Should I follow Jack Bogle in "I don't do International"

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SoundInvesting
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Should I follow Jack Bogle in "I don't do International"

Post by SoundInvesting » Sun Dec 13, 2015 6:18 pm

Recently there was an interview with Jack Bogle on Morningstar regarding investing in international equities. Bogle states in this interview that he does not invest in international equities with the uncertainty in the world economy. "What are you buying?" - Bogle notes that people investing in an international index fund have the top 3 largest investments in 1) Great Britain 2) Japan and 3) France. He then goes on to say that he thinks it is unlikely that these 3 countries will outpace "investment return" of the United States equities in the next decade. He sites as some of his reasons that the US will do better because the US has the best, most advanced economy, and US equities have share holder protections that International equities do not have. If Bogle is right, then the US will have a better performing return in stocks and has less risk due to the share holder protections. I have also read in other articles interviewing Jack Bogle where Mr. Bogle mentions the added risk of currency risk adding to the risk of international investments.

So, it seems clear that Bogle thinks that United States equities will perform better and be less risky compared to international equities. However, it seems that a lot of other people think that investing in international equities is a good idea. I read that Vanguard Research Group recommends a 20% investment in international equities. I also read in that Charles Schwab stated investing in international equities decreases risk and increases returns. As far as currency risk goes, I have read several statements from Morningstar and others that the increasing and decreasing return of international stocks from currency changes cancel each other out over time.

What about the Bogleheads in regards to investing in international equities? Do Bogleheads disagree with Mr. Bogle and recommend investing in international stocks? If Bogleheads do think investing in international is a good way to invest, what are the reasons for doing so?

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Re: Should I follow Jack Bogle in "I don't do International"

Post by mister_sparkle » Sun Dec 13, 2015 6:26 pm

I allocate 20% to international. It's been beaten down pretty badly this year, in part due to the strong dollar, but I'm not confident enough in my prognostication abilities to think that the tide won't turn at some point in the future.

Also, my time horizon is long enough that I only need international to rebound in 10-20 years.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by NoRoboGuy » Sun Dec 13, 2015 6:27 pm

There are already many threads and polls here on this subject. Many, but not all Bogleheads include international within their stock allocation. Diversification is one of the few "free lunches" in investing, and international provides it.
There is no free lunch.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by arcticpineapplecorp. » Sun Dec 13, 2015 6:38 pm

This question has been answered at length. You can find some of the past threads at the following link:

https://www.google.com/search?sitesearc ... ernational+

In the past Vanguard's recommendation was between 20% and 40% international. You may read more about this (at the link below) which explains how they concluded that adding international has (in the past, the future may be different) decreased volatility as it increased diversification.

https://personal.vanguard.com/pdf/ISGGEB.pdf

Vanguard's Target Date Retirement funds used to contain 30% (considered the sweet spot in the past) international, but over the past year I believe they announced they were increasing the percentage of international stock to 40%. How the market is truly allocated is around 45% U.S. and 55% international at present (this may change in the future).

Some people are comfortable going 50/50 to get closer to the actual market cap weightings. Others are not because of added risk investing internationally known as currency risk (which can both help at times, and hurt at times). But know that investing solely in the U.S. subjects you to an additional risk that you don't have when you invest internationally. That is known as country risk. What happened to Japan between 1990 and present is often used as an example (for better or worse) for the risk of investing solely in your home country.

If I had to guess (there's probably a poll on bogleheads, to know for sure) I would say many bogleheads hover between the 20%-40% range, and some go up to 50% and some could have 0%. It's an individual decision. Yes, international's a little more expensive than a total U.S. stock market index fund but it gets you around 6000 additional companies for around 9000 total (when combined with U.S.) instead of just around 3000 U.S. solely. Also, in theory you get some protection since all markets don't usually (2008 was clearly an exception) decline at the same time or by the same amount. But they also don't increase at the same time or by the same amount either.

