What's wrong with VTIAX? [Vanguard Total International]

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Coyote22
Posts: 38
Joined: Tue Jan 22, 2008 9:49 pm
Location: Houston

What's wrong with VTIAX? [Vanguard Total International]

Post by Coyote22 » Sat Dec 28, 2013 3:24 pm

Significantly trailing the Lipper YTD average and now a Morningstar two-star. I also hold a BlackRock International Index fund in my 401K and DODFX. Both of them have YTD returns over 50% higher. What's up?

livesoft
Posts: 62693
Joined: Thu Mar 01, 2007 8:00 pm

Re: What's wrong with VTIAX?

Post by livesoft » Sat Dec 28, 2013 3:29 pm

It's problem is that it contains all the sectors that are going to go way up in 2014, but didn't go up in 2013, such as emerging markets.
Wiki This signature message sponsored by sscritic: Learn to fish.

selftalk
Posts: 1096
Joined: Thu Mar 08, 2012 10:08 am

Re: What's wrong with VTIAX?

Post by selftalk » Sat Dec 28, 2013 3:32 pm

It will have it`s day! Stay put.

User avatar
Coyote22
Posts: 38
Joined: Tue Jan 22, 2008 9:49 pm
Location: Houston

Re: What's wrong with VTIAX?

Post by Coyote22 » Sat Dec 28, 2013 3:44 pm

BlackRock fund has no emerging markets and DODFX about 7% vs 19% for VTIAX. That is certainly a factor. Gap is huge though.

livesoft
Posts: 62693
Joined: Thu Mar 01, 2007 8:00 pm

Re: What's wrong with VTIAX?

Post by livesoft » Sat Dec 28, 2013 4:08 pm

The average annual return of the Vanguard emerging markets fund for the past 3 years is -1%. That is, this sector hasn't made anyone any money in 3 whole years. So maybe I am being optimistic that this sector will go way up in 2014.

The spread of performance among various international asset classes (large developed, small developed, large emerging, small emerging) is quite striking this year. It is not just that some things didn't go up; they went down instead.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
whaleknives
Posts: 1210
Joined: Sun Jun 24, 2012 7:19 pm

Re: What's wrong with VTIAX?

Post by whaleknives » Sat Dec 28, 2013 4:21 pm

Vanguard Total International Stock tracks the FTSE Global All Cap ex US Index of "developed and emerging markets, excluding the United States. The Index includes more than 5,300 stocks of companies located in 46 countries. As of April 30, 2013, the largest markets covered in the Index were Japan, the United Kingdom, Canada, Australia, and France (which made up approximately 16.1%, 14.8%, 7.1%, 6.5%, and 5.8%, respectively, of the Index’s market capitalization)."

BlackRock International Index tracks the MSCI EAFE Index of "developed markets outside of the U.S. & Canada. . . the EAFE acronym stands for Europe, Australasia and Far East. . . Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, Israel, Australia, New Zealand, Singapore, Hong Kong, and Japan."

Dodge & Cox International Stock is an active fund that invests in a "non-U.S. companies from at least three different countries, including emerging markets."

(I came to appreciate the Vanguard prospectus style, that describes the details of the index for you.)
"I'm an indexer. I own the market. And I'm happy." (John Bogle, "BusinessWeek", 8/17/07) ☕ Maritime signal flag W - Whiskey: "I require medical assistance."

User avatar
TheTimeLord
Posts: 5284
Joined: Fri Jul 26, 2013 2:05 pm

Re: What's wrong with VTIAX?

Post by TheTimeLord » Sat Dec 28, 2013 4:27 pm

14.68% Emerging Markets
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

User avatar
Kevin M
Posts: 10079
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: What's wrong with VTIAX?

Post by Kevin M » Sat Dec 28, 2013 4:42 pm

Coyote22 wrote:Significantly trailing the Lipper YTD average and now a Morningstar two-star. I also hold a BlackRock International Index fund in my 401K and DODFX. Both of them have YTD returns over 50% higher. What's up?
To reinforce the explanations above, if you compare Vanguard's Developed Markets Index Fund (VDMIX), you will see the one-year performance is almost identical to the Blackrock fund.

Regarding the actively managed DODFX, sometimes an actively managed fund will outperform a "comparable" index fund, sometimes it will underperform. I used a chart to scan rolling one-year returns of VDMIX and DODFX (by sliding the one-year window back and forth). Often they perform almost the same, sometimes one does better than the other. DODFX has had a few nice runs of outperformance, including the last few months of this year. It's 5 and 10-year performance has been quite impressive, but if you had bought it at its peak in 2007, you would have lost more by the time it hit bottom in early 2009.

