Explaining a Bogle quote
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Explaining a Bogle quote
Please explain if Bogle has a valid point here, and if it should give us pause about investing internationally:
"And we (the U.S.) also have shareholder protections that can be taken for granted. Outside of the U.S., you can be very disappointed. I think it was in Malaysia a few years ago--you couldn't get your money out. Korea is a bit fragile in that regard. Heaven knows what China would do under those circumstances. But if you don't have the basic institutional structure for the markets and the basic protection of shareholder rights that we've had institutionalized over 250 years here, you want to be very careful before you depart that."
http://www.morningstar.co.uk/UK/NEWS/14 ... HE-US.ASPX
"And we (the U.S.) also have shareholder protections that can be taken for granted. Outside of the U.S., you can be very disappointed. I think it was in Malaysia a few years ago--you couldn't get your money out. Korea is a bit fragile in that regard. Heaven knows what China would do under those circumstances. But if you don't have the basic institutional structure for the markets and the basic protection of shareholder rights that we've had institutionalized over 250 years here, you want to be very careful before you depart that."
http://www.morningstar.co.uk/UK/NEWS/14 ... HE-US.ASPX
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Re: Explaining a Bogle quote
He is much more intelligent then me, but there is nothing preventing U.S. government from freezing assets here in the U.S. as well. That is why the lat Harry Browne not only advocated gold and swiss francs BUT for them to be stored out of the country. Please correct me if I am wrong.
BTW, I don't think anyone is advocating putting 100% of one's money in ANY country (except those who have a home country bias) due to these exact risk of political risks.
Good luck.
BTW, I don't think anyone is advocating putting 100% of one's money in ANY country (except those who have a home country bias) due to these exact risk of political risks.
Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” |
-Jack Bogle
Re: Explaining a Bogle quote
I'd say shareholders are pretty much protected in Germany, UK and Japan as well.
Investing only in the US leaves out half of the market. Who knows, it could be the half of the market that is going to do better.
The quote is much more pertinent to investments in particular markets. Sure, I'd have reservations about investing 50% of one's capital in China.
Investing only in the US leaves out half of the market. Who knows, it could be the half of the market that is going to do better.
The quote is much more pertinent to investments in particular markets. Sure, I'd have reservations about investing 50% of one's capital in China.
- Taylor Larimore
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International stock -- A suggestion
simplesauce:
This post may be helpful:
How Much International Stock? A Suggestion
Best wishes.
Taylor
This post may be helpful:
How Much International Stock? A Suggestion
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
- nisiprius
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Re: Explaining a Bogle quote
He (obviously I think) has a valid point, but it's not clear how much weight to put on it or how much it should influence us.
We shouldn't be deceived by the fact that we can click "sell" on our Total International holding, and it feels just like clicking "sell" on our Total Stock holding and we see money in our account the next day. What's going on behind the scenes isn't the same, and if some kind of financial crisis makes the United States or its trading partners decide they don't want an "open border" policy on money, Vanguard might have difficulty valuing or liquidating overseas stocks.
On the "no problem" side: developed markets constitute about 81% of total market cap and they are reasonably comparable to the U.S. in terms of free market tradition, investor protections, etc. It's not like all foreign countries are Malayasia.
On the "hmmm" side:
1) That there are special risks in international investing is mentioned in every prospectus, and I think we should believe it.
2) Right now, I'm taking Spanish lessons via videocalls from a teacher in Venezuela. I don't want to get into the issues, which I don't fully understand--from my point of view it's straightforward since payments are mediated by a language-lesson-marketplace called italki, but... it not smooth or trouble-free to move money across the Venezuelan border. (I can remember when fictional Ernst Stavro Blofeld kept all of SPECTRE's funds in "Swiss francs and Venezuelan bolivars...the hardest currencies in the world.")
3) The U.S. isn't perfect, and I have no crystal ball about the permanence of our institutions, but, yeah, it's pretty good. For example, on a map of a "corruption perceptions index," we're not the very cleanest of all countries, but there's still, dare I say a world of difference, between the U.S. and many other countries.
Source
We shouldn't be deceived by the fact that we can click "sell" on our Total International holding, and it feels just like clicking "sell" on our Total Stock holding and we see money in our account the next day. What's going on behind the scenes isn't the same, and if some kind of financial crisis makes the United States or its trading partners decide they don't want an "open border" policy on money, Vanguard might have difficulty valuing or liquidating overseas stocks.
On the "no problem" side: developed markets constitute about 81% of total market cap and they are reasonably comparable to the U.S. in terms of free market tradition, investor protections, etc. It's not like all foreign countries are Malayasia.
On the "hmmm" side:
1) That there are special risks in international investing is mentioned in every prospectus, and I think we should believe it.
2) Right now, I'm taking Spanish lessons via videocalls from a teacher in Venezuela. I don't want to get into the issues, which I don't fully understand--from my point of view it's straightforward since payments are mediated by a language-lesson-marketplace called italki, but... it not smooth or trouble-free to move money across the Venezuelan border. (I can remember when fictional Ernst Stavro Blofeld kept all of SPECTRE's funds in "Swiss francs and Venezuelan bolivars...the hardest currencies in the world.")
3) The U.S. isn't perfect, and I have no crystal ball about the permanence of our institutions, but, yeah, it's pretty good. For example, on a map of a "corruption perceptions index," we're not the very cleanest of all countries, but there's still, dare I say a world of difference, between the U.S. and many other countries.