While I know most respect Mr. Bogle's opinions and advice, they also may differ with him (and have done so on this issue, as well as others). This board offers a forum for healthy, respectful debate and people can give their opinions and evidence to back up any claims they make. There's no way to know if Mr. Bogle will be right or wrong (about investing in the U.S. solely) in advance and even then over what time frame are we talking about? Could he will be correct over the next 23 years, but incorrect over the next 37 years? Sure. There's no way to know until the ballgame's over. So the best thing to do if you haven't formed your own opinion is to listen to the opinions and evidence presented by others, mull over the disparate ideas in your head over a period of time and draw your own conclusions.

Hope that helps.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Re: Should I follow Jack Bogle in "I don't do International"

Post by oldzey » Sun Dec 13, 2015 6:55 pm

I'm with Jack in that if you want to do up to 20% in international equities, go ahead.

I don't personally own any international equities, but if I did, I'd do about 15%

I have a 3 fund portfolio-ish setup with commercial real-estate (15%) instead of international equities.
Last edited by oldzey on Sun Dec 13, 2015 6:56 pm, edited 1 time in total.
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Re: Should I follow Jack Bogle in "I don't do International"

Post by fortyofforty » Sun Dec 13, 2015 6:56 pm

If you choose to invest in international, you wouldn't be too wrong. If you choose not to invest in international, you wouldn't be too wrong. Nobody knows. Most of us do invest at least part of our money in international equities. I lean heavily towards LifeStrategy, and those funds have an international exposure. Only time will tell, and then it'll be too late.
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Re: Should I follow Jack Bogle in "I don't do International"

Post by selftalk » Sun Dec 13, 2015 7:16 pm

Not that Mr. Bogle may be wrong but I`d side with him. His experience is pretty good.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by cfs » Sun Dec 13, 2015 7:21 pm

Callan Tables

You can take a look at the The Callan Periodic Table of Investment Returns. Note that the so-called "Submerging Markets" are not having a good year, but in the past they have smoked [pun intended] the rest of the markets (look at 2003-2007). Proceed with caution.

Good luck and have a Feliz Navidad.
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Re: Should I follow Jack Bogle in "I don't do International"

Post by FreeAtLast » Sun Dec 13, 2015 7:48 pm

cfs wrote:Callan Tables

You can take a look at the The Callan Periodic Table of Investment Returns. Note that the so-called "Submerging Markets" are not having a good year, but in the past they have smoked [pun intended] the rest of the markets (look at 2003-2007). Proceed with caution.

Good luck and have a Feliz Navidad.
+1. The Callan Tables were what finally persuaded me to make 20% of my stock funds international.
Illegitimi non carborundum.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by Peter Foley » Sun Dec 13, 2015 7:57 pm

This question has indeed been rehashed a few times. While I am not a huge fan of international [different account standards, currency exchanges, etc.] I do believe it is prudent to have some diversification there. My reasoning is that I would want to avoid the experience that a number of Japanese shareholders have had over the past couple of decades. I tend to run somewhere from 10% to 20% of equities in international. When I last updated account values almost a year ago I was at 13% of equities, about 7% of total investments.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by baw703916 » Sun Dec 13, 2015 8:18 pm

I think the OP should read through the various threads on this topic and maybe this document from Vanguard:

https://personal.vanguard.com/pdf/icriecr.pdf

Then make one's own decision. You shouldn't invest in international (or not) based on what Mr. Bogle or anyone else does, you should decide based on our financial situation, life circumstances, and the available information. Then stay the course (of course :) )
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Taylor Larimore
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A foreseeable difference ?

Post by Taylor Larimore » Sun Dec 13, 2015 8:28 pm

it seems clear that Bogle thinks that United States equities will perform better and be less risky compared to international equities. However, it seems that a lot of other people think that investing in international equities is a good idea.
SoundInvesting:

When experts disagree it is often because it does not make a foreseeable difference.

