% International?

Had me thinking of a model portfolio of say $1,000,000 in an account with a 40% equity / 60% bond allocation:

Equity - $400,000
* Total Stock Index - $140,000
* Total International- $140,000
* US REIT Index - $60,000 <--
* International REIT Index - $60,000 <-- 30% REIT of Equities is crazy to me.

Bonds - Total Bond Index - $650,000 <-- this should be $600,000
abuss368 wrote:In addition to my original question regarding a 50/50 allocation, does the above sample portfolio appear reasonable?
Your MOST important decision is Equity/non-Equity split. If it is 40/60, the rest is LESS important.

I use 50/50 US/non-US.

World market capitalizations change/move all the time - a poster recently posted a picture (something I can't do) from Credit Suisse Yearbook 2013 showing what has happened since 1900. Take a look at Japan pre/post-WWII and pre/post-1990. Also, Russia pre/post-1920, the U.S. from 1900-1920 at about 25%. Etc.
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Re: Split the Equity allocation 50% US / 50% International

Post by hafius500 » Thu Jun 20, 2013 2:45 pm

I note the experts disagree and I don't have better information:

Some (value?) funds benchmarked against the MSCI World Index by Morningstar:

North America/ Japan:

49,95/ 22,36% Oakmark Global I (OAKGX)
58,01/ 00,00% Longleaf Partners Global (LLGLX)
52,49/ 01,68% Tweedy Value (TWEBX)
37,18/ 03,75% Templeton Growth (TEPLX)
48,38/ 18,26% IVA Worldwide A (IVAX)
51,48/ 20,84% First Eagle A (SGENX)
prior username: hafis50

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Re: Split the Equity allocation 50% US / 50% International

Post by Frengo » Thu Jun 20, 2013 2:48 pm

There is a recent Vanguard study. Check it out. For the US investor something around 25% gives you most of the advantages of international markets diversification, and cuts in half the extra investment cost, not to mention the exchange rate risk.

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Re: Split the Equity allocation 50% US / 50% International

Post by Quidnam » Thu Jun 20, 2013 3:02 pm

Frengo wrote:There is a recent Vanguard study. Check it out. For the US investor something around 25% gives you most of the advantages of international markets diversification, and cuts in half the extra investment cost, not to mention the exchange rate risk.
It "gave" a U.S. investor most of the advantages -- based on backtesting over those prior decades.

Much has changed from then to now in terms of the cost and accessibility of those ex-US capital markets. And it may well be that in those decades, having a 75% weighting to US equities was roughly equivalent to globally weighting developed markets only.

Part of the reason I'm comfortable with globally weighting today is that I don't know what the next several decades will look like, and it is the closest thing to an "agnostic" position that is available.

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Re: Split the Equity allocation 50% US / 50% International

Post by MnD » Thu Jun 20, 2013 3:13 pm

IlliniDave wrote:I know this is slightly off topic, but do those who follow a policy of (at least semi-strict) global market cap weighting for stocks, do you do the same for bonds (US vs. ex-US)? Between stocks and bonds? Seems like the same logic would apply, but bonds don't seem to enter the discussion. I've never seriously considered ex-US bonds, even when VG rolled them out.
If I had high quality low cost ex-US bond fund/ETF options in most accounts absolutely. I'd go market cap for international and emerging market on the fixed income side.

Our jobs and job skill value is more closely linked to domestic prosperity. So is our real estate. Our one pension continuing is linked much closer to continued US prosperity versus global, as is both of our expected Social Security benefits. So going market cap weight international on our financial net worth exclusive of human capital, real estate, pensions and social security does not worry me one bit. In fact I'd sleep just fine if we had to go 100% international on our investment net worth, and would actually opt for that if the choice was 100% domestic or 100% international. We have loads of domestic exposure outside of investment accounts.
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Re: Split the Equity allocation 50% US / 50% International

Post by SimpleGift » Thu Jun 20, 2013 3:34 pm

IlliniDave wrote:I know this is slightly off topic, but do those who follow a policy of (at least semi-strict) global market cap weighting for stocks, do you do the same for bonds (US vs. ex-US)? Between stocks and bonds? Seems like the same logic would apply, but bonds don't seem to enter the discussion. I've never seriously considered ex-US bonds, even when VG rolled them out.
Dave, count me in the camp that views equity and bonds as having fundamentally different roles in the portfolio and therefore different needs for diversification:
  • • For stocks, my objective is enhanced real returns over the long term, so I want significant global diversification to avoid the risk of single country underperformance.

