John Bogle Has Been Right About Investing In International Stocks

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Taylor Larimore
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John Bogle Has Been Right About Investing In International Stocks

Post by Taylor Larimore »

Bogleheads:

In his first book, Bogle on Mutual Funds, published in 1993, Mr. Bogle wrote:

"Your exposure to mutual funds investing in foreign stocks should not exceed 20% of your equity portfolio."

A recent NewsMax article stated:

"The MSCI USA Index has returned 9.5 percent annually from 1993 through May (2017), including dividends, while the MSCI ACWI ex USA Index -- a collection of global stocks that excludes the U.S. -- has returned just 6.9%."

Mr. Bogle has been right.

Think Global? Invest Local, Bogle Advises

Best wishes.
Taylor

Edit after reading 185 Replies: I hope this earlier post is helpful:

How much international stock? A suggestion.

Best wishes.
Taylor
Last edited by Taylor Larimore on Wed Jul 26, 2017 3:00 pm, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

Taylor Larimore wrote:
Mr. Bogle has been right.
No. He hasn't. At least, not by the evidence offered in your post, which is not logic that should be promoted by a member of this forum that a good number of readers look to for advice. By your logic, the "right" investment is simply the one that offers the best return. So everyone in 1993 should have just bought stock in Apple. That's essentially what you're telling people.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by z3r0c00l »

The fact that returns have been so different is a stronger case in favor of diversification internationally.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by willthrill81 »

z3r0c00l wrote:The fact that returns have been so different is a stronger case in favor of diversification internationally.
I think that's only true if you expect that the mean returns will for the U.S. and the rest of the world will ultimately be equal over your investing horizon, unless you expect that international returns will be less volatile than those of the U.S.
Last edited by willthrill81 on Sun Jul 23, 2017 10:42 pm, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by stumpy »

Thank you Mr. Larimore for The Bogle Heads Guide to Retirement Planning. I will be re-reading it again this year. If i would have known this information 10 years ago i would be retiring in a year from now instead of 3-4 years from now. I have purchased the book for one of my nephews and my 2 oldest sons. Thanks again.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by willthrill81 »

I just read an interesting article from Tyler over on Portfolio Charts that's relevant here. Holding exactly the same funds in different countries would have historically had a significant impact on safe withdrawal rates. It demonstrates that "home country bias" may not be so illogical after all.

"In fact, I would suggest that the data provides a good argument for investing (at least partially) in your home country. Not only will that bypass the effect of exchange rates, but it arguably also helps with inflation. Local stocks and bonds are not perfectly correlated to local inflation by any means, but local inflation is far more related to the local economy than to one halfway around the world. Completely detaching the engine of your returns from the inflation it needs to account for may have negative consequences for your portfolio that you did not anticipate."
https://portfoliocharts.com/2017/06/09/ ... awal-rate/
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by aegis965 »

Bogle's right! Rejoice!
Imma play Handel's Messiah nonstop for a week to process the bliss.
Seriously though, the article is very even-handed. It says clearly that Bogle's advice is an active bet and also warns the readers of possible biases, which the OP did not mention at all.
I may be biased.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by dos palomas »

Wow. Past performance is no guarantee of future results.

This one is destined to go to 10+ pages.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by SimpleGift »

Cherry-picking dates and asserting investment conclusions from them is not an honorable Forum practice.
What conclusions can we draw from the pre-1993 period? Was Mr. Bogle wrong about international investing?
Last edited by SimpleGift on Sun Jul 23, 2017 11:00 pm, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Crushtheturtle »

Simplegift wrote:Cherry-picking dates and asserting investment conclusions from them is not an honorable Forum practice.
I like that chart- good argument for market weight.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by aegis965 »

Here's what Bogle said in a PBS interview:
Good markets turn to bad markets, bad markets turn to good markets. So the system is almost rigged against human psychology that says if something has done well in the past, it will do well in the future. That is not true. And it's categorically false. And the high likelihood is when you get to somebody at his peak, he's about to go down to the valley. The last shall be first and the first shall be last.
So it seems that Bogle is both right and wrong at the same time. Schrödinger's cat?
I may be biased.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by JoMoney »

Simplegift wrote:Cherry-picking dates and asserting investment conclusions from them is not an honorable Forum practice...
It wasn't exactly cherry picked, it was the publication date of Bogle on Mutual Funds, as was stated in the original post.
100% accurate Mr. Bogle HAS BEEN right. Nobody knows what the future will bring.

