What percentage of international do you hold?

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longinvest
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Re: What percentage of international do you hold?

Post by longinvest » Fri Dec 02, 2016 12:46 pm

50% of equities.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic / international) stocks / domestic (nominal / inflation-indexed) long-term bonds | VCN/VXC/VLB/ZRR

heyyou
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Re: What percentage of international do you hold?

Post by heyyou » Fri Dec 02, 2016 2:09 pm

We have about 30% of our total portfolio invested in international equity funds and about 30% of our total portfolio invested in US equity funds. I'll let folks do the other math.
Same here, half and half, since I probably couldn't find my slide rule on the day that I was choosing my foreign stock allocation. So far, that has been good enough.

The narrow range of returns from the various decile mixes is amusing. If that graph was full scale on one paper page, would the curve even look like a smeared dot? Consider how thoroughly that equity market volatility will bury those few tenths of a percent of return difference contributed by the domestic/foreign split.

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Re: What percentage of international do you hold?

Post by boglephreak » Fri Dec 02, 2016 2:09 pm

rbaldini wrote:
whaleknives wrote:I'm at 30% of stocks, based on a trade-off between minimum volatility and maximum return from this chart in the Wiki:

Image

Recommendations here range from 0% from John Bogle to 51% by market cap. Here's a recent thread: Why not use Global Market Cap %'s for Equities?
FYI, I tried to replicate the above graph.

I used S&P 500 data from here: http://pages.stern.nyu.edu/~adamodar/Ne ... retSP.html
And international index data from here: https://www.bogleheads.org/wiki/MSCI_EAFE_index
Used 1970-2015. Included rebalancing.

I found that
(1) Return is maximized by buying 0% international.
(2) Std deviation (one measure of risk) is minimized by choosing 10% international.
So, based on that data, the optimal allocation to international is somewhere between 0 and ~10%. Any higher than that gets you less return with more risk - i.e. bad. Mind you, these are small sample sizes, so there's a lot of uncertainty. Anywhere from 0-30% is basically statistically indistinguishable - and I'd personally take 30% over 0% (right now I'm at about 23%).

Why do I get a different answer? A combination of (1) I probably use different indices than were used in the above plot, and (2) I have 7 more years of recent data (2009-2015), during which domestic outperformed international by a lot.
interesting how such a small time frame can change the result so much (assuming indices doesnt make a large diference).

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Re: What percentage of international do you hold?

Post by livesoft » Fri Dec 02, 2016 2:22 pm

Grt2bOutdoors wrote:
livesoft wrote:The chart is great for somebody invested from 1970 to 2008, but probably not so great for some other times. Which international funds existed in 1970? 1980? Did the current composition of Vanguard Total International Index fund even exist in 2008? I don't think so.

We have about 30% of our total portfolio invested in international equity funds and about 30% of our total portfolio invested in US equity funds. I'll let folks do the other math.
I thought your asset allocation was 65/35, is the other 5% in REIT?
See: viewtopic.php?t=150267
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Taylor Larimore
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Re: What percentage of international do you hold?

Post by Taylor Larimore » Fri Dec 02, 2016 3:04 pm

The Thinker:

This is one of the most asked questions on the Boglehead forum. I gave my opinion in this link:

How Much International Stock -- A Suggestion

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

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Phineas J. Whoopee
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Re: What percentage of international do you hold?

Post by Phineas J. Whoopee » Fri Dec 02, 2016 3:05 pm

My model is 40% of equities. However, at my relatively low allocation of 40%, that would mean 16% of portfolio international, 24% US. Such tiny differences mean nothing, expectantly, plus it strains my brain, so I call it 15%/25% of portfolio, which means really the target is 37.5%. My rebalance bands are wider anyway.

The reason I hold so little stock is I've come to a point where I can meet my financial goals without holding more, so I choose not to take the additional risk. Other investors make their own choices.

PJW

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Re: What percentage of international do you hold?

Post by rbaldini » Fri Dec 02, 2016 3:07 pm

boglephreak wrote: interesting how such a small time frame can change the result so much (assuming indices doesnt make a large diference).
As a check, I looked at my indices from 1970-2008 to see if I got the same answer as the other plot. Qualitatively, yes: over that time period, the optimal allocation for max return is about 30% international. The lowest-risk allocation is about 11% international. That looks similar to the plot that's being passed around. So my conclusion is that the difference indeed due to the last 8 years, not so much due to different indices.

