How much international stock? A suggestion.

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vineviz
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Re: How much international stock? A suggestion.

Post by vineviz » Sat Nov 10, 2018 2:28 pm

fennewaldaj wrote:
Sat Nov 10, 2018 2:07 pm
vineviz wrote:
Sat Nov 10, 2018 2:00 pm
Taylor Larimore wrote:
Sat Nov 10, 2018 1:26 pm
You may not agree with Jack, but is arguments are not "illogical." If you read his 26 page chapter "On Global Investing" in his book, Common Sense on Mutual Funds, you will learn that his arguments are very logical. There is nothing about "emotions or patriotism" as someone wrote.
Jack Bogle is rich and famous. That doesn't mean he's right on this topic.

Many people believe whatever Jack Bogle says. That doesn't mean his arguments are logical.

Bogle's arguments are framed as being rational. That doesn't mean they aren't better explained as being emotional, xenophobic, or based on a presumption of American exceptionalism.
I don't think they are framed that way in his book. It is worth checking out common sense on mutual funds from the library and reading the chapter if you haven't already because I think his arguments are more nuanced / better stated in the book. I ultimately did not find them convincing.
I've read the book a couple of times, though I admit it's been several years.

In any case it's not really so much that I feel the need to debunk Bogle per se: the benefits of global diversification have been well articulated so often, including by the experts at his former firm, that I don't think the case for international stocks needs to be rehashed. The one thing I think is worth challenging, however, is the repeated appeal to authority to support an argument that is both empirically and theoretically dismissible.

I don't lose TOO much sleep over it because there is credible data that younger, more highly educated cohorts of investors have reasonably substantial allocations to international stocks. The old wives tales spun by Bogle (and Buffett to some degree) on this topic will, I suspect, fade into the background as time progresses. I just hope that future generations won't have a reason to judge them harshly over the advice they gave at the end of otherwise illustrious careers.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

jibantik
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Re: Words of wisdom

Post by jibantik » Sat Nov 10, 2018 2:33 pm

There are ALOT of "bogleheads" who should be thankful they aren't Japanese.
Taylor Larimore wrote:
Fri Nov 09, 2018 5:47 pm
Bogleheads:

When I look at oldzey's graph (above), I am reminded of this statement by author Bill Bernstein:
"When I disagree with Jack Bogle – I am usually wrong."
Best wishes.
Taylor
When talking about strategy, the chart proves nothing. Investing only in Apple over the years would have made you rich, but it doesn't mean it would have been a better _strategy_.

MnD
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Re: How much international stock? A suggestion.

Post by MnD » Sat Nov 10, 2018 2:44 pm

vineviz wrote:
Sat Nov 10, 2018 2:28 pm
The one thing I think is worth challenging, however, is the repeated appeal to authority to support an argument that is both empirically and theoretically dismissible.
Appeal to authority seems to be the primary go to argument in these threads posted or bumped almost daily here by those that take issue with globally diversified equity investing, along with forward investing planning using the rear-view mirror.

What's most amusing is that the same posters dismiss out of hand Jack Bogle's often repeated advice to 1) consider Social Security as a bond-like holding when settings ones asset allocation between stocks and bonds and 2) to replace 50% of Total Bond Market holdings with a corporate bond index fund because the TBM index is badly flawed.

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oldzey
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Re: How much international stock? A suggestion.

Post by oldzey » Sat Nov 10, 2018 3:13 pm

lostdog wrote:
Sat Nov 10, 2018 11:44 am
oldzey wrote:
Wed Apr 04, 2018 7:56 pm
The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VGTSX) was 4/29/1996.

Per Morningstar, as of 4/4/2018, if you had invested $10,000 in both funds on 4/29/1996, you would currently have $61,061 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $29,329 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image
No, you're saying " I use past performance to invest in U.S. only stocks." Thanks Jack!
Actually, I first use past performance in part as a guide to determine what percentage of my portfolio I want to have in stocks in general.

Image
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Re: How much international stock? A suggestion.

Post by jalbert » Sat Nov 10, 2018 3:52 pm

JoMoney wrote:
Sat Nov 10, 2018 12:51 am
jalbert wrote:
Fri Nov 09, 2018 11:43 pm
Going 100% domestic EXPOSES you to uncompensated currency risk (that of your home currency).
Currency exposure of int’l investments would not be called a risk if it could not go both ways— we would call it a liability. By definition a risk is a possible problem not a guaranteed one.

If your expenses are in your home currency then holding assets denominated in a different currency exposes you to the risk of the expenses becoming more costly in your home currency denomination. That is currency risk.
You seem to be confusing inflation risk and currency risk, they're not quite the same thing.

"Risk" does not "go both ways" unless you're under the false premise that risk is volatility, a risk is about consequences and the possibility of harm. The possibility of earning something extra is not a "risk". Some people hope that "risk" is compensated with "risk premiums", a higher expected value for being exposed to the risk. So far, I haven't seen anyone suggest there is a "risk premium" for being exposed to exchange rate fluctuations, there can't really be one for exchange rate fluctuations, it would have to be that one specific currency has a higher expected value than another specific currency (or basket of currencies), which is saying something different then being exposed to either side of the exchange rate fluctuations itself. Most people have their liabilities in only one currency.
You are making an inference that when I say risk can go either way that I must think there is a premium to compensate for it, but I did not take that position.

Currency risk is uncompensated because the long-term expected return of currency exposure is zero, hence no risk premium for it. My point was just that many people suggest that currency risk can go either way as a motivation for ignoring it. All risks can go either way or they would just be a liability. That does not mean that there is a premium that compensates for taking the risk— risks can also be uncompensated.
Risk is not a guarantor of return.

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vineviz
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Re: How much international stock? A suggestion.

