Vanguard International Index Returns

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Jpg
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Vanguard International Index Returns

Postby Jpg » Sat Jan 07, 2017 4:34 pm

International index in year ending Oct 31, 2016 returned 1%. Last 5 years averaged 4.2%.last 10 years 1.5%. I assume this is one reason Mr. Boglehead does not invest in international index funds? I still keep a small amount in international , although I am considering changes. I would appreciate other's thoughts.

Soon2BXProgrammer
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Re: Vanguard International Index Returns

Postby Soon2BXProgrammer » Sat Jan 07, 2017 4:38 pm

so... your saying international has grossly under-performed domestic for the last 10 years, and now you want to change and dump the rest of your allocation? aka, sell when its cheap?

Jpg
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Re: Vanguard International Index Returns

Postby Jpg » Sat Jan 07, 2017 4:45 pm

No, I did not say I want to dump my allocation now that it is cheap. I said that the person we name this forum after ( John ) , does not invest in international, and I am considering making changes. Please keep the condescending comments to yourself. Thanks.

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whaleknives
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Re: Vanguard International Index Returns

Postby whaleknives » Sat Jan 07, 2017 5:02 pm

Here's a recent thread on international. Note the comment on the Callan Periodic Table (click on the table for a more legible version).
"I'm an indexer. I own the market. And I'm happy." (John Bogle, "BusinessWeek", 8/17/07) ☕ Maritime signal flag W - Whiskey: "I require medical assistance."

deikel
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Re: Vanguard International Index Returns

Postby deikel » Sat Jan 07, 2017 5:04 pm

Not so much condescending but rather pointing out the logical fault in your reasoning...

a) Bogle has his own history he is basing his recommendations on, he lived through times with high yoelds for bonds and his bond allocation suggestions are usually heavy IMO. He sees little use in INT diversification given it is somewhat related to the US economy and the latter being the general engine of the world economy by and large - what the future brings may wary

b) If you have a well defined asset allocation, you should now rather buy up on INT since its 'cheap' (given its currency conversion at this point in time). Once the US collapses again in the future (IF ?), you will have done the right thing if you see the same delay in collapse in the ROW

If you think your allocation is wrong for one reason or another, change it - but stick with it, the losses pile up when you change your allocation due to whimps, feelings and assumptions that will likely all turn out different
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immidiatly and destroy any copy or remembrance of it.

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baw703916
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Re: Vanguard International Index Returns

Postby baw703916 » Sat Jan 07, 2017 5:30 pm

I'm quite sure that Mr. Bogle's decision not to invest in international equities has nothing at all to do with their performance over the last 5 or 10 years. What he has said is that he doesn't feel that holding international equities is necessary for an adequately-diversified portfolio, and that there are higher costs (expense ratios and foreign tax withholding on dividends), and that there's not a lot of diversification benefit.

I happen to disagree with him on some of these points, but it's quite important to note that his objections have nothing to do with historical performance (other than how closely international tends to correlate with U.S. returns). Otherwise, what if international outperforms the U.S. over the next 10 years? Does one then decide to change their mind and add it to their portfolio? All the good advice on international out there includes this point: pick a percentage of your portfolio you want to be in international (Mr. Bogle says this number can be 0%-20%, Vanguard's generic advice is 20%-50%--international's share of the total world market cap). Whatever number you pick, stick to that number, whatever might happen. I.e., stay the course.
Most of my posts assume no behavioral errors.

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Christine_NM
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Re: Vanguard International Index Returns

Postby Christine_NM » Sat Jan 07, 2017 5:36 pm

If you have a really long time horizon just leave your international on the table and ignore it. The dollar will weaken eventually and VTIAX will have a moment in the sun. I do not see a need to sell it.

Recently I saw an interview where Mr. Bogle said you the investor should decide for yourself what your reasons are for owning or not owning international. This seems sensible to me. It is not an asset class like small/large, value/growth. You will have to come up with reasons to add to it. I am not persuaded by any of the popular arguments for owning international.

Just like when you get costs low enough, lopping off another basis point does not matter, once you are diversified away from company and sector risk, does further diversification matter? Similarly, the 500 index captures most of the US, and switching Total Market is right theoretically but doesn't make much difference in practice. Perhaps VTIAX/VXUS reaches a point of diminishing returns for indexing. Anyway I frankly do not know the best way to approach global investing, so I no longer try to do it. If I figure out something I may try it. I could still be persuaded because the strong dollar makes this the time to buy international. OTOH, I am in my seventies and would like positive returns. That will not happen with international funds as long as we have an ever stronger dollar.
10% cash 45% stock 45% bond. Retired, w/d rate 1.5%

pokebowl
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Re: Vanguard International Index Returns

Postby pokebowl » Sun Jan 08, 2017 5:18 pm

One could also make the argument, you are, generally, reducing your exposure to tech and healthcare and diversifying into things such as basic materials, industrials when investing in international as most US focused indexes are currently weighted heavily in those two categories. I myself am heavily invested in international (40% into FTIPX) and while international has been underperforming the last couple years, I see no reason to stop this allocation.

