Mr. Bogle on CNBC today--International and Bonds

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SailingAway
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Mr. Bogle on CNBC today--International and Bonds

Post by SailingAway » Tue Jan 27, 2015 2:37 pm

Don't know if someone already posted it, didn't see it if so.
:beer

http://www.cnbc.com/id/102369672

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Taylor Larimore » Tue Jan 27, 2015 3:13 pm

Sailing Away:

Thank you for this excellent video of our mentor, Jack Bogle. It is great to see him so full of vim, vigor and (as always)--sound advice.

I love this quote by Mr. Bogle who knows more about investing than any of us:
"I'm never sure I'm right."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by subham » Tue Jan 27, 2015 3:36 pm

May be I didnt get his point, but VG (founded by him) gave me a 4 fund portfolio: Stock(US:INT = 70:30) and Bond(US:INT = 80:20).

I am now confused! Should I change my allocation or ignore his advice?

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Gropes & Ray » Tue Jan 27, 2015 3:57 pm

The target retirement date funds generally don't match Jack Bogle's thinking. He seems to believe you should hold your age in bonds, hold more corporate or mid-term bonds than the total bond fund does and hold virtually no international. That doesn't look much like the target date funds. But, either is a valid option depending on your risk tolerance.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Triple digit golfer » Tue Jan 27, 2015 3:59 pm

I understand the thinking in saying that there's no need to invest internationally because the U.S. is an international economy. But instead of asking "why invest internationally?" shouldn't the question really be "Why not invest in an additional 5,800+ companies, including BP, Shell, Bayer, HSBC, Toyota, and Samsung?

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Triple digit golfer » Tue Jan 27, 2015 4:02 pm

subham wrote:May be I didnt get his point, but VG (founded by him) gave me a 4 fund portfolio: Stock(US:INT = 70:30) and Bond(US:INT = 80:20).

I am now confused! Should I change my allocation or ignore his advice?
There is no perfect portfolio. Your portfolio is a well-diversified, good portfolio that will serve you well.

Jack Bogle also says "The enemy of a good plan is the dream of a perfect plan" and "Stay the course."

I suggest you stay the course and be happy with your very good plan.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by happyisland » Tue Jan 27, 2015 4:21 pm

Triple digit golfer wrote:I understand the thinking in saying that there's no need to invest internationally because the U.S. is an international economy. But instead of asking "why invest internationally?" shouldn't the question really be "Why not invest in an additional 5,800+ companies, including BP, Shell, Bayer, HSBC, Toyota, and Samsung?
I agree with your way of thinking. Additionally, it seems to me the flip side of the "the USA stock market is actually very international" idea is that the USA economy is also a huge consumer of goods produced by international companies (e.g Toyota).

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by SailingAway » Tue Jan 27, 2015 4:23 pm

subham wrote:May be I didnt get his point, but VG (founded by him) gave me a 4 fund portfolio: Stock(US:INT = 70:30) and Bond(US:INT = 80:20).

I am now confused! Should I change my allocation or ignore his advice?

Your answer is in your question. Founded by Jack, no longer run by Jack..... He has been clear all along on his opinion about international holdings. He more recently has questioned the wisdom of the Total Bond Market fund. This is due to the distortion in the holdings of TBM due to current US Fed policy.

In my opinion, not Jack's, you have a perfectly good portfolio as are all the Target Retirement funds. You do have to decide if your risk tolerance matches up with the particular Target fund you are in. Personally, I'm 80:20 US:Int in equities which is sort of the max that Mr. Bogle seems to allow in his recommendations. Personally again, I don't see the point in the Int Bond funds. I don't think it will hurt you and it's such a small allocation normally that it will probably disappear into the noise. (although right now the yields look better than US). I have all my son's portfolios in Target Retirement Funds at VG and feel perfectly fine with them.

