How many here follow Bogle's "no international" theory?

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Kevin M
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Re: How many here follow Bogle's "no international" theory?

Post by Kevin M » Wed Aug 19, 2015 9:23 pm

40% of equities.

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whaleknives
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Re: How many here follow Bogle's "no international" theory?

Post by whaleknives » Wed Aug 19, 2015 9:41 pm

Browser wrote:Since US companies are already deriving half their revenues from foreign countries, if you invest in foreign equities wouldn't that mean that much more than half of the revenues generated by companies in your global stock portfolio be derived from non-U.S. sources? Is that what you want?
My VG Total International is only 30% of equities, but aren't you buying much more than sales revenue with your share in a foreign company? Things like their market, product line, labor force, location, R & D, government subsidies?
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Re: How many here follow Bogle's "no international" theory?

Post by SimpleGift » Wed Aug 19, 2015 11:36 pm

Browser wrote:Since US companies are already deriving half their revenues from foreign countries, if you invest in foreign equities wouldn't that mean that much more than half of the revenues generated by companies in your global stock portfolio be derived from non-U.S. sources? Is that what you want?
It's not quite that simple, since foreign companies are also generating revenues from sales to the U.S. as well. For a look at the net-net breakdown of revenue exposures for various mixes of U.S. and international stock indexes, see this Forum thread from September 2014. This chart is from that thread:
  • Revenue Exposure — Various Mixes of U.S. and Intl Cap-weighted Stock Indexes, 2012-13
    Image
    U.S. Revenue Data for Q2-2013 from The Economist
    Global Revenue Data for Q3-2012 from Blackrock
I do agree that at some level of foreign stock allocation, an investor starts to become underexposed to the U.S. economy — which is why I've personally limited my international allocation to 40% of total equities.
Cordially, Todd

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Re: How many here follow Bogle's "no international" theory?

Post by koekebakker » Wed Aug 19, 2015 11:56 pm

1% Domestic/99% International

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Re: How many here follow Bogle's "no international" theory?

Post by rca1824 » Thu Aug 20, 2015 8:45 am

Browser wrote:Image

http://www.marketwatch.com/story/sp-500 ... 2015-08-19

Since US companies are already deriving half their revenues from foreign countries, if you invest in foreign equities wouldn't that mean that much more than half of the revenues generated by companies in your global stock portfolio be derived from non-U.S. sources? Is that what you want?
Never heard of a sales-weighted index before, and I don't think it is as efficient as a cap-weighted index. A sales-weighted index would be equivalent to an income-weighted index, which would be similar to a GDP-weighted index.

I don't think where the sales occur matters. It may slightly increase correlation but origin of sales are only one factor in returns. A lot will also depend upon the economic climate and capital markets of the owning company.
Monthly or yearly movements of stocks are often erratic and not indicative of changes in intrinsic value. Over time, however, stock prices and intrinsic value almost invariably converge. ~ WB

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Re: How many here follow Bogle's "no international" theory?

Post by Browser » Thu Aug 20, 2015 8:46 am

Thanks simplegift. That's the sort of data I was interested in and didn't know if it was available. I sort of like the 25% to international, which gives about 50% revenue exposure to the US and 50% foreign. Interesting that this would be roughly consistent with Bogle's suggestion to invest no more than about 20% in international.
We don't know where we are, or where we're going -- but we're making good time.

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Re: How many here follow Bogle's "no international" theory?

Post by JonnyDVM » Thu Aug 20, 2015 12:08 pm

Browser wrote:Image

http://www.marketwatch.com/story/sp-500 ... 2015-08-19

Since US companies are already deriving half their revenues from foreign countries, if you invest in foreign equities wouldn't that mean that much more than half of the revenues generated by companies in your global stock portfolio be derived from non-U.S. sources? Is that what you want?
As patriotic as that chart makes me feel I think my answer to your question is yes. I'm OK with that.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

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Re: How many here follow Bogle's "no international" theory?

Post by garlandwhizzer » Thu Aug 20, 2015 2:46 pm

Great chart, Simplegift, thanks for posting it again. Certainly makes Bogle's point that even a US only portfolio is widely diversified in terms of its sales and profits. This is a rational argument for a US only equity portfolio which has significant international exposure built into it or a 75/25 split if you want to get a 50 US/50 INTL revenue exposure.