No home bias here, while US and Ex-US tend to mirror each other to a degree, there have been periods of time where one has out performed the other and visa versa. I take international's under performance a great deal right now to continue to buy into until the US and Ex-US switch positions down the road. While I am not a good coin flipper as say Mr. Bogle or Warren Buffett, I invest knowing no one has any idea what the future holds and like to spread out where I can. This strategy has worked wonders for me going into the 2001 and 2008 crash and will most likely serve me will in the next one. :beer

wesgreen
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Re: Vanguard International Index Returns

Postby wesgreen » Mon Jan 09, 2017 11:07 am

My investing horizon hopefully extends another 30 or 35 years, if I get very lucky. I don't think my retirement portfolio will recover from the losses my international allocation has amassed, compared to the Total US part. Ignoring Mr.Bogle's advice on this may be my biggest investing mistake so far.
As Christine_NM wrote, the thing to do now (for me) seems to wait for that day in the sun for VTIAX, and then get out of it, with just one black eye. In the meanwhile I'll try to gradually shift my exposure with new contributions and occasional rebalancing.
If I were in my twenties I would see a stronger case for buying international.

Tamalak
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Re: Vanguard International Index Returns

Postby Tamalak » Mon Jan 09, 2017 11:16 am

Jpg wrote:No, I did not say I want to dump my allocation now that it is cheap. I said that the person we name this forum after ( John ) , does not invest in international, and I am considering making changes. Please keep the condescending comments to yourself. Thanks.


Would you have noticed, or cared, that Mr. Bogle did not invest internationally if international stocks had been outperforming domestic instead of the other way around? Trying to 'fix' the parts of your portfolio that are underperforming is a recipe for selling low and buying high.

retire57
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Re: Vanguard International Index Returns

Postby retire57 » Mon Jan 09, 2017 3:00 pm

Jpg wrote:International index in year ending Oct 31, 2016 returned 1%. Last 5 years averaged 4.2%.last 10 years 1.5%. I assume this is one reason Mr. Boglehead does not invest in international index funds? I still keep a small amount in international , although I am considering changes. I would appreciate other's thoughts.


Not sure where you are getting these numbers. They don't align with the returns I'm seeing.

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Phineas J. Whoopee
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Re: Vanguard International Index Returns

Postby Phineas J. Whoopee » Mon Jan 09, 2017 4:56 pm

wesgreen wrote:...
As Christine_NM wrote, the thing to do now (for me) seems to wait for that day in the sun for VTIAX, and then get out of it, with just one black eye. ...

I think that plan bears re-examination. To wait for an investment you don't want in your portfolio at all to go up before you sell it is an example of the behavioral pitfall called Loss Aversion, and is related to Anchoring (both links are from the Bogleheads wiki).

I would advise you to think about what you're doing a little more, before taking action. Are you truly convinced holding international equities is not for you, and will never be for you, because under no circumstances does it improve your portfolio's characteristics (note I didn't say returns); or are you really, deep down, responding to its recent performance?

To put it another way, if you didn't have the fund today, but instead cash equal to its value, would you buy international with it? Are there other market circumstances under which you think you possibly might?

Those are questions to answer for yourself, not for us. No need to post the answers if you don't want to.

If you honestly conclude international stocks are wrong for you and your portfolio, and will remain wrong even if they vastly outperform US stocks over the next many years, then I'd suggest making the move, rather than waiting around. A clearly wrong portfolio should be replaced by a clearly better one as soon as reasonably practicable, taking taxes into account if necessary.

On the other hand, if the US vs. International return situation being the opposite would, honestly, cause you to want to buy more international, then I think you should stand pat.

It's up to you either way, of course. Good luck whatever you choose.

PJW
Last edited by Phineas J. Whoopee on Mon Jan 09, 2017 5:07 pm, edited 1 time in total.

alex_686
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Re: Vanguard International Index Returns

Postby alex_686 » Mon Jan 09, 2017 5:06 pm

Let me point out a few things.

1. The dollar has surged from a point of relative weakness to one of relative strength. This run up is somewhat limited by Purchasing Power Parity (PPP). I am not calling a dollar high but it would be hard for it to preform the same feat over the next 10.

2. The market has favored growth and large cap stocks for the past 10 years. The US is over weighted here. Will the next 10 years be like this?

3. The US has done a much better job of cleaning up its mess over the 2008 crash. We took our bitter medicine and moved on. The rest of the world less so. Will the US be in the vanguard in handling the next crisis? Who knows.

In short, past performance does not indicate future performance.

jalbert
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Re: Vanguard International Index Returns

Postby jalbert » Mon Jan 09, 2017 5:38 pm

Jpg wrote:International index in year ending Oct 31, 2016 returned 1%. Last 5 years averaged 4.2%.last 10 years 1.5%. I assume this is one reason Mr. Boglehead does not invest in international index funds? I still keep a small amount in international , although I am considering changes. I would appreciate other's thoughts.

