VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

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kosomoto
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VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by kosomoto » Tue Dec 27, 2016 8:52 pm

Is nobody else disturbed by the fact that over the course of 17 years Vanguard Total Intl Stock Index (VGTSX) is still at the same price level (split adjusted) as 17 years ago? That means the only return received has been from dividends in that time frame! (If in a retirement account, that means you lost some of those dividends to withholding taxes as well!)

In 2007 shares were at $22! Shares are down 33% from 10 years ago!

For reference, Vanguard Total Stock Mkt Idx Inv (VTSMX) was at $32 (split adjusted) and now trades at $56.8, nearly a 100% gain in capital appreciation, excluding dividends. In 2007, shares were around $37.

So after such a massive underperformance international stocks still aren't dramatically cheaper, in fact they should be trading at valuations of less than 50% of US stocks. Yet total international is trading at a P/E over 20 according to Vanguard. Before you mention CAPE, let me just remind you that CAPE is also at 20 for total international. (http://www.starcapital.de/research/stockmarketvaluation) International stocks should be trading at a CAPE of 10 or a PE of 10 after this level of underperformance. Does anybody have earnings growth figures for international stocks? They are clearly nowhere close to US figures and at this point it looks like 0, or negative after inflation.

How are people reconciling this? If you are expecting higher future returns, what are you basing your expectations on? Because it's clearly not valuations and earnings growth rates.

Edit: I ask because I am invested in international stocks but the more I look at the data the more I doubt their value.
Last edited by kosomoto on Tue Dec 27, 2016 9:08 pm, edited 1 time in total.

livesoft
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by livesoft » Tue Dec 27, 2016 8:55 pm

Perhaps capital gains distributions were intermittently larger in the old days than they are now since the fund changed composition and indexes over the years?

But we all know that international sucks in the past few years, especially with Japan, Grexit, Brexit, and other things. The temporal rebalancing opportunities have been HUGE and profitable.
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Wildebeest
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by Wildebeest » Tue Dec 27, 2016 9:11 pm

John C Bogle suggests not to invest in international funds. He also quotes a market analyst as to what the future expectations are regarding stockmarket: "Nobody knows nothing".

He is a wise man.

I did not follow his advice: We have 40 % of our portfolio in international funds and as Livesoft, I am also happy to continue to rebalance in international funds.

Time will tell if my happiness will persist.
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Fudgie
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by Fudgie » Tue Dec 27, 2016 9:13 pm

:oops:
Last edited by Fudgie on Fri Dec 08, 2017 7:17 am, edited 1 time in total.

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triceratop
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by triceratop » Tue Dec 27, 2016 9:16 pm

IMO you should only care about total return. What does its growth chart since the highest close of 2000 for VGTSX?

Image

Not great! But it did have positive returns over a 15 year period.
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by MorningstarFan » Tue Dec 27, 2016 9:19 pm

Hi,

I do not blame you for having doubts at all! However, I would like to state the value of owning VGTSX and why I own it as well. It all comes down to diversification. Yes, the international index has been lagging for a long period of time. However, I cannot predict what will happen in the next decade. The US stock market has done well, but I do not know how long that can last.

In other words, the longer your investment window (or how long before you need to use your investment money), the more important it is to diversify your portfolio.

This is just my opinion - there are many stocks in greater value in the international market than the US. Because I tend to focus on value (or buying stocks at a cheaper price), therefore I am owning VGTSX and hoping for the future to grow more. Many US stocks are quite pricey... Again, this is my personal view on this matter.

Wish you a happy new year!

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zaboomafoozarg
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by zaboomafoozarg » Tue Dec 27, 2016 9:25 pm

Well, I feel better about buying for $14 in 2016 than I do about buying it for $14 in 2000.

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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by MossySF » Tue Dec 27, 2016 9:44 pm

Why would you have bought in 2000 when the graph shows you clearly could have waited for a much better deal in 2002? :beer

For any asset class, you can always find start/end dates to prove your point. Just a few years ago, this was the same topic in this thread about U.S. Stocks because bonds were whipping stocks over the same period.