Thinking of doing a boot-strapped analysis of it to get a sense of the statistical uncertainty. My guess is that it's very high.

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SpringMan
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Re: What percentage of international do you hold?

Post by SpringMan » Fri Dec 02, 2016 3:14 pm

Vanguard now recommends between 30% and 50% international stocks. They would consider 20% too low. From Vanguard's Portfolio Watch tool
"consider To further diversify your stock portfolio, consider allocating 30% to 50% to foreign stocks."
Best Wishes, SpringMan

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Re: What percentage of international do you hold?

Post by Rodc » Fri Dec 02, 2016 3:16 pm

rbaldini wrote:
boglephreak wrote: interesting how such a small time frame can change the result so much (assuming indices doesnt make a large diference).
As a check, I looked at my indices from 1970-2008 to see if I got the same answer as the other plot. Qualitatively, yes: over that time period, the optimal allocation for max return is about 30% international. The lowest-risk allocation is about 11% international. That looks similar to the plot that's being passed around. So my conclusion is that the difference indeed due to the last 8 years, not so much due to different indices.

Thinking of doing a boot-strapped analysis of it to get a sense of the statistical uncertainty. My guess is that it's very high.
This may answer the question well enough (from the wiki page with the other figure):
[img]
https://www.bogleheads.org/w/images/c/c ... decade.png[/img]
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: What percentage of international do you hold?

Post by Day9 » Fri Dec 02, 2016 3:20 pm

One well-respected poster on this forum (whose name you may be able to deduce) recently said:
So with global market cap at 50% international (1/4 of that being EM) might go to say 60% and 1/3 of that EM. But be sure you can live with that TE [Tracking Error].
Based on current valuations, international & emerging markets may have higher expected return (and higher risk) than US stocks and it may be more efficient to increase your allocation to these while lowering your overall stock allocation and increasing your allocation to safe bonds.

People whose human capital (current and future income) is more strongly correlated with the US stock market may want to hedge their risks by increasing their international allocation. Young American professionals with 30-40 years of career ahead of them should consider this.
I'm just a fan of the person I got my user name from

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Re: What percentage of international do you hold?

Post by rbaldini » Fri Dec 02, 2016 3:32 pm

Rodc wrote:
rbaldini wrote:
boglephreak wrote: interesting how such a small time frame can change the result so much (assuming indices doesnt make a large diference).
As a check, I looked at my indices from 1970-2008 to see if I got the same answer as the other plot. Qualitatively, yes: over that time period, the optimal allocation for max return is about 30% international. The lowest-risk allocation is about 11% international. That looks similar to the plot that's being passed around. So my conclusion is that the difference indeed due to the last 8 years, not so much due to different indices.

Thinking of doing a boot-strapped analysis of it to get a sense of the statistical uncertainty. My guess is that it's very high.
This may answer the question well enough (from the wiki page with the other figure):
[img]
https://www.bogleheads.org/w/images/c/c ... decade.png[/img]
None of those look at all the data together, though.

Rodc
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Re: What percentage of international do you hold?

Post by Rodc » Fri Dec 02, 2016 3:35 pm

rbaldini wrote:
Rodc wrote:
rbaldini wrote:
boglephreak wrote: interesting how such a small time frame can change the result so much (assuming indices doesnt make a large diference).
As a check, I looked at my indices from 1970-2008 to see if I got the same answer as the other plot. Qualitatively, yes: over that time period, the optimal allocation for max return is about 30% international. The lowest-risk allocation is about 11% international. That looks similar to the plot that's being passed around. So my conclusion is that the difference indeed due to the last 8 years, not so much due to different indices.

Thinking of doing a boot-strapped analysis of it to get a sense of the statistical uncertainty. My guess is that it's very high.
This may answer the question well enough (from the wiki page with the other figure):
[img]
https://www.bogleheads.org/w/images/c/c ... decade.png[/img]
None of those look at all the data together, though.
Sorry, thought you were interested in sensitivity to time periods. Are you interested only in sensitivity to what indices/funds are used?
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: What percentage of international do you hold?