It's very disingenuous to take what was said, and try to twist it into saying something else.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by pascalwager »

If you invested only in US stocks during this 24 year period, then your bet did pay off. But it's still a bet. US stocks are currently only 30% of a world bond/stock market portfolio.

Mr. Bogle was indisputably great for creating Vanguard and low-cost index investing; but why should we think that he can predict future world market performance, or anyone else?

I think that this post and title could be misleading to new, inexperienced investors, and might cause them to attribute undue importance to historical returns with respect to formulating a personal portfolio policy.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by letsgobobby »

pascalwager wrote:If you invested only in US stocks during this 24 year period, then your bet did pay off. But it's still a bet. US stocks are currently only 30% of a world bond/stock market portfolio.

Mr. Bogle was indisputably great for creating Vanguard and low-cost index investing; but why should we think that he can predict future world market performance, or anyone else?

I think that this post and title could be misleading to new, inexperienced investors, and might cause them to attribute undue importance to historical returns with respect to formulating a personal portfolio policy.
Right, the outcome does not confirm the strategy. In my opinion the strategy is still risky and not the way I invest to minimize the risk of catastrophic loss.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

JoMoney wrote:
100% accurate Mr. Bogle HAS BEEN right.
Measuring the "correctness" of investment decisions bases solely on returns should be discouraged. Whatever one's opinion on the merits of international investing, the rationale used by Taylor in the original post to defend US-only investing should offend anyone with a passing knowledge of investing.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by reriodan »

saltycaper wrote:
Taylor Larimore wrote:
Mr. Bogle has been right.
No. He hasn't. At least, not by the evidence offered in your post, which is not logic that should be promoted by a member of this forum that a good number of readers look to for advice. By your logic, the "right" investment is simply the one that offers the best return. So everyone in 1993 should have just bought stock in Apple. That's essentially what you're telling people.

+1. This is a serious case of confusing outcome with strategy. I am actually in shock at the OP of this thread :shock:. Now we are in even a worse situation. We have the one at the top advocating something illogical, and another one near the top justifying it based on past returns.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by lostdog »

I highly respect Taylor and Mr. Bogle. With that being said it was a good guess and I cannot base my investment plan on speculation and home bias. I am going to side with Vanguard on this which is to diversify and simplify.

U.S. only portfolios are home biased and speculative.
Last edited by lostdog on Sun Jul 23, 2017 11:42 pm, edited 2 times in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by JoMoney »

saltycaper wrote:
JoMoney wrote:
100% accurate Mr. Bogle HAS BEEN right.
Measuring the "correctness" of investment decisions bases solely on returns should be discouraged. Whatever one's opinion on the merits of international investing, the rationale used by Taylor in the original post to defend US-only investing should offend anyone with a passing knowledge of investing.
This is obviously a contentious issue. It says absolutely nothing about the future or about someones "passing knowledge of investing". I'd wager Mr.Bogle has far more experience than anyone on this board. The statement stands exactly as it was written, and is 100% accurate. If you want to twist it into an argument about future returns that's something else, but that's not something that can be proved or disproved. You (and others) don't like the strategy, that's fine, but trying to twist what was said into something else, and then disparaging the poster about delusions of it saying something else is 100% WRONG.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by PFInterest »

Taylor Larimore wrote:Bogleheads: Mr. Bogle has been right.
and? doesnt me he WILL be right.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