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

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Re: Should I follow Jack Bogle in "I don't do International"

Post by WolfgangPauli » Sun Dec 13, 2015 9:05 pm

I have not gone into international funds because I feel, with my core holding being the total stock market index fund, I am already very exposed to international business. Most of those companies, while US Based, do incredible business world wide. So, if your fund owns APPLE are you investing internationally? I believe I am. Their future depends on sales overseas so I am comfortable being in the total stock market index fund and calling that my "international" exposure.
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Re: Should I follow Jack Bogle in "I don't do International"

Post by joe8d » Sun Dec 13, 2015 9:34 pm

15-20% International is where I am.
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Re: Should I follow Jack Bogle in "I don't do International"

Post by furwut » Sun Dec 13, 2015 9:47 pm

WolfgangPauli wrote:I have not gone into international funds because I feel, with my core holding being the total stock market index fund, I am already very exposed to international business. Most of those companies, while US Based, do incredible business world wide. So, if your fund owns APPLE are you investing internationally? I believe I am. Their future depends on sales overseas so I am comfortable being in the total stock market index fund and calling that my "international" exposure.
FYI - This is Vanguard's counter argument.
Can multinational corporations provide enough exposure?
One common question regarding exposure to non-U.S. stocks is whether enough coverage
of foreign markets is embedded in the prices
of U.S.-domiciled multinational companies such as McDonald’s, Amazon.com, or ExxonMobil.
The thinking goes that because many large firms generate a significant portion of their revenue from foreign operations, the diversification benefits of global investing are already reflected in the prices and performance of large U.S. firms.
While this aspect of globalization cannot be ignored (and certainly can have an impact on investors’ portfolios), we believe it still makes sense for investors to hold non-U.S.-domiciled investments, for several reasons. First, companies’ historical performance has been more highly correlated with their domestic markets than foreign markets, regardless of where business is conducted (Rowland and Tesar, 2000; McEnally and Cristophe, 2000). For example, for the 50
largest U.S. companies, we found that although the median firm conducted 57% of its business outside of the United States, the firm’s correlation to the U.S. market was 0.52. On the other hand, the median firm’s correlation to the non-U.S. market was 0.45. In addition, of the 50 largest U.S. stocks, 39 were more highly correlated to the U.S. than non-U.S. markets.
The second key point concerns sector diversification. As discussed by Bhagat (2011), a portfolio made up solely of U.S. firms, which are more concentrated in biotechnology, computer equipment, information technology and IT services, and software, would be underweighted in “old world” industries such as electrical equipment, durable household goods, and automobiles.
In other words, an all-U.S. portfolio would lose
not just investment opportunities but also the diversification benefits of a portfolio that’s more evenly distributed across industries.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by dharrythomas » Sun Dec 13, 2015 10:01 pm

I own some international.

Who is right is (a) time period dependent, and (2) unknowable in advance.

Good luck.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by rob » Sun Dec 13, 2015 10:03 pm

No - But I'm probably wrong :D
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Re: Should I follow Jack Bogle in "I don't do International"

Post by GoldenFinch » Sun Dec 13, 2015 10:17 pm

We have only 10% allocated to international and it isn't pretty. Based on experience we will probably buy more since the category is down, but it doesn't feel very good. Emotion is not supposed to be part of investing, so robotic like (gulp), we will definitely buy more (ugh). I hope this is smart (hope.....). If not, I think we'll be just fine. I am a fan of diversifying.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by IPer » Sun Dec 13, 2015 10:25 pm

You could, would you be staying the course if you did?
What have you already put in your plan? You do have notes
don't you? I personally have a target of no less than 20% International
and am consistently below that, around 13%, for various reasons,
none of them being I think that that market will do differently or
better or that having it will reduce my risk or even give diversity.
I think, like Jack, who knows Jack, that 20% in International isn't
going to make much of a difference anyways because the majority
of US based companies have revenue streams over seas and so
forth. So really for me it could be 0% or 20% and I doubt it will make
that much difference over time, HOWEVER, it is not something I
am constantly re evaluating and changing. You should know that
re evaluating and changing things too often if one of the main
areas that can lead to losses.

