Rick Ferri looking to internationalize his portfolio

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Re: Rick Ferri looking to internationalize his portfolio

Post by cfs »

Wow, you can say that again!

Vanguard and their "passive" balanced portfolios with a lot of changes in the past few years.
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Re: Rick Ferri looking to internationalize his portfolio

Post by zotty »

Rick Ferri wrote:Being passive doesn't mean doing nothing. The world changes over time and your personal circumstances change as well. Being passive means making small adjustments as these changes become apparent. This is a very small shift in the big scheme of things.

Rick Ferri
Yep. your sig line says it all and is one of the reasons i don't post very much. I try to not to pay attention: just keep saving, keep costs low, make small adjustments that are long term, and then do your best to forget about it. hopefully we'll be rewarded for the "almost" global weights, but it's not something we can control.

Cheers.
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

Rick Ferri wrote:I wrote several times in the conversation that I'm making this move whether there's a correction in international stocks or not.
I don' think it's surprising that you are having trouble getting this point across. I think the problem is what you said in your blog that is the topic of this thread:
Rick Ferri wrote:This is what I’m waiting for. The global media hyped around a sovereign debt default or two will present long-term investors an opportunity to re-align their portfolio allocation to something more global-like and less US-like.
Could you explain why you said this in your blog?
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Re: Rick Ferri looking to internationalize his portfolio

Post by Rick Ferri »

We're almost there.

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Re: Rick Ferri looking to internationalize his portfolio

Post by livesoft »

I will speculate out the wazoo here:

I think someone was paid as a consultant in changing some of the international indexes in order to make sure they better reflected the world market weights especially of the Chinese local market. Perhaps they had to sign a non-disclosure agreement and also an agreement to not front-run the changes they helped to effect in the indices. Such agreements would have an expiration date which we're almost there in reaching.
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Re: Rick Ferri looking to internationalize his portfolio

Post by stlutz »

I will speculate out the wazoo here:

I think someone was paid as a consultant in changing some of the international indexes in order to make sure they better reflected the world market weights especially of the Chinese local market. Perhaps they had to sign a non-disclosure agreement and also an agreement to not front-run the changes they helped to effect in the indices. Such agreements would have an expiration date which we're almost there in reaching.
Companies like MSCI, FTSE/Russell, and S&P/Dow Jones have plenty of people working for them without needing a consultant to tweak their indexes.
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Re: Rick Ferri looking to internationalize his portfolio

Post by zotty »

livesoft wrote:I will speculate out the wazoo here:

I think someone was paid as a consultant in changing some of the international indexes in order to make sure they better reflected the world market weights especially of the Chinese local market. Perhaps they had to sign a non-disclosure agreement and also an agreement to not front-run the changes they helped to effect in the indices. Such agreements would have an expiration date which we're almost there in reaching.

I personally think that vanguard is tired of being front run and this is guiding a lot of decision making. They viewed an early entry into china as a way to beat the rush.
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

zotty wrote:
livesoft wrote:I will speculate out the wazoo here:

I think someone was paid as a consultant in changing some of the international indexes in order to make sure they better reflected the world market weights especially of the Chinese local market. Perhaps they had to sign a non-disclosure agreement and also an agreement to not front-run the changes they helped to effect in the indices. Such agreements would have an expiration date which we're almost there in reaching.

I personally think that vanguard is tired of being front run and this is guiding a lot of decision making. They viewed an early entry into china as a way to beat the rush.
Hi zotty,

I do not follow your post in terms of "Vanguard is tired of being front run". Would you be willing to elaborate?

Thanks!
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Re: Rick Ferri looking to internationalize his portfolio

Post by zotty »

abuss368 wrote:
Hi zotty,

I do not follow your post in terms of "Vanguard is tired of being front run". Would you be willing to elaborate?

Thanks!
The amount of money in index funds can move the price of an individual security that is newly listed in the index. With transparent, pre-published indices, quants can take advantage of the situation and anticipate money flows. They "front run" the newly indexed stocks, anticipating a large demand for the shares as the big majors do the shuffle with the big money.

I am pretty sure this is one of the reasons vanguard switched to indices which are more controlled in-house. It's a good deal for investors.