It has not been uncommon for actively managed funds to have superior multi-year track records, only to be followed by mediocre if not miserable multi-year track records.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)

rotorhead
Posts: 422
Joined: Wed Mar 17, 2010 3:59 pm
Location: Florida

Re: What's wrong with VTIAX?

Post by rotorhead » Sat Dec 28, 2013 8:27 pm

Our VTIAX is up 13.88% this year. We can live with that.

gerrym51
Posts: 1679
Joined: Sat Apr 27, 2013 1:44 pm

Re: What's wrong with VTIAX?

Post by gerrym51 » Sat Dec 28, 2013 8:54 pm

your suffering from end of year fund envy. there is no question some funds have made more some less. thats why investing is like gambling. :mrgreen:

User avatar
Coyote22
Posts: 38
Joined: Tue Jan 22, 2008 9:49 pm
Location: Houston

Re: What's wrong with VTIAX?

Post by Coyote22 » Sat Dec 28, 2013 9:43 pm

Good comments from all and very helpful. Thank you.

User avatar
ofcmetz
Posts: 2313
Joined: Tue Feb 08, 2011 8:09 pm
Location: Louisiana

Re: What's wrong with VTIAX?

Post by ofcmetz » Sat Dec 28, 2013 10:15 pm

Funny, I switched from a couple of different EAFE index funds to all Vanguard Total International this year. One of the funds I got out of was the Blackrock EAFE collective trust. I wanted a more broadly diversified international fund. I'm still happy, because at least I'm buying the one area of equities that hasn't shot into the stratosphere this year in emerging markets.
Never underestimate the power of the force of low cost index funds.

User avatar
ofcmetz
Posts: 2313
Joined: Tue Feb 08, 2011 8:09 pm
Location: Louisiana

Re: What's wrong with VTIAX?

Post by ofcmetz » Sat Dec 28, 2013 10:16 pm

rotorhead wrote:Our VTIAX is up 13.88% this year. We can live with that.

Ditto^ :sharebeer
Never underestimate the power of the force of low cost index funds.

Grt2bOutdoors
Posts: 19149
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What's wrong with VTIAX?

Post by Grt2bOutdoors » Sat Dec 28, 2013 10:20 pm

ofcmetz wrote:
rotorhead wrote:Our VTIAX is up 13.88% this year. We can live with that.

Ditto^ :sharebeer
Yep, I was hoping for 10%, but if I have to, I guess I will have to accept 13.88%! :D
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
Kevin M
Posts: 10079
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: What's wrong with VTIAX?

Post by Kevin M » Sat Dec 28, 2013 10:35 pm

ofcmetz wrote:Funny, I switched from a couple of different EAFE index funds to all Vanguard Total International this year. One of the funds I got out of was the Blackrock EAFE collective trust. I wanted a more broadly diversified international fund. I'm still happy, because at least I'm buying the one area of equities that hasn't shot into the stratosphere this year in emerging markets.
Exactly. If you own an EAFE fund, and want to broaden your exposure to include emerging markets, now would be a time I would like to do so. My partner has access to a Fidelity EAFE fund and a Fidelity EM fund in her 403b plan. Previously we had been using Vanguard's EM fund in her taxable account to get EM exposure (lower cost, index instead of active), but for several reasons, a few months ago we just started directing some of her new 403b contributions to the Fidelity EM fund in her 403b to get her EM allocation back to target.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)

pkcrafter
Posts: 13062
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: What's wrong with VTIAX?

Post by pkcrafter » Sat Dec 28, 2013 10:36 pm

Coyote22 wrote:Significantly trailing the Lipper YTD average and now a Morningstar two-star. I also hold a BlackRock International Index fund in my 401K and DODFX. Both of them have YTD returns over 50% higher. What's up?
Ask not what is wrong with VTIAX, ask what is wrong with emerging markets.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

User avatar
grabiner
Advisory Board
Posts: 22681
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: What's wrong with VTIAX?

Post by grabiner » Sun Dec 29, 2013 1:04 am

Coyote22 wrote:Significantly trailing the Lipper YTD average and now a Morningstar two-star. I also hold a BlackRock International Index fund in my 401K and DODFX. Both of them have YTD returns over 50% higher. What's up?
The reason Total International is trailing other international funds is that it holds more in emerging markets, and developed markets outperformed emerging markets this year. BlackRock's fund probably tracks the MSCI EAFE index, which is the index that Developed Markets Index has tracked for most of its history (it now tracks a similar FTSE index).