The best way to do it is to set a course, and throw cash in there as
it comes, and evaluate it over the long haul, every 10 years or so.
If you are listening to the heads talk and now saying "oh, they don't
like International like they did last year, they are the experts, I better
listen" then you already have a hole in your financial plan. I am not saying
to ignore them, though it would suit most on this board, and most
investors in general way better. I watch the headlines, read them, and
usually have a laugh or two, sometimes I smack myself for wasting the
time, sometimes I congratulate myself for gleaning some cheap entertainment
over there. But I never (at least not in the last 15 years) have bought or sold
or reallocated based on what I think these guys "mean"...because anyone who
studies Mr Market (Ms Market, really guys!) and says they can derive a plan
other than something broad and general like Mr Bogle or Graham have outlined
should be shunned, while your other hand is on your pocketbook!
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Re: Should I follow Jack Bogle in "I don't do International"

Post by climber2020 » Sun Dec 13, 2015 10:25 pm

SoundInvesting wrote:Recently there was an interview with Jack Bogle on Morningstar regarding investing in international equities. Bogle states in this interview that he does not invest in international equities with the uncertainty in the world economy. "What are you buying?" - Bogle notes that people investing in an international index fund have the top 3 largest investments in 1) Great Britain 2) Japan and 3) France. He then goes on to say that he thinks it is unlikely that these 3 countries will outpace "investment return" of the United States equities in the next decade. He sites as some of his reasons that the US will do better because the US has the best, most advanced economy, and US equities have share holder protections that International equities do not have. If Bogle is right, then the US will have a better performing return in stocks and has less risk due to the share holder protections. I have also read in other articles interviewing Jack Bogle where Mr. Bogle mentions the added risk of currency risk adding to the risk of international investments.

So, it seems clear that Bogle thinks that United States equities will perform better and be less risky compared to international equities. However, it seems that a lot of other people think that investing in international equities is a good idea. I read that Vanguard Research Group recommends a 20% investment in international equities. I also read in that Charles Schwab stated investing in international equities decreases risk and increases returns. As far as currency risk goes, I have read several statements from Morningstar and others that the increasing and decreasing return of international stocks from currency changes cancel each other out over time.

What about the Bogleheads in regards to investing in international equities? Do Bogleheads disagree with Mr. Bogle and recommend investing in international stocks? If Bogleheads do think investing in international is a good way to invest, what are the reasons for doing so?
Regardless of everything you just wrote, if International had consistently outperformed US by a wide margin over the last 5 years, would you still be asking this question?

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Re: Should I follow Jack Bogle in "I don't do International"

Post by IPer » Sun Dec 13, 2015 10:26 pm

fortyofforty wrote:If you choose to invest in international, you wouldn't be too wrong. If you choose not to invest in international, you wouldn't be too wrong. Nobody knows. Most of us do invest at least part of our money in international equities. I lean heavily towards LifeStrategy, and those funds have an international exposure. Only time will tell, and then it'll be too late.
+1 Hark say the lark!
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patrick013
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Re: Should I follow Jack Bogle in "I don't do International"

Post by patrick013 » Sun Dec 13, 2015 10:35 pm

I agree with Jack Bogle, especially regarding emerging. An
article I read reveals things like a worker shortage, everybody
is either very young or very old. But emerging govt. bonds
looks tempting.

I think domestic returns will be more than adequate.
age in bonds, buy-and-hold, 10 year business cycle

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Re: Should I follow Jack Bogle in "I don't do International"

Post by baw703916 » Sun Dec 13, 2015 10:36 pm

IPer wrote: Mr Market (Ms Market, really guys!)
Actually Mr. Market may be more appropriate after all. In Benjamin Graham's depiction, Mr. Market was all impulsivity and no self-control, which studies have shown tends do describe male investors (non-Boglehead ones, at any rate) more than female investors. :)
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Re: Should I follow Jack Bogle in "I don't do International"

Post by IPer » Sun Dec 13, 2015 10:40 pm

baw703916 wrote:
IPer wrote: Mr Market (Ms Market, really guys!)
Actually Mr. Market may be more appropriate after all. In Benjamin Graham's depiction, Mr. Market was all impulsivity and no self-control, which studies have shown tends do describe male investors (non-Boglehead ones, at any rate) more than female investors. :)
Yes, but our Market seems to hold a perfect blend of Venus as well as Mars, perhaps we should look to the stars for guidance!
Read the Wiki Wiki !