    • For bonds, my objective is a high degree of safety, a bit of income and a reduction in overall portfolio volatility. Since I can achieve all these aims with high-quality U.S bonds, there's no need to look for overseas diversification. Just my two cents.

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Re: Split the Equity allocation 50% US / 50% International

Post by Quidnam » Thu Jun 20, 2013 3:38 pm

MnD wrote:We have loads of domestic exposure outside of investment accounts.
Interesting point -- it would seem that we are all "overweight" Americans in more sense than one...

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Re: Split the Equity allocation 50% US / 50% International

Post by Paul78 » Thu Jun 20, 2013 4:37 pm

mid 20's

30% g-fund

70% equity
55% in USA
15% in EM
30% in inter

+ a federal pension

If America performs wonderful during my investing career I will be set.

If America performs "so-so" but other parts of the world step it up I should still be ok.

If America falls apart then I am screwed. BUT really since my job,pension, and house (ie large part of my assets) are located in the USA it would be hard to avoid the downfall. Unless I become independently wealthy (that will never happen) or I invest 100% into inter/em (way to risky for my taste) my future well being is greatly dependent on America's success.

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Re: Split the Equity allocation 50% US / 50% International

Post by ray.james » Thu Jun 20, 2013 4:53 pm

Frengo wrote:There is a recent Vanguard study. Check it out. For the US investor something around 25% gives you most of the advantages of international markets diversification, and cuts in half the extra investment cost, not to mention the exchange rate risk.
There was a seminar and they posted videos here https://personal.vanguard.com/us/insigh ... /2495-Exc1.

The conclusion was at 25-30% is considered good and beneficial from their view.
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Re: Split the Equity allocation 50% US / 50% International

Post by bobcat2 » Thu Jun 20, 2013 5:18 pm

Foreign stocks are riskier than US stocks. In addition to all the risks US stocks entail, foreign stocks are also subject to currency risk. The advantage of foreign stocks in the portfolio is the extra diversification they provide for equity holdings. The question becomes when does the currency risk outweigh the diversification benefit. Most studies I have seen on this trade-off (most famously by the late Fischer Black) indicate that foreign equity holdings up to 20% of the total portfolio unambiguously improve the risk/return profile of a portfolio. When foreign stock holdings are between 20%-30% of the portfolio it is ambiguous as to whether the risk/return profile is improved. If more than 30% of the portfolio is foreign stock then the additional currency risk outweighs the diversification benefit. In other words if you have 25% of your total portfolio in foreign stocks and you want more exposure to equities, you should increase your holdings of domestic stocks, not foreign stocks.

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Re: Split the Equity allocation 50% US / 50% International

Post by imperialyoyo » Thu Jun 20, 2013 7:07 pm

I have 36 years before RMD. VTSAX ER entices me from going above 25% international equities. Also I live in the US and have a better idea of how the market works or does not work here.

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Re: Split the Equity allocation 50% US / 50% International

Post by Frengo » Thu Jun 20, 2013 7:23 pm

bobcat2 wrote:Foreign stocks are riskier than US stocks. In addition to all the risks US stocks entail, foreign stocks are also subject to currency risk. The advantage of foreign stocks in the portfolio is the extra diversification they provide for equity holdings. The question becomes when does the currency risk outweigh the diversification benefit. Most studies I have seen on this trade-off (most famously by the late Fischer Black) indicate that foreign equity holdings up to 20% of the total portfolio unambiguously improve the risk/return profile of a portfolio. When foreign stock holdings are between 20%-30% of the portfolio it is ambiguous as to whether the risk/return profile is improved. If more than 30% of the portfolio is foreign stock then the additional currency risk outweighs the diversification benefit. In other words if you have 25% of your total portfolio in foreign stocks and you want more exposure to equities, you should increase your holdings of domestic stocks, not foreign stocks.

BobK
Well known conundrum for Eurozone investors. Their domestic market capitalizes only 15%.
Solution is usually to overweight modestly the Eurozone and hedge the US-denominated part of their portfolio.
We are in a lucky situation, since can diversify without the cost of currency hedging.
They too end up with a 70% of portfolio with no currency risk

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Re: Split the Equity allocation 50% US / 50% International

Post by gnosis » Thu Jun 20, 2013 7:38 pm

The poll is set up with 4 straight-forward mathematical options and one opinion statement of "No way! Too aggressive!". Consider editing the poll.

at 50/50 now
going to 50/50
zero
other

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Re: Split the Equity allocation 50% US / 50% International

Post by abuss368 » Fri Jun 21, 2013 6:34 am

Excellent responses.