What would make better sense if you then overlaid US vs International during multiple periods and see how "sometimes" they diverge. If you rebalance, you can take advantage of these differences. During the post-2002 recovery, International recovered way faster than U.S. The post-2008 recovery, U.S. stocks has ruled the roost -- REITs in particular. Don't fight the last war -- what just happened in recent history is unlikely to be repeated given that we are always surprised by the results in hindsight.

kosomoto
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by kosomoto » Tue Dec 27, 2016 9:45 pm

triceratop wrote:IMO you should only care about total return. What does its growth chart since the highest close of 2000 for VGTSX?

Image

Not great! But it did have positive returns over a 15 year period.
Yeah, I'm aware dividends give it a positive return, but honestly over such a long period of time either:

a) Valuations should now be extremely low, they aren't, based on earnings.
b) Returns should have been higher

kosomoto
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by kosomoto » Tue Dec 27, 2016 9:47 pm

MossySF wrote:Why would you have bought in 2000 when the graph shows you clearly could have waited for a much better deal in 2002? :beer

For any asset class, you can always find start/end dates to prove your point. Just a few years ago, this was the same topic in this thread about U.S. Stocks because bonds were whipping stocks over the same period.

What would make better sense if you then overlaid US vs International during multiple periods and see how "sometimes" they diverge. If you rebalance, you can take advantage of these differences. During the post-2002 recovery, International recovered way faster than U.S. The post-2008 recovery, U.S. stocks has ruled the roost -- REITs in particular. Don't fight the last war -- what just happened in recent history is unlikely to be repeated given that we are always surprised by the results in hindsight.
I'm actually aware of the overlaid chart you reference, here it is:

https://qph.ec.quoracdn.net/main-qimg-0 ... _webp=true

Yes, international has had some short periods of outperformance but it hasn't made up for the past 20 years. My problem is also with current valuations. Valuations should be in theory much lower if foreign companies are able to grow their earnings - but they seem to have a real problem doing so.

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zaboomafoozarg
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by zaboomafoozarg » Tue Dec 27, 2016 10:04 pm

I thought this thread looked familiar. I guess that's because you posted basically the same thing back in October, and July, and May, and March.

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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by gkaplan » Tue Dec 27, 2016 10:11 pm

zaboomafoozarg wrote:I thought this thread looked familiar. I guess that's because you posted basically the same thing back in October, and July, and May, and March.

He likes beating a dead horse.
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by triceratop » Tue Dec 27, 2016 10:14 pm

I hope this is Mr Bogles account, trying to needle us for not investing wholly within the US. :D
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by MossySF » Tue Dec 27, 2016 10:29 pm

kosomoto wrote:Yes, international has had some short periods of outperformance but it hasn't made up for the past 20 years.
20 year cycle is too short. The average bear-bull cycle is roughly 7 years so right now we are the ragged end of a US-INTL-US pattern. What if you looked back 30 years instead? I'm too lazy to calculate the data off-hand but I remember Japan was on a huge rise back then so 30 years probably be INTL-US-INTL-US.
kosomoto wrote:My problem is also with current valuations. Valuations should be in theory much lower if foreign companies are able to grow their earnings - but they seem to have a real problem doing so.
Why would valuations be lower if companies have earnings growth? That would make a company more attractive and hence have a higher valuation. And the 2nd part about not being able to grow earnings -- don't mistake earnings growth numbers as a future value. That is a backwards value that directly impacts the existing value. Growth is a future event which we cannot predict with any accuracy. All we're really doing is looking at historic trends and project to the ultimate end. It's a simple thought process -- 1) the US continues to outgrow International for your effective investing lifespan of 50 years or so or 2) US slows down and International catches up (and down) in the next 50 years. For me, it's mostly odds -- I tilt my portfolio a bit more where the odds seem favorable.

But I'll short-circuit this entire thread. It's perfectly fine if you want to hold only U.S. stocks. You don't have to ask anybody for approval. In the overall picture, it doesn't mean much as stock US/Intl mix is way down the list. On the impact pyramid, savings rate controls 80% of your final outcome. Then behavior, stock/bond allocation, expenses and tax optimizations are the next 18%. That leaves at most 2% for the US/Intl mix. The only caveat is to stick with the plan. As long as you don't try to chase Intl the moment Intl outperforms US over a 5 year period, it won't matter that much.