As someone already told you, the enemy of a good plan is the search for the perfect plan. You don't need to search any further if you are content with your stock/bond ratio, ie, your risk tolerance. (BTW, you don't have to hold the year they suggest in a Target Fund. If you are more comfortable with less equity then move on out on the fund timelines a little bit)

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by SailingAway » Tue Jan 27, 2015 4:28 pm

Taylor Larimore wrote:Sailing Away:

Thank you for this excellent video of our mentor, Jack Bogle. It is great to see him so full of vim, vigor and (as always)--sound advice.

Best wishes.
Taylor

He is kind of like the EveReady Bunny isn't he.
Let's be glad we still have him and hope for many more years.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Taylor Larimore » Tue Jan 27, 2015 4:33 pm

subham wrote:May be I didnt get his point, but VG (founded by him) gave me a 4 fund portfolio: Stock(US:INT = 70:30) and Bond(US:INT = 80:20).

I am now confused! Should I change my allocation or ignore his advice?
Subham:

No one knows which funds will outperform in the future. One of our contributors listed 150 different portfolios recommended by different investment experts.

There is more than one road to Dublin.

Stay-the-course.

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

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by lack_ey » Tue Jan 27, 2015 4:34 pm

Triple digit golfer wrote:I understand the thinking in saying that there's no need to invest internationally because the U.S. is an international economy. But instead of asking "why invest internationally?" shouldn't the question really be "Why not invest in an additional 5,800+ companies, including BP, Shell, Bayer, HSBC, Toyota, and Samsung?
Bogle seems to primarily focus on currency risk and then secondarily on market / economic condition quality. As even he notes sometimes, a lot of people disagree with him.

subham wrote:May be I didnt get his point, but VG (founded by him) gave me a 4 fund portfolio: Stock(US:INT = 70:30) and Bond(US:INT = 80:20).

I am now confused! Should I change my allocation or ignore his advice?
Virtually everybody has a different idea of what's best, and that really depends on the individual's temperament and circumstances anyway.

Even among those recommending 100% buy and hold strategies, there are differences in opinion about what to buy, never mind how to upkeep and maintain the allocation and change it over time. There will always be experts recommending something different from what you're doing. For what it's worth, you can look around Vanguard's whitepapers to see the justification for the generic portfolio recommendations and target date funds. Here's a place to start with:
https://advisors.vanguard.com/iwe/pdf/ICRTDF.pdf

You should not ignore the advice. There is a value in reconsidering one's assumptions and analyzing others' viewpoints. But you probably should not change your allocation either. With a good enough plan, only rarely should changing circumstances, new knowledge, a different perspective, or new products make a change of course beneficial—never mind necessary.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by visualguy » Tue Jan 27, 2015 4:36 pm

Triple digit golfer wrote:I understand the thinking in saying that there's no need to invest internationally because the U.S. is an international economy. But instead of asking "why invest internationally?" shouldn't the question really be "Why not invest in an additional 5,800+ companies, including BP, Shell, Bayer, HSBC, Toyota, and Samsung?
I think he answers that. One reason is the currency risk. Another reason is that you are investing in economies and stock markets that are not as strong, well-run, well-regulated, innovative, etc. as in the US. Yet another reason that he mentions is that historically the US has performed better.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by elgob.bogle » Tue Jan 27, 2015 4:52 pm

Thanks for the link. I have been tempted lately to move toward cap weighting. Having watched the video, I think I'll do nothing.

elgob

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by ERMD » Tue Jan 27, 2015 5:02 pm

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Fclevz » Tue Jan 27, 2015 5:12 pm

I don't think I've ever heard him mention it, but what's his advice for someone who doesn't live in the US?

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by SpringMan » Tue Jan 27, 2015 5:23 pm

When Mr. Bogle says he does not recommend international, does he mean just equities or both equities and fixed income? Vanguard's international bond fund is hedged against currency risk which should alleviate one of his concerns. I don't think he likes international bonds but have not heard him specifically address them.
Best Wishes, SpringMan

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by subham » Tue Jan 27, 2015 6:17 pm

Thanks for everyone who asked me to stay the course.