Thank you and please keep them coming.
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Re: Split the Equity allocation 50% US / 50% International

Post by acr123 » Fri Jun 21, 2013 6:55 am

I am 60% equity & 40% bonds and 60% US and 40% International.

Al

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Re: Split the Equity allocation 50% US / 50% International

Post by IlliniDave » Fri Jun 21, 2013 6:56 am

MnD wrote:
IlliniDave wrote:I know this is slightly off topic, but do those who follow a policy of (at least semi-strict) global market cap weighting for stocks, do you do the same for bonds (US vs. ex-US)? Between stocks and bonds? Seems like the same logic would apply, but bonds don't seem to enter the discussion. I've never seriously considered ex-US bonds, even when VG rolled them out.
If I had high quality low cost ex-US bond fund/ETF options in most accounts absolutely. I'd go market cap for international and emerging market on the fixed income side.

Our jobs and job skill value is more closely linked to domestic prosperity. So is our real estate. Our one pension continuing is linked much closer to continued US prosperity versus global, as is both of our expected Social Security benefits. So going market cap weight international on our financial net worth exclusive of human capital, real estate, pensions and social security does not worry me one bit. In fact I'd sleep just fine if we had to go 100% international on our investment net worth, and would actually opt for that if the choice was 100% domestic or 100% international. We have loads of domestic exposure outside of investment accounts.
That's an interesting take MnD. On a gut level not an outlook that resonates with me personally, but I admit I'm quirky. If I look at what could cause my inherent domestic risks (akin to your job, real estate, SS, pension) plus implicitly risk to the US economy/financial system to manifest in a sustained and significantly bad way while I'm alive (a few more decades, let's hope), it's hard to see many causes that would hit all those together that wouldn't sever me from any connection to overseas paper assets. But for considerations that extend beyond my time, your outlook seems like one worth mulling over.
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Re: Split the Equity allocation 50% US / 50% International

Post by IlliniDave » Fri Jun 21, 2013 7:20 am

Simplegift wrote:
IlliniDave wrote:I know this is slightly off topic, but do those who follow a policy of (at least semi-strict) global market cap weighting for stocks, do you do the same for bonds (US vs. ex-US)? Between stocks and bonds? Seems like the same logic would apply, but bonds don't seem to enter the discussion. I've never seriously considered ex-US bonds, even when VG rolled them out.
Dave, count me in the camp that views equity and bonds as having fundamentally different roles in the portfolio and therefore different needs for diversification:
  • • For stocks, my objective is enhanced real returns over the long term, so I want significant global diversification to avoid the risk of single country underperformance.

    • For bonds, my objective is a high degree of safety, a bit of income and a reduction in overall portfolio volatility. Since I can achieve all these aims with high-quality U.S bonds, there's no need to look for overseas diversification. Just my two cents.
Thanks Simplegift,

I guess I don't segregate stocks and bonds quite so much (maybe because I have a relatively small bond allocation), and tend to see high-quality US bonds and high-quality US equities as analogies in their respective domains. For some reason I can't excavate any logic for, I don't mind adding a good pinch of overseas spice in the stock pile, but on the bond side it's off the table in my mind. Maybe my subconscious is operating somewhat like what you describe. For me I might express it as greed-->stocks (scoot a wee bit out on the risk limb to overseas), fear-->bonds (stay 100% US). So I guess I see it opposite from most folks (not an uncommon situation :D )--I'm looking to make a little extra money on the margins by reaching out overseas at the expense of increasing my risk while the conventional wisdom seems to say reaching out overseas in substantial measure is desirable/essential to lower risk. Interesting. Thanks!
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Re: Split the Equity allocation 50% US / 50% International

Post by staythecourse » Fri Jun 21, 2013 7:49 am

Do as you feel comfortable, but can tell you why I chose 50/50.

1. I know there will be times U.S. equities outperform
2. I know there will be times foreign equities outperform
3. I, nor anyone else, knows when the above will happen

So to me 50/50 is the cowards/ smart way to play it out. This way I don't "bet" on one doing better then the other. Either way I am happy (I hold large amounts of whatever does well) and also unhappy (wished I would hold more of the higher returning subasset).

That is the ultimate sign one is diversified when you are ALWAYS going to be happy and unhappy at the same time.

Good luck.
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Re: Split the Equity allocation 50% US / 50% International

Post by abuss368 » Tue Jun 25, 2013 10:50 pm

Excellent responses. Please keep them coming.