The reason it has two stars is that the M* rating is based only on three years. M* star ratings are based on performance over the last 3, 5, and 10 years, but Total International Admiral shares haven't been around for five years. The Investor shares, which have been around for more than ten years, earn three stars, but are guaranteed to do worse in the future than the two-star Admiral shares.
Wiki David Grabiner

garlandwhizzer
Posts: 1971
Joined: Fri Aug 06, 2010 3:42 pm

Re: What's wrong with VTIAX?

Post by garlandwhizzer » Sun Dec 29, 2013 12:26 pm

I suggest that you not to chase past performance with Black Rock or Dodge and Cox. Essentially all their outperformance is due to EMs underperformance relative to DMs. DMs and EMs go through cycles, sometimes one outperforms the other for years, but that cycle has always in the past reversed at some point and often very much so. Multiyear outperformance (DMs) results in overvaluation due to performance chasing investors. Multiyear underperformance (EMs) causes investors to flee, improving valuations. The resulting difference in valuations become at some point compelling. I believe we are at or near such an inflection point in EMs now. VEMAX (EM index admiral shares) currently has a P/E of 13.1 while VDMAX (admiral DMs) has a P/E of 17.9, a 37% premium you pay for every dollar of earnings in DMs in spite of the fact that EMs have higher return on equity and higher earnings growth rates. If you bail out of EMs now you're selling into weakness and you're joining the performance chasing herd, usually not a good long term investment strategy.

Personally in light of the multiyear weakness in EMs relative to US and DMs I have rebalanced back into them at year end according to my asset allocation model. I have ridden them on the downdraft for several years and hope to catch an updraft soon. I expect that over the long term, which is the only time frame I'm interested in, EMs will outperform DMs and EMs will also be better diversifiers relative to US stocks than DMs. Nothing that has occurred in the past few years of underperformance has changed that point of view.

Garland Whizzer

invhelpme
Posts: 48
Joined: Sun Apr 04, 2010 12:14 pm

Re: What's wrong with VTIAX?

Post by invhelpme » Sun Dec 29, 2013 9:04 pm

According to Morningstar, Vangaurd International Growth has 16.25% Emerging Markets and International Value has 12% EM. If your international allocation was made up of a 50/50 split between these two funds it has about the same Emerging Markets and Total International and the active managed funds have beaten the International Index in 1,3, 5 and 10 year returns. It's pretty hard to stay the course and not want to go to the active funds given their track record. I want to stay with the index to but man it's tempting...Has anyone else noticed this too? Should we all stay the course?

User avatar
ogd
Posts: 4854
Joined: Thu Jun 14, 2012 11:43 pm

Re: What's wrong with VTIAX?

Post by ogd » Sun Dec 29, 2013 9:17 pm

VTIAX is unusual in that it integrates EM and DM. The vast majority of funds don't, and Morningstar uses another benchmark for EM-specialized funds so they're not "peers" of VTIAX to join it in its misery.

User avatar
jeffyscott
Posts: 7208
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: What's wrong with VTIAX?

Post by jeffyscott » Sun Dec 29, 2013 9:57 pm

Coyote22 wrote:BlackRock fund has no emerging markets and DODFX about 7% vs 19% for VTIAX.
DODFX has been about 18% emerging, according to Dodge and Cox: https://www.dodgeandcox.com/ISF_character.asp
as well as morningstar: http://portfolios.morningstar.com/fund/ ... ture=en-US

VTIAX is about 15%, according to morningstar: http://portfolios.morningstar.com/fund/summary?t=VTIAX
press on, regardless - John C. Bogle

User avatar
riptide
Posts: 713
Joined: Thu Jul 17, 2014 2:38 pm
Location: Coastal, South Carolina

Re: What's wrong with VTIAX?

Post by riptide » Tue Dec 09, 2014 1:36 pm

I know this thread is old from 2013, but I searched and found my exact topic I was looking for.
I only began index investing this year 2014, and have a core index portfolio thanks to several members here (Retired JG, Nedsaid, Toons)

I am sick of my VTIAX , it is the only index fund that has unrecognized losses this year for thousands. I consistently has gone down since I've owned it.
I have read the debate on here in reference to international funds being necessary or not. I compared the 3 year , 5 year, and 10 year for international and U.S. equity funds. It is no comparison , the U.S. funds have beat them continually. I would get rid of my international fund now, except that it is so low, and I would take a loss. I look forward to it going up and then selling it when it is high, if this ever happens - I'll be glad to put the money into U.S. index funds.
Brokerage account 70/30 | VG total Market 40% | VG total Intl 11% | VG small cap value 12% | VG Reit index 7% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

navyitaly
Posts: 238
Joined: Fri Jun 13, 2014 7:18 am

Re: What's wrong with VTIAX?