I wonder what Mr. Rick Ferri would say about this video as his blog states that he intends to increase international allocation!

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by jnet2000 » Tue Jan 27, 2015 6:27 pm

Mr. Bogle makes a good case. But I plan to stay the course and keep no more than 20% of my stock allocation in International stocks. I don't agree with everything Vanguard recommends either and plan to stay the course and not invest in International Bonds. Thanks for sharing.
"You really don't need leverage in this world much. If you're smart, you're going to make a lot of money without borrowing" Warren Buffet

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Index Fan » Tue Jan 27, 2015 6:31 pm

I can't quite figure out why Mr. Bogle says you don't need international equities then says don't own more than 20% of your equities in international. Shouldn't he say you should own 0%, given his view on the subject? Or is he seeing that 20% a limit on currency plays?

Me and Mr. Bogle will have to respectfully disagree on this subject :) I'm 1/3 international when it comes to equities. There have been years with significant differences in the returns of domestic & international stock indexes.
"Optimum est pati quod emendare non possis." | -Seneca

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by subham » Wed Jan 28, 2015 12:47 pm

I asked my VG CFP and here is what they said:

Thank you for your email regarding International investments. Mr. Bogle is
speaking to the general investor. Your plan has been customized to you and
your specific situation. Keep in mind Vanguard's guardrails are 20% - 40%
International exposure on the stock allocation which correlates the 20% Mr.
Bogle mentions in the clip.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by lack_ey » Wed Jan 28, 2015 12:53 pm

Index Fan wrote:I can't quite figure out why Mr. Bogle says you don't need international equities then says don't own more than 20% of your equities in international. Shouldn't he say you should own 0%, given his view on the subject? Or is he seeing that 20% a limit on currency plays?

Me and Mr. Bogle will have to respectfully disagree on this subject :) I'm 1/3 international when it comes to equities. There have been years with significant differences in the returns of domestic & international stock indexes.
He thinks 0% is preferred and just fine, but because he's against the mainstream and so many want to do otherwise, he recommends no more than 20%.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by garlandwhizzer » Wed Jan 28, 2015 1:05 pm

Taylor Larimore wrote:
No one knows which funds will outperform in the future. One of our contributors listed 150 different portfolios recommended by different investment experts.

There is more than one road to Dublin.

Stay-the-course.
1+

Rather than arguing over how many angels can dance on the head of a pin, I suggest following this sage advice, the wisdom derived from many long years of investing experience. Either approach will work if you stick to it. Well thought out rational investing plans can and do differ in their details. It is more important to choose one you're comfortable with and stick to it than to debate endlessly about which one is optimal. I can assure you that no one knows now with any serious level of certainty what will be optimal in the investing future, neither the experts nor the novices.

Garland Whizzer

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by timboktoo » Wed Jan 28, 2015 1:08 pm

Fclevz wrote:I don't think I've ever heard him mention it, but what's his advice for someone who doesn't live in the US?
Good question :)

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by dkturner » Wed Jan 28, 2015 1:40 pm

timboktoo wrote:
Fclevz wrote:I don't think I've ever heard him mention it, but what's his advice for someone who doesn't live in the US?
Good question :)

I believe Mr. Bogle pitches his interview comments strictly to Americans. I can't imagine what he would say if a Brit were to approach him and say "I'm confused, are you recommending that I should buy only U.S. stocks or should I buy only U.K stocks?" :confused

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by mhalley » Thu Jan 29, 2015 12:57 am

Here is a list of 150 of the many roads to dublin:
http://whitecoatinvestor.com/150-portfo ... han-yours/
Mike

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by heartandsoul » Thu Jan 29, 2015 2:03 am

Triple digit golfer wrote:I understand the thinking in saying that there's no need to invest internationally because the U.S. is an international economy.
This thinking is flawed because it ignores valuations. Japanese companies are probably more international in their trade (need to be as Japan is a smaller economy than the US) but thanks to nosebleed valuations they collapased post-1990.

