Eliminate International?

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adtx75001
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Eliminate International?

Post by adtx75001 » Sat Oct 17, 2015 11:34 am

Vanguard says need 40% international exposure Bogle says its not needed at all. Who do I follow?

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Rick Ferri
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Re: Eliminate International?

Post by Rick Ferri » Sat Oct 17, 2015 11:46 am

I wrote about this a couple of months ago: Should You Own Foreign Stocks? Bottom line, currency diversification helps and having more stocks is better than having less stocks. So I'm on the side of owning foreign.

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Re: Eliminate International?

Post by Doc » Sat Oct 17, 2015 11:48 am

Rick Ferri wrote:I wrote about this a couple of months ago: Should You Own Foreign Stocks? Bottom line, currency diversification helps and having more stocks is better than having less stocks. So I'm on the side of owning foreign.

Rick Ferri
... currency diversification helps ...

Does this mean don't use a currency hedged fund?
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: Eliminate International?

Post by Rick Ferri » Sat Oct 17, 2015 11:49 am

I do not use any international bond funds or currency hedged equity funds.

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Doc
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Re: Eliminate International?

Post by Doc » Sat Oct 17, 2015 11:51 am

Thanks Rick.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: Eliminate International?

Post by lack_ey » Sat Oct 17, 2015 11:52 am

You stick with what you have now unless you have a really good reason for changing it.

btw this comes up all the time, e.g.
viewtopic.php?t=167255
viewtopic.php?t=144519
viewtopic.php?t=157779

adtx75001
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Re: Eliminate International?

Post by adtx75001 » Sat Oct 17, 2015 11:54 am

Thank you very much huge fan of yours:) One last question what percentage of my stock holdings should be devoted to international?

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Raybo
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Re: Eliminate International?

Post by Raybo » Sat Oct 17, 2015 11:55 am

At the recent Boglehead's conference, Jack Bogle reconfirmed his belief that international funds were not needed. He showed a slide comparing the returns of US vs International Equity. It appears that US Equity has had a higher return than International Equity in the past several years. Before that, it was the other way around.

In the end, it seems like the one that predominates is random, though persistent.

Personally, I have a market weight of International (50%).
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

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Re: Eliminate International?

Post by tibbitts » Sat Oct 17, 2015 11:55 am

adtx75001 wrote:Vanguard says need 40% international exposure Bogle says its not needed at all. Who do I follow?
Perhaps neither one, since neither has any knowledge of which will turn out to be better over your investing lifetime. Sometimes when experts disagree on investing, it's because there's no predictable difference. It's not like one of them is saying to buy the most expensive active fund you can find. But the bottom line is that there are times when you just need to make up your own mind.

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Re: Eliminate International?

Post by VictoriaF » Sat Oct 17, 2015 11:57 am

adtx75001 wrote:Vanguard says need 40% international exposure Bogle says its not needed at all. Who do I follow?
At every Bogleheads conference Jack is challenged about his avoidance of international investments, and he always emphasizes that he could be wrong. The cornerstone of the Boglehead investing is broad-based, low-cost index funds. One can hold international funds and still qualify as a "good Boglehead."

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Phineas J. Whoopee
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Re: Eliminate International?

Post by Phineas J. Whoopee » Sat Oct 17, 2015 12:02 pm

What you've discovered is opinions vary.

In my opinion, looking from today, without knowing the outcome in advance, a US retirement investor doesn't need international equity (let's just focus on that), based on knowing what we know now. Adding international equity increases diversification. Knowing what we know, which doesn't include the outcome, in my opinion it would be prudent to hold a meaningful portion of equity internationally, so long as one does it inexpensively.

I think 20% of equity is about as small a chunk as one can reasonably expect to make any important difference. Global market cap fluctuates, but today is within spitting distance of 50% US, 50% other. I personally chose, years ago, to hold 40% of my stocks internationally, using Vanguard's Total International Stock Index Fund (and its predecessor before that).

It appears the biggest benefits come from making a decision and sticking with it. In that way it's like many other topics in investing.

I personally choose, at this time, not to include international fixed income. My mind could be changed, I suppose, but I don't see how adding some would make a meaningful difference in my own portfolio the way I've designed it. I view the question as a minor matter.