The surprise move to A-shares fits the same, general, pattern. If vanguard waited, it ran the risk of being the last big money to enter the market. Being first, with a surprise change, is good business. it avoids money flow distortions caused by the other big majors. yeah, the dice didn't roll our way, but the rationale is solid.

You can google 'CRSP Vanguard Front Running' if you wish to read what others have said on the subject.

Then again, maybe this is 100% tin foil.
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

zotty wrote:
abuss368 wrote:
Hi zotty,

I do not follow your post in terms of "Vanguard is tired of being front run". Would you be willing to elaborate?

Thanks!
The amount of money in index funds can move the price of an individual security that is newly listed in the index. With transparent, pre-published indices, quants can take advantage of the situation and anticipate money flows. They "front run" the newly indexed stocks, anticipating a large demand for the shares as the big majors do the shuffle with the big money.

I am pretty sure this is one of the reasons vanguard switched to indices which are more controlled in-house. It's a good deal for investors.

The surprise move to A-shares fits the same, general, pattern. If vanguard waited, it ran the risk of being the last big money to enter the market. Being first, with a surprise change, is good business. it avoids money flow distortions caused by the other big majors. yeah, the dice didn't roll our way, but the rationale is solid.

You can google 'CRSP Vanguard Front Running' if you wish to read what others have said on the subject.

Then again, maybe this is 100% tin foil.
Hi zotty,

Thank you for explaining in additional detail. I will search for that term on the internet as it is interesting.

Best.
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Re: Rick Ferri looking to internationalize his portfolio

Post by Oliver »

abuss368 wrote:
zotty wrote:
livesoft wrote:I will speculate out the wazoo here:

I think someone was paid as a consultant in changing some of the international indexes in order to make sure they better reflected the world market weights especially of the Chinese local market. Perhaps they had to sign a non-disclosure agreement and also an agreement to not front-run the changes they helped to effect in the indices. Such agreements would have an expiration date which we're almost there in reaching.

I personally think that vanguard is tired of being front run and this is guiding a lot of decision making. They viewed an early entry into china as a way to beat the rush.
Hi zotty,

I do not follow your post in terms of "Vanguard is tired of being front run". Would you be willing to elaborate?

Thanks!
I think the choice to include small and mid cap stocks into the international funds is the real sign that vanguard is tired of front running. If a small cap is added, front running would have a trivial impact on a market cap weighted index. In addition, using relatively unpopular indexs means that others are not also purchasing the stock at the same time.

PS I can not believe I am putting a link to Barron's in my post.

http://blogs.barrons.com/focusonfunds/2 ... rkets-etf/
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Re: Rick Ferri looking to internationalize his portfolio

Post by livesoft »

This thread told me to bump it.
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Re: Rick Ferri looking to internationalize his portfolio

Post by sergeant »

Rick Ferri wrote:We're almost there.

Rick Ferri
Are we there yet?
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Re: Rick Ferri looking to internationalize his portfolio

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Last edited by LiveSimple on Tue Aug 25, 2015 6:58 am, edited 1 time in total.
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

John C. Bogle: “Simplicity is the master key to financial success."
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Re: Rick Ferri looking to internationalize his portfolio

Post by oldzey »

livesoft wrote:This thread told me to bump it.
*bump* :D
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

As of now, VTI > VEU by about 2% YTD. So waiting past 1/1/2015 has offered an superior opportunity to internationalize stocks, assuming the dividends (which are not included the VTI/VEU price) are about the same.

VTI = TSM EFT
VEU = World ex US ETF

This is a similar comparison to the plot in the OP blog, except Rick used the World EFT.

PS: But internationalizing might not look so good on risk-adjusted basis. International has proven to be more volatile in the past at least.
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Re: Rick Ferri looking to internationalize his portfolio

Post by Rick Ferri »

sergeant wrote:
Rick Ferri wrote:We're almost there.

Rick Ferri
Are we there yet?
Not yet. Maybe later this year. I'm in no hurry.

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Re: Rick Ferri looking to internationalize his portfolio

Post by timmy »

Rick - And folks were calling you a market timer. Such nonsense. Keep up the good work. I always enjoy you, Will B and Larry S. Good stuff!
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

timmy wrote:Rick - And folks were calling you a market timer. Such nonsense. Keep up the good work. I always enjoy you, Will B and Larry S. Good stuff!
Hi timmy,

Agreed! I have learned a wealth of investing knowledge from Rick over the years. I appreciate his posts and thoughts.