US valuations are nowhere near the levels Japan reached back then but they are starting to look stretched compared to other developed markets.
'Life is a strange thing. Just when you think you learned how to use it. It's gone' SS

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Noobvestor » Thu Jan 29, 2015 2:35 am

You may find my notes of what Jack Bogle said about international investing at Bogleheads 11 of interest: http://www.bogleheads.org/forum/viewtop ... st=1521456

Including this quote from Jack himself: "If there's one place I don't want people to take my advice, it's international. I want you to think it through for yourself."
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by swaption » Thu Jan 29, 2015 10:04 am

Noobvestor wrote:You may find my notes of what Jack Bogle said about international investing at Bogleheads 11 of interest: http://www.bogleheads.org/forum/viewtop ... st=1521456

Including this quote from Jack himself: "If there's one place I don't want people to take my advice, it's international. I want you to think it through for yourself."
Thank you for this. It is here where Jack Bogle displays his remarkable self awareness that in some form led him down this path in the first place. Truely extraordinary. The more this gets discussed, the more I am convinced that I do not agree with Bogle's approach. Bogle clearly knows what he knows, but as well he apparently clearly also knows what he doesn't know. Among the numerous reasons why I do not follow Bogle on this is because I can't think of any reson why Bogle would be in any position to have a superior view regarding international investing than others in the market. And apparently, Jack agrees.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Noobvestor » Thu Jan 29, 2015 12:55 pm

swaption wrote:
Noobvestor wrote:You may find my notes of what Jack Bogle said about international investing at Bogleheads 11 of interest: http://www.bogleheads.org/forum/viewtop ... st=1521456

Including this quote from Jack himself: "If there's one place I don't want people to take my advice, it's international. I want you to think it through for yourself."
Thank you for this. It is here where Jack Bogle displays his remarkable self awareness that in some form led him down this path in the first place. Truely extraordinary. The more this gets discussed, the more I am convinced that I do not agree with Bogle's approach. Bogle clearly knows what he knows, but as well he apparently clearly also knows what he doesn't know. Among the numerous reasons why I do not follow Bogle on this is because I can't think of any reson why Bogle would be in any position to have a superior view regarding international investing than others in the market. And apparently, Jack agrees.
He is a great man in all the senses - smart, compassionate, hard-working, humorous but also notably humble! This is one of a few things I disagree with him on, but I try to remember he is coming from a different time in place - notably one in which international investing was difficult and cost-prohibitive for a long time (though not anymore, thanks, strangely enough, to him!).
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by theduke » Thu Jan 29, 2015 3:17 pm

I know what I know and I know what I don't know. I know Mr. Bogle knows a lot more about investing than I do, so I'll stick with him. :wink:

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Wise words

Post by Taylor Larimore » Thu Jan 29, 2015 4:26 pm

theduke wrote:I know what I know and I know what I don't know. I know Mr. Bogle knows a lot more about investing than I do, so I'll stick with him. :wink:
theduke:

Wise words, indeed. I live in the home that Jack built.

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

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by asset_chaos » Thu Jan 29, 2015 5:25 pm

Fclevz wrote:I don't think I've ever heard him mention it, but what's his advice for someone who doesn't live in the US?
Although I don't have a citation handy, Bogle has said before in at least one interview that his advice is directed towards an American investor. His advice to have only domestic investments is, I think, fairly wrong for almost every investor in the world. If we accept that the Eurozone is a single market, then it's the second largest, but euro companies still only comprise ~10% of global market cap versus ~50% for the US. And markets go down rapidly in size from there. Most people's domestic stock market is small and not well diversified, so most investors, especially those outside the US, should start with the best available global stock index fund and overweight domestic to the extent warrented by domestic tax and cost issues or by personal preference.

Bogle's advice to invest with the broadest diversification and the lowest cost is, however, both clearly correct and universally applicable. That he made it practically possible for all of us to make diversified and low cost investments and continues to fight for a better world for us all is why he's a great man.
Regards, | | Guy

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by wassabi » Thu Jan 29, 2015 5:26 pm

Noobvestor wrote:
He is a great man in all the senses - smart, compassionate, hard-working, humorous but also notably humble! This is one of a few things I disagree with him on, but I try to remember he is coming from a different time in place - notably one in which international investing was difficult and cost-prohibitive for a long time (though not anymore, thanks, strangely enough, to him!).