Mr. Bogle's position to "Stay the Course" is a much stronger conviction than his suggestion to avoid int'l equities, which he considers ok up to 20% of equities.
Risk is not a guarantor of return.

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whaleknives
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Re: Vanguard International Index Returns

Postby whaleknives » Mon Jan 09, 2017 9:27 pm

Tamalak wrote:Would you have noticed, or cared, that Mr. Bogle did not invest internationally if international stocks had been outperforming domestic instead of the other way around? Trying to 'fix' the parts of your portfolio that are underperforming is a recipe for selling low and buying high.

:thumbsup This. Having an asset underperform is a fact of life with diversification:

    "If you become upset when one of your asset classes does poorly, even when the rest of your portfolio is doing well, then you should not be managing your own money." (Bill Bernstein, Four Pillars of Investing)
"I'm an indexer. I own the market. And I'm happy." (John Bogle, "BusinessWeek", 8/17/07) ☕ Maritime signal flag W - Whiskey: "I require medical assistance."

kiddoc
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Re: Vanguard International Index Returns

Postby kiddoc » Mon Jan 09, 2017 10:14 pm

To add to the above discussion, please do not confuse the stated "total returns" as actual investor returns. I am a case in point that these can vary significantly, especially in the first few years of investing. For me, the US equities have given me market return. International equities have outperformed them over the past ~1.5-2 years for me!
viewtopic.php?f=1&t=206846&p=3171341#p3171341
"The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton

4a757374696e
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Re: Vanguard International Index Returns

Postby 4a757374696e » Mon Jan 09, 2017 10:18 pm

Phineas J. Whoopee wrote:I think that plan bears re-examination. To wait for an investment you don't want in your portfolio at all to go up before you sell it is an example of the behavioral pitfall called Loss Aversion, and is related to Anchoring (both links are from the Bogleheads wiki).

Hey thanks for the link to that wiki page, PJW. Those were really interesting to read. With that said, I think the poster might be suffering from Recency Bias. By thinking that because international markets haven't done well recently, they won't do well in the future.

I'm a market-cap investor myself. I am 50/50 domestic/international, which I believe is close enough. To me this is the most logical thing to do. I think investing too much in the US is home country bias. Oh and I don't have to rebalance :happy
Don't do anything tomorrow that can be done today

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badbreath
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Re: Vanguard International Index Returns

Postby badbreath » Tue Jan 10, 2017 12:12 am

I just like to own Samsung, LG, Toyota, Nestle that I do not hold in total stock market. So I do invest ing internationals (only 10 %)
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

wesgreen
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Re: Vanguard International Index Returns

Postby wesgreen » Tue Jan 10, 2017 9:54 pm

Phineas, thank you very much for your perspective and the links. I guess I do suffer from recency bias, if losing to TSM for 20 years (and counting) is just a short blip in your investing career. Definitely from loss aversion! It wasn't a huge mistake, but an unnecessary one, especially for a Boglehead. I should have known that Mr. Bogle tends to be right on these matters.
I don't want to get out now while it's down, and plan to wait until the next US market crash at the earliest, but I stopped buying VTIAX last year. Nisiprius always writes that in the long run there probably won't be a big difference - I guess he means long when he says it!

pascalwager
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Re: Vanguard International Index Returns

Postby pascalwager » Thu Jan 12, 2017 4:18 am

wesgreen wrote:Phineas, thank you very much for your perspective and the links. I guess I do suffer from recency bias, if losing to TSM for 20 years (and counting) is just a short blip in your investing career. Definitely from loss aversion! It wasn't a huge mistake, but an unnecessary one, especially for a Boglehead. I should have known that Mr. Bogle tends to be right on these matters.
I don't want to get out now while it's down, and plan to wait until the next US market crash at the earliest, but I stopped buying VTIAX last year. Nisiprius always writes that in the long run there probably won't be a big difference - I guess he means long when he says it!


Int'l AA is a matter of personal taste (Gene Fama). Give yourself some time to identify your personal taste and then customize your portfolio accordingly. Since the experts disagree, they can provide no consensus; but still, your personal taste may include following the recommendations of Mr. Bogle.

Only then might you find investment peace-of-mind.

My personal taste seems to be fixed at 50/50 and hasn't changed since 1995, although I've considered reducing int'l in the recent past.

Valuethinker
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Re: Vanguard International Index Returns

Postby Valuethinker » Thu Jan 12, 2017 5:08 am

Christine_NM wrote: That will not happen with international funds as long as we have an ever stronger dollar.


Currency rates are unforecastable. Take a look at the dollar up to the September 1987 Plaza Agreement, and its fall in the 6-7 years thereafter (S&L Crisis and bailout, etc.).

The same factors that are saying "stronger dollar" now such as new president elect and likely fiscal policies may well be used in 4 years time to argue for a lower dollar.


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