Post by rbaldini » Fri Dec 02, 2016 3:45 pm

Rodc wrote: Sorry, thought you were interested in sensitivity to time periods. Are you interested only in sensitivity to what indices/funds are used?
No, I mean that one can do a statistical analysis on the entire time series and get a the standard error of the estimates. Doing this basically means that you make up some model about how the data are generated, and then use the data to estimate the model. The model estimate itself will some uncertainty, which implies some uncertainty in the optimal allocation. E.g. is it 10% international, with an error of +- 20%? Would be interesting to see how variable this optimal allocation is. If it's all over the place, then it implies we're not learning anything (which is what using the sub-periods suggest).

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Re: What percentage of international do you hold?

Post by Rodc » Fri Dec 02, 2016 3:51 pm

rbaldini wrote:
Rodc wrote: Sorry, thought you were interested in sensitivity to time periods. Are you interested only in sensitivity to what indices/funds are used?
No, I mean that one can do a statistical analysis on the entire time series and get a the standard error of the estimates. Doing this basically means that you make up some model about how the data are generated, and then use the data to estimate the model. The model estimate itself will some uncertainty, which implies some uncertainty in the optimal allocation. E.g. is it 10% international, with an error of +- 20%? Would be interesting to see how variable this optimal allocation is. If it's all over the place, then it implies we're not learning anything (which is what using the sub-periods suggest).
Oh sure. The lazy method of posting the 10 year plots is enough for me to know well enough that the uncertainty is very high. I don't need a three significant digit answer to a 1 significant digit parameter. :)

Not that it might not be fun if one wants.

Added: I think the first plot was sufficient. If the return varies a tiny fraction of a percent over most the range, and the volatility varies by one part in 20 over most of the range, it just does not matter much at all. Put in optimization terms - the penalty function you are optimizing is nearly flat which indicates the problem is numerically very sensitive to any errors in the inputs.
Last edited by Rodc on Fri Dec 02, 2016 4:04 pm, edited 2 times in total.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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ray.james
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Re: What percentage of international do you hold?

Post by ray.james » Fri Dec 02, 2016 3:52 pm

I do between 40-50%. 50% when valuations are low on both relative(US-ExUS) and absolute terms. Allocation is also EM/small cap heavy for international. The only time my valuation triggered was for Em early this year. No complaints :happy
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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ray.james
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Re: What percentage of international do you hold?

Post by ray.james » Fri Dec 02, 2016 3:55 pm

Rodc wrote:
rbaldini wrote:
boglephreak wrote: interesting how such a small time frame can change the result so much (assuming indices doesnt make a large diference).
As a check, I looked at my indices from 1970-2008 to see if I got the same answer as the other plot. Qualitatively, yes: over that time period, the optimal allocation for max return is about 30% international. The lowest-risk allocation is about 11% international. That looks similar to the plot that's being passed around. So my conclusion is that the difference indeed due to the last 8 years, not so much due to different indices.

Thinking of doing a boot-strapped analysis of it to get a sense of the statistical uncertainty. My guess is that it's very high.
This may answer the question well enough (from the wiki page with the other figure):
[img]
https://www.bogleheads.org/w/images/c/c ... decade.png[/img]
Thanks for sharing. I haven't seen this one before. Adds a lot of perspective that countries rise and fall just like empires.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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Steadfast
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Re: What percentage of international do you hold?

Post by Steadfast » Fri Dec 02, 2016 4:00 pm

47% of equity holdings are ex-U.S. (that's 22% of equity in Emerging Markets, and 25% of equity in Int'l developed markets).
We don't see things as they are, we see things as we are.

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Re: What percentage of international do you hold?

Post by Grogs » Fri Dec 02, 2016 4:18 pm

I do 1/3 international and 2/3 US in my equity allocation. I picked it because it gives a hefty dose of international, while still tilting a bit toward the US relative to the global cap weighting.

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Taylor Larimore
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Re: What percentage of international do you hold?

Post by Taylor Larimore » Fri Dec 02, 2016 4:41 pm

SpringMan wrote:Vanguard now recommends between 30% and 50% international stocks. They would consider 20% too low. From Vanguard's Portfolio Watch tool
"consider To further diversify your stock portfolio, consider allocating 30% to 50% to foreign stocks."
Springman:

Can you provide a link to Vanguard's latest recommendation: "30% to 50% international stocks?"