Post by vineviz » Sat Nov 10, 2018 8:07 pm

jalbert wrote:
Sat Nov 10, 2018 3:52 pm
JoMoney wrote:
Sat Nov 10, 2018 12:51 am
jalbert wrote:
Fri Nov 09, 2018 11:43 pm
Going 100% domestic EXPOSES you to uncompensated currency risk (that of your home currency).
Currency exposure of int’l investments would not be called a risk if it could not go both ways— we would call it a liability. By definition a risk is a possible problem not a guaranteed one.

If your expenses are in your home currency then holding assets denominated in a different currency exposes you to the risk of the expenses becoming more costly in your home currency denomination. That is currency risk.
You seem to be confusing inflation risk and currency risk, they're not quite the same thing.

"Risk" does not "go both ways" unless you're under the false premise that risk is volatility, a risk is about consequences and the possibility of harm. The possibility of earning something extra is not a "risk". Some people hope that "risk" is compensated with "risk premiums", a higher expected value for being exposed to the risk. So far, I haven't seen anyone suggest there is a "risk premium" for being exposed to exchange rate fluctuations, there can't really be one for exchange rate fluctuations, it would have to be that one specific currency has a higher expected value than another specific currency (or basket of currencies), which is saying something different then being exposed to either side of the exchange rate fluctuations itself. Most people have their liabilities in only one currency.
You are making an inference that when I say risk can go either way that I must think there is a premium to compensate for it, but I did not take that position.

Currency risk is uncompensated because the long-term expected return of currency exposure is zero, hence no risk premium for it. My point was just that many people suggest that currency risk can go either way as a motivation for ignoring it. All risks can go either way or they would just be a liability. That does not mean that there is a premium that compensates for taking the risk— risks can also be uncompensated.
One form of compensation from currency exposure comes in the form of diversification: it’s relatively uncorrelated with other typical portfolio assets.

Plus, avoiding has a cost (at least when it comes to international equity mutual funds) whereas accepting it is essentially free.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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fortyofforty
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Re: How much international stock? A suggestion.

Post by fortyofforty » Sat Nov 10, 2018 10:00 pm

The only "cost" of avoiding international equities is the possibility of outperformance in the future, which is unknowable. If international is highly correlated with domestic, at a reduced return, what benefit is it providing? I'm not sure there is any benefit. I do not question the motives, integrity, or intelligence of those who argue that international equities are unnecessary. Jack Bogle would not propose any action or behavior that would cost small investors if he didn't believe it was the right thing to do. He has nothing to gain by doing so. Why would Jack Bogle care if you did or did not invest internationally? He's not selling anything. He has his beliefs, based not on emotion and xenophobia but on empirical data and historical perspective.

I still do it, in the interest of adding diversification and in the belief (hope) that it won't cost me too much in terms of lower returns (although it has cost me so far over the past several years), if it doesn't increase my returns. I also have a desire to invest in companies around the world, for personal reasons.

So, I carry on with my plan, but don't dispute the point often made that international investing is unnecessary to capture most of the function of equities in a portfolio. (Similarly, it would be hard to dispute someone who uses the S&P 500 rather than Total Stock Market out of preference or necessity, to capture the returns of the domestic stock market.)
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vineviz
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Re: How much international stock? A suggestion.

Post by vineviz » Sat Nov 10, 2018 10:24 pm

fortyofforty wrote:
Sat Nov 10, 2018 10:00 pm
The only "cost" of avoiding international equities is the possibility of outperformance in the future, which is unknowable.
I was specifically speaking about the cost of currency hedging, which can be avoided by using an unhedged equity index fund.

The cost of omitting international equity diversification altogether are already well discussed and documented.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by fortyofforty » Sat Nov 10, 2018 10:32 pm

vineviz wrote:
Sat Nov 10, 2018 10:24 pm
The cost of omitting international equity diversification altogether are already well discussed and documented.
And disputed and debunked, here and elsewhere.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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vineviz
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Re: How much international stock? A suggestion.

Post by vineviz » Sat Nov 10, 2018 10:34 pm

fortyofforty wrote:
Sat Nov 10, 2018 10:32 pm
vineviz wrote:
Sat Nov 10, 2018 10:24 pm
The cost of omitting international equity diversification altogether are already well discussed and documented.
And disputed and debunked, here and elsewhere.
Disputed? No doubt.

Debunked? Hardly.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by MJW » Sat Nov 10, 2018 11:36 pm

fortyofforty wrote:
Sat Nov 10, 2018 10:00 pm
I do not question the motives, integrity, or intelligence of those who argue that international equities are unnecessary.
It is unfortunate that others choose to do so. Also, I don't recall ever seeing the "100% US" crowd leveling the same kind of personal attacks toward strong believers in international investing. It tends to be more of an "agree to disagree" attitude. Yet somehow it's acceptable on this forum for one group to have their intelligence and moral character called into question on a fairly regular basis.

Your entire post pretty closely sums up my view on the subject. Like you, I invest internationally and like you I am skeptical that it will work to my benefit. I hope it does, but it's my weakest conviction out of the few that I have when it comes to investing. I'm also not passionate enough about it either way to spend much time arguing over it with someone on the Internet.

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Re: How much international stock? A suggestion.

Post by willthrill81 » Sun Nov 11, 2018 12:19 am

MJW wrote:
Sat Nov 10, 2018 11:36 pm
fortyofforty wrote:
Sat Nov 10, 2018 10:00 pm
I do not question the motives, integrity, or intelligence of those who argue that international equities are unnecessary.
It is unfortunate that others choose to do so. Also, I don't recall ever seeing the "100% US" crowd leveling the same kind of personal attacks toward strong believers in international investing. It tends to be more of an "agree to disagree" attitude. Yet somehow it's acceptable on this forum for one group to have their intelligence and moral character called into question on a fairly regular basis.