JoMoney wrote:
This is obviously a contentious issue. It says absolutely nothing about the future or about someones "passing knowledge of investing". I'd wager Mr.Bogle has far more experience than anyone on this board. The statement stands exactly as it was written, and is 100% accurate. If you want to twist it into an argument about future returns that's something else, but that's not something that can be proved or disproved. You (and others) don't like the strategy, that's fine, but trying to twist what was said into something else, and then disparaging the poster about delusions of it saying something else is 100% WRONG.
Whether it is appropriate or not to judge investments based solely on their past return should not even be a question. It's simply not appropriate. That is what anyone with a passing knowledge of investing should know. (My comment had nothing to do with Bogle's knowledge of investing.) This is my criticism of Taylor's post. If Taylor did not make arguments based on similar logic in the past (and not only on the topic of international investing), perhaps I would have been gentler. But this is a recurring theme, and it ought to be brought to light.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Nate79 »

So if we come back in a few years and if international goes up a lot and the US has had a downturn will you update this thread and say he was wrong? International has outperformed the US many times.

I do not construct a portfolio based purely on who had the highest performance. If so I would be 100% stock with no bond.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Osp62 »

I had posted this in another thread today but better to post it here as well. I agree with Taylor and the issue is not just past performance. Even analytically it seems hard to justify foreign equity holdings if you believe markets are reasonably efficient.

If markets are efficient in local currency it is hard to understand why an unhedged foreign equity holding would provide reasonable efficient market returns. To explain further -- In any country the marginal buyer and seller are transacting in the local currency and their return requirement and hence price is denominated in the local currency. Over the long term you can assume that the foreign market will provide a reasonable return in the local currency ( just like the US market provides a reasonable return in USD).

My issue is why a lot of people believe that this automatically translates to a reasonable return for US dollar investors. Its quite possible that local currency investors get a reasonable return in their local currency and USD investors don't or the reverse can happen depending on the exchange rate movement. I can understand that one can try to manage this risk with currency hedging but given the complexity and cost of hedging, most US foreign equity funds are unhedged.

I myself own a large stake in VXUS (15% of assets) but lately, despite good performance, I have been having second thoughts especially given that I have started realizing that in every local market it is the local buyers-sellers that are setting the prices. Even more importantly, I have not seen this discussed anywhere. Even the Vanguard paper that justifies international allocation does not even mention this issue. It just seems intellectually hard to reconcile how I can justify buying unhedged foreign equity funds when I believe the foreign equity prices are being determined by marginal buyers-sellers in the local currency.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Bigbonds »

It's not just Bogle, Buffett thinks the same.

"Most employer-run 401(k) retirement plans offer multiple mutual funds with different assets strategies, but Buffett warned against going with those options, saying "you'll do very well with an S&P index."

He added: "And don't let them talk to you about other index funds…and say you know, you have to have foreign or maybe you can pick a better industry. You'll almost always find it comes with bigger fees."

https://finance.yahoo.com/news/warren-b ... 00688.html
Last edited by Bigbonds on Mon Jul 24, 2017 12:17 am, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by willthrill81 »

Osp62 wrote:My issue is why a lot of people believe that this automatically translates to a reasonable return for US dollar investors. Its quite possible that local currency investors get a reasonable return in their local currency and USD investors don't or the reverse can happen depending on the exchange rate movement. I can understand that one can try to manage this risk with currency hedging but given the complexity and cost of hedging, most US foreign equity funds are unhedged.
You are correct. Currency risk and inflation risk are both present with international equities, regardless as to which country you live in. I suggest that you take a look at the article I referenced earlier in this thread. It uses historical data to demonstrate how different investors' returns can be in their own currency when they invest in exactly the same funds.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by visualguy »

saltycaper wrote: Whether it is appropriate or not to judge investments based solely on their past return should not even be a question. It's simply not appropriate. That is what anyone with a passing knowledge of investing should know. (My comment had nothing to do with Bogle's knowledge of investing.)
The whole Boglehead approach of investing in broad market indices is justified by extrapolating from past returns. It's not based on some laws of economics, physics, or math.