Post by navyitaly » Tue Dec 09, 2014 1:37 pm

If you are sick of it..just sell it..your money, your savings..nobody here is stopping you...

User avatar
cfs
Posts: 4154
Joined: Fri Feb 23, 2007 1:22 am
Location: ~ Mi Propio Camino ~

Re: What's wrong with VTIAX?

Post by cfs » Tue Dec 09, 2014 1:57 pm

Article published December 9th 2014

Jack Bogle: I Wouldn't Risk Investing Outside the U.S.

Relax, here is this from Mister Bogle. Have you ever invested in international markets? Not really. Other than when I had small amounts when we launched [Vanguard] International Growth and the [Vanguard] International Index fund, I had small investments in both. It’s hard to believe that the differences in returns over the long term will be huge. That’s just not what we have seen for the most part. Why take the currency risk?

http://www.bloomberg.com/news/2014-12-0 ... -u-s-.html
~ Member of the Active Retired Force since 2014 ~

User avatar
nisiprius
Advisory Board
Posts: 36637
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: What's wrong with VTIAX?

Post by nisiprius » Tue Dec 09, 2014 2:07 pm

Notice that Morningstar has two different ratings systems.

Source
Image

It got two stars, the rating system that looks at past performance, relative to category, adjusted for risk and for the amount of variation within the category.

It also got a gold medallion, the rating that's based on their analyst's opinions in some very complicated systematic way, that Morningstar hopes or claims might predit future performance. "Gold" is the best possible such rating.

So, Morningstar likes it but it hasn't done well lately.

Now that you know these two ratings, I suggest ignoring both of them.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
Kenkat
Posts: 4276
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: What's wrong with VTIAX?

Post by Kenkat » Tue Dec 09, 2014 2:11 pm

riptide wrote:I know this thread is old from 2013, but I searched and found my exact topic I was looking for.
I only began index investing this year 2014, and have a core index portfolio thanks to several members here (Retired JG, Nedsaid, Toons)

I am sick of my VTIAX , it is the only index fund that has unrecognized losses this year for thousands. I consistently has gone down since I've owned it.
I have read the debate on here in reference to international funds being necessary or not. I compared the 3 year , 5 year, and 10 year for international and U.S. equity funds. It is no comparison , the U.S. funds have beat them continually. I would get rid of my international fund now, except that it is so low, and I would take a loss. I look forward to it going up and then selling it when it is high, if this ever happens - I'll be glad to put the money into U.S. index funds.
Please don't take this wrong, but if you become sick of every fund that has a loss in a particular year, eventually you will become sick of almost any fund and will end up with just money market and short term bond funds. Or you will continually be chasing performance, buying funds after they have gone up rather than sticking to a plan.

International funds have not done well lately. That may change in the future and you may come to find that you regret selling your international fund since some day it may be US funds that are lagging.

Set a plan and forget it. If you decide international funds are not for you, that's fine. But the fact that they have underperformed is a poor reason and leaves you vulnerable to making decisions based on emotions, not logic.

M1garand30064
Posts: 85
Joined: Tue Sep 04, 2012 8:49 pm

Re: What's wrong with VTIAX?

Post by M1garand30064 » Tue Dec 09, 2014 2:22 pm

riptide wrote:I know this thread is old from 2013, but I searched and found my exact topic I was looking for.
I only began index investing this year 2014, and have a core index portfolio thanks to several members here (Retired JG, Nedsaid, Toons)

I am sick of my VTIAX , it is the only index fund that has unrecognized losses this year for thousands. I consistently has gone down since I've owned it.
I have read the debate on here in reference to international funds being necessary or not. I compared the 3 year , 5 year, and 10 year for international and U.S. equity funds. It is no comparison , the U.S. funds have beat them continually. I would get rid of my international fund now, except that it is so low, and I would take a loss. I look forward to it going up and then selling it when it is high, if this ever happens - I'll be glad to put the money into U.S. index funds.
How would you feel if you sell it now, put it all in VTSAX and the following year the domestic market declines by a significant amount but international equities increase substantially?

I'm not saying it is a bad strategy to be 100% domestic, but I certainly would not change course/strategy based upon such a short time frame.

User avatar
riptide
Posts: 713
Joined: Thu Jul 17, 2014 2:38 pm
Location: Coastal, South Carolina

Re: What's wrong with VTIAX?

Post by riptide » Tue Dec 09, 2014 2:24 pm

Thank you Ken and everybody,
I am trying to hold it and will hold it, but it sad to see it as a loss since I've owned it. I have never seen it do well. The Callan Periodic Table of investment returns for 1994-2013 (RetiredJg gave me the link) has helped me greatly to look at the big picture and try to see things long term. Your posts have made good sense to me, thank you all.
Brokerage account 70/30 | VG total Market 40% | VG total Intl 11% | VG small cap value 12% | VG Reit index 7% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

livesoft
Posts: 62693
Joined: Thu Mar 01, 2007 8:00 pm

Re: What's wrong with VTIAX?