Your entire post pretty closely sums up my view on the subject. Like you, I invest internationally and like you I am skeptical that it will work to my benefit. I hope it does, but it's my weakest conviction out of the few that I have when it comes to investing. I'm also not passionate enough about it either way to spend much time arguing over it with someone on the Internet.
:thumbsup

The "international crowd" is far more aggressive in their stance than is the "U.S. crowd," as is evident in this thread.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: How much international stock? A suggestion.

Post by Plz » Sun Nov 11, 2018 2:25 am

petulant wrote:
Sat Nov 10, 2018 6:47 am
Plz wrote:
Sat Nov 10, 2018 4:22 am
visualguy wrote:
Fri Nov 09, 2018 10:02 pm
Plz wrote:
Fri Nov 09, 2018 9:51 pm
Is there a way to see the returns of a portfolio that contributes $1000 to the US total stock market portfolio on a monthly basis since inception, vs one that contributes $800 to US and $200 to intl indices?
Yes, you can do it on portfolio visualizer. From 1986 until today (32 years), with your contribution schedule, the ending balances would be:

1) US only: $2.46M
2) ex-US only: $924K
3) 80/20 without rebalancing: $2.1M
4) 80/20 with rebalancing: $2.05M
JoMoney wrote:
Sat Nov 10, 2018 12:39 am
Plz wrote:
Fri Nov 09, 2018 9:51 pm
...

Is there a way to see the returns of a portfolio that contributes $1000 to the US total stock market portfolio on a monthly basis since inception, vs one that contributes $800 to US and $200 to intl indices?
Yes there is! Using PortfolioVisualizer.com , which is a neat tool someone (I think a Boglehead) created and provides for free on the Internet

Here's a link to PV comparison of $1000 monthly contributions to a 100% US and a 80/20 portfolio
Link
Over a 20+ year period, less than 0.6% difference annualized returns, standard deviation was pretty much the same.
Thank you both! Why do your two results differ so much? I think I must be reading them incorrectly
They don’t difer. The $2.4 million vs. $2.1 million reflects the “less than .6% difference” in return playing out over 32 years.

How do the $2.4M and $2.1M translate to the $717k and $655k?

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JoMoney
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Re: How much international stock? A suggestion.

Post by JoMoney » Sun Nov 11, 2018 2:28 am

Plz wrote:
Sun Nov 11, 2018 2:25 am
...

How do the $2.4M and $2.1M translate to the $717k and $655k?
One is covering a 32 year period, one is covering a 20 year period.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

Plz
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Re: How much international stock? A suggestion.

Post by Plz » Sun Nov 11, 2018 4:33 am

:oops: thank you
JoMoney wrote:
Sun Nov 11, 2018 2:28 am
Plz wrote:
Sun Nov 11, 2018 2:25 am
...

How do the $2.4M and $2.1M translate to the $717k and $655k?
One is covering a 32 year period, one is covering a 20 year period.

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Re: How much international stock? A suggestion.

Post by Valuethinker » Sun Nov 11, 2018 7:03 am

willthrill81 wrote:
Sun Nov 11, 2018 12:19 am
MJW wrote:
Sat Nov 10, 2018 11:36 pm
fortyofforty wrote:
Sat Nov 10, 2018 10:00 pm
I do not question the motives, integrity, or intelligence of those who argue that international equities are unnecessary.
It is unfortunate that others choose to do so. Also, I don't recall ever seeing the "100% US" crowd leveling the same kind of personal attacks toward strong believers in international investing. It tends to be more of an "agree to disagree" attitude. Yet somehow it's acceptable on this forum for one group to have their intelligence and moral character called into question on a fairly regular basis.

Your entire post pretty closely sums up my view on the subject. Like you, I invest internationally and like you I am skeptical that it will work to my benefit. I hope it does, but it's my weakest conviction out of the few that I have when it comes to investing. I'm also not passionate enough about it either way to spend much time arguing over it with someone on the Internet.
:thumbsup

The "international crowd" is far more aggressive in their stance than is the "U.S. crowd," as is evident in this thread.
Strangely I read this thread as the opposite ;-) ;-)

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Re: How much international stock? A suggestion.

Post by willthrill81 » Sun Nov 11, 2018 10:06 am

Valuethinker wrote:
Sun Nov 11, 2018 7:03 am
willthrill81 wrote:
Sun Nov 11, 2018 12:19 am
MJW wrote:
Sat Nov 10, 2018 11:36 pm
fortyofforty wrote:
Sat Nov 10, 2018 10:00 pm
I do not question the motives, integrity, or intelligence of those who argue that international equities are unnecessary.
It is unfortunate that others choose to do so. Also, I don't recall ever seeing the "100% US" crowd leveling the same kind of personal attacks toward strong believers in international investing. It tends to be more of an "agree to disagree" attitude. Yet somehow it's acceptable on this forum for one group to have their intelligence and moral character called into question on a fairly regular basis.

Your entire post pretty closely sums up my view on the subject. Like you, I invest internationally and like you I am skeptical that it will work to my benefit. I hope it does, but it's my weakest conviction out of the few that I have when it comes to investing. I'm also not passionate enough about it either way to spend much time arguing over it with someone on the Internet.
:thumbsup

The "international crowd" is far more aggressive in their stance than is the "U.S. crowd," as is evident in this thread.
Strangely I read this thread as the opposite ;-) ;-)
Where are "U.S." folks accusing the other side of all types of biases?
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: How much international stock? A suggestion.

Post by fortyofforty » Sun Nov 11, 2018 4:58 pm

vineviz wrote:
Sat Nov 10, 2018 10:34 pm
fortyofforty wrote:
Sat Nov 10, 2018 10:32 pm
vineviz wrote:
Sat Nov 10, 2018 10:24 pm
The cost of omitting international equity diversification altogether are already well discussed and documented.
And disputed and debunked, here and elsewhere.
Disputed? No doubt.