I've read that idea a lot in this forum, but do you really think that someone as financially savvy as Jack Bogle has failed to adapt to international just because he's from a time in which international investing was too difficult and expensive? Hm, I don't think so. I just think that rationale is far too simplistic for someone like Jack Bogle. He is a pioneer. He changed the way millions invest. I think he has appropriately weighed his international options, and he simply chooses to use American companies to absorb international in his portfolio. Who knows if he is right. But we have to give him a little more credit than being from a different time and place. :happy :happy

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by EMDW » Thu Jan 29, 2015 6:24 pm

Any data available for the annual returns for the vanguard's 2 funds portfolio (total stock market index, total bond market index) vs. 3 funds portfolio (total stock market index, total bond market index, total international market index). Question is does the 2 funds or 3 funds portfolio perform better? Thanks

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by z3r0c00l » Thu Jan 29, 2015 7:17 pm

Triple digit golfer wrote:I understand the thinking in saying that there's no need to invest internationally because the U.S. is an international economy. But instead of asking "why invest internationally?" shouldn't the question really be "Why not invest in an additional 5,800+ companies, including BP, Shell, Bayer, HSBC, Toyota, and Samsung?
Exactly right. The man could just be wrong. The dozen large companies in NY state are closely linked to the global economy, why shouldn't I just buy them? GE often follows movements in the S&P 500, except during the last recovery, why not just own one stock? It is nonsense to think that correlation is always so strong (it has not been for a solid year now, not nearly) or that correlation alone is an excuse to not own all stocks in a market. Indexing makes sense globally as much as it makes sense domestically.

The man is not an idol to be followed blindly. At some point the student has to become the teacher. Index the global markets for maximum diversification benefits including currency, all of which are coming true this year.

US stocks will either beat or fall behind the global market in the future. We simply don't know which it will be. The only sure thing is to match the global market.
Last edited by z3r0c00l on Thu Jan 29, 2015 8:11 pm, edited 1 time in total.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by CyberBob » Thu Jan 29, 2015 7:18 pm

sari wrote:Any data available for the annual returns for the vanguard's 2 funds portfolio (total stock market index, total bond market index) vs. 3 funds portfolio (total stock market index, total bond market index, total international market index). Question is does the 2 funds or 3 funds portfolio perform better? Thanks
More similar than different, really:
https://www.portfoliovisualizer.com/bac ... entage=0.0

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2 funds or 3 funds?

Post by Taylor Larimore » Thu Jan 29, 2015 8:08 pm

sari wrote:Any data available for the annual returns for the vanguard's 2 funds portfolio (total stock market index, total bond market index) vs. 3 funds portfolio (total stock market index, total bond market index, total international market index). Question is does the 2 funds or 3 funds portfolio perform better? Thanks
Sari:

One of the worst things you can do is to pick funds on the basis of their prior performance. These experts explain:

What Experts Say About Past Performance

I realize you must make a decision. I prefer The Three Fund Portfolio for the reasons in this post:

The Three Fund Portfolio

There is more than one road to Dublin.

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

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A student has to become the teacher ?

Post by Taylor Larimore » Thu Jan 29, 2015 8:19 pm

The man is not an idol to be followed blindly. At some point the student has to become the teacher.
z3r0c00l:

No one in the mutual fund industry has a greater combination of character, practical experience, knowledge, inventive genius, wisdom, perseverance, literary ability, kindness, modesty, and desire to help others.

I have been a student of Mr. Bogle since the 80s. It would be absurd for me to become his "teacher."