On the other hand there are a few points to consider that may favor direct international exposure. First is the differing sector mixes between US and INTL. US equities tend to have more exposure to technology and healthcare and less exposure to basic materials and financials than their INTL counterparts. One can argue that including INTL increases sector diversification. Second is the question of valuations. Currently you pay 20% more for every dollar of profits generated by US companies than you do for INTL companies as measured by respective PEs of VTI and VXUS. The price to book ratio between the two shows about a 50% advantage for INTL over US. On the other hand, the US relative to INTL has better rule of law, property rights, deeper more efficient markets, and operates in the world's reserve currency that we use every day to buy things. Are these advantages relative to INTL worth 20% in terms of PE and 50% in terms of P/B? That valuation question is one that each of us must answer for himself but again one can make rational arguments for either position. Finally there is the point that the US is in a different phase of central bank action than is the rest of the world. The FED is very likely to start a slow and very gradual but prolonged tightening process in the near future whereas the rest of the world is moving in the opposite direction with greater and greater central bank stimulus applied to their economies. Might this favor INTL equities over US equities in the near and intermediate term? Good question, and again not a simple answer but something to seriously consider.

In spite of (and even perhaps because of) persistent multi-year underperformance in INTL equity relative to US, I personally have direct INTL equity exposure at 40% of equity. Hopefully this will in time reward me but like everything else about the future, I realize that it not certain.

Garland Whizzer

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Re: How many here follow Bogle's "no international" theory?

Post by JoMoney » Thu Aug 20, 2015 3:31 pm

garlandwhizzer wrote:...the differing sector mixes between US and INTL. US equities tend to have more exposure to technology and healthcare and less exposure to basic materials and financials than their INTL counterparts. One can argue that including INTL increases sector diversification. Second is the question of valuations. Currently you pay 20% more for every dollar of profits generated by US companies than you do for INTL companies as measured by respective PEs of VTI and VXUS....
There's issues trying to compare U.S. valuations to an International fund. On top of the accounting differences, different growth rates / dividend payout rates, your initial point about the differences in sector weighting plays a role in valuations as well. If you compare Technology and Financials even within the U.S. you'll find a big difference in P/E and P/B ratios. So comparing valuations on a fund that's higher in Tech (U.S.) to one higher in Financials (Intl) may just be re-emphasizing the first point.
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Re: How many here follow Bogle's "no international" theory?

Post by zaboomafoozarg » Thu Aug 20, 2015 4:31 pm

1/3 of my portfolio is international, both stocks and bonds.

Mainly because I like thirds.

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Re: How many here follow Bogle's "no international" theory?

Post by Browser » Thu Aug 20, 2015 7:37 pm

zaboomafoozarg wrote:1/3 of my portfolio is international, both stocks and bonds.

Mainly because I like thirds.
Then why not 1/3 in the U.S. instead? Any third should be as good as any other, right? And the third thing I'd like to say is that I like your way of thinking.
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Re: How many here follow Bogle's "no international" theory?

Post by jalbert » Thu Aug 20, 2015 8:08 pm

Our allocation:

24% of equities are int'l
0% of fixed income is int'l

Rationale for equities:

1. I've seen two independent studies arrive at 24/76 as the mix of non-US and US equities as the efficient portfolio. VG's recommendations changing from 70% US to 60% US in a 4 year span weakens their recommendations in my view.

2. 24% non-US splits the difference between 100% US and weighting US equities at current market cap, so it is a good compromise between either extreme from a risk management. perspective.

3. I'm also not comfortable having more than 25% of equities in a currency differing from our liabilities.

That's 3 separate criteria to support the equity allocation decision, so it feels right for us.

As far as diversifying fixed-income risk, VG's int'l bond recommendation may be fine, but our mix of stable value fund (at 4% currently and backed by CMBS's), GNMAs, and TIPs also diversifies alot of fixed-income risk without accepting the curtently paltry int'l developed market bond yields.

-jalbert

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Re: How many here follow Bogle's "no international" theory?

Post by jginseattle » Thu Aug 20, 2015 8:12 pm

I'm up to 40% of equities.

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Re: How many here follow Bogle's "no international" theory?

Post by swguy » Thu Aug 20, 2015 8:26 pm

25% of equities here.

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Re: How many here follow Bogle's "no international" theory?

Post by rnitz » Thu Aug 20, 2015 8:55 pm

30+ % of equities are Int'l (trying to get to 40%).

For those who think they are internationally diversified because US companies have international sales: Revenues are not profits. Current profits are not total return. Markets are pretty damn efficient. Diversification works.

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Re: How many here follow Bogle's "no international" theory?

Post by saurabh » Thu Aug 20, 2015 9:15 pm

NateInCT wrote:His no international theory seems to stem from his belief that the US Economy is inherently better than the international economy. I don't share that belief to be honest, especially when you look at how other developed countries have leapfrogged us in terms of education, healthcare and regulations regarding business and finance.
If Europeans are so much better than the US in education and healthcare why don't European recipients dominate the Nobel Prizes and why is pretty much all medical innovation done in the US? It also doesn't stand to reason that more regulation would imply higher returns to capital.