Other posters have other opinions, and no doubt some will offer them.

In fact, they did as I was composing.

PJW

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Re: Eliminate International?

Post by nedsaid » Sat Oct 17, 2015 12:14 pm

adtx75001 wrote:Vanguard says need 40% international exposure Bogle says its not needed at all. Who do I follow?
Vanguard.
A fool and his money are good for business.

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Re: Eliminate International?

Post by knpstr » Sat Oct 17, 2015 12:25 pm

adtx75001 wrote:Vanguard says need 40% international exposure Bogle says its not needed at all. Who do I follow?
Not needed. If you have some it is still fine.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

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Rick Ferri
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Re: Eliminate International?

Post by Rick Ferri » Sat Oct 17, 2015 12:32 pm

adtx75001 wrote: One last question what percentage of my stock holdings should be devoted to international?
OK, let's step back and look at the three legs on a successful index investing stool. They are philosophy, strategy and discipline.

Philosophy is your belief about how to achieve the returns you need to make your life easier. Do you believe you can outperform the markets with market timing or security selection, or do you believe you're better off getting a fair share of market return though a sensible long-term asset allocation and low-cost market matching funds? I jester to guess that most people who read this site believe the latter. So, philosophy is universal, meaning we are all alike.

Strategy is how you implement the philosophy. Here, we are all different. My portfolio is different than your portfolio. The asset allocation and security selection is based on each of our own individual needs and in some cases our desires and beliefs. Jack Bogle would prefer to get his international exposure through US stocks. I prefer to use between 30-40 percent in international unhedge equity. Who is right and who is wrong? Who cares! It doesn't matter much because it's the allocation to stocks and bonds, broad diversification and low fees that matters most. To use foreign or not use foreign isn't the cake, it's the icing on the cake.

One more thing, the third leg to all this is Discipline. This is the ability to implement your strategy and maintain though all market conditions. You can do this only when your philosophy is pure. You keep your philosophy pure by continuing education : read books, read this site, go to a Bogleheads' meeting, etc.

Philosophy, strategy and discipline are the three legs on a successful index investing stool. To answer your question, what percentage to put in international, it’s whatever works for you.

Rick Ferri
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Re: Eliminate International?

Post by Clive » Sat Oct 17, 2015 1:31 pm

Phineas J. Whoopee wrote:...
Global market cap fluctuates, but today is within spitting distance of 50% US, 50% other. I personally chose, years ago, to hold 40% of my stocks internationally
...
Is that not domicile though. Many of the (at least) larger firms will have a global presence. Its my understanding that more recent figures indicate that the S&P500 firms have around 50% of sales (earnings) derived from 'foreign' business exposure/activity. Some large firms that have opted to domicile elsewhere, perhaps London for instance, might have 50% of their earnings from US sales/earnings. I believe recently the largest 100 UK domiciled firms (FT100) has around 80% of earnings from foreign.

Holding foreign potentially is safer as many firms might hedge their currency 'risk' to better stabilise earnings to the currency where they've opted to domicile. A basket of (unhedged) currencies however might broadly middle road average and be safer than being heavily concentrated into a single currency alone.

During the 2008/9 financial crisis both US and UK stocks dropped by similar amounts. The GB£ however declined relatively more than US$ such that most of US stock declines were mitigated by a strengthening US$ relative to GB£ (i.e. from a UK investors perspective). A combination of -40% UK stock declines, US stock values down just a little and 50/50 of both = -20% type decline through having held 'foreign'. In the opposite direction however a US investors with 50/50 US and UK would have seen deeper losses, perhaps something more like -60%. i.e. adding foreign can reduce or increase volatility, might broadly wash, but might prove to be a god-send if your domestic turns ugly (generally better to be diversified and exposed to a higher frequency of a smaller loss than to be concentrated and exposed to a infrequent large loss).

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Phineas J. Whoopee
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Re: Eliminate International?