Debunked? Hardly.
Absolutely debunked. And handily, I might add. No contest.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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vineviz
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Re: How much international stock? A suggestion.

Post by vineviz » Sun Nov 11, 2018 5:34 pm

fortyofforty wrote:
Sun Nov 11, 2018 4:58 pm
Absolutely debunked. And handily, I might add. No contest.
If that's what you think, then more power to you and good luck with your investing.

As far as I can see, most open-minded and well-educated investors can see through the xenophobic rhetoric and embrace the principles of diversification.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by lostdog » Sun Nov 11, 2018 5:40 pm

vineviz wrote:
Sun Nov 11, 2018 5:34 pm
fortyofforty wrote:
Sun Nov 11, 2018 4:58 pm
Absolutely debunked. And handily, I might add. No contest.
If that's what you think, then more power to you and good luck with your investing.

As far as I can see, most open-minded and well-educated investors can see through the xenophobic rhetoric and embrace the principles of diversification.
+1

I'm fortunate to see through it. The good thing is this forum allows for a healthy debate. With that being said, young investors seeing both sides of the debate will make a choice. In my opinion, if a young investor decides to go U.S. only, it's not a good choice. I am going to guess young investors are picking international indexes. Times are changing.

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JoMoney
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Re: How much international stock? A suggestion.

Post by JoMoney » Sun Nov 11, 2018 5:52 pm

lostdog wrote:
Sun Nov 11, 2018 5:40 pm
vineviz wrote:
Sun Nov 11, 2018 5:34 pm
fortyofforty wrote:
Sun Nov 11, 2018 4:58 pm
Absolutely debunked. And handily, I might add. No contest.
If that's what you think, then more power to you and good luck with your investing.

As far as I can see, most open-minded and well-educated investors can see through the xenophobic rhetoric and embrace the principles of diversification.
+1

I'm fortunate to see through it. The good thing is this forum allows for a healthy debate. With that being said, young investors seeing both sides of the debate will make a choice. In my opinion, if a young investor decides to go U.S. only, it's not a good choice. I am going to guess young investors are picking international indexes. Times are changing.
Yes, it takes a very imaginative "open-minded" person to ignore the very explicit expenses and risks associated with international, concoct a theoretical story around covariances that has been shown empirically just doesn't work in the real-world. Then fall back on name-calling as if holding some particular portfolio of stocks was "Xenophobic".
People are free to pick whatever portfolio suits them, but they should at least look at it clearly and see the facts, and if they're afraid someone will call them "Xenophobic" if they don't buy some risky investments, go with it... but understand their are risks and expenses involved that just aren't necessary.

FWIW, if someone was looking for a "Xenophobic" portfolio, buying a broad U.S. market fund, filled with multi-nationals is hardly the place to be.
Which makes me wonder if that wouldn't make for a good thread... What should the "Xenophobic" stock portfolio look like? I would imagine lots of REITs, Utilities, and small-cap (small value?)
Last edited by JoMoney on Sun Nov 11, 2018 5:58 pm, edited 1 time in total.
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oldzey
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Re: How much international stock? A suggestion.

Post by oldzey » Sun Nov 11, 2018 5:54 pm

I choose not to "diversify" my garden with weeds. :beer
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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vineviz
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Re: How much international stock? A suggestion.

Post by vineviz » Sun Nov 11, 2018 5:58 pm

lostdog wrote:
Sun Nov 11, 2018 5:40 pm
With that being said, young investors seeing both sides of the debate will make a choice. In my opinion, if a young investor decides to go U.S. only, it's not a good choice. I am going to guess young investors are picking international indexes. Times are changing.
Indeed, a study by researchers at Columbia University examined the international equity allocations of over 3 million people in 296 401(k) plans over the 2006-2011 period and offers some optimism.
We find that there is an upward trend in international allocations that is only partially accounted for by the slight decrease in importance of the US market relative to the world market. There is a strong cohort effect, with younger cohorts investing more internationally, but each cohort also investing more internationally over time. This finding suggests that the home bias phenomenon may slowly disappear over time. We also find a positive salary and a negative account balance effect, but these effects are not economically large. The level of education measured at the zip code level has a strong positive effect on international diversification, as does financial literacy. Moreover, the presence of foreign-born people at the zip code level also strongly increases international allocations.
Source: https://www0.gsb.columbia.edu/mygsb/fac ... sified.pdf

The researchers also observed, though it wasn't a focus on this paper, that international under-diversification might be also One possibility "correlated with other behavioral investment biases/mistakes, such as excessive allocations to money market instruments and/or to company stock". I'd like to see a follow-up study on that, but such a correlation wouldn't surprise me.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by MJW » Sun Nov 11, 2018 6:09 pm

lostdog wrote:
Sun Nov 11, 2018 5:40 pm
The good thing is this forum allows for a healthy debate.
Sure, it allows for it. That doesn't mean that is what actually happens. It's too bad there isn't more room for tolerance of skepticism and divergence of viewpoints without the convenient and reliable fallback of personal attacks.

Given that this sort of dialogue is permitted continually here, I must question whether it is the official position of Bogleheads.org that anyone skeptical of international investing can appropriately be called stupid and bigoted.

And this is coming from someone who "embraces the principles of diversification" and invests internationally. So maybe one of you who is particularly fond of relying on these tropes can be so helpful as to clarify where my skepticism falls on the stupidity and bigotry continuum. I'll wait.

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Re: How much international stock? A suggestion.

Post by pascalwager » Sun Nov 11, 2018 6:17 pm

oldzey wrote:
Sun Nov 11, 2018 5:54 pm
I choose not to "diversify" my garden with weeds. :beer
Actually, I wish my international growth was a little more weedlike.
Preferred AA: Total US and foreign stock markets and short-term Treasury fixed income

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Re: How much international stock? A suggestion.