Post by livesoft » Tue Dec 09, 2014 2:33 pm

It is not just that you have to hold it, but you actually have to buy more of it. The more it goes down, the more you have to rebalance into it. Only then will you reap the rewards of the anxiety you have watching it go down.
Wiki This signature message sponsored by sscritic: Learn to fish.

randomguy
Posts: 6279
Joined: Wed Sep 17, 2014 9:00 am

Re: What's wrong with VTIAX?

Post by randomguy » Tue Dec 09, 2014 2:39 pm

riptide wrote:I know this thread is old from 2013, but I searched and found my exact topic I was looking for.
I only began index investing this year 2014, and have a core index portfolio thanks to several members here (Retired JG, Nedsaid, Toons)

I am sick of my VTIAX , it is the only index fund that has unrecognized losses this year for thousands. I consistently has gone down since I've owned it.
I have read the debate on here in reference to international funds being necessary or not. I compared the 3 year , 5 year, and 10 year for international and U.S. equity funds. It is no comparison , the U.S. funds have beat them continually. I would get rid of my international fund now, except that it is so low, and I would take a loss. I look forward to it going up and then selling it when it is high, if this ever happens - I'll be glad to put the money into U.S. index funds.
In 1981 would you have sold all your US stock funds because their 3,5, and 10 year returns significantly trailed the international ones? Short term thinking like this is why the basic booglehead investing approach doesn't work for most people. They can't handle owning out of favor assets and end up chasing returns.

User avatar
ogd
Posts: 4854
Joined: Thu Jun 14, 2012 11:43 pm

Re: What's wrong with VTIAX?

Post by ogd » Tue Dec 09, 2014 2:47 pm

riptide wrote:I know this thread is old from 2013, but I searched and found my exact topic I was looking for.
I only began index investing this year 2014, and have a core index portfolio thanks to several members here (Retired JG, Nedsaid, Toons)

I am sick of my VTIAX , it is the only index fund that has unrecognized losses this year for thousands. I consistently has gone down since I've owned it.
I have read the debate on here in reference to international funds being necessary or not. I compared the 3 year , 5 year, and 10 year for international and U.S. equity funds. It is no comparison , the U.S. funds have beat them continually. I would get rid of my international fund now, except that it is so low, and I would take a loss. I look forward to it going up and then selling it when it is high, if this ever happens - I'll be glad to put the money into U.S. index funds.
This is a really bad idea. Not just VTIAX (which I like for diversification), but more importantly investing this way.

It's called the "behavioral gap". Investors have a habit of buying things that have done well and selling things that have done poorly, extrapolating into the future like we humans are prone to do, despite the evidence that markets work exactly the opposite. They end up buying high and selling low, one half of which you're preparing to do right now, leaking money every time. As a result, they end up underperforming by multiple percentage points the very funds they invest in.

Think about what things might look like when you finally decide to buy international stocks again, with this mentality. US economy losing its edge? Political situations abroad on the mend? VTIAX posting stellar 5 year returns? All of these things can only mean one thing: VTIAX is going to be much more expensive than it is now. So what will this divestment have done for you? Lost a whole bunch of money, that's what.

Don't do this. Convince yourself that the markets don't work this way, because they really don't, and stick with the plan. There's nothing at all wrong with an international index investment in just about anyone's portfolio.

User avatar
InvestorNewb
Posts: 1592
Joined: Mon Sep 03, 2012 11:27 am

Re: What's wrong with VTIAX?

Post by InvestorNewb » Tue Dec 09, 2014 2:48 pm

At least you can pick up more shares with the dividend reinvestments. It's not fun seeing it stay down like this, but the people who are rewarded are the ones who stick to their plans.

I bought about 16k worth of international last month.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

henry
Posts: 115
Joined: Fri Mar 16, 2007 3:33 pm

Re: What's wrong with VTIAX?

Post by henry » Tue Dec 09, 2014 2:55 pm

I bought 6K of VTIAX last month. Will be buying more this month. (I am currently trying to rebalance my domestic/international allocation which is out of balance due to recent runup in domestic equities.) Stick to your plan and desired asset allocation.

User avatar
Steadfast
Posts: 163
Joined: Wed Nov 06, 2013 3:44 pm

Re: What's wrong with VTIAX?

Post by Steadfast » Tue Dec 09, 2014 3:06 pm

Always having something in your portfolio that you hate means you are doing it right.
We don't see things as they are, we see things as we are.