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

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by swaption » Thu Jan 29, 2015 9:04 pm

wassabi wrote:
Noobvestor wrote:
He is a great man in all the senses - smart, compassionate, hard-working, humorous but also notably humble! This is one of a few things I disagree with him on, but I try to remember he is coming from a different time in place - notably one in which international investing was difficult and cost-prohibitive for a long time (though not anymore, thanks, strangely enough, to him!).

I've read that idea a lot in this forum, but do you really think that someone as financially savvy as Jack Bogle has failed to adapt to international just because he's from a time in which international investing was too difficult and expensive? Hm, I don't think so. I just think that rationale is far too simplistic for someone like Jack Bogle. He is a pioneer. He changed the way millions invest. I think he has appropriately weighed his international options, and he simply chooses to use American companies to absorb international in his portfolio. Who knows if he is right. But we have to give him a little more credit than being from a different time and place. :happy :happy
Alright wassabi, I'll bite. I tend to agree with you. Initially this might have been the case, but my guess is that the prevailing rationale would now relate to some perceived superiority of the U.S. system in terms of the legal and regulatory framework, market transparency, accounting, investor protections, among numerous other factors. Given that so much business is in fact international and there are more than enough companies to be adequately diversified, why invest in inferior markets? And certainly now we have a track record of return that very much support this view, particularly recently where the resiliency of the U.S. system has been particularly beneficial.

The above is all very plausible and sensible, but therein lies the problem. It feels like the growth stocks that people hold for half a century. We've heard the view, all you need is some hi gh quality companies like IBM, Exxon, Coke, etc. and just hold them for a long time. These are the proverbial museum pieces. Look really good on the shelf, and certainly the S&P looks pretty good right now. But the mistake is that the explanation (of past performance) becomes the rationale. One thing we know is the world is not static. The track record has not necessarily been great for those other geographies to close the gap. But remember the U.S. was also once an emerging market. When inordinately focused on the museum pieces, there are chips not on places on the table where they probably should be.

A long reply, but this pretty much sums up my view.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by StormShadow » Thu Jan 29, 2015 9:51 pm

I think the bottom line is... do you believe that currency diversification adds any benefit if you spend your whole life in one country where goods are bought/sold by only the US dollar?

Jack's position is it does not. 2014's international performance (in US dollars) seems to support his argument.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Noobvestor » Fri Jan 30, 2015 12:27 am

wassabi wrote:I've read that idea a lot in this forum, but do you really think that someone as financially savvy as Jack Bogle has failed to adapt to international just because he's from a time in which international investing was too difficult and expensive? Hm, I don't think so. I just think that rationale is far too simplistic for someone like Jack Bogle. He is a pioneer. He changed the way millions invest. I think he has appropriately weighed his international options, and he simply chooses to use American companies to absorb international in his portfolio. Who knows if he is right. But we have to give him a little more credit than being from a different time and place. :happy :happy
I'm less than half Jack's age and already quite set in my ways, so yes, I think it's entirely possible that Jack, founder of the 500 index fund, is somewhat overly attached to his creation. Frankly I find it endearing and not at all surprising or particularly lamentable except insofar as it spawns threads like this. Also, as I explained in the analysis I linked to, I suspect he doesn't want people changing their portfolios a lot, so people who have been investing in US only for a long time, well, I suspect he worries about them changing course, but who knows, that's just speculation on my part. I too started a really successful business - orders of magnitude smaller than his, but still enough to set me up for life - and guess what? I'm convinced I'm right about a lot of things related to that business area based on the time and method in which I was successful ... and for me it was only a few years ago! But I digress.

But really, the quote I gave you says it all. If you won't take Jack's own word that you shouldn't take Jack's word about international investing, well, I don't know what else to say.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Noobvestor » Fri Jan 30, 2015 12:28 am

StormShadow wrote:I think the bottom line is... do you believe that currency diversification adds any benefit if you spend your whole life in one country where goods are bought/sold by only the US dollar?