Thank you and best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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whaleknives
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Re: What percentage of international do you hold?

Post by whaleknives » Fri Dec 02, 2016 5:05 pm

The Wiki section Domestic/International Allocation (full title to make the link more noticeable) does have later data including emerging markets, but still only to 2007. Also, note the lack of return numbers. It would be nice to have updated charts. :D

Image
  • "Figure 4 [Graph of U.S./International allocation 'efficient frontier' (including emerging markets)] is similar to Figure 1 [Graph of U.S./International allocation 'efficient frontier' (1970-2008)]. However, instead of using just the EAFE developed market international index, it combines that with international emerging market figures when they became available from 1988 onward."
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Re: What percentage of international do you hold?

Post by NoD » Fri Dec 02, 2016 5:07 pm

20% of equities, all in VTIAX
Some day we'll look back on all this and plow into a parked car.

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Re: What percentage of international do you hold?

Post by rbaldini » Fri Dec 02, 2016 5:11 pm

whaleknives wrote:The Wiki section Domestic/International Allocation (full title to make the link more noticeable) does have later data including emerging markets, but still only to 2007. Also, note the lack of return numbers. It would be nice to have updated charts. :D

Image
  • "Figure 4 [Graph of U.S./International allocation 'efficient frontier' (including emerging markets)] is similar to Figure 1 [Graph of U.S./International allocation 'efficient frontier' (1970-2008)]. However, instead of using just the EAFE developed market international index, it combines that with international emerging market figures when they became available from 1988 onward."
Would also be nice to see actual numbers on the plot...

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Re: What percentage of international do you hold?

Post by Rodc » Fri Dec 02, 2016 5:17 pm

rbaldini wrote:
whaleknives wrote:The Wiki section Domestic/International Allocation (full title to make the link more noticeable) does have later data including emerging markets, but still only to 2007. Also, note the lack of return numbers. It would be nice to have updated charts. :D

Image
  • "Figure 4 [Graph of U.S./International allocation 'efficient frontier' (including emerging markets)] is similar to Figure 1 [Graph of U.S./International allocation 'efficient frontier' (1970-2008)]. However, instead of using just the EAFE developed market international index, it combines that with international emerging market figures when they became available from 1988 onward."
Would also be nice to see actual numbers on the plot...
Yes, as it is it is completely worthless.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: What percentage of international do you hold?

Post by rbaldini » Fri Dec 02, 2016 5:32 pm

Hopefully this is useful.

I took the years from 1970-2015, and resampled them with replacement 5000 times, to produce 5000 different possible return sequences. Then I calculated the geometric mean return and standard deviation of returns for each of the 5000 simulations for a range of different international allocations. I plotted them on top of each other (in light gray - the more lines overlap, the darker the region), with a red line for the expectation. Here's what it looks like.

Image

As expected, there's *a lot* of uncertainty. This is shown by the large gray clouds around the red lines. Yes, the red lines suggest that lower international allocation is generally good for both returns and risk, but there's so much uncertainty that it's hard to draw strong conclusions. Generally speaking, I'd say any international allocation from 0%-40% is quite defensible.

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Re: What percentage of international do you hold?

Post by whaleknives » Fri Dec 02, 2016 6:04 pm

rbaldini wrote:
whaleknives wrote:The Wiki section Domestic/International Allocation (full title to make the link more noticeable) does have later data including emerging markets, but still only to 2007. Also, note the lack of return numbers. It would be nice to have updated charts.
Would also be nice to see actual numbers on the plot...
(Emphasis added.) :D
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Re: What percentage of international do you hold?

Post by rbaldini » Fri Dec 02, 2016 6:07 pm

whaleknives wrote:
rbaldini wrote:
whaleknives wrote:The Wiki section Domestic/International Allocation (full title to make the link more noticeable) does have later data including emerging markets, but still only to 2007. Also, note the lack of return numbers. It would be nice to have updated charts.
Would also be nice to see actual numbers on the plot...
(Emphasis added.) :D
:oops: :sharebeer

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blueblock
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Re: What percentage of international do you hold?