User avatar
riptide
Posts: 713
Joined: Thu Jul 17, 2014 2:38 pm
Location: Coastal, South Carolina

Re: What's wrong with VTIAX?

Post by riptide » Tue Dec 09, 2014 3:16 pm

Thanks again for all the wise words. I forgot I do re-invest the dividends for VTIAX. I have to remind myself of that and keep looking at the Callahan Periodic Table of Investment Returns for the last 10 years. I have just about 12% of my total portfolio in International - VTIAX. International accounts for about 17% of total stock owned.
Brokerage account 70/30 | VG total Market 40% | VG total Intl 11% | VG small cap value 12% | VG Reit index 7% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

User avatar
Noobvestor
Posts: 4753
Joined: Mon Aug 23, 2010 1:09 am
Contact:

Re: What's wrong with VTIAX?

Post by Noobvestor » Tue Dec 09, 2014 3:26 pm

nisiprius wrote:Now that you know these two ratings, I suggest ignoring both of them.
8-)
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

Bungo
Posts: 880
Joined: Wed Sep 28, 2011 11:28 am

Re: What's wrong with VTIAX?

Post by Bungo » Tue Dec 09, 2014 3:34 pm

riptide wrote: I am trying to hold it and will hold it, but it sad to see it as a loss since I've owned it.
If you are still in the accumulation phase, then it's not really a loss; it's a chance to continue buying at discounted prices (assuming it will not remain stagnant for the remainder of your investment lifetime).

User avatar
riptide
Posts: 713
Joined: Thu Jul 17, 2014 2:38 pm
Location: Coastal, South Carolina

Re: What's wrong with VTIAX?

Post by riptide » Tue Dec 09, 2014 3:38 pm

Bungo wrote:
riptide wrote: I am trying to hold it and will hold it, but it sad to see it as a loss since I've owned it.
If you are still in the accumulation phase, then it's not really a loss; it's a chance to continue buying at discounted prices (assuming it will not remain stagnant for the remainder of your investment lifetime).
Thanks!
Brokerage account 70/30 | VG total Market 40% | VG total Intl 11% | VG small cap value 12% | VG Reit index 7% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

User avatar
Kevin M
Posts: 10079
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: What's wrong with VTIAX?

Post by Kevin M » Tue Dec 09, 2014 3:56 pm

Ten years is really not a very long time in stock market terms. I think it was in early 2009 that there was a point when long-term bonds had done better than stocks over the previous 30 years, but that probably was not a good reason to abandon stocks and put everything into long-term bonds.

One of the points of diversifying among asset classes is that they will perform differently. As a matter of fact, one of the fundamental principles of diversification is low correlation between assets, so from this perspective you should be pleased that international stocks have not been tracking US stocks recently. As someone else mentioned, you might want to consider buying more of whichever of your asset classes are performing the worst. I came very close to buying some more European stock index fund at the bottom of its last swoon in mid-October, but it turned around before hitting my trigger.

Recency bias is a well known behavioral cognitive bias, and is one that can lead to performance chasing and inferior long-term investing results.

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)

User avatar
riptide
Posts: 713
Joined: Thu Jul 17, 2014 2:38 pm
Location: Coastal, South Carolina

Re: What's wrong with VTIAX?

Post by riptide » Tue Dec 09, 2014 4:08 pm

Kevin M wrote:Ten years is really not a very long time in stock market terms. I think it was in early 2009 that there was a point when long-term bonds had done better than stocks over the previous 30 years, but that probably was not a good reason to abandon stocks and put everything into long-term bonds.

One of the points of diversifying among asset classes is that they will perform differently. As a matter of fact, one of the fundamental principles of diversification is low correlation between assets, so from this perspective you should be pleased that international stocks have not been tracking US stocks recently. As someone else mentioned, you might want to consider buying more of whichever of your asset classes are performing the worst. I came very close to buying some more European stock index fund at the bottom of its last swoon in mid-October, but it turned around before hitting my trigger.

Recency bias is a well known behavioral cognitive bias, and is one that can lead to performance chasing and inferior long-term investing results.

Kevin
Kevin, I have that behavioral gap or behavioral cog bias you are speaking about. I will search about it on Wiki...Recency Bias:
I want to overcome this and listen to experienced investors.
Brokerage account 70/30 | VG total Market 40% | VG total Intl 11% | VG small cap value 12% | VG Reit index 7% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

User avatar
Kevin M
Posts: 10079
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: What's wrong with VTIAX?