Thanks.
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Re: Split the Equity allocation 50% US / 50% International

Post by pascalwager » Tue Jun 25, 2013 11:26 pm

I have 30% int'l, all factor-tilted; but if I were starting over, I would simply go with TSM or Large Cap Index, and maybe some large and small value. I'd exclude int'l because of the high correlation between domestic and foreign.

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Re: Split the Equity allocation 50% US / 50% International

Post by gmtret » Wed Jun 26, 2013 12:27 am

At at least 28% +/- whatever basis points (split 'tween VFSVX [internat small X-US] and VTIAX [total internat]. What, me worry? :oops:
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Re: Split the Equity allocation 50% US / 50% International

Post by abuss368 » Wed Jun 26, 2013 2:34 pm

staythecourse wrote:Do as you feel comfortable, but can tell you why I chose 50/50.

1. I know there will be times U.S. equities outperform
2. I know there will be times foreign equities outperform
3. I, nor anyone else, knows when the above will happen

So to me 50/50 is the cowards/ smart way to play it out. This way I don't "bet" on one doing better then the other. Either way I am happy (I hold large amounts of whatever does well) and also unhappy (wished I would hold more of the higher returning subasset).

That is the ultimate sign one is diversified when you are ALWAYS going to be happy and unhappy at the same time.

Good luck.
Excellent thought process. That makes a lot of sense.
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Re: Split the Equity allocation 50% US / 50% International

Post by InvestorNewb » Wed Jun 26, 2013 2:42 pm

abuss: By implementing a 50/50 plan, are you not going against the wise words in your signature?

(This is not meant to come across the wrong way, but a "splash" of international doesn't exactly sound like 50%.)
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My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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Re: Split the Equity allocation 50% US / 50% International

Post by abuss368 » Wed Jun 26, 2013 7:56 pm

InvestorNewb wrote:abuss: By implementing a 50/50 plan, are you not going against the wise words in your signature?

(This is not meant to come across the wrong way, but a "splash" of international doesn't exactly sound like 50%.)
Jack Bogle: "The ideal portfolio would combine Total Stock Index and Total Bond Index with a splash of Total International Stock Index if you must." | | Note: Three Fund Portfolio + REITs.

I love that quote by Jack. I guess you could say the last couple of weeks have me thinking about the domestic to international allocation. I probably will not go up to 50%, but I was very interested in other forum members thoughts.

It does appear that we will all continue to increase it over time. I can see Vanguard increasing it as well in the Target and Life Strategy funds going forward. They have provided research reports noting a "starting point of 30% up to market weight" and recent webinars. It feels like it is heading in that direction.

Would love to hear more of Rick Ferri's thoughts.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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grap0013
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Re: Split the Equity allocation 50% US / 50% International

Post by grap0013 » Thu Jun 27, 2013 1:37 pm

InvestorNewb wrote:abuss: By implementing a 50/50 plan, are you not going against the wise words in your signature?
I think there's an edit button for that. :wink:

Abuss,

Judging by your posts over the past several months I think you are destined for 50:50. You might as well do it now while international is cheaper. Otherwise you might be kicking yourself later when international is outperforming. I think there is some real danger of you buying international high in a few years if you don't do it now.
There are no guarantees, only probabilities.

lostdog
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Re: Split the Equity allocation 50% US / 50% International

Post by lostdog » Fri Nov 10, 2017 12:34 pm

Did you make the move Abuss?
VTWAX and chill.

FRANK2009
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Re: Split the Equity allocation 50% US / 50% International

Post by FRANK2009 » Sat Nov 11, 2017 12:01 pm

Why not just invest in Vanguard Total World and let Vanguard worry about it?

That's what I do...

Phil DeMuth
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Re: Split the Equity allocation 50% US / 50% International

Post by Phil DeMuth » Sat Nov 11, 2017 12:18 pm

The issue is not intellectual (which would default to 45/55 US/Foreign) but psychological: tracking error tolerance. My clients read the Wall Street Journal. When International stocks outperform domestic, they say, "Great job, Phil, really love those international stocks." When international stocks lag, they say "But the Dow Jones Industrial Average was up 20%! Why do we own all these damn international stocks?"