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Re: Should I follow Jack Bogle in "I don't do International"

Post by sawhorse » Sun Dec 13, 2015 11:03 pm

International stocks are a strange beast in terms of risks. In the one hand, they are more volatile and exhibit exaggerated rises and falls. In that sense, it is riskier to hold them. On the other hand, they can provide diversification and improve a portfolio when your home country experiences a long brutal bear market. In that sense, it is less risky to hold them.

Bogle's arguments could have easily been made by the Japanese 25 years ago, so I don't have enough faith in those arguments to forgo international diversification. See the most recent episode in my series on Japan:
viewtopic.php?f=10&t=179398

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Re: Should I follow Jack Bogle in "I don't do International"

Post by ClevrChico » Sun Dec 13, 2015 11:26 pm

I've ratcheted up international to match Vanguard's 40% target allocation in their target retirement funds. This hasn't made any money this year, but maybe I bought it on sale, right?

I read an article on the shrinking middle class in the US. I think International will have better growth. At the very least, it increases diversification.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by siamond » Sun Dec 13, 2015 11:32 pm

Hedging your bets would seem like sound investing (pun intended), wouldn't it?

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Re: Should I follow Jack Bogle in "I don't do International"

Post by boglerdude » Sun Dec 13, 2015 11:39 pm

Index theory says you follow the market cap which is currently ~50% US

No "looking under the hood" at the component countries or businesses and estimating their value yourself. You use the market's collective "wisdom".

Bogle keeps his advice simple for his audience, passive investors. He's also a patriot, and in fact Americans might benefit geopolitically by keeping assets in the US.

On the other hand, this huge bias for US stock, makes international underpriced ;)

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Re: Should I follow Jack Bogle in "I don't do International"

Post by jj987 » Sun Dec 13, 2015 11:56 pm

I am sitting around 18% international exposure in total (Roth, Traditional, Taxable, 401K). I will probably increase that amount somewhat this year with my IRA contribution. I have heard from multiple interview with analysts that owning a "US domestic" stock is not really owning "domestic" since we live in such a global economy. Coca-Cola, Pfizer (well not for long), Apple, Google, Intel, ExxonMobile, are all US HQ companies, but a good part of their revenue stream comes from overseas. Also BP, Royal Dutch Shell, GSK, Novartis, Airbus are all overseas HQ companies that do business in the US; which I am sure a large part of their revenue comes from as well.

I see owning an int'l fund gives me companies that are overseas and may not be listed in the US markets. Given my current situation in life I am free to accept the extra "risk" int'l may pose.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by JoMoney » Mon Dec 14, 2015 5:25 am

I'm one of the few dissidents who openly follows the advice of Jack Bogle and Warren Buffett. I have the entirety of my equities in S&P500 funds.
If you've ever looked at the constituency, where the revenues are coming from, and even where some of the companies are headquartered, it would be hard to say I'm not investing internationally.
You need to get it settled in your own mind whether or not such a portfolio is appropriate for you. If it's going to be a source of consternation where you flip flop and get in and out and can't seem to get settled on, you should probably find some middle ground.
Jack Bogle says he doesn't think it's necessary. Others suggest holding market weight (which would be about 50%). Jack says if you feel you must do it, keep it at about 20% ... which seems like a fair "middle way" to me (if you really feel you must have some dedicated Intl allocation).

I'd also suggest framing it in ways that consider things someone might actually know. Nobody knows what the relative returns are going to be over some particular time period. But you can look at the expenses of holding Intl (which may be more than ER when considering foreign tax withholding and transaction expenses that can be somewhat hidden). You can also take a look at the risks and how readily you accept the idea that the ever broader "diversification" is actually making it less risky along the factors that you would actually rank as making a holding more or less risky.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Should I follow Jack Bogle in "I don't do International"

Post by trasmuss » Mon Dec 14, 2015 6:06 am

While Morningstar may be correct that currency risks balance out over time it is important to point out that it can take a long time. Perhaps someone can come up with a long term chart showing the US dollar vs. others. My recollection of international returns is that they seem to go in trends and that the trends can last for quite some time.