Post by Kevin M » Tue Dec 09, 2014 4:23 pm

riptide wrote: Kevin, I have that behavioral gap or behavioral cog bias you are speaking about. I will search about it on Wiki...Recency Bias:
I want to overcome this and listen to experienced investors.
A good way to combat recency bias is to look at longer-term historical performance. That Callan periodic table you mention is one example. A quick Google search turned up this article, which addresses recency bias and international stocks directly. Probably a good quick read for you.

Avoiding The Recency Bias in Foreign Stock Markets | Pragmatic Capitalism

Kevin
Wiki ||.......|| Suggested format for Asking Portfolio Questions (edit original post)

d0gerz
Posts: 202
Joined: Thu Apr 10, 2014 9:45 pm

Re: What's wrong with VTIAX?

Post by d0gerz » Tue Dec 09, 2014 8:30 pm

riptide wrote:Thanks again for all the wise words. I forgot I do re-invest the dividends for VTIAX. I have to remind myself of that and keep looking at the Callahan Periodic Table of Investment Returns for the last 10 years. I have just about 12% of my total portfolio in International - VTIAX. International accounts for about 17% of total stock owned.
In terms of percentages I'm almost exactly in the same boat as you. My target is international to be 16% of my total portfolio and I'm currently at 13%. At the moment I'm buying more every month using dividends from other funds. I'm with you in that it isn't fun looking at capital gains/losses for the year and seeing VTIAX the only one in the red. Would be nice to see a big fat gain there! But as others have said, just a sign that it is in fact a diversifier. If international moved in lockstep with US, there would be less of a reason to hold it.

garlandwhizzer
Posts: 1971
Joined: Fri Aug 06, 2010 3:42 pm

Re: What's wrong with VTIAX?

Post by garlandwhizzer » Tue Dec 09, 2014 9:04 pm

Poor international fund results are largely the result of all the bad news out there. Let's start with Europe: no growth, risk of recession, aging demographics, looming deflation, huge levels of debt, high taxes, rigid labor markets, and political paralysis of the basic EU framework with a stalemate between Germany which is for fiscal austerity and against further monetary policy easing whereas most of the other countries take the opposite view. As a result of all this, stagnation. How about Japan. Here again there are massive issues: astronomical and increasing government debt, essentially no economic growth and deflation for 25 years, a looming demographic disaster worse than any other country, and the last ditch policy effort, Abeomics, still an experiment that may ultimately fail. Finally as for the EMs, there is political risk aplenty, lack of transparency, political and economic corruption at levels greater than in developed economies, possible Chinese shadow banking-real estate bubbles, etc..

Relative to all these the US even with all our problems looks like the place to invest. Investors have therefore bid up prices of US equities and bonds and in a relative sense bid down the prices of international equities. The question is: have they priced the equilibrium valuations between US and International correctly? I admit that I don't know for certain but one thing I believe in regarding markets over long periods of time is reversion the the mean. All the bad news internationally will one day (I don't know when) change and the outlooks for international equities relative to the US will brighten. That tends to be when investment dollars will pour into these areas. Many experienced and wise market analysts--Bernstein, Grantham, Ferri, Swedroe among them--are expecting increased future returns internationally relative the US and probably have pre-emptively shifted their portfolios in that direction. Take your choice. You can buy at high prices when the outlook is great or you can buy at bargain prices when the news is depressing. History suggests the latter approach works better long term.

Garland Whizzer

User avatar
JoMoney
Posts: 5822
Joined: Tue Jul 23, 2013 5:31 am

Re: What's wrong with VTIAX?

Post by JoMoney » Tue Dec 09, 2014 10:01 pm

Not sure if this is helpful or not, but you might consider this:
According to the data used in PortfolioVisualizer
Someone who averaged the same amount into a portfolio each year of either
100% U.S. or
50%/50% US/Intl (rebalanced)
from 1972-2013 would have achieved pretty much the same long-term result.
PV Link
Image
Personally, I think there's additional risks and expenses involved with investing internationally, and is in a sense di-worse-ifying. Some people believe the international exposure/diversification is only beneficial. But there's some chance that it really may not make any difference. Rather than trying to base your decision on recent performance trends in returns that could very easily swing the other way, I think you should come to some sort of decision on the risks, and "stay the course".
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

User avatar
ofcmetz
Posts: 2313
Joined: Tue Feb 08, 2011 8:09 pm
Location: Louisiana

Re: What's wrong with VTIAX?

Post by ofcmetz » Tue Dec 09, 2014 10:43 pm

After awhile of investing, you will come to realize that things that have stagnated for years with low or negative returns sometimes have higher future expected returns. It is the things that people have come to discard or not want that will have to offer higher returns at some point. When you are diversified you should expect to have one or two types of funds not performing well. Like Livesoft said, that is when you continue to pour your new money into those things that are flat or going down in value. Make a plan and follow it. That will keep you from making behavioral mistakes that will cost you wealth in the long run.
Never underestimate the power of the force of low cost index funds.

john94549
Posts: 4638
Joined: Tue Jul 26, 2011 8:50 pm

Re: What's wrong with VTIAX?