Post by oldzey » Sun Nov 11, 2018 6:19 pm

pascalwager wrote:
Sun Nov 11, 2018 6:17 pm
oldzey wrote:
Sun Nov 11, 2018 5:54 pm
I choose not to "diversify" my garden with weeds. :beer
Actually, I wish my international growth was a little more weedlike.
Good one! Hehe! 8-)
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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Re: How much international stock? A suggestion.

Post by visualguy » Sun Nov 11, 2018 6:35 pm

lostdog wrote:
Sun Nov 11, 2018 5:40 pm
I'm fortunate to see through it. The good thing is this forum allows for a healthy debate. With that being said, young investors seeing both sides of the debate will make a choice. In my opinion, if a young investor decides to go U.S. only, it's not a good choice. I am going to guess young investors are picking international indexes. Times are changing.
What is changing? Seems like the same old picture to me in terms of foreign stock market indexing. The big story is the economic growth in China and India, but there hasn't been a change that would let us benefit from that as investors in the foreign stock index, and no signs of that changing. No revolution expected to install a US-style public shareholder-focused free-market capitalist system. With other areas (EU, UK, Japan, Korea) - same old issues.

You're talking some really long time horizons to have any hope of this changing and reflected in the stock index. Even if and when it finally happens, you need compensation for the many decades of poor performance until those changes happen. You fall so far behind that you can't catch up within the time frame relevant to your life span. There's no indication that these other countries even want such changes to happen. People and governments in most big foreign economies aren't exactly fighting hard to emulate the US system with its subservience to public market shareholders. I wouldn't hold my breath for such revolutions or radical changes, and even when revolutions happen, the results are unpredictable...

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Re: How much international stock? A suggestion.

Post by fortyofforty » Sun Nov 11, 2018 6:49 pm

vineviz wrote:
Sun Nov 11, 2018 5:34 pm
fortyofforty wrote:
Sun Nov 11, 2018 4:58 pm
Absolutely debunked. And handily, I might add. No contest.
If that's what you think, then more power to you and good luck with your investing.

As far as I can see, most open-minded and well-educated investors can see through the xenophobic rhetoric and embrace the principles of diversification.
Good luck with your investments in international bonds, oil futures, Russian real estate, and bitcoin. In the interest of pure diversification, of course. :beer Embrace it.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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Re: How much international stock? A suggestion.

Post by vineviz » Sun Nov 11, 2018 6:55 pm

fortyofforty wrote:
Sun Nov 11, 2018 6:49 pm
Good luck with your investments in international bonds, oil futures, Russian real estate, and bitcoin. In the interest of pure diversification, of course. :beer Embrace it.
If that caricature is what people think diversification means, I'm not surprised that some people have a hard time pushing past it in pursuit of actual understanding.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by JoMoney » Sun Nov 11, 2018 7:27 pm

vineviz wrote:
Sun Nov 11, 2018 6:55 pm
fortyofforty wrote:
Sun Nov 11, 2018 6:49 pm
Good luck with your investments in international bonds, oil futures, Russian real estate, and bitcoin. In the interest of pure diversification, of course. :beer Embrace it.
If that caricature is what people think diversification means, I'm not surprised that some people have a hard time pushing past it in pursuit of actual understanding.
It's obviously a hyperbolic extreme, but calling various portfolios "Xenophobic" and not addressing the risks, expenses, and real world failures of the ex ante "efficient frontier" justifications isn't leading to any kind "understanding" either.
Despite trying to depict it as the "open minded" thing to do, you might temper that a bit as not being an entirely virtuous rationale. As a personality trait, being "open" is also to be vulnerable to all sorts of threats, some imagined, some real. While it is a necessary trait for progress, the old adage was "pioneers get the arrows, settlers get the land".
"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: How much international stock? A suggestion.

Post by LadyGeek » Sun Nov 11, 2018 8:00 pm

The discussion is getting derailed. As a reminder, see: General Etiquette
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At all times we must conduct ourselves in a respectful manner to other posters. Attacks on individuals, insults, name calling, trolling, baiting or other attempts to sow dissension are not acceptable.
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Re: How much international stock? A suggestion.

Post by MJW » Sun Nov 11, 2018 8:09 pm

For those of you that are fond of throwing out this term, let’s have a look at the definition of xenophobia, courtesy Merriam-Webster (my emphasis bolded):

“fear and hatred of strangers or foreigners or of anything that is strange or foreign”

Is this really what you mean to say about your fellow forum members?

Hopefully we can agree that this is a serious accusation to make of someone. To level it so casually at people you have presumably never met and do not know beyond the highly limited exposure you have to them on a forum about investing is way over the line. And to do it in the abstract by generalizing the perspective rather than addressing it directly with the individuals concerned is cowardly.

I hope that the moderators will give careful consideration as to whether there is a place for that word and its implications in the context of the discussions we have here. I am starting to have my doubts as to whether this forum really is a respectful, welcoming place to learn.

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Re: How much international stock? A suggestion.

Post by fortyofforty » Sun Nov 11, 2018 8:32 pm

MJW wrote:
Sun Nov 11, 2018 8:09 pm
For those of you that are fond of throwing out this term, let’s have a look at the definition of xenophobia, courtesy Merriam-Webster (my emphasis bolded):

“fear and hatred of strangers or foreigners or of anything that is strange or foreign”

Is this really what you mean to say about your fellow forum members?

Hopefully we can agree that this is a serious accusation to make of someone. To level it so casually at people you have presumably never met and do not know beyond the highly limited exposure you have to them on a forum about investing is way over the line. And to do it in the abstract by generalizing the perspective rather than addressing it directly with the individuals concerned is cowardly.