The problem with the ex-US index is that it has had very sub-par performance overall for a very long period of decades which makes it a very questionable investment, if not just categorically a bad investment. You know the famous saying about the definition of insanity...
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Avo »

Osp62 wrote:My issue is why a lot of people believe that this automatically translates to a reasonable return for US dollar investors. Its quite possible that local currency investors get a reasonable return in their local currency and USD investors don't or the reverse can happen depending on the exchange rate movement.
The theory is that currency fluctuations will average out over time, because they will be arbitraged away if a discrepancy is systemic. On the other hand, currency fluctuations are an extra source of uncompensated risk. This extra risk is relatively small compared to equity price fluctuations themselves.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by aegis965 »

Osp62 wrote:Over the long term you can assume that the foreign market will provide a reasonable return in the local currency (just like the US market provides a reasonable return in USD).
What do you mean "reasonable"?

Image
I may be biased.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Avo »

I looked up the performance of the MSCI World Index; from 5/31/1994 through 6/30/2017, the annualized return was 7.41%, not including dividends. Over the same period, the S&P500 index returned an annualized 7.49%, not including dividends.

MSCI data:
https://www.msci.com/documents/10199/8d ... 2942e3adeb

S&P500 data:
http://quotes.morningstar.com/indexquot ... html?t=spx

So, holding a world-weighting of developed-market stocks did very slightly worse than US only. This is hardly a case for excluding international based on past performance.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by JoMoney »

Excoriating the OP for presenting facts that don't agree with some unstated "conclusion" that others have drawn on a contentious strategy is ridiculous.
Probably best to remind people of what Taylor often says, “When experts disagree, it is often because it does not make a foreseeable difference.”

The portfolio Taylor recommends is The Three-Fund Portfolio
Which includes an international allocation.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by pascalwager »

JoMoney wrote:Excoriating the OP for presenting facts that don't agree with some unstated "conclusion" that others have drawn on a contentious strategy is ridiculous.
Probably best to remind people of what Taylor often says, “When experts disagree, it is often because it does not make a foreseeable difference.”

The portfolio Taylor recommends is The Three-Fund Portfolio
Which includes an international allocation.
Why do you think Taylor is telling us that "Mr. Bogle has been right"? What conclusion are we to draw from that fact–or was the post pointless?
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by oldzey »

"Over the years, I’ve learned that disagreeing with Jack Bogle is not a good idea." -- William J. Bernstein, 2007
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by FIREchief »

Simplegift wrote:Cherry-picking dates and asserting investment conclusions from them is not an honorable Forum practice.
What conclusions can we draw from the pre-1993 period? Was Mr. Bogle wrong about international investing?
Some people look at that chart and conclude "I have to invest both US and foreign, since I'll be 50% right 100% of the time." Others look at it an conclude "I'll just invest all US, so I'll be 100% correct 50% of the time." I think either approach works, as long as a person commits to it long term. I've firmly committed to 100% US so, naturally, I have no problem with this thread. 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by aegis965 »

FIREchief wrote:
Simplegift wrote:Cherry-picking dates and asserting investment conclusions from them is not an honorable Forum practice.
What conclusions can we draw from the pre-1993 period? Was Mr. Bogle wrong about international investing?
Some people look at that chart and conclude "I have to invest both US and foreign, since I'll be 50% right 100% of the time." Others look at it an conclude "I'll just invest all US, so I'll be 100% correct 50% of the time." I think either approach works, as long as a person commits to it long term. I've firmly committed to 100% US so, naturally, I have no problem with this thread. 8-)
Still others look at it and conclude "I should not make decisions on my AA by just looking at a chart."
I may be biased.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Durzo »

What a joke. There are a lot of good arguments to be made for holding no (or very little) international stocks. Cherry picking dates and using past performance to suggest a certain asset allocation is not one of them. Part of being a Boglehead is diversifying/buying the haystack and making the best investing decisions for each individual based on their personal need , ability and willingness to take risk. For some that may be 0%, 10%, 20%, or 50% in international stocks. Nothing wrong with any of those numbers imo.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by lazyday »

oldzey wrote:"Over the years, I’ve learned that disagreeing with Jack Bogle is not a good idea." -- William J. Bernstein, 2007
To me it's a good idea to follow advice because the advice is sound, not because of who gave it.