Best.
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Re: Rick Ferri looking to internationalize his portfolio

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timmy wrote:Rick - And folks were calling you a market timer. Such nonsense. Keep up the good work. I always enjoy you, Will B and Larry S. Good stuff!
Have you read the blog linked in the OP?
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Re: Rick Ferri looking to internationalize his portfolio

Post by timmy »

Yes, and all 9 pages (of posts). That was an easy question. Now on with the long holiday weekend!

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Re: Rick Ferri looking to internationalize his portfolio

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timmy wrote:Rick - And folks were calling you a market timer. Such nonsense. Keep up the good work. I always enjoy you, Will B and Larry S. Good stuff!
The timing is not even close to the the worst blunder in the blog. Worst blunder is the contradiction of saying now is the time for a change therefore wait to make the change.
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Re: Rick Ferri looking to internationalize his portfolio

Post by timmy »

Ah... I see your point. I would be kinder. Maybe a little sloppy, but not a blunder.
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

Do you like investment advice to be a little sloppy?
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

I enjoy Rick's expert guidance and advice.
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Re: Rick Ferri looking to internationalize his portfolio

Post by columbia »

abuss368 wrote:I enjoy Rick's expert guidance and advice.
As do I (along with the price of receiving it).
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

walletless wrote:From his blog post: http://www.rickferri.com/blog/investmen ... ri+Blog%29

Rick Ferri will be looking to increase his international allocation for the 2nd half of the decade.
Looks like his bet did (or could have) paid off, in that it involved waiting to some point in 2015 when international was cheaper.

FTSE Ex US (VEU) is ~4% cheaper relative to the US total stock market (VTI) than it was when he published that blog.
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Re: Rick Ferri looking to internationalize his portfolio

Post by zotty »

tadamsmar wrote:
FTSE Ex US (VEU) is ~4% cheaper relative to the US total stock market (VTI) than it was when he published that blog.
I still feel like a troll b/c i like rick a lot.

How does dividend yield factor in? you looking at total return?
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

zotty wrote:
tadamsmar wrote:
FTSE Ex US (VEU) is ~4% cheaper relative to the US total stock market (VTI) than it was when he published that blog.
I still feel like a troll b/c i like rick a lot.

How does dividend yield factor in? you looking at total return?
Not total return, I just looked at prices. I think it might be close enough to a wash.
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Outcome and Strategy

Post by Taylor Larimore »

FTSE Ex US (VEU) is ~4% cheaper relative to the US total stock market (VTI) than it was when he published that blog.
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Re: Rick Ferri looking to internationalize his portfolio

Post by timmy »

Bumping post
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

Any update on the change in strategy?
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

walletless wrote:From his blog post: http://www.rickferri.com/blog/investmen ... ri+Blog%29

Rick Ferri will be looking to increase his international allocation for the 2nd half of the decade.
Alas, the OP link is dead, it did not survive the year, the events of which it was predicting, crystal balls are fragile things. But, fear not, be not deprived, the same content is to be found here:

http://www.etf.com/sections/index-inves ... nopaging=1
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Re: Rick Ferri looking to internationalize his portfolio

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abuss368 wrote:Any update on the change in strategy?
I'm curious as well.

Another question I have for Rick concerns the Vanguard Global ex-U.S. Real Estate ETF (VNQI).

In the past, Rick had noted that he liked the diversification the fund could provide, but he thought the associated costs were not worth the benefit.

However, it seems that in about 4 months Vanguard will announce that the expense ratio for the ETF share class has dropped to 0.18%.

It's true that there is some concern about tax inefficiency in holding VNQI in either taxable or tax-advantaged accounts. Still, the direct costs have come down remarkably in 5 years, with the initial 0.35% ER slashed to 0.18%.

It would also seem, based on valuations, that VNQI has a higher expected return than VNQ.

VNQI (ER soon to be reported = 0.18%): Price/Cash Flow = 10.69

VNQ (ER = 0.12%): Price/Cash Flow = 13.92

So I wonder, will Rick be taking a closer look at the Vanguard Global ex-U.S. Real Estate ETF?
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

iceport wrote:
abuss368 wrote:Any update on the change in strategy?
I'm curious as well.