Source
Last edited by nisiprius on Sat Jun 24, 2017 3:26 pm, edited 1 time in total.
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Re: Explaining a Bogle quote
The added risk of foreign market is reflected in their valuations, when it does exist.
Why would cap weighing work in the US, but not in the World ?
Why would cap weighing work in the US, but not in the World ?
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Re: Explaining a Bogle quote
I on board with the Pros. I go with the 20% international.
Re: Explaining a Bogle quote
Which pros ? Globally they are almost 50% weighted on intl, on average.
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Re: International stock -- A suggestion
Do you still adhere to the 20% international rule of thumb? Do you see any scenarios where you would increase this, as Vanguard and others have continued to do?Taylor Larimore wrote:simplesauce:
This post may be helpful:
How Much International Stock? A Suggestion
Best wishes.
Taylor
Also, what are your thoughts on how much emerging markets vs developed markets?
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Re: Explaining a Bogle quote
Thesaints wrote:Which pros ? Globally they are almost 50% weighted on intl, on average.
Bogle/Vanguard pros read link below
viewtopic.php?t=196956
Last edited by indexonlyplease on Sat Jun 24, 2017 5:06 pm, edited 3 times in total.
Re: Explaining a Bogle quote
I see: "pro", then. Not "pros"
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Re: Explaining a Bogle quote
Bogle/Vanguard pros read link belowThesaints wrote:I see: "pro", then. Not "pros"
viewtopic.php?t=196956
Re: Explaining a Bogle quote
Enron.
Lehman Brothers.
Bernie Madoff.
Lehman Brothers.
Bernie Madoff.
Re: Explaining a Bogle quote
Vanguard published a very convincing paper a few years ago saying that US investors can reap a substantial fraction of the diversification benefit from intl markets by investing only 20/25%. More recently they have published a paper at least as convincing, where they state fraction should be at least 35%.
I don't think they were wrong in either case, but rather that correlation between the two markets has increased, while cost of intl investing has decreased.
IMO, bar individual tax implications, today there is no reason at all to deviated from cap weight.
I don't think they were wrong in either case, but rather that correlation between the two markets has increased, while cost of intl investing has decreased.
IMO, bar individual tax implications, today there is no reason at all to deviated from cap weight.
Last edited by Thesaints on Sat Jun 24, 2017 5:31 pm, edited 1 time in total.
- Phineas J. Whoopee
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Re: Explaining a Bogle quote
I'm writing to add, not to disagree with what you said.Thesaints wrote:The added risk of foreign market is reflected in their valuations, when it does exist.
Why would cap weighing work in the US, but not in the World ?
For a truly global truly average investor, taking institutions and sovereign wealth funds into account as well as individuals, a globally-weighted stock portfolio might well be a good choice, but there are few if any truly global individual investors. I won't argue against global cap-weight in a stock portfolio, and it's probably good and maybe my long-term returns would be better if I didn't slightly overweight the US where I live. That said, who is truly global truly average?
As I've explained in previous posts, but I never mind repeating my cleverness because I expect my expenses to be denominated in US dollars I slightly underweight stocks from other countries because I, not truly global truly average, face currency risk. My model is 60% of equities US, 40% international, both cap weighted. In practice it's a little more domestic, because 60/40 would mean 24% of portfolio and 16% of it, so I just aim at 25/15 and call it close enough.
I fully agree a totally global cap weighted stock portfolio is a good starting point, and if anybody wants to use it I won't criticize them for it.
PJW
Re: Explaining a Bogle quote
I have some issues with Bogle. Let me start out with 2 points.
Developed Markets (DM) have shareholder protections that are equivalent to the US. There are differences, and I can point to some aspects where the US is better or worse than other countries.
If a company sponsors an ADRs they fall under SEC jurisdiction.
Take a look at Boogle's quote and you see he is referring to Emerging Market issues, not DM issues.
Developed Markets (DM) have shareholder protections that are equivalent to the US. There are differences, and I can point to some aspects where the US is better or worse than other countries.
If a company sponsors an ADRs they fall under SEC jurisdiction.
Take a look at Boogle's quote and you see he is referring to Emerging Market issues, not DM issues.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
- triceratop
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Re: Explaining a Bogle quote
Bogle/Vanguard pros suggest passive total market investing. Underweighting international seems like an active investing decision to me.indexonlyplease wrote:Thesaints wrote:Which pros ? Globally they are almost 50% weighted on intl, on average.
Bogle/Vanguard pros read link below
viewtopic.php?t=196956
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
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Re: Explaining a Bogle quote
How do you know that is underweighting the market. Maybe or Maybe not. We will know for sure in 10-20 yrs.triceratop wrote:Bogle/Vanguard pros suggest passive total market investing. Underweighting international seems like an active investing decision to me.indexonlyplease wrote:Thesaints wrote:Which pros ? Globally they are almost 50% weighted on intl, on average.
Bogle/Vanguard pros read link below
viewtopic.php?t=196956
Re: Explaining a Bogle quote
Not sure I understand: cap weight, calculated with present cap value. That's how under and over weight are defined.indexonlyplease wrote:How do you know that is underweighting the market. Maybe or Maybe not. We will know for sure in 10-20 yrs.