Bernstein is my favorite guru, but I still reject much of what he says.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by lazyday »

visualguy wrote:The whole Boglehead approach of investing in broad market indices is justified by extrapolating from past returns. It's not based on some laws of economics, physics, or math.
Many of us do look to theory for why an asset is likely to have a return. I don't buy stocks just because "stocks go up," I also have some belief in dividends and growth of dividends, for example.

In early 2000, an investor who extrapolates from past returns would think that the S&P 500 was a fantastic investment. Some of us owned none at the time, because it seemed a terrible investment to us.
The problem with the ex-US index is that it has had very sub-par performance overall for a very long period of decades which makes it a very questionable investment, if not just categorically a bad investment. You know the famous saying about the definition of insanity...
By theory, foreign stocks should have similar returns to US stocks, as explained in Swensen's Unconventional Success starting on p. 57.

As of the end of June, expected returns of foreign stocks are higher than US stocks. See for example https://interactive.researchaffiliates. ... rrency=USD

Over the last year, foreign stocks have performed better than US stocks. According to research on momentum, we might expect foreign stocks to continue to perform better than US.

Over the last 5 years, foreign stocks have performed worse than US stocks. According to research on momentum reversals, we might expect foreign stocks to now perform better than US.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by lazyday »

aegis965 wrote:It says clearly that Bogle's advice is an active bet and also warns the readers of possible biases
Yes, especially at the very end:
Another bias is the belief that because a bet has paid off in one period it will pay in others. Bogle has apparently been promoting his preference for U.S. stocks since 1993. Reflecting on the period since then, he says “I was right, really right.”

It’s true that U.S. stocks have beaten overseas stocks during that period. The MSCI USA Index has returned 9.5 percent annually from 1993 through May, including dividends, while the MSCI ACWI ex USA Index -- a collection of global stocks that excludes the U.S. -- has returned just 6.9 percent.

Much of that outperformance, however, can be attributed to U.S. stocks' winning streak in recent years. If Bogle were looking at the score card in late 2007 or in early 2008, overseas stocks would be ahead. In fact, overseas stocks have beaten U.S. stocks 53 percent of the time over rolling 10-year periods since 1993.

Still, Bogle may prove to be right about U.S. stocks. But the real lesson is that investors’ personal -- and often subjective -- views have a habit of creeping into their portfolios.

To borrow from Warren Buffett, passive investing is simple but not easy. Just ask the father of passive investing.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

visualguy wrote:
The whole Boglehead approach of investing in broad market indices is justified by extrapolating from past returns.

That's simply not true. Past returns are only one component, not the foundation of the "whole Boglehead approach." How you assess risk, how much risk to take, and how returns are adjusted by risk taken is a fundamental part of the investment philosophy. The article rightfully skewers Bogle for contradicting his own investment philosophy, ignoring inconvenient data, and misrepresenting what it means to follow the crowd. There's also an inherent contradiction within your statement that the Boglehead approach is to invest in broad market indices, as you then recommend investing only in a subset of the broad market without any justification other than past returns from a single time period.
visualguy wrote:
The problem with the ex-US index is that it has had very sub-par performance overall for a very long period of decades which makes it a very questionable investment, if not just categorically a bad investment. You know the famous saying about the definition of insanity...
If you'd like to get into cherry-picking dates to suit an agenda, there's dozens of old threads that can be resurrected. No need to start fresh.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by indexonlyplease »

saltycaper wrote:
Taylor Larimore wrote:
Mr. Bogle has been right.
No. He hasn't. At least, not by the evidence offered in your post, which is not logic that should be promoted by a member of this forum that a good number of readers look to for advice. By your logic, the "right" investment is simply the one that offers the best return. So everyone in 1993 should have just bought stock in Apple. That's essentially what you're telling people.