The dollar has been strong for quite a while now (look at the 1, 5, and 10 year returns of Total Stock vs. Total International). As the Fed raises rates and if it is true other countries are still lowering rates my understanding is that the dollar will become even stronger. If this is true 2016 may be another year of underperformance for Total International.

This may lead someone to ask if currency diversification is important and valuable. I may wonder why there isn't a hedged international option similar to the hedged option in bonds. How much would it increase the expenses?

With all my doubts I am currently at 19% of equities in international. I seem to keep putting additional funds into Total International to keep it at 20%. I know this will one day reverse and international will once again beat domestic; and that trend could last years.

I have never considered investing in currencies. And yet it appears that is what I am doing with my investment in Total International.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by stemikger » Mon Dec 14, 2015 6:42 am

SoundInvesting wrote:Recently there was an interview with Jack Bogle on Morningstar regarding investing in international equities. Bogle states in this interview that he does not invest in international equities with the uncertainty in the world economy. "What are you buying?" - Bogle notes that people investing in an international index fund have the top 3 largest investments in 1) Great Britain 2) Japan and 3) France. He then goes on to say that he thinks it is unlikely that these 3 countries will outpace "investment return" of the United States equities in the next decade. He sites as some of his reasons that the US will do better because the US has the best, most advanced economy, and US equities have share holder protections that International equities do not have. If Bogle is right, then the US will have a better performing return in stocks and has less risk due to the share holder protections. I have also read in other articles interviewing Jack Bogle where Mr. Bogle mentions the added risk of currency risk adding to the risk of international investments.

So, it seems clear that Bogle thinks that United States equities will perform better and be less risky compared to international equities. However, it seems that a lot of other people think that investing in international equities is a good idea. I read that Vanguard Research Group recommends a 20% investment in international equities. I also read in that Charles Schwab stated investing in international equities decreases risk and increases returns. As far as currency risk goes, I have read several statements from Morningstar and others that the increasing and decreasing return of international stocks from currency changes cancel each other out over time.

What about the Bogleheads in regards to investing in international equities? Do Bogleheads disagree with Mr. Bogle and recommend investing in international stocks? If Bogleheads do think investing in international is a good way to invest, what are the reasons for doing so?
I agree with John Bogle. I have never held it and strongly feel you don't need it. Read Common Sense on Mutual Funds by John Bogle or at least the chapter on international investing. You do not need to add it. Keep things simple and invest in the Total Stock Market Index and the Total Bond Market Index (the end).

Most disagree with Jack, but he sticks to his guns when it comes to this issue because he believes he is right and when it comes to investing it would be foolish to bet against two men - - John Bogle and Warren Buffett (who by the way agrees with Jack). Warren Buffett has often said you can't bet against America and win, which is kind of like saying, invest in an all U.S. index fund and just keep adding to it which is what Warren Buffett is doing for the money he is leaving his wife.

When two of the smartest men in investing tell you what to do, it is very wise to listen.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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Re: Should I follow Jack Bogle in "I don't do International"

Post by Call_Me_Op » Mon Dec 14, 2015 7:27 am

You wouldn't put your entire equity allocation into a single stock, right? Why would you put it all in a single country? I think it's the same question on a different scale. Doesn't matter what any one person says. This to me is a question of common sense.
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Re: Should I follow Jack Bogle in "I don't do International"

Post by victork » Mon Dec 14, 2015 7:53 am

Personally, I'm 25% international stocks, and 15% international bonds.
I know that Vanguard uses larger overseas allocations, and that Mr. Bogle uses less.
Both are respectable, and both are to be taken seriously.
Take your time, think it over, and do what you can comfortably live with for the long term.
It's can be difficult to predict the future, but I forecast that you will have a long, happy, and healthy life with anything between 0% and 50% in international stocks.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by knpstr » Mon Dec 14, 2015 8:33 am

A debate this muddled with opinion essentially means it doesn't matter.