I hope that the moderators will give careful consideration as to whether there is a place for that word and its implications in the context of the discussions we have here. I am starting to have my doubts as to whether this forum really is a respectful, welcoming place to learn.
Yes, unfortunately, that is exactly what they mean to say about their fellow forum members. Create a strawman, then attack it. Like other accusations, like racism, sexism, or homophobia, it is serious and meant to shut down debate. Unfortunately, some posters cannot refrain from carrying their personal political battles to this forum. I'm done on this thread. Best of luck to all to whom it's deserved. :beer
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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Re: How much international stock? A suggestion.

Post by MnD » Mon Nov 12, 2018 10:15 am

Regardless of what range is buried in some white paper, Vanguard invests 40% of their customers equity holdings in ex-US through their Target Date and Lifestrategy funds, a percentage that is also default equity allocation used in their Personal Advisor Services. Hence when it comes to managing real money, 40% is the actual Vanguard "recommendation".

That's also little difference from the current global market cap of 45% for ex-US equity. I expect the final change in these VG funds and advised account allocations will be a move to global market cap. It's the ultimate "buy the haystack" diversified allocation and eliminates the need for tilting and rebalancing within the equity class on the basis of where a company's HQ is located. There will always be be investors and "experts" betting on single stocks, various market cap slices and S&P 500 industry sectors or specific countries in an effort to outperform the entire market or just due to performance chasing. The heavy US-tilt bet (and at the extreme single-country speculation) is something that will continue to fade away as the move to indexing moves to the logical endpoint of one-funds for equity indexing all-country all-cap.

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Re: Words of wisdom

Post by oldzey » Mon Nov 12, 2018 6:23 pm

abuss368 wrote:
Fri Nov 09, 2018 5:52 pm
Taylor Larimore wrote:
Fri Nov 09, 2018 5:47 pm
Bogleheads:

When I look at oldzey's graph (above), I am reminded of this statement by author Bill Bernstein:
"When I disagree with Jack Bogle – I am usually wrong."
Best wishes.
Taylor
Well said indeed. :beer
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Re: How much international stock? A suggestion.

Post by KJVanguard » Mon Nov 12, 2018 11:58 pm

JoMoney wrote:
Sat Nov 10, 2018 8:26 am
Bogle is also an advocate for having a balanced allocation with bonds, not just holding stocks and "pray that basket doesn't run into any trouble".
Well, we can agree 100% on holding some percentage in bonds. How much is yet another argument.

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Re: How much international stock? A suggestion.

Post by Hyperborea » Tue Nov 13, 2018 3:05 am

Just because somebody is right on one topic does not automatically mean they are right on other topics even within the same field. In the sciences it is almost a cliche that elderly scientists, even ones who were rebels in their youth, are the ones resisting the new truths. Einstein is a classic example of this. He broke so much ground in his youth and is probably one of the greatest physicists. Among many other things his work included the beginnings of quantum mechanics (light is both and neither a particle and a wave). When the full implications of it were developed later in the work of others he couldn't accept them as was strongly against it. He continued to be against it throughout his life and worked to disprove it (hidden variable theory). It's the origin of the famous quote on god playing dice with the universe.

He was wrong about quantum mechanics but that doesn't diminish the importance of his earlier work just as the importance of his earlier work didn't make him right about quantum mechanics.
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Re: How much international stock? A suggestion.

Post by oldzey » Tue Nov 13, 2018 4:04 am

Hyperborea wrote:
Tue Nov 13, 2018 3:05 am
Just because somebody is right on one topic does not automatically mean they are right on other topics even within the same field. In the sciences it is almost a cliche that elderly scientists, even ones who were rebels in their youth, are the ones resisting the new truths. Einstein is a classic example of this. He broke so much ground in his youth and is probably one of the greatest physicists. Among many other things his work included the beginnings of quantum mechanics (light is both and neither a particle and a wave). When the full implications of it were developed later in the work of others he couldn't accept them as was strongly against it. He continued to be against it throughout his life and worked to disprove it (hidden variable theory). It's the origin of the famous quote on god playing dice with the universe.

He was wrong about quantum mechanics but that doesn't diminish the importance of his earlier work just as the importance of his earlier work didn't make him right about quantum mechanics.
Investing: Is it an art or science?
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Re: How much international stock? A suggestion.

Post by JoMoney » Tue Nov 13, 2018 6:37 am

oldzey wrote:
Tue Nov 13, 2018 4:04 am
Hyperborea wrote:
Tue Nov 13, 2018 3:05 am
Just because somebody is right on one topic does not automatically mean they are right on other topics even within the same field. In the sciences it is almost a cliche that elderly scientists, even ones who were rebels in their youth, are the ones resisting the new truths. Einstein is a classic example of this. He broke so much ground in his youth and is probably one of the greatest physicists. Among many other things his work included the beginnings of quantum mechanics (light is both and neither a particle and a wave). When the full implications of it were developed later in the work of others he couldn't accept them as was strongly against it. He continued to be against it throughout his life and worked to disprove it (hidden variable theory). It's the origin of the famous quote on god playing dice with the universe.

He was wrong about quantum mechanics but that doesn't diminish the importance of his earlier work just as the importance of his earlier work didn't make him right about quantum mechanics.
Investing: Is it an art or science?
Honestly, I'm still trying to figure out if the analogy was supposed to apply to one side of the argument or the other, or just a general statement about appeals to authority being a weak argument. ...
I'm guessing it's an attempt at dismissing Mr. Bogle's comments, without addressing any of his actual claims with facts... which is pretty difficult to do since he's been spot-on about international diversification and dismissing the claims of the 'efficient frontier' charts that used to be so prevalent as a justification for buying international (despite the additional expenses, taxes, and risks that come with international stocks).
"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: How much international stock? A suggestion.