Post by Phineas J. Whoopee » Sat Oct 17, 2015 1:46 pm

Clive wrote:...
Is that not domicile though. Many of the (at least) larger firms will have a global presence. Its my understanding that more recent figures indicate that the S&P500 firms have around 50% of sales (earnings) derived from 'foreign' business exposure/activity. Some large firms that have opted to domicile elsewhere, perhaps London for instance, might have 50% of their earnings from US sales/earnings. I believe recently the largest 100 UK domiciled firms (FT100) has around 80% of earnings from foreign.
...
Thanks for the further thoughts, Clive.

Whether or not there is a theoretical reason one should prefer to allocate assets by domicile or countries of operation, I'm using the tools readily available to me, which are based on where the stocks are listed.

I personally think the total market argument makes more sense with respect to the listing exchange. Others disagree, and even go so far as arguing for total economy (although I don't know why they would leave out proxies for land owned by national and lower governments used as public parks, and the tax revenues spent operating them).

PJW

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Re: Eliminate International?

Post by jalbert » Sat Oct 17, 2015 1:56 pm

I think any recommendation to a US investor of percentage of equities to hold in international equities that does not include a glide path to adjust the allocation as one ages is fundamentally flawed.

A young retirement saver faces the deep risk of underperformance of US, int'l DM, or EM equities over, say, a 40-year horizon, which cannot be remedied after the fact. They also cost-average contributions smoothing out currency and market fluctuations, and have a long horizon to average out the variance of secular currency cycles.

A retiree faces the risk of short-term currency fluctations if a substantial allocation of their portfolio generates income in currencies other than the currency in which one's expenses/liabilities are denominated.

It is not hard to see that the risks and benefits of int'l diversification of these two groups differ enough that it is unlikely that the same allocation to int'l is warranted for both.

-jalbert

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Re: Eliminate International?

Post by kolea » Sat Oct 17, 2015 2:02 pm

Phineas J. Whoopee wrote:What you've discovered is opinions vary.

In my opinion, looking from today, without knowing the outcome in advance, a US retirement investor doesn't need international equity (let's just focus on that), based on knowing what we know now. Adding international equity increases diversification.
PJW
I suppose it increases diversification but what really matters is what it does for the risk adjusted return of the portfolio. And the trouble with looking at that is it becomes very time-frame dependent; there have been periods of an improved risk adjusted return, and periods of the opposite, with the last few years having a worse RAR (assuming a reasonably balanced portfolio). We really have no idea what will happen in the future, but it looks to me like the trend is that international is becoming more correlated with US equities. Higher correlation combined with the higher volatility of international will decrease the RAR of the portfolio.

Currently I have about 10% (of total assets) in international but am unsure if I will go higher than that. So, basically I am agreeing with PJW; I don't need any more.

It surprises me a bit how hard international is being pushed by Fidelity, Vanguard, Schwab, etc. Is it a coincidence that they all have something to sell me?
Kolea (pron. ko-lay-uh). Golden plover.

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Re: Eliminate International?

Post by CABob » Sat Oct 17, 2015 2:25 pm

adtx75001 wrote:Vanguard says need 40% international exposure Bogle says its not needed at all. Who do I follow?
Read all of the opinions and all of the arguments ... then ignore them all and do what you think is best and what you are comfortable with.
:?
Bob

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Re: Eliminate International?

Post by Phineas J. Whoopee » Sat Oct 17, 2015 2:32 pm

TwoByFour (two posts up),

Risk-adjusted return can only be known after the fact. Asset allocation decisions must be made before the fact.

I apologize for the monotonically increasing nature of time. :wink:

PJW

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Re: Eliminate International?

Post by backpacker » Sat Oct 17, 2015 2:44 pm

Clive wrote:
Phineas J. Whoopee wrote:...
Global market cap fluctuates, but today is within spitting distance of 50% US, 50% other. I personally chose, years ago, to hold 40% of my stocks internationally
...
Is that not domicile though. Many of the (at least) larger firms will have a global presence. Its my understanding that more recent figures indicate that the S&P500 firms have around 50% of sales (earnings) derived from 'foreign' business exposure/activity.
Read Rick's article above. Sure, US exporters get a big chunk of their revenue from overseas, but not every industry is an export industry. US utilities don't export electricity to China. US railroads don't export freight capacity to Germany. On top of that, the US market is tilted towards certain industries (like tech) and away from others (like mining). I have no desire to ignore the major mining companies, say, just because most of them are listed on the London stock exchange.