Jack's position is it does not. 2014's international performance (in US dollars) seems to support his argument.
This is a joke, right? The last thing he would recommend is investing based on last year's returns. International beat US in US dollars for 3 of the last 4 decades. If we're going to use past performance to make this call, then I guess we should just hold international? :confused
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by nedsaid » Fri Jan 30, 2015 12:53 am

My take on this is "Let Bogle be Bogle." He certainly has his opinions and I highly doubt that anything that I could say would change his mind.

One of my few areas of disagreement with Mr. Bogle is his aversion to International investing. He certainly has earned his right to his opinion.
A fool and his money are good for business.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by convert949 » Fri Jan 30, 2015 9:06 am

jnet2000 wrote:Mr. Bogle makes a good case. But I plan to stay the course and keep no more than 20% of my stock allocation in International stocks. I don't agree with everything Vanguard recommends either and plan to stay the course and not invest in International Bonds. Thanks for sharing.
+1

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by StormShadow » Fri Jan 30, 2015 6:51 pm

Noobvestor wrote:
StormShadow wrote:I think the bottom line is... do you believe that currency diversification adds any benefit if you spend your whole life in one country where goods are bought/sold by only the US dollar?

Jack's position is it does not. 2014's international performance (in US dollars) seems to support his argument.
This is a joke, right? The last thing he would recommend is investing based on last year's returns. International beat US in US dollars for 3 of the last 4 decades. If we're going to use past performance to make this call, then I guess we should just hold international? :confused
And how much of the outperformance was due to a weaker dollar relative to now? Some of it? All of it?

I'm not claiming to use past performance to predict the future. My point was, even in a year where most international corporations do well, as an american it may not make any difference if the US dollar remains relatively strong compared to foreign currencies. If I'm not mistaken, thats what Bogle's point is and I think its a valid one.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Noobvestor » Fri Jan 30, 2015 7:51 pm

StormShadow wrote:
Noobvestor wrote:
StormShadow wrote:I think the bottom line is... do you believe that currency diversification adds any benefit if you spend your whole life in one country where goods are bought/sold by only the US dollar?

Jack's position is it does not. 2014's international performance (in US dollars) seems to support his argument.
This is a joke, right? The last thing he would recommend is investing based on last year's returns. International beat US in US dollars for 3 of the last 4 decades. If we're going to use past performance to make this call, then I guess we should just hold international? :confused
And how much of the outperformance was due to a weaker dollar relative to now? Some of it? All of it?

I'm not claiming to use past performance to predict the future. My point was, even in a year where most international corporations do well, as an american it may not make any difference if the US dollar remains relatively strong compared to foreign currencies. If I'm not mistaken, thats what Bogle's point is and I think its a valid one.
I'll just go ahead and quote a previous post for this one - see the two examples below:
Noobvestor wrote:I can go into greater depth, but as I've written around here before (and probably need to write solidly in one place) currency risk is a pretty small issue for most practical portfolios. A young accumulator has mostly human capital, denominated in their home currency. An older retiree has mostly bonds (as well as other assets, like a house, pension/SS income stream, etc... ) denominated in their home currency.

30/40-something: 70% human capital in USD, maybe 10% ex-US currency in a three-fund portfolio (equal weighted)

50/60-something: 30% human capital in USD, 10%-20% in house, 10-20% in SS/pension, etc... maybe 10% ex-US currency in a three-fund portfolio (or less as bonds are added with age)

My *very rough ballpark estimate* is that a typical Boglehead-style investor has less than 15% ex-US currency exposure once you tally other assets (including human capital - i.e. future earnings). To me, this is an asset, not a liability - it means that if the dollar suffers, at least you have some portion of your portfolio that will not suffer with it (a global-buying-power insurance play). If the dollar does well, obviously most of your portfolio being in dollars is thus an asset.
Feel free to run the simulation on yourself: if you add up your expected future earnings (human capital), social security, house, etc... then took your portfolio and made your stock portion 50/50 US/international, how much of your total net worth would be in non-US currency?
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by abuss368 » Fri Jan 30, 2015 8:05 pm

What a great clip by our mentor Jack Bogle. Mr. Bogle looks full of energy and passion.