You took what Taylor posted way out of content. I believe what he was posting, that Jack Bogles believes the large companies of the US are the best to invest you money in. He also believe that US companies invest over seas, so thats the international part. Then comes the diversified portfolio. But keep the international down to 20%.

Also, in the Bogleheads book it has a portfolio for a young person with Total Stock Market and Total Bond Market. 2 funds no international fund.

Question: I read constanlty that past porformace does not guarantee future porformance. But then the only thing we talk about is past performance. Also, that the only thing the gurus talk about when setting up their portfolio recommendations. All the Lazy Portfolios are based on past. Is that not true. But I would state the 3 fund is not based on past performance because it holds the market. Is my thinking correct?????? Then I would never see another chart posted here.
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saltycaper
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

indexonlyplease wrote:
You took what Taylor posted way out of content.
I did not take anything out of context. Taylor posted a quote from Bogle saying what an investor "should" do. He then posted return figures for a single time period. He then said Bogle was right. The conclusion is that the "right" investment was the one with the best return over a single time period and that investors "should have" selected investments that had the best return in that given time period and that if they invested in something that did not have the best return in that time period, they picked the "wrong" investment. This is an absurd argument, especially coming from a seasoned member of this forum.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by saltycaper »

indexonlyplease wrote:
Question: I read constanlty that past porformace does not guarantee future porformance. But then the only thing we talk about is past performance. Also, that the only thing the gurus talk about when setting up their portfolio recommendations. All the Lazy Portfolios are based on past. Is that not true. But I would state the 3 fund is not based on past performance because it holds the market. Is my thinking correct?????? Then I would never see another chart posted here.
That past performance is not guaranteed does not mean past performance is meaningless. It's just not promised. That should not be surprising. But there is more to performance than return. There is also risk. And the performance of the entire portfolio over a lifetime is what's important, not the performance of one component over a single period of time. Yes, "Lazy Portfolios" are based on the past. So is the three-fund portfolio. But none of them are based solely on return of individual components over a single time period. If that was the case, they'd all hold the same investments.
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Da5id
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Da5id »

Active bet worked is not the same as person X was right, even if that person was Mr. Bogle. Or so it seems to me.

To put it differently, presumably the US percentage of the total world market cap won't keep increasing forever. When/how does one call the top? Looking at the graph from Simplegift above, this is somewhat cyclical. Where are we in the cycle? Who knows...
Last edited by Da5id on Mon Jul 24, 2017 7:48 am, edited 1 time in total.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by CULater »

Over the long run, I doubt that it makes much difference whether you invest 100% in a U.S. market index or include an allocation to Foreign Developed and Emerging Market. What will make a difference is whether or not you stick with whatever allocation you select. So, it's important to do whatever you think you can live with over the long run and not mess around with it.
Diversification alone is never enough to protect you from all risks but it can shield you from one of the biggest risks we all face — our own ignorance.
The late-Peter Bernstein once wrote, “Diversification is the only rational deployment of our ignorance.”
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by Nowizard »

Fascinating thread that reflects the confusion that occurs with complex topics ranging from investment to religion to politics, to name a few. Ultimately, we each have to answer the question of whether advice adheres to the Sane Man Theory. Even the definition of a "Sane Man" comes under scrutiny. Oh, how boring, though more predictable, our lives would be if there were definitive answers to universal questions rather than our eventually reaching the point where facts and belief intersect, leaving each of us to our own conclusions!

Tim
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by BHUser27 »

Isn't it worth considering how "20% Intl Equities or Not?" would have affected a real-world portfolio?