On top of that, US exports are influenced by the strength of the dollar. This is one of the reasons that, historically, the US dollar is somewhat negatively correlated with the US stock market. The US dollar goes up, US exports go down. The US dollar goes down, US exports go up. Exposure to foreign currency fluctuations, up to a point, reduces risk.

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Re: Eliminate International?

Post by Rick Ferri » Sat Oct 17, 2015 2:46 pm

I agree! :D

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Re: Eliminate International?

Post by bloom2708 » Sat Oct 17, 2015 3:07 pm

I went in the middle and have ~20% Total International.

I will likely be right and wrong on the journey.
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Re: Eliminate International?

Post by kolea » Sat Oct 17, 2015 3:53 pm

Phineas J. Whoopee wrote:TwoByFour (two posts up),

Risk-adjusted return can only be known after the fact. Asset allocation decisions must be made before the fact.
Yes, but when making AA decisions we are implicitly making assumptions about the future behavior of the assets in question. We mitigate the risk and volatility of equities with bonds because we know that worked in the past and we believe it will work in the future. You have to give some weight to the past when making decisions about the future. Perhaps I am giving more weight to the trends I see, and the experts are giving more weight to optimism than I am. It is all subjective; there is no right or wrong answer here.

I apologize for the monotonically increasing nature of time. :wink:

PJW
Does time monotonically increase? Or is that human perception? The anthropic principle and all that. Oops, off topic. :)
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Re: Eliminate International?

Post by small_index » Sat Oct 17, 2015 5:14 pm

If you believe in a value premium, you might expect international stocks to outperform U.S. stocks in some future years. You could view the high correlation between S&P 500 and Europe's stocks as a reason for 0% international, or a reason to reach higher for a 40% international allocation. Most books I've read consider a solid benefit at 20% (and a comfort level for many investors), and a likely benefit up to 40%. But I digest that reading to my own allocation of 30%.

Since I view international for diversification, I actually favor emerging markets and small international funds rather than the developed markets that occupy most of Vanguard's Total International fund. Avoiding the typical 85% allocation to developed markets also could be an answer to those who say the S&P 500 is too highly correlated with developed markets.

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Re: Eliminate International?

Post by selftalk » Sat Oct 17, 2015 5:20 pm

Again Bogle and Buffett certainly have more knowledge about this international allocation than most people and I side with them. I know that international has been the under performer for a good while and maybe a better value at this time but they both have earned the same returns over the very long term which of course doesn`t mean it will be the same in the future but I personally like to keep it simple so I buy VTSAX or VIT only and feel comfortable. I realize my mental comfort level is not for everyone.

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Re: Eliminate International?

Post by VictoriaF » Sat Oct 17, 2015 5:41 pm

backpacker wrote:On top of that, US exports are influenced by the strength of the dollar. This is one of the reasons that, historically, the US dollar is somewhat negatively correlated with the US stock market. The US dollar goes up, US exports go down. The US dollar goes down, US exports go up. Exposure to foreign currency fluctuations, up to a point, reduces risk.
And on top of that, many foreign companies conduct business in the U.S. just as American companies conduct business abroad. Investing internationally, e.g., in Honda and Sony, implies some domestic investing.

Victoria
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Re: Eliminate International?

Post by southbay » Sat Oct 17, 2015 5:47 pm

pick a % and stick to it. most recommend no more than 50%.

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Re: Eliminate International?

Post by Rodc » Sat Oct 17, 2015 6:53 pm

Why would one want to own Ford and Chevy and not also own Honda, Toyota and BMW etc if you can own them all at low cost?

That said, diversifying across US and international has historically not been at all sensitive to the precise split. Due to the globalization of trade and the rise of large multinational companies this is likely to continue if one sticks to cap weighted funds.