Post by blueblock » Fri Dec 02, 2016 6:28 pm

Equities: 80 US / 20 Intl

While I have no plans to change, I always read these international threads with interest and appreciate the information so freely shared.

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Re: What percentage of international do you hold?

Post by Munir » Fri Dec 02, 2016 6:36 pm

0% international- both equities and fixed income.
Last edited by Munir on Fri Dec 02, 2016 6:41 pm, edited 1 time in total.

Rodc
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Re: What percentage of international do you hold?

Post by Rodc » Fri Dec 02, 2016 6:40 pm

whaleknives wrote:
rbaldini wrote:
whaleknives wrote:The Wiki section Domestic/International Allocation (full title to make the link more noticeable) does have later data including emerging markets, but still only to 2007. Also, note the lack of return numbers. It would be nice to have updated charts.
Would also be nice to see actual numbers on the plot...
(Emphasis added.) :D
Just to be clear, my complaint was not directed at you.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: What percentage of international do you hold?

Post by Rodc » Fri Dec 02, 2016 6:44 pm

rbaldini wrote:Hopefully this is useful.

I took the years from 1970-2015, and resampled them with replacement 5000 times, to produce 5000 different possible return sequences. Then I calculated the geometric mean return and standard deviation of returns for each of the 5000 simulations for a range of different international allocations. I plotted them on top of each other (in light gray - the more lines overlap, the darker the region), with a red line for the expectation. Here's what it looks like.

Image

As expected, there's *a lot* of uncertainty. This is shown by the large gray clouds around the red lines. Yes, the red lines suggest that lower international allocation is generally good for both returns and risk, but there's so much uncertainty that it's hard to draw strong conclusions. Generally speaking, I'd say any international allocation from 0%-40% is quite defensible.
Did you keep the returns paired by year? So for example if it was a year of global recession both US and international had the same influence? As opposed to sampling from 1998 US and 2008 International - which pairs a boom year in the US and a recession year internationally.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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just frank
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Re: What percentage of international do you hold?

Post by just frank » Fri Dec 02, 2016 7:11 pm

I don't own any international funds, but Personal Capital says I own 2.85% international equities anyway. :annoyed

0% bonds.

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Re: What percentage of international do you hold?

Post by Hector » Fri Dec 02, 2016 8:09 pm

Proportional to international equity which is around 50% right now.
0% in bond.

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Re: What percentage of international do you hold?

Post by rbaldini » Fri Dec 02, 2016 8:22 pm

Rodc wrote: Did you keep the returns paired by year? So for example if it was a year of global recession both US and international had the same influence? As opposed to sampling from 1998 US and 2008 International - which pairs a boom year in the US and a recession year internationally.
Yep. The correlation between the two is too strong to sample independently.

Worth nothing that resampling implicitly assumes that there is no time series structure to the data. I.e., each draw is random, unconditioned on the past. This is probably not strictly true, but whatever temporal structure is in the data is probably weak. For example there's essentially 0 autocorrelation in either domestic or international. So I can't imagine this assumption will make much difference.

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Re: What percentage of international do you hold?

Post by Rodc » Fri Dec 02, 2016 8:27 pm

rbaldini wrote:
Rodc wrote: Did you keep the returns paired by year? So for example if it was a year of global recession both US and international had the same influence? As opposed to sampling from 1998 US and 2008 International - which pairs a boom year in the US and a recession year internationally.
Yep. The correlation between the two is too strong to sample independently.

Worth nothing that resampling implicitly assumes that there is no time series structure to the data. I.e., each draw is random, unconditioned on the past. This is probably not strictly true, but whatever temporal structure is in the data is probably weak. For example there's essentially 0 autocorrelation in either domestic or international. So I can't imagine this assumption will make much difference.
Agreed.

Thanks.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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Re: What percentage of international do you hold?

Post by KlangFool » Fri Dec 02, 2016 8:34 pm

OP,

64 / 36 portfolio. 19% of the portfolio in International. 35% of the portfolio in US stock.

KlangFool

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Re: What percentage of international do you hold?

Post by lack_ey » Fri Dec 02, 2016 8:45 pm

rbaldini wrote:
Rodc wrote: Did you keep the returns paired by year? So for example if it was a year of global recession both US and international had the same influence? As opposed to sampling from 1998 US and 2008 International - which pairs a boom year in the US and a recession year internationally.
Yep. The correlation between the two is too strong to sample independently.