When I look at Europe I see anemic population growth rates, lack of economic dynamism and bureaucracy. It is not at all clear to me that owners of German, French, Italian and Spanish equities are going to do better than American. In fact with American Dollar as the worlds dominant currency (and in no danger of ever being replaced by the Euro which has now been revealed to be completely flawed), already inferior European equity returns will be further reduced by currency drag when translated to USD.

Emerging markets on the other hand I do see a legitimate role as a diversifier as their economies have stronger growth and demographic trends and cheaper valuations. My main concern with emerging markets funds has always been outsized China exposure, but looks like the current Chinese bear market will take care of that.

Americans are pretty lucky to live in the most attractive sand deepest tock market in the developed world. While there are some worrisome trends in America, its lead is so huge that if it descends into mediocrity and stagnation, most of us will be dead and gone by the time the decline becomes meaningful.

My personal international equity exposure is slightly above 20%, but that can be considered as high as 30% as some holdings like Accenture and Anheuser Busch are technically considered international equities. Within the 20% international equities only a third is emerging markets, but I am seriously considering making it half/half between foreign developed and emerging or going to all emerging for international completely.

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Re: How many here follow Bogle's "no international" theory?

Post by oldzey » Thu Aug 20, 2015 9:35 pm

56% U.S. Stocks
26% U.S. Stable Value Fund
15% U.S. Real Estate
3% U.S. Cash
0% International
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Re: How many here follow Bogle's "no international" theory?

Post by Gort » Thu Aug 20, 2015 10:43 pm

zaboomafoozarg wrote:1/3 of my portfolio is international, both stocks and bonds.

Mainly because I like thirds.
I like thirds too! 2/3 of my portfolio is USA, 1/3 international. That means I have twice as much USA as compared to international. Seems natural to me in some sort of mathematical way I can't describe.

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Re: How many here follow Bogle's "no international" theory?

Post by abuss368 » Thu Aug 20, 2015 11:58 pm

We allocate 40% of equity.
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Re: How many here follow Bogle's "no international" theory?

Post by Scotttheking » Fri Aug 21, 2015 12:29 am

Browser wrote:Image

http://www.marketwatch.com/story/sp-500 ... 2015-08-19

Since US companies are already deriving half their revenues from foreign countries, if you invest in foreign equities wouldn't that mean that much more than half of the revenues generated by companies in your global stock portfolio be derived from non-U.S. sources? Is that what you want?
The reverse is true as well: foreign companies derive income from the U.S. Think Toyota, nestle, etc.

I'm about 50/50 but haven't looked at my retirement portfolio in a while.

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Re: How many here follow Bogle's "no international" theory?

Post by truenorth418 » Fri Aug 21, 2015 4:50 am

Browser wrote:
Since US companies are already deriving half their revenues from foreign countries, if you invest in foreign equities wouldn't that mean that much more than half of the revenues generated by companies in your global stock portfolio be derived from non-U.S. sources? Is that what you want?

Wouldn't you need to account for US sales of the international companies on the other side?


Anyway, international is 28% of my equities.

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Re: How many here follow Bogle's "no international" theory?

Post by ajacobs6 » Fri Aug 21, 2015 5:53 am

This new article by Burton Malkiel makes him seem quite worried about China:

http://www.princeton.edu/~bmalkiel/Chin ... 0Folly.pdf

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Re: How many here follow Bogle's "no international" theory?

Post by stemikger » Fri Aug 21, 2015 7:49 am

I do. Never held them.
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Re: How many here follow Bogle's "no international" theory?

Post by BTDT » Fri Aug 21, 2015 7:58 am

I have 30% in international
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Re: How many here follow Bogle's "no international" theory?

Post by ajacobs6 » Fri Aug 21, 2015 7:58 am

How much of your international is in emerging markets?

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Re: How many here follow Bogle's "no international" theory?