Another question I have for Rick concerns the Vanguard Global ex-U.S. Real Estate ETF (VNQI).

In the past, Rick had noted that he liked the diversification the fund could provide, but he thought the associated costs were not worth the benefit.

However, it seems that in about 4 months Vanguard will announce that the expense ratio for the ETF share class has dropped to 0.18%.

It's true that there is some concern about tax inefficiency in holding VNQI in either taxable or tax-advantaged accounts. Still, the direct costs have come down remarkably in 5 years, with the initial 0.35% ER slashed to 0.18%.

It would also seem, based on valuations, that VNQI has a higher expected return than VNQ.

VNQI (ER soon to be reported = 0.18%): Price/Cash Flow = 10.69

VNQ (ER = 0.12%): Price/Cash Flow = 13.92

So I wonder, will Rick be taking a closer look at the Vanguard Global ex-U.S. Real Estate ETF?
Hi iceport,

I added the International REIT fund many years ago and it appears to add additional diversification. Many times the fund "zings" when U.S. REITs "zangs". The cost has decreased over the years.

Did you by chance happen to read the expect expense ratio for the investor and admiral shares?

Best.
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

abuss368 wrote:Any update on the change in strategy?
Only the update on the change in his blogging strategy: he apparently deleted his blog post on the strategy. If you look at his blog, there are plenty of entries before and after that one. That particular one is gone.

Have you ever seen anyone post a strategy like that and then give a series of serious updates until the strategy has played out one way or the other? I have not. The most likely outcome is that the whole thing dies with a whimper, the would-be strategist just hopes we forget about it.
Last edited by tadamsmar on Sat Jan 02, 2016 5:57 am, edited 1 time in total.
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Re: Rick Ferri looking to internationalize his portfolio

Post by iceport »

abuss368 wrote:Hi iceport,

I added the International REIT fund many years ago and it appears to add additional diversification. Many times the fund "zings" when U.S. REITs "zangs". The cost has decreased over the years.

Did you by chance happen to read the expect expense ratio for the investor and admiral shares?
Hi abuss368,

Yes, the admiral shares ER will match the ETF ER (0.18%), and the ER for the investor shares will improve only very slightly to 0.36%. These are published in the fine print at the bottom of Page 4 of the October 2015 Annual Report. If the pattern holds, these figures will be reported as the official fund expense ratios in the February 2016 prospectus.

It will be interesting to see if there are any changes to the purchase and redemption fees of the mutual funds. I'd love to ditch the ETF share class if and when those fees are dropped.
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Re: Rick Ferri looking to internationalize his portfolio

Post by zotty »

tadamsmar wrote:
abuss368 wrote:Any update on the change in strategy?
Only the update on the change in his blogging strategy: he apparently deleted his blog post on the strategy. If you look at his blog, there are plenty of entries before and after that one. That particular one is gone.

Have you ever seen anyone post a strategy like that and then give a series of serious updates until the strategy has played out one way or the other? I have not. The most likely outcome is that the whole thing dies with a whimper, the would-be strategist just hopes we forget about it.
In his defense, he was right, it's about +6% outperformance in domestics?

Of course, the would-be dip buyers dilemma is in the timing. 6 is better than 4, but 25 is better than 6.

Not my cup of tea. I just kept accumulating international equities to maintain portfolio balance and consider myself fortunate. years of accumulating bonds to balance w/ stocks got long in the tooth. accumulating stocks at all time highs isn't all that pleasant either.
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

zotty wrote: In his defense, he was right, it's about +6% outperformance in domestics?
When I mentioned that earlier, did you see Taylor's comment?:

viewtopic.php?p=2707395#p2707395

PS: There is one Chinese billionaire who can quote Carl Sagan when asked how much he lost last year on China stocks, "billions and billions".
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Re: Rick Ferri looking to internationalize his portfolio

Post by tadamsmar »

I going to take his advice and put 13K in total international, our 2016 Roth contribution. Well, sort of. I was already neutral back when Rick blogged those immortal words about how he now believed that international as at least and good as domestic so he was going to act on his current beliefs later. Are there any market timers that understand the concept of time, any who can manage to even compose a coherent thought about time?
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Re: Rick Ferri looking to internationalize his portfolio

Post by columbia »

Nothing happened in 2015 to convince me that it's the wrong idea and I'm very comfortable with Vanguard increasing from 30 to 40% for my Target Date fund, which I hold in my IRA.
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

Bogleheads,

We increased our allocation to international from 30% to 40% before both Rick Ferri and the change in Vanguard's Target and Life Strategy funds.