Pick an allocation and be done with it. Move on to something that matters more.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Vanguard's Recommendation for non-U.S. stocks

Post by Taylor Larimore » Sat Oct 17, 2015 7:07 pm

Vanguard says need 40% international exposure. Bogle says its not needed at all.
This is Vanguard's recommendation:
This paper concludes that although no one answer fits all investors,
empirical and practical considerations suggest a reasonable starting
allocation to non-U.S. stocks of 20%, with an upper limit based on
global market capitalization,
subject to the investor’s perspective on
the short- and long-term trade-offs.
http://www.vanguard.com/pdf/ISGGEB.pdf

Best wishes.
Taylor
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Re: Vanguard's Recommendation for non-U.S. stocks

Post by Rodc » Sat Oct 17, 2015 7:39 pm

Taylor Larimore wrote:
Vanguard says need 40% international exposure. Bogle says its not needed at all.
This is Vanguard's recommendation:
This paper concludes that although no one answer fits all investors,
empirical and practical considerations suggest a reasonable starting
allocation to non-U.S. stocks of 20%, with an upper limit based on
global market capitalization,
subject to the investor’s perspective on
the short- and long-term trade-offs.
http://www.vanguard.com/pdf/ISGGEB.pdf

Best wishes.
Taylor
How very sensible! :happy
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: Eliminate International?

Post by BogleBoogie » Sat Oct 17, 2015 9:35 pm

I do 20% of my equities in an international index fund. Like others said, it is a choice. I'm not trying to beat the average investor or take additional risk by doing this. For me, the 20% is is for the sake of diversification. It may get me better returns or it may not. If the "sweet spot" is between 0% and 40%, I like 20%!

Whatever you decide, write down WHY you are doing this and stick with it. Don't let market fluctuations change your allocation. If international drops huge, I'll be buying more to get back to 20% and vice versa. Best of luck!

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Re: Eliminate International?

Post by in_reality » Sat Oct 17, 2015 11:15 pm

BogleBoogie wrote:Whatever you decide, write down WHY you are doing this and stick with it. Don't let market fluctuations change your allocation. If international drops huge, I'll be buying more to get back to 20% and vice versa. Best of luck!
I really think that is the whole point. Money flows to the hot spots so if emerging booms, money will flow there and maybe you will rebalance out. If the US booms and valuations get high, rebalance out.

Money flows to the hot spots, so I don't want to be all in one spot in case the money is flowing out of that spot.

I don't expect international --even emerging -- to outperform long term. I rather expect a smoother ride as different economies are on different cycles, even if sometimes they go in crisis or boom together.

So if something drops, and you end up overweight someplace else -- rebalance and keep your AA.

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Re: Eliminate International?

Post by Erwin » Sun Oct 18, 2015 12:07 am

I suggest you that you consider the following:
The Global total Market is by definition perfectly diversified, i.e., it is impossible for any other portfolio to have both higher expected return and lower risk than the market. Why? Simply because it is the collective judgement of all investors. It is like going to an auction where all investors, worldwide, participate.
There are been multiple attempts to pinpoint what it means in terms of allocation, obviously it is a moving target, but a very slow one. The latest research on the subject that I found is the 2014 paper by Attaluri, Global Invested Capital Market. see http://papers.ssrn.com/sol3/papers.cfm? ... id=2401754. Basically, if I remember well, it proposes the allocation based on Global Market Capitalization to be about:
50% U.S.
37.5% Developed world ex U.S.
12.5% Emerging Markets
Erwin

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Re: Eliminate International?

Post by visualguy » Sun Oct 18, 2015 12:38 am

International such as Vanguard Total Intl was recently back to what it was 15 years ago. Quite frightening... 15 years is long term in my opinion.

It's one of the reasons I'm quite skeptical of the Boglehead approach in general. You can be in the market for seriously long periods of time without getting anywhere. Another reason I have trouble with this approach is that none of the people I know personally who are doing very well financially believe in this approach or use it with their after-tax money.

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Re: Eliminate International?

Post by Dandy » Sun Oct 18, 2015 5:18 am

In retirement I have a small allocation to international equities. I am not convinced that getting near a global weighted equity allocation is all that important. I treat international equities as a tilt like you would REITS. It does provide some diversity. I think international equities have more risk and therefore more opportunity for reward. My retirement goal is more asset preservation than growth so the additional risk/reward of international fits better as a tilt percentage.

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Re: Eliminate International?