Worth nothing that resampling implicitly assumes that there is no time series structure to the data. I.e., each draw is random, unconditioned on the past. This is probably not strictly true, but whatever temporal structure is in the data is probably weak. For example there's essentially 0 autocorrelation in either domestic or international. So I can't imagine this assumption will make much difference.
When working on the yearly returns, right?

There is some significant structure but probably not on that timescale, predicting return. For example, volatility (say of daily returns) shows strong autocorrelation when calculated on one period (e.g. a month, or even several months) to the next. That shouldn't really have much of an impact on the analysis you did, though, so this is just an aside.

There are also some concerns and considerations outside of the scope of the data examined as well. For example, it's very possible that the average US worker's income is more correlated with or at least related to US stock returns than ex-US stock returns. I imagine it might also be the case over the long run for home prices within the US as well. This would imply a little more utility from ex-US allocation than an analysis simply of US and ex-US stock returns. Potentially, you may also have priors like "I have no idea," which would suggest a more neutral allocation.

On the other other hand, the costs in ex-US investing are higher... and the pre-1970 data doesn't look so great for ex-US relative to US, though you could interpret that as an argument for either way.

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Re: What percentage of international do you hold?

Post by rbaldini » Fri Dec 02, 2016 9:08 pm

lack_ey wrote: When working on the yearly returns, right?
Yeah.
lack_ey wrote: There are also some concerns and considerations outside of the scope of the data examined as well. For example, it's very possible that the average US worker's income is more correlated with or at least related to US stock returns than ex-US stock returns. I imagine it might also be the case over the long run for home prices within the US as well. This would imply a little more utility from ex-US allocation than an analysis simply of US and ex-US stock returns. Potentially, you may also have priors like "I have no idea," which would suggest a more neutral allocation.

On the other other hand, the costs in ex-US investing are higher... and the pre-1970 data doesn't look so great for ex-US relative to US, though you could interpret that as an argument for either way.
Useful insight, as usual.

One can add to this simple statistical model the "sh*t hits the fan" model, in which one of the indices hits a unprecedented losing streak for a long time. Black swan kind of thing. For sure this would push toward an international allocation of 50%, so as to minimize catastrophic risk of either - a sort of "insurance allocation." Of course, such a catastrophe would probably be world-wide, so perhaps it wouldn't matter anyway.

In any case, I tend not to completely trust my own work, and so I usually average my results with the common advice and go from there.

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aj76er
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Re: What percentage of international do you hold?

Post by aj76er » Sat Dec 03, 2016 4:36 am

30% of equities is international

I tried 20% and it felt too low; then I tried 40% and it felt too high. 30% feels right.

0% of fixed income is international
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RNJ
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Re: What percentage of international do you hold?

Post by RNJ » Sat Dec 03, 2016 6:24 am

50% of equities in a roughly 65/35 portfolio.

KarenC
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Re: What percentage of international do you hold?

Post by KarenC » Sat Dec 03, 2016 6:46 am

Taylor Larimore wrote:
SpringMan wrote:Vanguard now recommends between 30% and 50% international stocks. They would consider 20% too low. From Vanguard's Portfolio Watch tool
"consider To further diversify your stock portfolio, consider allocating 30% to 50% to foreign stocks."
Springman:

Can you provide a link to Vanguard's latest recommendation: "30% to 50% international stocks?"

Thank you and best wishes.
Taylor
I think the language produced by the tool might be simplified. From page 10 of "Vanguard's approach to target-date funds" (http://www.vanguard.com/pdf/s167.pdf):
Our research has shown that allocations of 20% non-U.S. equities have provided about 85% of the maximum diversification benefit. Higher amounts such as 30% and 40% have provided more than 95% of this benefit. Allocations exceeding 40% would not have historically added significant additional diversification benefits, particularly when costs are taken into account. We believe non-U.S. equity allocations between 20% and full market-cap can be appropriate.
"How much you know is less important than how clearly you understand where the borders of your ignorance begin." — Jason Zweig

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Taylor Larimore
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Re: What percentage of international do you hold?