Best.
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Re: Rick Ferri looking to internationalize his portfolio

Post by LadyGeek »

FYI - I moved some posts asking about Rick Ferri's blog into here: Rick Ferri's Blog
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Re: Rick Ferri looking to internationalize his portfolio

Post by saltycaper »

If I recall, and honestly I am not sure I recall correctly without reading all 444 posts of this thread, which I'm not going to do, or the original blog entry, which is inaccessible at the moment, but I think Rick was waiting for some driver of capitulation, where investors would throw in the towel--perhaps a sovereign default. I used the further decline in oil prices, the run-up of the US dollar, and the bursting (?) of the Chinese stock market bubble (?) as an excuse to add to my international position between August and December. I'm a bit over 50% now with a target international allocation of 40%. Hopefully it won't get back to 40% without rebalancing anytime soon, but after the past 17 years of investing, I'm always waiting for the second anvil to fall.
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Re: Rick Ferri looking to internationalize his portfolio

Post by iceport »

saltycaper wrote:If I recall, and honestly I am not sure I recall correctly without reading all 444 posts of this thread, which I'm not going to do, or the original blog entry, which is inaccessible at the moment, but I think Rick was waiting for some driver of capitulation, where investors would throw in the towel--perhaps a sovereign default.
There's always the wayback machine:

My Expected Investment Changes in 2015
I believe the tailspin in commodity prices lays the foundation for a fresh round of emerging country defaults. It will hit oil exporting countries the hardest such as Russia, Venezuela and several Middle East countries whose governments are already unstable. If these defaults do occur, there will be temporary contagion in all emerging markets similar to the Russian default in 1998.

This is what I’m waiting for. The global media hyped around a sovereign debt default or two will present long-term investors an opportunity to re-align their portfolio allocation to something more global-like and less US-like. This isn’t to say I’m bearish on the US. This shift just puts my portfolio closer to a global market allocation, which is where I want it to be during the second half of this decade.
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Re: Rick Ferri looking to internationalize his portfolio

Post by Rick Ferri »

Please accept my apologies. We are working on RickFerri.com.

In the mean time, all of my blogs are available on Forbes.com. Here is the link:

http://www.forbes.com/sites/rickferri/

The article on my decision to increase international equity exposure can be found here:

My Expected Investment Changes In 2015

I did not make the change to more international exposure in my personal portfolio in 2015. It will probably happen sometime this year.

Thank you!

Rick Ferri
Last edited by Rick Ferri on Sun Jan 03, 2016 11:28 am, edited 1 time in total.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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cfs
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Re: Rick Ferri looking to internationalize his portfolio

Post by cfs »

Thank you.

Thanks to our shipmate Rick for the links and thanks for all the updates.

Wishing the Portfolio Solutions Team a productive 2016
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abuss368
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Re: Rick Ferri looking to internationalize his portfolio

Post by abuss368 »

Rick Ferri wrote:Please accept my apologies. We are working on RickFerri.com.

In the mean time, all of my blogs are available on Forbes.com. Here is the link:

http://www.forbes.com/sites/rickferri/

The article on my decision to increase international equity exposure can be found here:

My Expected Investment Changes In 2015

I did not make the change to more international exposure in my personal portfolio in 2015. It will probably happen sometime this year.

Thank you!

Rick Ferri
Thanks Rick!
John C. Bogle: “Simplicity is the master key to financial success."
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fetch5482
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Re: Rick Ferri looking to internationalize his portfolio

Post by fetch5482 »

Rick Ferri wrote:Please accept my apologies. We are working on RickFerri.com.

...

The article on my decision to increase international equity exposure can be found here:

My Expected Investment Changes In 2015
...
Thanks Rick. I have added the link OP.
(AGE minus 23%) Bonds | 5% REITs | Balance 80% US (75/25 TSM/SCV) + 20% International (80/20 Developed/Emerging)
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