Post by lostdog » Tue Nov 13, 2018 11:12 am

JoMoney wrote:
Tue Nov 13, 2018 6:37 am
oldzey wrote:
Tue Nov 13, 2018 4:04 am
Hyperborea wrote:
Tue Nov 13, 2018 3:05 am
Just because somebody is right on one topic does not automatically mean they are right on other topics even within the same field. In the sciences it is almost a cliche that elderly scientists, even ones who were rebels in their youth, are the ones resisting the new truths. Einstein is a classic example of this. He broke so much ground in his youth and is probably one of the greatest physicists. Among many other things his work included the beginnings of quantum mechanics (light is both and neither a particle and a wave). When the full implications of it were developed later in the work of others he couldn't accept them as was strongly against it. He continued to be against it throughout his life and worked to disprove it (hidden variable theory). It's the origin of the famous quote on god playing dice with the universe.

He was wrong about quantum mechanics but that doesn't diminish the importance of his earlier work just as the importance of his earlier work didn't make him right about quantum mechanics.
Investing: Is it an art or science?
Honestly, I'm still trying to figure out if the analogy was supposed to apply to one side of the argument or the other, or just a general statement about appeals to authority being a weak argument. ...
I'm guessing it's an attempt at dismissing Mr. Bogle's comments, without addressing any of his actual claims with facts... which is pretty difficult to do since he's been spot-on about international diversification and dismissing the claims of the 'efficient frontier' charts that used to be so prevalent as a justification for buying international (despite the additional expenses, taxes, and risks that come with international stocks).
What he is saying is this way of thinking is on it's way out. In time it will be a minority if not already. I think Viv referenced a survey above.

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Re: How much international stock? A suggestion.

Post by JoMoney » Tue Nov 13, 2018 11:58 am

lostdog wrote:
Tue Nov 13, 2018 11:12 am
...
What he is saying is this way of thinking is on it's way out. In time it will be a minority if not already. I think Viv referenced a survey above.
If that's what he meant to say, he sure used a lot of words to not say that.
I saw the paper Vineviz linked, suggesting rising levels of international diversification. The graph I linked here viewtopic.php?f=10&t=196956&start=250#p4205649 seemed to show rising international equities being held in the US as well, at least up to 2010...
The fact that more younger people are (or at least were) allocating more internationally, doesn't necessarily make it necessary, let alone suggest that it's actually providing any benefit.
"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: How much international stock? A suggestion.

Post by vineviz » Tue Nov 13, 2018 12:13 pm

JoMoney wrote:
Tue Nov 13, 2018 11:58 am
lostdog wrote:
Tue Nov 13, 2018 11:12 am
...
What he is saying is this way of thinking is on it's way out. In time it will be a minority if not already. I think Viv referenced a survey above.
If that's what he meant to say, he sure used a lot of words to not say that.
I saw the paper Vineviz linked, suggesting rising levels of international diversification. The graph I linked here viewtopic.php?f=10&t=196956&start=250#p4205649 seemed to show rising international equities being held in the US as well, at least up to 2010...
The fact that more younger people are (or at least were) allocating more internationally, doesn't necessarily make it necessary, let alone suggest that it's actually providing any benefit.
It does suggest that younger, more educated people are less likely to blindly follow the archaic advice of yesterday’s heroes. That’s nothing but a good thing, IMHO.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by willthrill81 » Tue Nov 13, 2018 12:17 pm

vineviz wrote:
Tue Nov 13, 2018 12:13 pm
JoMoney wrote:
Tue Nov 13, 2018 11:58 am
lostdog wrote:
Tue Nov 13, 2018 11:12 am
...
What he is saying is this way of thinking is on it's way out. In time it will be a minority if not already. I think Viv referenced a survey above.
If that's what he meant to say, he sure used a lot of words to not say that.
I saw the paper Vineviz linked, suggesting rising levels of international diversification. The graph I linked here viewtopic.php?f=10&t=196956&start=250#p4205649 seemed to show rising international equities being held in the US as well, at least up to 2010...
The fact that more younger people are (or at least were) allocating more internationally, doesn't necessarily make it necessary, let alone suggest that it's actually providing any benefit.
It does suggest that younger, more educated people are less likely to blindly follow the archaic advice of yesterday’s heroes. That’s nothing but a good thing, IMHO.
Why don't you tell us how you really feel about this? :wink:
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Re: How much international stock? A suggestion.

Post by vineviz » Tue Nov 13, 2018 12:24 pm

willthrill81 wrote:
Tue Nov 13, 2018 12:17 pm
vineviz wrote:
Tue Nov 13, 2018 12:13 pm
JoMoney wrote:
Tue Nov 13, 2018 11:58 am
lostdog wrote:
Tue Nov 13, 2018 11:12 am
...
What he is saying is this way of thinking is on it's way out. In time it will be a minority if not already. I think Viv referenced a survey above.
If that's what he meant to say, he sure used a lot of words to not say that.
I saw the paper Vineviz linked, suggesting rising levels of international diversification. The graph I linked here viewtopic.php?f=10&t=196956&start=250#p4205649 seemed to show rising international equities being held in the US as well, at least up to 2010...
The fact that more younger people are (or at least were) allocating more internationally, doesn't necessarily make it necessary, let alone suggest that it's actually providing any benefit.
It does suggest that younger, more educated people are less likely to blindly follow the archaic advice of yesterday’s heroes. That’s nothing but a good thing, IMHO.
Why don't you tell us how you really feel about this? :wink:
Surely you don’t want me to refrain from being respectful? That’d be a violation of community guidelines. 😉
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by MJW » Tue Nov 13, 2018 12:25 pm

It’s interesting that a rebuttal of appeal to authority would be to point out what all the cool kids are doing. I fail to see how that makes a convincing argument.