Post by Taylor Larimore » Sat Dec 03, 2016 7:35 am

KarenC:

Thank you for providing the 2015 quote from Vanguard which concluded:

We believe non-U.S. equity allocations between 20% and full market-cap can be appropriate.

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

Rodc
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Re: What percentage of international do you hold?

Post by Rodc » Sat Dec 03, 2016 8:01 am

rbaldini wrote:
lack_ey wrote: When working on the yearly returns, right?
Yeah.
lack_ey wrote: There are also some concerns and considerations outside of the scope of the data examined as well. For example, it's very possible that the average US worker's income is more correlated with or at least related to US stock returns than ex-US stock returns. I imagine it might also be the case over the long run for home prices within the US as well. This would imply a little more utility from ex-US allocation than an analysis simply of US and ex-US stock returns. Potentially, you may also have priors like "I have no idea," which would suggest a more neutral allocation.

On the other other hand, the costs in ex-US investing are higher... and the pre-1970 data doesn't look so great for ex-US relative to US, though you could interpret that as an argument for either way.
Useful insight, as usual.

One can add to this simple statistical model the "sh*t hits the fan" model, in which one of the indices hits a unprecedented losing streak for a long time. Black swan kind of thing. For sure this would push toward an international allocation of 50%, so as to minimize catastrophic risk of either - a sort of "insurance allocation." Of course, such a catastrophe would probably be world-wide, so perhaps it wouldn't matter anyway.

In any case, I tend not to completely trust my own work, and so I usually average my results with the common advice and go from there.
One could do that. One could also play with adding a little momentum or adding a little auto-correlation, which I have looked into in some of my past work.

But the more you add the harder to validate the model and more likely one is to introduce non-realistic behavior, or at least behavior you cannot know is realistic or not, so things just get sketchy.

I think better than introducing black swans, which by definition you do not know the statistical behavior, is to do some companion testing of stress testing.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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thethinker
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Re: What percentage of international do you hold?

Post by thethinker » Sat Dec 03, 2016 10:44 am

Taylor Larimore wrote:The Thinker:

This is one of the most asked questions on the Boglehead forum. I gave my opinion in this link:

How Much International Stock -- A Suggestion

Best wishes.
Taylor
Great link. Thank you

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thethinker
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Re: What percentage of international do you hold?

Post by thethinker » Sat Dec 03, 2016 10:48 am

Taylor Larimore wrote:KarenC:

Thank you for providing the 2015 quote from Vanguard which concluded:

We believe non-U.S. equity allocations between 20% and full market-cap can be appropriate.

Best wishes.
Taylor
Are you considered a change in your percentage with this information?

How long ago did Mr Bogle suggest 0%-20%? Has he updated or reaffirmed his position recently?

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abuss368
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Re: What percentage of international do you hold?

Post by abuss368 » Sat Dec 03, 2016 10:52 am

Presently we hold 40% of stocks in international and 0% bonds. We may add Total International Bond Index in the future.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

imabeliever
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Re: What percentage of international do you hold?

Post by imabeliever » Sat Dec 03, 2016 10:53 am

looks like as of right now i'm at:

18% Int'l and 48% US equities.
2.5% Int'l and 15% US bonds.

I'm 46 and rate myself to be in the "moderately aggressive" risk tolerance, depending on who's profile you use :)
yes you can do this!

lazydavid
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Re: What percentage of international do you hold?

Post by lazydavid » Sat Dec 03, 2016 11:10 am

rbaldini wrote:See my posts above. Not a plot, but the return optimum becomes 0% international. The risk optimum (lowest risk in std dev) is ~10% international. Basically, the last 7 years have favored domestic, so the total picture has pushed toward domestic. Mind you, my indices may not be exactly what the original guy used.
Should be easy to find out if they're at least equivalent, if not the same exact index. Just exclude the last 7 years. If the chart looks like the original one, you're using functionally identical indices.

Steve K
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Re: What percentage of international do you hold?

Post by Steve K » Sat Dec 03, 2016 11:15 am

I am at 10% of equities.

Dave55
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Re: What percentage of international do you hold?

Post by Dave55 » Sat Dec 03, 2016 11:19 am

30% of equities is International

Dave

Dottie57
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Re: What percentage of international do you hold?

Post by Dottie57 » Sat Dec 03, 2016 11:43 am

16% of equities
9 %'of total portfolio.

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