Post by Call_Me_Op » Sun Oct 18, 2015 6:43 am

I have been 50/50 US/International for many years and plan to stay the course. Seems to me that approximating global market cap is a good starting point, just like approximating US market cap is a good starting point for the US portion. I also tilt toward small cap because my equity allocation is small, my philosophy being to take more (systematic) risk with less money.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Eliminate International?

Post by Erwin » Sun Oct 18, 2015 8:59 am

Dandy wrote:In retirement I have a small allocation to international equities. I am not convinced that getting near a global weighted equity allocation is all that important. I treat international equities as a tilt like you would REITS. It does provide some diversity. I think international equities have more risk and therefore more opportunity for reward. My retirement goal is more asset preservation than growth so the additional risk/reward of international fits better as a tilt percentage.
By doing what you do, essentially by not holding the global market, you have practically stopped being "passive", since Investing beyond the market is a bet that you are right and the market is wrong.
Erwin

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Correction

Post by Taylor Larimore » Sun Oct 18, 2015 9:08 am

International such as Vanguard Total Intl was recently back to what it was 15 years ago. Quite frightening.
This statement is incorrect. $10,000 invested in Vanguard Total International Index Fund (VGTSX) 15-year's ago is now worth approximately $15,000--a 50% increase.

http://performance.morningstar.com/fund ... ture=en_US

Best wishes.
Taylor
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Re: Eliminate International?

Post by pkcrafter » Sun Oct 18, 2015 9:35 am

Bogle's view of international.
Bogle famously keeps his portfolio entirely in U.S. markets. This isn't because he's U.S.-centric: In fact, he pointed out the inconsistency of even calling the rest of the world "international." He just believes in placing bets based on what he knows
And, of course, Bogle knows S&P500. My interpretation of this is Bogle has a bit of a bias. He's not anti-international, he's just pro U.S. market index.

http://www.cnbc.com/2015/10/14/jack-bog ... -rest.html

The quoted comment is in the text.

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Re: Eliminate International?

Post by sheneron » Sun Oct 18, 2015 9:48 am

I go 100% equity and 50/50 US/International because I ain't scared. I am in it to win it baby.

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in_reality
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Re: Eliminate International?

Post by in_reality » Sun Oct 18, 2015 10:06 am

Rick Ferri wrote:Bottom line, currency diversification helps

Rick Ferri
In what way? Currency risk is not compensated. It will increase the volatility of the portfolio won't it?

Is it that it will diversify economic and political risks (say for example in the case the U.S. Gov. shuts down because politicians just can't agree and the dollar plummets)?

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siamond
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Re: Eliminate International?

Post by siamond » Sun Oct 18, 2015 10:25 am

Diversification is about the only free lunch one can find in investing. Even if US and International seem to get more correlated (statistically true, although recently, they were clearly not), this remains a free lunch. Why not take it... This is how one of the Vanguard key executives explained their decision at the last Boglehead conference (while readily admitting that Jack keeps giving him a hard time about it!).

Another perspective is that the US returns were significantly better than Int'l in the past century, but if you eliminate the first half of the century (where Europe and Japan were pummeled by WW-I and WW-II while the US escaped domestic disaster), then stocks returns got very much aligned. Here are charts from the Credit Suisse showing the point (expressed in US$). And this isn't a starting point thing, I checked with other starting points in the 50s and 60s, and this remains fairly true.

Image

So... I'm back to my point. Why not take the free lunch. Isn't that very Boglehead-ish? :sharebeer

Rodc
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Re: Eliminate International?

Post by Rodc » Sun Oct 18, 2015 11:02 am

The Global total Market is by definition perfectly diversified, i.e., it is impossible for any other portfolio to have both higher expected return and lower risk than the market. Why? Simply because it is the collective judgement of all investors. It is like going to an auction where all investors, worldwide, participate.
That is like in freshman physics where the professor says something like, "Let's assume billiard balls roll with no friction and all collisions are perfectly elastic." Not a bad zeroth order assumption for building a simple model that is not really reality.

And in fact it is not true even in theory. What is true in theory is the cap weighted universe of risky investments is optimal - stocks being only a modest slice of the entire investment pie, cap weighted stocks is certainly not theoretically optimal.

I don't even think it is possible to define "perfectly diversified" much less achieve it.