Post by NateInCT » Fri Aug 21, 2015 2:03 pm

saurabh wrote:
NateInCT wrote:His no international theory seems to stem from his belief that the US Economy is inherently better than the international economy. I don't share that belief to be honest, especially when you look at how other developed countries have leapfrogged us in terms of education, healthcare and regulations regarding business and finance.
If Europeans are so much better than the US in education and healthcare why don't European recipients dominate the Nobel Prizes and why is pretty much all medical innovation done in the US? It also doesn't stand to reason that more regulation would imply higher returns to capital.
I never said they were so much better, but they are pulling ahead. We have a much larger population so if you correct for that, we don't have the most Nobel Prizes and besides that's not a good measure of the quality of education as a whole anyway. Nobel Prize winners are major outliers and a poor statistical measure of overall population. If you compare the U.S. to other first-world countries, we rank near the bottom in terms of education, health/healthcare, and income inequality. The key to a strong economy is a vibrant middle class as 70% of the economic activity is from consumer spending and the vast vast majority of that comes from the middle class. Those regulations i mentioned are consumer protections that help to keep said middle class healthy and large.

While i have Faith that the US will be an economic powerhouse for at least the rest of my lifetime, there is no way any of us can know that.

Either way, like you i am only investing 20% of equities in foreign markets atm as i am more comfortable investing in markets that i know, aka the US.

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Re: How many here follow Bogle's "no international" theory?

Post by saurabh » Fri Aug 21, 2015 3:01 pm

NateInCT wrote: I never said they were so much better, but they are pulling ahead. We have a much larger population so if you correct for that, we don't have the most Nobel Prizes and besides that's not a good measure of the quality of education as a whole anyway. Nobel Prize winners are major outliers and a poor statistical measure of overall population. If you compare the U.S. to other first-world countries, we rank near the bottom in terms of education, health/healthcare, and income inequality. The key to a strong economy is a vibrant middle class as 70% of the economic activity is from consumer spending and the vast vast majority of that comes from the middle class. Those regulations i mentioned are consumer protections that help to keep said middle class healthy and large.
Actually the EU has a population of 500 million, much higher than the US at 300-odd million, so US dominance is even more apparent in Nobel prizes. I don't believe income inequality matters that much or that it is a good proxy for the economic robustness of a country. Also I could easily design a measure of education and healthcare outcomes that could make the US come out at the top, it just depends on what you measure. Europe has been the promised land by your yardsticks for a long time yet its equity market performance has been pretty anemic compared to the US. If anything I see the social and economic situation in Europe deteriorating rapidly compared to America's gradual decline.

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Re: How many here follow Bogle's "no international" theory?

Post by digit8 » Fri Aug 21, 2015 3:59 pm

10% of my equities, possibly to increase as time goes on but definitely staying somewhere in the "tilt" category. I'd compare the idea of going closer to 50/50 (on a much saner level) with the idea of investing heavily in physical gold: within my lifetime, if the value of US equities crashes so much that it's a life-and-death difference in returns, I expect I'll have much bigger problems on hand then my investment portfolio.

For what it's worth, I'm considerably less confident regarding a longer timeframe: the money set aside so far for the Wee Baby Digit is in VTWSX.
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Re: How many here follow Bogle's "no international" theory?

Post by investorguy1 » Fri Aug 21, 2015 4:14 pm

Browser wrote:Image

http://www.marketwatch.com/story/sp-500 ... 2015-08-19

Since US companies are already deriving half their revenues from foreign countries, if you invest in foreign equities wouldn't that mean that much more than half of the revenues generated by companies in your global stock portfolio be derived from non-U.S. sources? Is that what you want?
The argument from the pie chart is that S&P 500 is just as diversified as a global equity portfolio. Therefore there is no need to bother with international. I think that is mistaken. Where a company gets their revenues from is only one risk factor of many. There are single country risks, political risk. As I've posted before a war could disproportionately effect US markets, currency/ inflation, taxation, national debt etc. These are all country specific risks which can be diversified.

Theory aside just look at an historical price chart of VTI compared to VEU. They are very different.

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Re: How many here follow Bogle's "no international" theory?

Post by hafius500 » Fri Aug 21, 2015 4:37 pm

saurabh wrote:It is not at all clear to me that owners of German, French, Italian and Spanish equities are going to do better than American.
IIRC, the majority of all German stocks are owned by foreigners, with the largest group of foreign investors being US investors.

Maybe these investors did not invest to earn total returns. I don't know.
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Re: How many here follow Bogle's "no international" theory?

Post by selftalk » Fri Aug 21, 2015 5:48 pm

Great chart! I currently have 20% in international but may decrease it a lot if the international gets profitable.

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Re: How many here follow Bogle's "no international" theory?

Post by gkaplan » Fri Aug 21, 2015 6:08 pm

ajacobs6 wrote:How much of your international is in emerging markets?
Thirty-Five Percent
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Re: How many here follow Bogle's "no international" theory?

Post by BogleBoogie » Fri Aug 21, 2015 6:26 pm

joe8d wrote::thumbsup to Mr Bogle. 20% International.
Ditto for me! (20%)

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