It will likely not have a material effect one way or the other if you add small international exposure. I hold no international personally. Just do what you're comfortable with.
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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Re: Should I follow Jack Bogle in "I don't do International"

Post by dbr » Mon Dec 14, 2015 9:40 am

Bogleheads on the whole and a lot of other people including Vanguard do not agree with Mr. Bogle on this. It is likely that investing or not investing in international for a US resident will not be a make or break proposition. You pays yer money and you takes yer choice.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by DaufuskieNate » Mon Dec 14, 2015 10:11 am

Mr. Bogle also uses current valuations in the U.S. market to predict low returns over the coming decade. The same math applied to international markets predicts higher returns. Nobody knows if this will happen or not, but it does lend support to the logic of international diversification.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by stemikger » Mon Dec 14, 2015 10:13 am

knpstr wrote:A debate this muddled with opinion essentially means it doesn't matter.

It will likely not have a material effect one way or the other if you add small international exposure. I hold no international personally. Just do what you're comfortable with.
This sums it up nicely.

To the OP, also, when you invest in the S&P 500 Index and Total Stock, you are getting a fair amount of international exposure without directly buying international companies. So many companies in the U.S. do business overseas, you do get a fair amount of international exposure. But again, no matter what you do, don't sweat it, I doubt very much it will be a deal breaker. Also, if you notice that Vanguard lessens their international exposure the closer you get to retirement, so that tells me they are taking a risker asset off the table or giving you less exposure to it as you get closer to retirement. Vanguard ranks the Total Stock Market Index Fund as a 4 and the Total International Index Fund as a 5.
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Re: Should I follow Jack Bogle in "I don't do International"

Post by Big Dog » Mon Dec 14, 2015 10:42 am

The Callan Tables were what finally persuaded me to make 20% of my stock funds international.
'There are lies, damn lies and statistics.'

I personally find the Callan Tables woefully inadequate, and potentially (purposely) misleading.

While colorful, and an interesting idea, I think it is playing with the stats in that it visually treats a loss of 53% (MSCI, '08) the same as a gain of 6% (Barclays Agg, '9). A much better and fair representation would be to show the colors in bands, or in brackets (say 10% groupings), so MSCI '08 would be waaaaaay down at the bottom. ( few of those placements at the rock bottom, and MSCI won't be looking as good.)

So, to answer the question, I'm staying the course with a two-fund, and for 30+ years, I was only a 1-fund, but then I'm a newbie here, so take it for what its worth.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by Starper » Mon Dec 14, 2015 11:01 am

Can somebody please remind me the name of the vanguard ticker i should use if i want to invest in total international market?

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Re: Should I follow Jack Bogle in "I don't do International"

Post by powermega » Mon Dec 14, 2015 1:54 pm

40% of our equity exposure is international. We are following the Vanguard 2035 Target Date Fund glidepath.
Even a stopped clock is right twice a day.

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oldzey
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Re: A foreseeable difference ?

Post by oldzey » Mon Dec 14, 2015 2:29 pm

Taylor Larimore wrote:
it seems clear that Bogle thinks that United States equities will perform better and be less risky compared to international equities. However, it seems that a lot of other people think that investing in international equities is a good idea.
SoundInvesting:

When experts disagree it is often because it does not make a foreseeable difference.

Best wishes.
Taylor
Steve Dunn's remarks reinforce this observation (see #8 below), originally found at: http://socialize.morningstar.com/NewSoc ... 62377.aspx
Order of importance

As a rather sluggish slice and dice type, I think that issue versus going total stock market is way down the list of what is important in managing one's financial affairs. In order of priority, I would list what is important in the following order of priority:

1. How much you earn (the value of your human capital).
2. An intelligent insurance program.
3. Your savings rate.
4. Your allocation to stocks versus bonds.
5. Have a reasonable diversification to your portfolio (anything reasonable will do).
6. Rebalancing to manage risk.
7. Tax management.
8. International versus domestic
9. Value versus growth.
10. Small versus large.
11. Slice and dice.