It was nice to hear Mr. Bogle speak about the Total Bond Index Fund.

Best.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by rnitz » Fri Jan 30, 2015 9:17 pm

StormShadow wrote:I think the bottom line is... do you believe that currency diversification adds any benefit if you spend your whole life in one country where goods are bought/sold by only the US dollar?

Jack's position is it does not. 2014's international performance (in US dollars) seems to support his argument.
Great synopsis. I agree with your analysis completely, but I disagree with Jack's position (and I'm guessing yours).

I'm an American and expect to live my whole life in America and I value the currency diversification/risk. I have a US house, US bonds, family in the US, and significant US equities, and so I feel pretty exposed to the US (and the US dollar). I expect, hope, and pray that the US remains a very successful investment environment, but I don't want to depend on it.

I view currency speculation as pretty much a zero sum game - I think the odds that the US dollar outperforms other currencies in the long term is similar to the odds that it underperforms. Similarly, I believe the both the US equity markets and the International equity markets are pretty damn efficient, and don't expect either to have a reason to underperform or outperform (on a risk adjusted basis). But I'd like to have some balance (or diversification) in case the US doesn't go the way it has in the past. As a result, my IPS has equities as 60/40 US/Int'l.

My whole life is dependent on the US continuing to be a great place, I'd just like some balance in case it doesn't.

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by StormShadow » Sat Jan 31, 2015 9:35 am

rnitz wrote:
StormShadow wrote:I think the bottom line is... do you believe that currency diversification adds any benefit if you spend your whole life in one country where goods are bought/sold by only the US dollar?

Jack's position is it does not. 2014's international performance (in US dollars) seems to support his argument.
Great synopsis. I agree with your analysis completely, but I disagree with Jack's position (and I'm guessing yours).

I'm an American and expect to live my whole life in America and I value the currency diversification/risk. I have a US house, US bonds, family in the US, and significant US equities, and so I feel pretty exposed to the US (and the US dollar). I expect, hope, and pray that the US remains a very successful investment environment, but I don't want to depend on it.

I view currency speculation as pretty much a zero sum game - I think the odds that the US dollar outperforms other currencies in the long term is similar to the odds that it underperforms. Similarly, I believe the both the US equity markets and the International equity markets are pretty damn efficient, and don't expect either to have a reason to underperform or outperform (on a risk adjusted basis). But I'd like to have some balance (or diversification) in case the US doesn't go the way it has in the past. As a result, my IPS has equities as 60/40 US/Int'l.

My whole life is dependent on the US continuing to be a great place, I'd just like some balance in case it doesn't.
I have about a 25% allocation to international stocks. I just wanted to play Devil's advocate. Since our namesake has never waffled on his position on international stocks, I think its important to know why. I also think you can't go wrong if you leave out international stocks altogether.

From a strictly lay person's perspective, broad acceptance of index investing is a fairly new phenomenon. When I first got into investing in the stock market (late '90s), most people I knew used either actively managed mutual funds or purchased stocks directly. Having a collection of 20 or so different US stocks spread across various industries was considered a reasonably diversified portfolio. Now, we're arguing about how many indexes to own (each consisting of literally hundreds if not thousands of different stock holdings) stretched across several countries?

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Re: Mr. Bogle on CNBC today--International and Bonds

Post by Lax67 » Sat Jan 31, 2015 12:30 pm

When I first got into investing in the stock market (late '90s), most people I knew used either actively managed mutual funds or purchased stocks directly. Having a collection of 20 or so different US stocks spread across various industries was considered a reasonably diversified portfolio. Now, we're arguing about how many indexes to own (each consisting of literally hundreds if not thousands of different stock holdings) stretched across several countries?
I think this comment points to important historical context that gets forgotten nowadays. What Mr. Bogle did was pull people away from that non-sense and got us on a simple, straightforward investment plan that saved us money and made investing easy to do. But now, as he has said himself numerous times, his message has been "bastardized". Keep it simple, keep it low-cost, and stay the course.

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