The following represents 60% Equities / 40% Bonds
* Portfolio #1 is 60% US Equities and 40% Tax-Exempt Interm Bond Index
* Portfolio #2 is 48% US Equities, 12% Global (ex US) and 40% Tax-Exempt Bond Index

Image

Reference: https://tinyurl.com/yd6gaye3
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by aegis965 »

Nowizard wrote:Fascinating thread that reflects the confusion that occurs with complex topics ranging from investment to religion to politics, to name a few. Ultimately, we each have to answer the question of whether advice adheres to the Sane Man Theory. Even the definition of a "Sane Man" comes under scrutiny. Oh, how boring, though more predictable, our lives would be if there were definitive answers to universal questions rather than our eventually reaching the point where facts and belief intersect, leaving each of us to our own conclusions!

Tim
This is one or two biased people (and their unfortunate followers) claiming one thing while the academia and evidence side with the opposite. Not sure if this counts as a universal question, even if you've made it sound profound.
I may be biased.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by beardsworth »

Intending to supplement the discussion rather than distract from it:

Whenever I read such threads, many of whose posts mention currency fluctuation concerns, I always wonder how, or if, this is an issue for Vanguard Global Minimum Volatility Fund (VMVFX). To the best of my recollection, from reading many prospectuses, that fund, which holds approximately a global market weight of foreign stocks, hedges its international holdings to the dollar, while Vanguard's other global stock funds, international stock funds, and balanced funds with international holdings do not. Whatever the wisdom of holding international stocks, whether in a Bogle-recommended percentage or not, it seems that a fund like VMVFX at least essentially removes, for a U.S. investor, the currency component from this decision.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by deltaneutral83 »

I never know who to go with so when it comes to international; the market weight purists or the John Bogles/Buffets. I simply meet in the middle at 25% and I will be sticking to that and re balancing over the decades. You can research, talk, and analyze for literally hours upon hours, days upon days, the key is to stick to your plan. I wonder what a 100/0, 75/25, and 50/50 Dom./Int. equities portfolio looks like CAGR the last 60 years.

I do know that anything above 30% makes me queasy, so I feel like I've found what makes me comfortable at 25%. This is why I hesitate to use target retirement funds because of the Intl weight is usually 35-40% of the equities which is a strange % because it's still not market weight.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by yukonjack »

[quote="CULater"]Over the long run, I doubt that it makes much difference whether you invest 100% in a U.S. market index or include an allocation to Foreign Developed and Emerging Market. What will make a difference is whether or not you stick with whatever allocation you select. So, it's important to do whatever you think you can live with over the long run and not mess around with it.

This in a nutshell nicely summarizes the entire post.
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Re: John Bogle Has Been Right About Investing In International Stocks

Post by bigred77 »

I really don't think many people read the article. Quoting from it:

"Another bias is the belief that because a bet has paid off in one period it will pay in others. Bogle has apparently been promoting his preference for U.S. stocks since 1993. Reflecting on the period since then, he says “I was right, really right.”

It’s true that U.S. stocks have beaten overseas stocks during that period. The MSCI USA Index has returned 9.5 percent annually from 1993 through May, including dividends, while the MSCI ACWI ex USA Index -- a collection of global stocks that excludes the U.S. -- has returned just 6.9 percent.

Much of that outperformance, however, can be attributed to U.S. stocks' winning streak in recent years. If Bogle were looking at the score card in late 2007 or in early 2008, overseas stocks would be ahead. In fact, overseas stocks have beaten U.S. stocks 53 percent of the time over rolling 10-year periods since 1993."


I have to say this threads title is now misleading. It should really read:

"Bogle is now right about investing in International stocks, if we asked the same question 10 years ago he would have been wrong, and if we ask the question 10 years from today nobody knows if he will be right or wrong, and the question is kind of flawed because no one is saying go 100% one way or the other and no one is looking at a balanced allocation to both US and INTL with annual re balancing, like most academics would suggest"

I don't know the character limit on titles but that's probably too long. :D
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