Why does everyone keep increasing their international stock %?

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lostdog
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Re: Why does everyone keep increasing their international stock %?

Post by lostdog » Fri Nov 24, 2017 11:02 am

World market cap weighting makes sense. Buy the haystack. We are 50/50 and plan to stay there for long term.
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lostdog
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Re: Why does everyone keep increasing their international stock %?

Post by lostdog » Fri Nov 24, 2017 11:08 am

minimalistmarc wrote:
Fri Nov 24, 2017 3:08 am
If you hold less than 40% international then you are underweighting the global market cap and tilting to the US.

If you do this then you are saying that you know more than all the other investment dollars in the world.
+1
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FrugalInvestor
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Re: Why does everyone keep increasing their international stock %?

Post by FrugalInvestor » Fri Nov 24, 2017 11:22 am

One reason I admire Jack so much is that he doesn't feel obligated to follow or agree with the current trend, although he doesn't hesitate to start one if he believes it's right! It seems that everyone is arguing with Jack these days about the wisdom of holding a significant percentage of one's portfolio in international stocks but Jack isn't going for it. I understand all the arguments, but I also think that if they were as overwhelmingly convincing as most would have us believe that Jack would come around. I know that Jack is human and that humans make mistakes, but I also know that Jack has one of the best investing minds (and guts) in the world. For that reason I'm very comfortable sticking with Jack's recommendation of "at most 20%."
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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in_reality
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Re: Why does everyone keep increasing their international stock %?

Post by in_reality » Fri Nov 24, 2017 12:06 pm

lostdog wrote:
Fri Nov 24, 2017 11:08 am
minimalistmarc wrote:
Fri Nov 24, 2017 3:08 am
If you hold less than 40% international then you are underweighting the global market cap and tilting to the US.

If you do this then you are saying that you know more than all the other investment dollars in the world.
+1
OK, explain this to me. (it's very late here so I can't think anymore)

If foreign holdings of US stocks are about 20-25%, and all Americans started to go with around market cap weighting of as you say 40% to maybe 47%, why wouldn't there be persistent flows of cash from the US to foreign companies?

I'm at 41% international personally, but doesn't the advice for Americans to go with market cap weighting presume that non-American are doing the same. If non-Americans have a strong home market bias, should Americans really target market cap weighting?

Or do non-Americans not have a home bias, but they are just underweighting the US? [seems unlikely to me but I don't know] And again, if foreigners are underweighting the US, doesn't that mean going with global market cap weighting for Americans suggest they are underweighting their home market of America (because every one else is)?

columbia
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Re: Why does everyone keep increasing their international stock %?

Post by columbia » