Does Vanguard gain anything from us investing more internationally?

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simplesauce
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Does Vanguard gain anything from us investing more internationally?

Post by simplesauce » Sat Jul 01, 2017 4:12 pm

I am just curious; does Vanguard gain anything from having their investors put more money overseas? I see them promoting international stocks and international bonds more and more. Not looking to be skeptical. I just know that the US/International allocation debate is still widely debated.

Anyway, from their new email blast:

"After underperforming U.S. stocks in recent years, European stocks have outperformed recently. The FTSE Developed Europe All Cap Index was up more than 16% from the beginning of the year through June 23. This rise is despite significant political and economic headwinds during the period, including the United Kingdom entering negotiations to exit the European Union and continuing weakness in the European banking sector. That figure was well ahead of the roughly 9.6% increase for U.S. stocks over the same period, as measured by the CRSP US Total Market Index.

Investors who choose to stay close to home, investing in a broad mix of U.S. stocks and bonds, may feel their portfolios are already diversified. The bigger picture, though, is that they're missing out on almost half of the world's stock market capitalization and an even bigger slice of the global bond market. Broad exposure to international securities over the long haul can help reduce a portfolio's volatility by mitigating losses when domestic stocks do poorly. Such exposure can also add to returns when international markets shine—as Europe has done so far this year."


https://vanguardblog.com/2017/06/19/for ... T:XX:XX:XX
Last edited by simplesauce on Sat Jul 01, 2017 4:26 pm, edited 1 time in total.

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nedsaid
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Re: Does Vanguard gain anything from us investing more internationally?

Post by nedsaid » Sat Jul 01, 2017 4:25 pm

Since Vanguard is owned by the investors in its mutual funds, I don't see how it would gain financially by advocating for a more international portfolio. I think this is driven by Vanguard's experts, who genuinely believe that 40% of stocks and 30% of bonds should be invested internationally. They do a lot of research and are always looking for ways to optimize the portfolios of those who invest with them.

You can buy your choice of funds and have a difference of opinion from the Vanguard experts. John Bogle, the founder of Vanguard, tells people that investors should have a maximum of 20% of their stocks in International. Indeed, Bogle thinks that investors have no need of International Stocks. My thinking aligns more closely with Vanguard than Mr. Bogle. It seems that the maximum diversification benefit is at about 30% International in your stock allocation. I am at about 27%. It seems there is not much difference between 20% and 50% in terms of optimizing portfolio performance. This is all educated guesswork anyway.
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whyme
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Re: Does Vanguard gain anything from us investing more internationally?

Post by whyme » Sat Jul 01, 2017 4:27 pm

I don't think there's anything nefarious in this recommendation. I think they've concluded that diversifying internationally is good for investors in the long run. That is pretty much the conventional wisdom at this point--John Bogle is an outlier on this issue, as he is quick to point out.

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Re: Does Vanguard gain anything from us investing more internationally?

Post by lack_ey » Sat Jul 01, 2017 4:27 pm

With a larger international footprint maybe they can expand more, help eventually grow more AUM in overseas funds (I mean Vanguard UK and so on, not US funds investing in international stocks).

The international funds have higher expense ratios, though most of it probably reflects the legitimately higher costs there. Vanguard is supposed to be run at cost, but at the individual fund level maybe it's not so clear cut. In any case there's more room for the international fund ERs to fall. More money there would help in that regard.

Vanguard's research team predicts higher returns are more likely in ex-US stocks starting from now (I mean this in the statistical sense, so actual outcomes may be far different), so a higher international allocation could make their target date and LifeStrategy asset allocation funds look better, and may improve investor outcomes, which could help with gathering and maintaining AUM.

The average investor allocation is underweight international assets relative to the broader professional investor consensus (and Vanguard's suggestion goes beyond even that), so a more charitable explanation is simply that they're nudging people towards what's probably better for them.

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Munir
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Re: Does Vanguard gain anything from us investing more internationally?

Post by Munir » Sat Jul 01, 2017 7:31 pm

How well do we know the foreign economies and countries that we are being urged to invest in? Being an immigrant myself, I am very hesitant in investing anywhere other than in the US. The political instability, whether current or possible in the future, is enough of a deterrent- even in in Europe. Is there really a great need for such extensive diversification into foreign countries? The extra cost, political uncertainties, and just not having the needed level of comfort with the economies and stability of foreign governments all urge me to invest only in the US.

I may come across xenophobic which I definitely am not, but I have lived overseas and don't feel I have the level of knowledge and comfort to invest there. There is more than enough to learn here, so why take the risk for a possible theoretical slight extra profit? I'm with Jack Bogle on this- and with his other views too.

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Re: Does Vanguard gain anything from us investing more internationally?

Post by jginseattle » Sat Jul 01, 2017 7:47 pm

^ The myriad risks of International investing are already reflected in the price.

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Re: Does Vanguard gain anything from us investing more internationally?

Post by EddyB » Sat Jul 01, 2017 7:52 pm

Munir wrote:The political instability, whether current or possible in the future, is enough of a deterrent- even in in Europe. Is there really a great need for such extensive diversification into foreign countries? The extra cost, political uncertainties, and just not having the needed level of comfort with the economies and stability of foreign governments all urge me to invest only in the US.
There are cross-border costs, but why do you think the market factors you're concerned about aren't reflected in current prices?

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Re: Does Vanguard gain anything from us investing more internationally?

Post by Munir » Sat Jul 01, 2017 7:59 pm

EddyB wrote:
Munir wrote:The political instability, whether current or possible in the future, is enough of a deterrent- even in in Europe. Is there really a great need for such extensive diversification into foreign countries? The extra cost, political uncertainties, and just not having the needed level of comfort with the economies and stability of foreign governments all urge me to invest only in the US.
There are cross-border costs, but why do you think the market factors you're concerned about aren't reflected in current prices?
Hi EddyB: I am not clear about what you are saying. Are you concluding that the risks or negative factors I mentioned are reducing the cost of international equities and bonds and therefore make them more attractive? Junk bonds would also be priced accordingly but that doesn't make them more attractive for me to purchase. Or am I missing something?

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Re: Does Vanguard gain anything from us investing more internationally?

Post by pascalwager » Sat Jul 01, 2017 8:34 pm

Why not ignore both investing thought leaders' and fund companies' recommendations for int'l allocations. Instead, let the world market be your guide, set up initially at 53/47 (current US/int'l stocks) and let it ride, clearly accepting the world market risks and rewards. Anything else is active management.

Don't forget, Vanguard strongly believes in active management and offers lots of active funds. And they're recommending only 40% int'l stocks, when the world market allocation is currently 47% of stocks.

Why don't they offer a total world market fund covering both stocks and bonds? This could be a default portfolio for someone nearing retirement, and for early retirement.

So, the thread title could be rewritten as "Does Vanguard gain anything from us investing less than world market percentages internationally?"

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Re: Does Vanguard gain anything from us investing more internationally?

Post by MotoTrojan » Sat Jul 01, 2017 8:40 pm

I'm just curious how they'll respond if the US tanks and Europe is at all time peak in P/E. Stay the way? Shift back?

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Re: Does Vanguard gain anything from us investing more internationally?

Post by EddyB » Sat Jul 01, 2017 8:42 pm

Munir wrote:
EddyB wrote:
Munir wrote:The political instability, whether current or possible in the future, is enough of a deterrent- even in in Europe. Is there really a great need for such extensive diversification into foreign countries? The extra cost, political uncertainties, and just not having the needed level of comfort with the economies and stability of foreign governments all urge me to invest only in the US.
There are cross-border costs, but why do you think the market factors you're concerned about aren't reflected in current prices?
Hi EddyB: I am not clear about what you are saying. Are you concluding that the risks or negative factors I mentioned are reducing the cost of international equities and bonds and therefore make them more attractive? Junk bonds would also be priced accordingly but that doesn't make them more attractive for me to purchase. Or am I missing something?
I don't think you (or I) know more about the risks of foreign equity markets (or the implied lack of those risk in the US market) than other investors. How have you decided that the ex-US market is the equivalent of a junk bond?

I don't think foreign markets are "more attractive," I just don't think I (or nearly anyone) can reliably predict what's more, or less, attractive, in terms of future returns (which have something to do with present prices). Notwithstanding your noted political risks, how have you made the leap to the conclusion that the equity returns are less attractive?

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Re: Does Vanguard gain anything from us investing more internationally?

Post by gkaplan » Sat Jul 01, 2017 8:42 pm

simplesauce wrote:I am just curious; does Vanguard gain anything from having their investors put more money overseas? I see them promoting international stocks and international bonds more and more. Not looking to be skeptical. I just know that the US/International allocation debate is still widely debated.

Anyway, from their new email blast:

"After underperforming U.S. stocks in recent years, European stocks have outperformed recently. The FTSE Developed Europe All Cap Index was up more than 16% from the beginning of the year through June 23. This rise is despite significant political and economic headwinds during the period, including the United Kingdom entering negotiations to exit the European Union and continuing weakness in the European banking sector. That figure was well ahead of the roughly 9.6% increase for U.S. stocks over the same period, as measured by the CRSP US Total Market Index.

Investors who choose to stay close to home, investing in a broad mix of U.S. stocks and bonds, may feel their portfolios are already diversified. The bigger picture, though, is that they're missing out on almost half of the world's stock market capitalization and an even bigger slice of the global bond market. Broad exposure to international securities over the long haul can help reduce a portfolio's volatility by mitigating losses when domestic stocks do poorly. Such exposure can also add to returns when international markets shine—as Europe has done so far this year."


https://vanguardblog.com/2017/06/19/for ... T:XX:XX:XX

In this thread viewtopic.php?f=10&t=222214&p=3427508#p3427508, you asked if Jack Bogle has a conflict of interest. I sense a pattern here.
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Re: Does Vanguard gain anything from us investing more internationally?

Post by TD2626 » Sat Jul 01, 2017 8:56 pm

Vanguard already owns a large share in US companies. For example, it owns 6.86% of General Electric (source: http://money.cnn.com/quote/shareholders ... titutional)

Many other companies are in the 3 to 5% range.

It is hard to buy too substantial a stake in companies... aren't there regulatory or capacity issues?

Higher international investment benefits vanguard investors by reducing these issues.

I feel that high levels of international, near cap weight are best supported by theory, and I am glad Vanguard's recommended range includes cap weight. Additionally, Vanguard offers many international options, including Total World, that are heavy in international.

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Re: Does Vanguard gain anything from us investing more internationally?

Post by bugeye » Sat Jul 01, 2017 9:02 pm

jginseattle wrote:^ The myriad risks of International investing are already reflected in the price.
Market segmentation is a real thing, even across asset classes in the US. I see the point you are making, but things as simple as home bias imply that prices are not always as efficient as we would like to think.

There are real costs to investing internationally, certainly in excess of just tax drag and transaction costs. Still, investing internationally helps to diversify trend risk, which history has shown to be very important in the long run.

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Re: Does Vanguard gain anything from us investing more internationally?

Post by EddyB » Sat Jul 01, 2017 9:25 pm

bugeye wrote:
jginseattle wrote:^ The myriad risks of International investing are already reflected in the price.
Market segmentation is a real thing, even across asset classes in the US. I see the point you are making, but things as simple as home bias imply that prices are not always as efficient as we would like to think.

There are real costs to investing internationally, certainly in excess of just tax drag and transaction costs. Still, investing internationally helps to diversify trend risk, which history has shown to be very important in the long run.
Why wouldn't the things that you're suggesting impact price efficiency in ex-US markets also impact price efficiency in the US equity market?

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Re: Does Vanguard gain anything from us investing more internationally?

Post by bugeye » Sat Jul 01, 2017 9:52 pm

They do, to some extent. Home bias, for instance, is pretty much universal. But there other things that I think do not happen in the US.

Public money is often used to prop up national champions, sometimes in fairly opaque ways, for instance by directing public pension funds to invest in this rather than that company. This happened several times in Italy during the recent banking crisis. France is also renowned for a strong industrial policy in favor of national champions. China is well known for its dirigistic economic policy.

In all these cases, investors overpay because the intervention of deep-pocketed shareholders who don't care about risk-adjusted returns distorts prices.

As long as this stuff happens more often abroad than in the US, US stocks are priced more efficiently.

simplesauce
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Re: Does Vanguard gain anything from us investing more internationally?

Post by simplesauce » Sat Jul 01, 2017 10:58 pm

gkaplan wrote:
simplesauce wrote:I am just curious; does Vanguard gain anything from having their investors put more money overseas? I see them promoting international stocks and international bonds more and more. Not looking to be skeptical. I just know that the US/International allocation debate is still widely debated.

Anyway, from their new email blast:

"After underperforming U.S. stocks in recent years, European stocks have outperformed recently. The FTSE Developed Europe All Cap Index was up more than 16% from the beginning of the year through June 23. This rise is despite significant political and economic headwinds during the period, including the United Kingdom entering negotiations to exit the European Union and continuing weakness in the European banking sector. That figure was well ahead of the roughly 9.6% increase for U.S. stocks over the same period, as measured by the CRSP US Total Market Index.

Investors who choose to stay close to home, investing in a broad mix of U.S. stocks and bonds, may feel their portfolios are already diversified. The bigger picture, though, is that they're missing out on almost half of the world's stock market capitalization and an even bigger slice of the global bond market. Broad exposure to international securities over the long haul can help reduce a portfolio's volatility by mitigating losses when domestic stocks do poorly. Such exposure can also add to returns when international markets shine—as Europe has done so far this year."


https://vanguardblog.com/2017/06/19/for ... T:XX:XX:XX

In this thread viewtopic.php?f=10&t=222214&p=3427508#p3427508, you asked if Jack Bogle has a conflict of interest. I sense a pattern here.
Just trying to understand what the conflict or issues could be with the advice we're getting, that's all. Just looking to see if the advice we're getting is pure.

Paul Merriman strongly thinks that Jack Bogle couldn't alter his advice, even if he wanted to. Even if Jack believed that value and small-cap will outperform in the future, he says Bogle could not say it. Is Jack's portfolio advice pure? viewtopic.php?f=10&t=222214&p=3427508#p3427508

As for Vanguard, their international allocation recommendations continue to creep up higher. And for them to have webcasts and send public facing emails discussing the subject often make me ask the questions about if there might be more behind it. Some answers in this thread think possibly so. Is their advice purely based on research?

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Re: Does Vanguard gain anything from us investing more internationally?

Post by Jacotus » Sat Jul 01, 2017 11:15 pm

It does sound like Vanguard's research experts have concluded that adding a certain amount of international stocks and bonds are beneficial, and therefore recommend it for everyone. But let me explore another aspect that could also result in greater pressure from Vanguard.

I think it natural for Vanguard to create an International Bond fund; if everyone else is doing it, they don't want to be the ones without their own product to point to. And once a new fund is opened, it becomes a necessity to get money into it quickly in order to pay for operating costs. It would be foolish to open a new fund and not market it.

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Re: Does Vanguard gain anything from us investing more internationally?

Post by triceratop » Sat Jul 01, 2017 11:18 pm

simplesauce wrote:
gkaplan wrote:
simplesauce wrote:I am just curious; does Vanguard gain anything from having their investors put more money overseas? I see them promoting international stocks and international bonds more and more. Not looking to be skeptical. I just know that the US/International allocation debate is still widely debated.

Anyway, from their new email blast:

"After underperforming U.S. stocks in recent years, European stocks have outperformed recently. The FTSE Developed Europe All Cap Index was up more than 16% from the beginning of the year through June 23. This rise is despite significant political and economic headwinds during the period, including the United Kingdom entering negotiations to exit the European Union and continuing weakness in the European banking sector. That figure was well ahead of the roughly 9.6% increase for U.S. stocks over the same period, as measured by the CRSP US Total Market Index.

Investors who choose to stay close to home, investing in a broad mix of U.S. stocks and bonds, may feel their portfolios are already diversified. The bigger picture, though, is that they're missing out on almost half of the world's stock market capitalization and an even bigger slice of the global bond market. Broad exposure to international securities over the long haul can help reduce a portfolio's volatility by mitigating losses when domestic stocks do poorly. Such exposure can also add to returns when international markets shine—as Europe has done so far this year."


https://vanguardblog.com/2017/06/19/for ... T:XX:XX:XX

In this thread viewtopic.php?f=10&t=222214&p=3427508#p3427508, you asked if Jack Bogle has a conflict of interest. I sense a pattern here.
Just trying to understand what the conflict or issues could be with the advice we're getting, that's all. Just looking to see if the advice we're getting is pure.

Paul Merriman strongly thinks that Jack Bogle couldn't alter his advice, even if he wanted to. Even if Jack believed that value and small-cap will outperform in the future, he says Bogle could not say it. Is Jack's portfolio advice pure? viewtopic.php?f=10&t=222214&p=3427508#p3427508

As for Vanguard, their international allocation recommendations continue to creep up higher. And for them to have webcasts and send public facing emails discussing the subject often make me ask the questions about if there might be more behind it. Some answers in this thread think possibly so. Is their advice purely based on research?
Why is it automatically suspicious that they have webcasts and public facing emails discussing the subject? Why would that make you ask those questions? The "answers" in this thread are just speculation and have no real evidence.

Even if Jack believed that value and small-cap will outperform in the future, he says Bogle could not say it. Is Jack's portfolio advice pure?

"Even if". Even if Merriman could prove that his claim about Bogle was correct it doesn't mean Bogle isn't saying exactly what he thinks and that Jack's portfolio advice isn't pure. I also notice you didn't address my rebuttal of your case that Bogle has a conflict.

You are suggesting quite a bit, or raising questions, about Jack Bogle and Vanguard having ulterior motives with no real evidence. Most people obtain evidence before they suggest conflicts of interest.

Is their advice purely based on research?

You're not obligated to follow the advice; most here do not. The question should be whether the research itself is convincing to you and how you choose to invest based on that.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Does Vanguard gain anything from us investing more internationally?

Post by simplesauce » Sun Jul 02, 2017 7:46 am

triceratop wrote:
simplesauce wrote:
gkaplan wrote:
simplesauce wrote:I am just curious; does Vanguard gain anything from having their investors put more money overseas? I see them promoting international stocks and international bonds more and more. Not looking to be skeptical. I just know that the US/International allocation debate is still widely debated.

Anyway, from their new email blast:

"After underperforming U.S. stocks in recent years, European stocks have outperformed recently. The FTSE Developed Europe All Cap Index was up more than 16% from the beginning of the year through June 23. This rise is despite significant political and economic headwinds during the period, including the United Kingdom entering negotiations to exit the European Union and continuing weakness in the European banking sector. That figure was well ahead of the roughly 9.6% increase for U.S. stocks over the same period, as measured by the CRSP US Total Market Index.

Investors who choose to stay close to home, investing in a broad mix of U.S. stocks and bonds, may feel their portfolios are already diversified. The bigger picture, though, is that they're missing out on almost half of the world's stock market capitalization and an even bigger slice of the global bond market. Broad exposure to international securities over the long haul can help reduce a portfolio's volatility by mitigating losses when domestic stocks do poorly. Such exposure can also add to returns when international markets shine—as Europe has done so far this year."


https://vanguardblog.com/2017/06/19/for ... T:XX:XX:XX

In this thread viewtopic.php?f=10&t=222214&p=3427508#p3427508, you asked if Jack Bogle has a conflict of interest. I sense a pattern here.
Just trying to understand what the conflict or issues could be with the advice we're getting, that's all. Just looking to see if the advice we're getting is pure.

Paul Merriman strongly thinks that Jack Bogle couldn't alter his advice, even if he wanted to. Even if Jack believed that value and small-cap will outperform in the future, he says Bogle could not say it. Is Jack's portfolio advice pure? viewtopic.php?f=10&t=222214&p=3427508#p3427508

As for Vanguard, their international allocation recommendations continue to creep up higher. And for them to have webcasts and send public facing emails discussing the subject often make me ask the questions about if there might be more behind it. Some answers in this thread think possibly so. Is their advice purely based on research?
Why is it automatically suspicious that they have webcasts and public facing emails discussing the subject? Why would that make you ask those questions? The "answers" in this thread are just speculation and have no real evidence.

Even if Jack believed that value and small-cap will outperform in the future, he says Bogle could not say it. Is Jack's portfolio advice pure?

"Even if". Even if Merriman could prove that his claim about Bogle was correct it doesn't mean Bogle isn't saying exactly what he thinks and that Jack's portfolio advice isn't pure. I also notice you didn't address my rebuttal of your case that Bogle has a conflict.

You are suggesting quite a bit, or raising questions, about Jack Bogle and Vanguard having ulterior motives with no real evidence. Most people obtain evidence before they suggest conflicts of interest.

Is their advice purely based on research?

You're not obligated to follow the advice; most here do not. The question should be whether the research itself is convincing to you and how you choose to invest based on that.
I am not suggesting anything; just raising questions. I think some of the speculation here is worth considering. Someone said for example, that when Vanguard launched their new international bond fund, they obviously need to get money for it in order to pay for it, etc. So is that why they include it in their life strategy funds, even though the argument for international bonds is weak? It's just worth asking these questions.

As for the conflict of interest post, that was based on Paul Merriman's podcast, which was more candid than I've ever heard him. He really goes deep on Bogle and why he may not be embracing the evidence of value and small-cap outperformance. I've never heard anyone speak the way Paul did about Bogle.

Would it be a conflict of interest or a conundrum...I guess it would be more of a conundrum. The topics presented in this thread here would lean more to conflict of interest. I'll go ahead and change the title of the last post, as I certainly don't mean to offend. Rather just raising questions.

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Re: Does Vanguard gain anything from us investing more internationally?

Post by Da5id » Sun Jul 02, 2017 8:09 am

simplesauce wrote: I am not suggesting anything; just raising questions.
I'm not a fan of the approach of casting aspersions on a person or companies motives without any real evidence and then say "just raising questions". Suppose I were to attack your character without knowing anything about you, and when asked about it say "not suggesting anything, just raising questions". Would you feel it fair? Everything I actually know about Bogle and Vanguard leads me to not question their character/corporate motives. That isn't to say their motives or character can't be challenged with evidence, of course they can. Just makes me inclined to look askance at those raising such challenges without evidence. I personally think Bogle is wrong about some things (e.g. thinking 0% international is a good approach). Doesn't lead me to question his motives for thinking that...

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Re: Does Vanguard gain anything from us investing more internationally?

Post by watchnerd » Sun Jul 02, 2017 9:48 am

pascalwager wrote:Why not ignore both investing thought leaders' and fund companies' recommendations for int'l allocations. Instead, let the world market be your guide, set up initially at 53/47 (current US/int'l stocks) and let it ride, clearly accepting the world market risks and rewards. Anything else is active management.
This is what I do -- just own the global market cap weight, although I do round it to 50/50 just to make rebalancing calcs easier.

Yes, I've read, and conducted myself, the backtesting that would indicate that 30% international is the best spot on the Efficient Frontier, but we all know the limits of backtesting and past returns as indicators of future returns.
Tweaked 3-Fund: 35% US Equities | 35% Total International | 30% Intermediate Treasuries

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Re: Does Vanguard gain anything from us investing more internationally?

Post by abuss368 » Sun Jul 02, 2017 5:25 pm

gkaplan wrote:
simplesauce wrote:I am just curious; does Vanguard gain anything from having their investors put more money overseas? I see them promoting international stocks and international bonds more and more. Not looking to be skeptical. I just know that the US/International allocation debate is still widely debated.

Anyway, from their new email blast:

"After underperforming U.S. stocks in recent years, European stocks have outperformed recently. The FTSE Developed Europe All Cap Index was up more than 16% from the beginning of the year through June 23. This rise is despite significant political and economic headwinds during the period, including the United Kingdom entering negotiations to exit the European Union and continuing weakness in the European banking sector. That figure was well ahead of the roughly 9.6% increase for U.S. stocks over the same period, as measured by the CRSP US Total Market Index.

Investors who choose to stay close to home, investing in a broad mix of U.S. stocks and bonds, may feel their portfolios are already diversified. The bigger picture, though, is that they're missing out on almost half of the world's stock market capitalization and an even bigger slice of the global bond market. Broad exposure to international securities over the long haul can help reduce a portfolio's volatility by mitigating losses when domestic stocks do poorly. Such exposure can also add to returns when international markets shine—as Europe has done so far this year."


https://vanguardblog.com/2017/06/19/for ... T:XX:XX:XX

In this thread viewtopic.php?f=10&t=222214&p=3427508#p3427508, you asked if Jack Bogle has a conflict of interest. I sense a pattern here.
Did you invest in international bonds? What percentage do you recommend as an allocation?
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

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"How Much International Stock? A Suggestion"

Post by Taylor Larimore » Sun Jul 02, 2017 6:09 pm

Does Vanguard gain anything from us investing more internationally?
Bogleheads:

Vanguard gains nothing extra from investing internationally. Any "gain" from a fund goes to fund shareholders--not Vanguard.

Last year I made a post which could help you decide the percentage of international stocks to own. I hope you find it helpful:

How Much International Stock? A suggestion

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

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Re: Does Vanguard gain anything from us investing more internationally?

Post by arcticpineapplecorp. » Sun Jul 02, 2017 7:14 pm

How can they?
Vanguard has a fairly unique structure in terms of investment management companies. The company is owned by its funds. The company’s different funds are then owned by the shareholders. Thus, the shareholders are the true owners of Vanguard. The company has no outside investors other than its shareholders. Most of the major investment firms are publicly traded.

Vanguard's structure allows the company to charge very low expenses for its funds. Due to its scope of size, the company has been able to reduce its expenses over the years. The average expense ratio for Vanguard funds was 0.89% in 1975. That number dropped to 0.18% by 2014.

Some experts believe Vanguard’s structure allows it to avoid conflicts of interest that are present at other investment management firms. Publicly traded investment management firms must cater to their shareholders and the investors in their funds.

souce: http://www.investopedia.com/articles/in ... -group.asp
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lostdog
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Re: Does Vanguard gain anything from us investing more internationally?

Post by lostdog » Mon Jul 03, 2017 10:15 am

No they don't gain anything. I chose Vanguard Total World Index fund. I let the world markets choose the allocation for me. I see you have some posts regarding international. I've been where you are. I decided for ultimate diversity and simplicity. Vanguard pretty much much sums it up:


"Investors who choose to stay close to home, investing in a broad mix of U.S. stocks and bonds, may feel their portfolios are already diversified. The bigger picture, though, is that they're missing out on almost half of the world's stock market capitalization and an even bigger slice of the global bond market. Broad exposure to international securities over the long haul can help reduce a portfolio's volatility by mitigating losses when domestic stocks do poorly. Such exposure can also add to returns when international markets shine—as Europe has done so far this year.""
Vanguard Total World Equity Index - The rational portfolio

trasmuss
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Joined: Sun Oct 26, 2008 7:10 am

Re: Does Vanguard gain anything from us investing more internationally?

Post by trasmuss » Mon Jul 03, 2017 10:25 am

I do agree with Vanguard that investing internationally in stocks and bonds likely decreases day to day volatility. It is possible that they feel low volatility decreases investors buying and selling and panicking when portfolios drop. Whether total return will increase is anyone's guess (especially with international bonds).

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watchnerd
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Re: Does Vanguard gain anything from us investing more internationally?

Post by watchnerd » Mon Jul 03, 2017 12:40 pm

trasmuss wrote:(especially with international bonds).
While I'm 50% international stocks, I still don't understand the rationale for international bonds, i.e. I don't see them as a more risk-free asset than Treasuries* and they often yield worse.

*If I'm wrong and the government defaults on Treasuries, then the ensuing apocalypse will be so bad there will be no place to hide anyway...
Tweaked 3-Fund: 35% US Equities | 35% Total International | 30% Intermediate Treasuries

pascalwager
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Re: Does Vanguard gain anything from us investing more internationally?

Post by pascalwager » Mon Jul 03, 2017 5:32 pm

watchnerd wrote:
trasmuss wrote:(especially with international bonds).
While I'm 50% international stocks, I still don't understand the rationale for international bonds, i.e. I don't see them as a more risk-free asset than Treasuries* and they often yield worse.

*If I'm wrong and the government defaults on Treasuries, then the ensuing apocalypse will be so bad there will be no place to hide anyway...
They're (int'l bonds) part of the market capitalized World Bonds/Stocks Portfolio. That's the only reason I would use them, or any other stocks/bonds. Today, the WBS (using Vanguard total market funds) is 30% US stocks, 27% int'l stocks, 22% US bonds, and 21% int'l bonds.

But the WBS is more suitable for a retiree, who also has a pension or a lot of TIPS. A young investor might want to add 50% market risk by using a greater proportion of stocks. But William Sharpe considers the WBS the default portfolio.

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