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Re: Split the Equity allocation 50% US / 50% International

Post by saltycaper » Sat Nov 11, 2017 12:23 pm

Phil DeMuth wrote:
Sat Nov 11, 2017 12:18 pm

The issue is not intellectual (which would default to 45/55 US/Foreign) but psychological: tracking error tolerance. My clients read the Wall Street Journal. When International stocks outperform domestic, they say, "Great job, Phil, really love those international stocks." When international stocks lag, they say "But the Dow Jones Industrial Average was up 20%! Why do we own all these damn international stocks?"
If I may ask, what do you tell them in response?
Quod vitae sectabor iter?

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Johnnie
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Re: Split the Equity allocation 50% US / 50% International

Post by Johnnie » Sat Nov 11, 2017 1:17 pm

Phil DeMuth wrote:
Sat Nov 11, 2017 12:18 pm
The issue is not intellectual (which would default to 45/55 US/Foreign) but psychological: tracking error tolerance. My clients read the Wall Street Journal. When International stocks outperform domestic, they say, "Great job, Phil, really love those international stocks." When international stocks lag, they say "But the Dow Jones Industrial Average was up 20%! Why do we own all these damn international stocks?"
My version of that is, when the internationals are down it's "Schmuck!" to the guru who persuaded me that investing in them was a good idea, and when they're up it's "I am such a genius!" :D

60/40 US/International
"I know nothing."

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RyeWhiskey
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Re: Split the Equity allocation 50% US / 50% International

Post by RyeWhiskey » Sat Nov 11, 2017 3:14 pm

FRANK2009 wrote:
Sat Nov 11, 2017 12:01 pm
Why not just invest in Vanguard Total World and let Vanguard worry about it?

That's what I do...
Good move my friend. :sharebeer
This post was brought to you by Vanguard Total World Stock Index (VTWSX/VT).

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7th_Diagram
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Re: Split the Equity allocation 50% US / 50% International

Post by 7th_Diagram » Sat Feb 16, 2019 2:18 pm

For the past 3 years I was 80/20 US vs. International; today I re balanced to 50/50.
"You have to understand, most people are not ready to be unplugged,and many of them are so injured, so hopelessly dependent upon the system, that they will fight to protect it." | ~Morpheus

bhusa
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Re: Split the Equity allocation 50% US / 50% International

Post by bhusa » Sat Feb 16, 2019 3:23 pm

Most of my investment money is inside IRA, and I understand that investing in foreign fund will incurred foreign tax credit loss that can not be claimed as tax credit at tax time. This causes my to hesitate in putting too much money in foreign fund. In other words, investing in foreign fund inside IRA incurs a hidden tax cost. Any thought on this?

The Casualty
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Re: Split the Equity allocation 50% US / 50% International

Post by The Casualty » Sat Feb 16, 2019 3:37 pm

We have had < 10 % International (Foreign) equity since 1987. Despite the efforts of our VG & FIDO advisors to think globally, I was never going to be comfortable with it. Worked out great for me. YMMV.

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oldzey
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Re: Split the Equity allocation 50% US / 50% International

Post by oldzey » Sat Feb 16, 2019 3:42 pm

Voted.
5) Do not allocate any equities to International.
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Re: Split the Equity allocation 50% US / 50% International

Post by pward » Sat Feb 16, 2019 3:46 pm

I swear, all this talk about international lately really has my contrarian indicator going off that it's a time to *not* be invested in international equities. Whatever the majority expects to happen always seems to play out the opposite.

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Re: Split the Equity allocation 50% US / 50% International

Post by GRP » Sat Feb 16, 2019 4:08 pm

If you're going to go 50/50 then why not just hold the global portfolio? Much simpler. :confused

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fortyofforty
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Re: Split the Equity allocation 50% US / 50% International

Post by fortyofforty » Sat Feb 16, 2019 7:56 pm

pward wrote:
Sat Feb 16, 2019 3:46 pm
I swear, all this talk about international lately really has my contrarian indicator going off that it's a time to *not* be invested in international equities. Whatever the majority expects to happen always seems to play out the opposite.
That's true. And it might be a good indicator that it's the right time to buy international bonds. I still don't understand how increasing diversification increases risk in bonds while reducing risk in equities. Again, the Boglehead Conundrum.
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heyyou
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Re: Split the Equity allocation 50% US / 50% International

Post by heyyou » Sat Feb 16, 2019 8:28 pm

I hope that others find what suits them, regardless of if it differs from what suits me. Allocations are very personal, not one size fits most.

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Re: Split the Equity allocation 50% US / 50% International

Post by columbia » Sat Feb 16, 2019 8:31 pm

Do people go to a dollar store and think that they’re purchasing quality products?

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