You are a bit late though. 2009 was the time to go 100% US. That's what I mostly did back then ... looked at the valuations and what did the best/worse the 5-7 years previous ... and sold off all developed INTL assets in favor of REITs (the worse performing class during the recession). Recently, I've been slowly going back to my original allocation after 7+ years of US & REIT outperformance (especially for REITs).

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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by raven15 » Tue Dec 27, 2016 11:01 pm

zaboomafoozarg wrote:Well, I feel better about buying for $14 in 2016 than I do about buying it for $14 in 2000.
This is my favorite answer and also my opinion on the subject.
It's Time. Adding Interest.

kosomoto
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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by kosomoto » Wed Dec 28, 2016 10:01 am

triceratop wrote:I hope this is Mr Bogles account, trying to needle us for not investing wholly within the US. :D
Ssshhhh, let this old man have his fun on the internet. JK. :P

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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by kosomoto » Wed Dec 28, 2016 10:02 am

MossySF wrote:
kosomoto wrote:Yes, international has had some short periods of outperformance but it hasn't made up for the past 20 years.
20 year cycle is too short. The average bear-bull cycle is roughly 7 years so right now we are the ragged end of a US-INTL-US pattern. What if you looked back 30 years instead? I'm too lazy to calculate the data off-hand but I remember Japan was on a huge rise back then so 30 years probably be INTL-US-INTL-US.
kosomoto wrote:My problem is also with current valuations. Valuations should be in theory much lower if foreign companies are able to grow their earnings - but they seem to have a real problem doing so.
Why would valuations be lower if companies have earnings growth? That would make a company more attractive and hence have a higher valuation. And the 2nd part about not being able to grow earnings -- don't mistake earnings growth numbers as a future value. That is a backwards value that directly impacts the existing value. Growth is a future event which we cannot predict with any accuracy. All we're really doing is looking at historic trends and project to the ultimate end. It's a simple thought process -- 1) the US continues to outgrow International for your effective investing lifespan of 50 years or so or 2) US slows down and International catches up (and down) in the next 50 years. For me, it's mostly odds -- I tilt my portfolio a bit more where the odds seem favorable.

But I'll short-circuit this entire thread. It's perfectly fine if you want to hold only U.S. stocks. You don't have to ask anybody for approval. In the overall picture, it doesn't mean much as stock US/Intl mix is way down the list. On the impact pyramid, savings rate controls 80% of your final outcome. Then behavior, stock/bond allocation, expenses and tax optimizations are the next 18%. That leaves at most 2% for the US/Intl mix. The only caveat is to stick with the plan. As long as you don't try to chase Intl the moment Intl outperforms US over a 5 year period, it won't matter that much.

You are a bit late though. 2009 was the time to go 100% US. That's what I mostly did back then ... looked at the valuations and what did the best/worse the 5-7 years previous ... and sold off all developed INTL assets in favor of REITs (the worse performing class during the recession). Recently, I've been slowly going back to my original allocation after 7+ years of US & REIT outperformance (especially for REITs).
Apologies for any confusion, by lower valuation I mean things like P/E ratio are lower, so basically I mean more earnings per share and whatnot.

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Re: VGTSX Price in 2000 - $14.31. Price in late 2016? $14.63.

Post by Tamalak » Wed Dec 28, 2016 10:38 am

Nobody mentioned the strength of the dollar?

If the dollar goes up, as it has been lately, that directly lowers the performance of international stocks in dollars. If you're a Frenchman investing in France, you've actually been doing pretty good these last few years - American investing in France, not so much.

When the dollar weakens, it'll swing the other way.

I think of it as currency diversification - if my buying power goes down, international stocks go up to compensate. If international stocks are going down due to dollar strength, at least my buying power has gone up!

Also, a minor thing but international stocks give 3%ish dividends. USA gives 2%ish. So even 'flat' you've been getting 3% annually.

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