After number 7, it just doesn't matter much IMO, for about 99% of investors. I say that as one who has watched the numbers pop up on my Quicken computer screen over the passing years. Some things matter a whole lot more than others as to what really influences those numbers.
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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Re: Should I follow Jack Bogle in "I don't do International"

Post by afan » Mon Dec 14, 2015 2:42 pm

It probably will not matter much whether you invest in international stocks. The Vanguard quote above, and the idea discussed in the linked threads, gets at why. In a cap weighted index, the returns are dominated by the mega cap companies. Mega cap US companies derive a larger part of their revenue from overseas. Mega cap non US companies derive a large part of their revenues from the US. So you are invested in BOTH US and international economies whether you are invested in US or international stocks. The correlations between US and international markets is much higher than it used to be and the correlations of the dominant companies has to follow.

There are good theoretical reasons to have both international and US stocks, but the argument gets weaker as the correlations get higher. At some point the behavior will be so similar that it will not matter. Right now it probably still matters somewhat, but not much.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Should I follow Jack Bogle in "I don't do International"

Post by mister_sparkle » Mon Dec 14, 2015 3:01 pm

Starper wrote:Can somebody please remind me the name of the vanguard ticker i should use if i want to invest in total international market?

VTIAX or VGTSX

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Re: Should I follow Jack Bogle in "I don't do International"

Post by Phineas J. Whoopee » Mon Dec 14, 2015 3:11 pm

IPer wrote:...
Yes, but our Market seems to hold a perfect blend of Venus as well as Mars, perhaps we should look to the stars for guidance!
We would court disaster.
PJW

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Re: Should I follow Jack Bogle in "I don't do International"

Post by randomguy » Mon Dec 14, 2015 8:18 pm

fortyofforty wrote:If you choose to invest in international, you wouldn't be too wrong. If you choose not to invest in international, you wouldn't be too wrong. Nobody knows. Most of us do invest at least part of our money in international equities. I lean heavily towards LifeStrategy, and those funds have an international exposure. Only time will tell, and then it'll be too late.
The second statement is wrong. You need to add the word probably. You could be very wrong by not investing interntationally. See Japan (i.e the largest market in the world win 1989). Yeah the odds are against it but it is a risk you are taking on. You can debate if the first statement needs a probably also but I would argue since the goal is to get market returns and not to beat it, that you can skip it.

Frankly most of the arguements against international sounds like stock picking (we can use are superior skill to pick the high returning market). I am not sure that is possible.

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Re: Should I follow Jack Bogle in "I don't do International"

Post by rob » Mon Dec 14, 2015 8:44 pm

randomguy wrote:Frankly most of the arguments against international sounds like stock picking (we can use are superior skill to pick the high returning market).
This is an overlooked observation.... I understand the arguments - I really do - but cannot get past the fact proponents of US only are effectively saying I trust the efficient US market but know better than the other @50% of the equity market weight for non-US....

Changing words it sounds exactly like the active stock picking argument... well... we don't pick the bad ones :D I just don't see the logic.... but understand the emotional reasons behind them.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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Re: Should I follow Jack Bogle in "I don't do International"

Post by vested1 » Mon Dec 14, 2015 9:45 pm

14% of stocks and 16% of bonds in international and still it feels risky to me. I can't imaging 40 or 50%. Staying the course though. What's that saying again? Insanity is doing the same thing over and over again and expecting different results. I'm wearing my tinfoil hat, sign me up!

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Re: Should I follow Jack Bogle in "I don't do International"

Post by Starper » Tue Dec 15, 2015 9:12 am

mister_sparkle wrote:
Starper wrote:Can somebody please remind me the name of the vanguard ticker i should use if i want to invest in total international market?

VTIAX or VGTSX
I bought this ETF - VXUS. Is it worse than the two tickers above?

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Re: Should I follow Jack Bogle in "I don't do International"

Post by razeus » Tue Dec 15, 2015 9:54 am

Over 10 years, my fund has only returned ~3.5%. Probably less since I DCA. I'm going to a 2-fund portfolio as Total International as been a total waste of my time. I've cost myself 4 percentage points using a 3 fund strategy when I could have dumped my international money into good old USA stocks (which are getting most of their profits overseas anyway).

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