What is optimal will depend on your goals and assumptions. And you will never know what is optimal even if such a thing exists. (claiming one certain portfolio is optimal makes as much sense as saying one particular car is optimal) One person may be helped by currency diversification while another is hurt, for example.

Fortunately there is no need to worry about optimal as there is wide range that is close enough.

All that said, a cap weighted stock fund has a lot going for it: plenty of diversification, low costs to run, low cap gain due to low turn over, low internal trading costs, no manager risk.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

visualguy
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Re: Correction

Post by visualguy » Sun Oct 18, 2015 11:37 am

Taylor Larimore wrote:
International such as Vanguard Total Intl was recently back to what it was 15 years ago. Quite frightening.
This statement is incorrect. $10,000 invested in Vanguard Total International Index Fund (VGTSX) 15-year's ago is now worth approximately $15,000--a 50% increase.

http://performance.morningstar.com/fund ... ture=en_US

Best wishes.
Taylor
There was some return thanks to dividends. The tax-adjusted 15-year return of VGTSX is 2.65% (10-year is 2.22%, and 5-year is 1.13%):

http://performance.morningstar.com/fund ... ture=en-US

It's pathetic, and not worth the risks and volatility that you have to put up with.

The 15-year tax-adjusted return on my house is almost double that of VGTSX...

John3754
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Re: Correction

Post by John3754 » Sun Oct 18, 2015 11:40 am

visualguy wrote:
Taylor Larimore wrote:
International such as Vanguard Total Intl was recently back to what it was 15 years ago. Quite frightening.
This statement is incorrect. $10,000 invested in Vanguard Total International Index Fund (VGTSX) 15-year's ago is now worth approximately $15,000--a 50% increase.

http://performance.morningstar.com/fund ... ture=en_US

Best wishes.
Taylor
There was some return thanks to dividends. The tax-adjusted 15-year return of VGTSX is 2.65% (10-year is 2.22%, and 5-year is 1.13%):

http://performance.morningstar.com/fund ... ture=en-US

It's pathetic, and not worth the risks and volatility that you have to put up with.

The 15-year tax-adjusted return on my house is almost double that of VGTSX...
If only you could tell me what the next 15 years will look like.

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rustymutt
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Re: Eliminate International?

Post by rustymutt » Sun Oct 18, 2015 11:47 am

Rick Ferri wrote:I wrote about this a couple of months ago: Should You Own Foreign Stocks? Bottom line, currency diversification helps and having more stocks is better than having less stocks. So I'm on the side of owning foreign.

Rick Ferri
Thank you Rick, I agree that's it's sound investing to own foreign indexes as well. The right funds/ETFs make all the difference.
Keeping your cost low, and furthers diversification.

We hope at least.
Last edited by rustymutt on Sun Oct 18, 2015 4:03 pm, edited 1 time in total.
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Big Dog
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Re: Eliminate International?

Post by Big Dog » Sun Oct 18, 2015 12:01 pm

Why would one want to own Ford and Chevy and not also own Honda, Toyota and BMW etc
to me, the short answer is VW. Having worked extensively with international subs, I've seen the shenanigans that are acceptable behavior overseas. Three sets of books: no problem. Sign a multi-million deal with Russia? Easy, and they will take it over within a decade, and the investment is guaranteed to be worth pennies on the dollar.

But then, that's what allows me to sleep well at night; that, and 100% equity AA for 30+ years.

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Re: Eliminate International?

Post by leonard » Sun Oct 18, 2015 12:04 pm

Big Dog wrote:
Why would one want to own Ford and Chevy and not also own Honda, Toyota and BMW etc
to me, the short answer is VW.
Yes. Because the Germans are known to be easy on regulation.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

leonard
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Re: Eliminate International?

Post by leonard » Sun Oct 18, 2015 12:06 pm

adtx75001 wrote:Vanguard says need 40% international exposure Bogle says its not needed at all. Who do I follow?
Don't "follow". Get the facts and make a decision.

I think some amount of international between 20-50% increases diversification, historically provides better risk adjusted returns. I don't think it's incredibly important to hit the exact right split.

With full disclosure - my target is 50% Int'l stocks.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

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