It seems like more of an opportunity to take passive-aggressive jabs at the great unwashed around here, as if it’s somehow more polite than simply calling them ignorant bigots.

But anyway, hopefully my international allocation pans out.
Last edited by MJW on Tue Nov 13, 2018 12:27 pm, edited 1 time in total.

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Re: How much international stock? A suggestion.

Post by JoMoney » Tue Nov 13, 2018 12:26 pm

vineviz wrote:
Tue Nov 13, 2018 12:13 pm
...
It does suggest that younger, more educated people are less likely to blindly follow the archaic advice of yesterday’s heroes. That’s nothing but a good thing, IMHO.
Younger people get older, and sometimes wiser. If they are following advice "blindly", maybe they'll learn to be more critical of the stories they're sold, and look to see if it's actually doing whatever it is they expected.
"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: How much international stock? A suggestion.

Post by vineviz » Tue Nov 13, 2018 12:39 pm

MJW wrote:
Tue Nov 13, 2018 12:25 pm
It’s interesting that a rebuttal of appeal to authority would be to point out what all the cool kids are doing. I fail to see how that makes a convincing argument.

It seems like more of an opportunity to take passive-aggressive jabs at the great unwashed around here, as if it’s somehow more polite than simply calling them ignorant bigots.

But anyway, hopefully my international allocation pans out.
There’s plenty of information and evidence about the benefits of diversification out there. I see no need to reintroduce it here, especially when the issue at hand is the tendency of some investors to value emotional reasons over rational ones as justification for being underdiversified.

I mentioned the Columbia research not as an ‘appeal to the crowds’, so to speak, but to illustrate both that behavior is shifting in the direction they experts advocate AND that investor underdiversification is objectively linked to certain demographic traits.

Nothing more than that.
Last edited by vineviz on Tue Nov 13, 2018 12:42 pm, edited 1 time in total.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by vineviz » Tue Nov 13, 2018 12:41 pm

JoMoney wrote:
Tue Nov 13, 2018 12:26 pm
vineviz wrote:
Tue Nov 13, 2018 12:13 pm
...
It does suggest that younger, more educated people are less likely to blindly follow the archaic advice of yesterday’s heroes. That’s nothing but a good thing, IMHO.
Younger people get older, and sometimes wiser. If they are following advice "blindly", maybe they'll learn to be more critical of the stories they're sold, and look to see if it's actually doing whatever it is they expected.
The good news is that the evidence suggests that younger cohorts are resisting, in large part, the tendency they older cohorts have exhibited of being less diversified over time. The Columbia study examined this too.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: How much international stock? A suggestion.

Post by staythecourse » Tue Nov 13, 2018 12:47 pm

vineviz wrote:
Sat Nov 10, 2018 2:28 pm
The one thing I think is worth challenging, however, is the repeated appeal to authority to support an argument that is both empirically and theoretically dismissible.
Amen to that. I have NEVER understood folks who can drink the kool aid just because x, y, z person says so. It amazes me how such intelligent folks do stuff (not just investing) just because some supposed authority says to do it (even advice coming from one's dad or mom). I'm not a psychologist, but there must me a term for that.

Thank you for pointing out that which seems very pervasive on this board. It seems WHO gives the advice is more important then the LOGIC of said advice.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: How much international stock? A suggestion.

Post by willthrill81 » Tue Nov 13, 2018 1:03 pm

staythecourse wrote:
Tue Nov 13, 2018 12:47 pm
vineviz wrote:
Sat Nov 10, 2018 2:28 pm
The one thing I think is worth challenging, however, is the repeated appeal to authority to support an argument that is both empirically and theoretically dismissible.
Amen to that. I have NEVER understood folks who can drink the kool aid just because x, y, z person says so. It amazes me how such intelligent folks do stuff (not just investing) just because some supposed authority says to do it (even advice coming from one's dad or mom). I'm not a psychologist, but there must me a term for that.
Human beings have a strong innate tendency to obey others whom they perceive to be authorities. Perhaps the most famous example of this was Stanley Milgram's obedience study back in 1963. He found that about 65% of ordinary Americans would kill someone because a perceived authority told them to do so, and 100% of the participants administered what they believed to be intense pain for the same reason.

Stanley proposed what's now know as agency theory to help explain his findings.
Milgram (1974) explained the behavior of his participants by suggesting that people have two states of behavior when they are in a social situation:

The autonomous state – people direct their own actions, and they take responsibility for the results of those actions.

The agentic state – people allow others to direct their actions and then pass off the responsibility for the consequences to the person giving the orders. In other words, they act as agents for another person’s will.

Milgram suggested that two things must be in place for a person to enter the agentic state:

1. The person giving the orders is perceived as being qualified to direct other people’s behavior. That is, they are seen as legitimate.

2. The person being ordered about is able to believe that the authority will accept responsibility for what happens.

Agency theory says that people will obey an authority when they believe that the authority will take responsibility for the consequences of their actions. This is supported by some aspects of Milgram’s evidence.

For example, when participants were reminded that they had responsibility for their own actions, almost none of them were prepared to obey. In contrast, many participants who were refusing to go on did so if the experimenter said that he would take responsibility.
https://www.simplypsychology.org/milgram.html

How much of this is present in non-social situation is debatable, but Tajfel and Turner (1979) showed that the mere perception of in-groups leads to preferential treatment of fellow in-group members and conformity with their perceived wishes.
staythecourse wrote:
Tue Nov 13, 2018 12:47 pm
Thank you for pointing out that which seems very pervasive on this board. It seems WHO gives the advice is more important then the LOGIC of said advice.
It's not that who gives the advice is more important than the logic of that advice but that not all advice is created equal. Bogle's recommendations carry more weight than mine, and they should because he is an recognized expert.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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