Post by john94549 » Tue Dec 09, 2014 10:47 pm

I chose the path of least resistance long ago (15 - 20% international, with a bit of a tilt to EM). This year's been a bit of a bust, but my domestic exposure has done quite well. And, of course, my CD ladder just keeps compounding. Win some, lose some, some get rained out.
Last edited by john94549 on Tue Dec 09, 2014 10:50 pm, edited 1 time in total.

User avatar
ofcmetz
Posts: 2313
Joined: Tue Feb 08, 2011 8:09 pm
Location: Louisiana

Re: What's wrong with VTIAX?

Post by ofcmetz » Tue Dec 09, 2014 10:48 pm

JoMoney wrote:Not sure if this is helpful or not, but you might consider this:
According to the data used in PortfolioVisualizer
Someone who averaged the same amount into a portfolio each year of either
100% U.S. or
50%/50% US/Intl (rebalanced)
from 1972-2013 would have achieved pretty much the same long-term result.
PV Link
Image
Personally, I think there's additional risks and expenses involved with investing internationally, and is in a sense di-worse-ifying. Some people believe the international exposure/diversification is only beneficial. But there's some chance that it really may not make any difference. Rather than trying to base your decision on recent performance trends in returns that could very easily swing the other way, I think you should come to some sort of decision on the risks, and "stay the course".
I think the simplest thing is to decide on a target allocation based off of ones wisdom and knowledge and then to stick to that allocation. If you make a change, then make it based off of new knowledge and not off of recent performance. Ideally we all end up with some nice positive returns even though we take different roads. I think its those that change things constantly that will end up at the worse destination.
Never underestimate the power of the force of low cost index funds.

User avatar
grabiner
Advisory Board
Posts: 22681
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: What's wrong with VTIAX?

Post by grabiner » Tue Dec 09, 2014 10:52 pm

nisiprius wrote:Notice that Morningstar has two different ratings systems.

Source
Image

It got two stars, the rating system that looks at past performance, relative to category, adjusted for risk and for the amount of variation within the category.

It also got a gold medallion, the rating that's based on their analyst's opinions in some very complicated systematic way, that Morningstar hopes or claims might predit future performance. "Gold" is the best possible such rating.
The two-star rating is also misleading. M* gives a star rating to each share class of a fund, based only on that share class's data. The Admiral shares, with less than a 5-year history, have only a 3-year rating, which is two stars, and their 5-year and 10-year ratings would be three starts if the missing performance were extrapolated from the Investor shares (as M* indicates with hollow stars). The Investor shares have a three-star rating. Thus M* gives a lower rating to the share class which is guaranteed to outperform.

Even then, the star rating is misleading for a different reason. Total International has much more in emerging markets than most funds in the M* foreign-large-blend class, and emerging markets did badly in 2013. The fund underpeformed its peer group in a way that says more about the choice of peer group than about the fund. If you wanted a fund comparable to the peer group, you would have used Developed Markets Index, a fund which is neither better nor worse but which has better three-year performance.
Wiki David Grabiner

User avatar
tainted-meat
Posts: 721
Joined: Tue Dec 20, 2011 9:35 pm
Location: Kentucky

Re: What's wrong with VTIAX?

Post by tainted-meat » Tue Dec 09, 2014 10:53 pm

As others have mentioned, it's a great buying opportunity. The yield on this fund is currently 3.37%... pretty awesome if you ask me!

User avatar
riptide
Posts: 713
Joined: Thu Jul 17, 2014 2:38 pm
Location: Coastal, South Carolina

Re: What's wrong with VTIAX?

Post by riptide » Wed Dec 10, 2014 7:46 am

ofcmetz wrote:After awhile of investing, you will come to realize that things that have stagnated for years with low or negative returns sometimes have higher future expected returns. It is the things that people have come to discard or not want that will have to offer higher returns at some point. When you are diversified you should expect to have one or two types of funds not performing well. Like Livesoft said, that is when you continue to pour your new money into those things that are flat or going down in value. Make a plan and follow it. That will keep you from making behavioral mistakes that will cost you wealth in the long run.
Thank you Officer. I am trying to do just this.

Thank you for pointing out the yield on the fund.
Brokerage account 70/30 | VG total Market 40% | VG total Intl 11% | VG small cap value 12% | VG Reit index 7% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

Post Reply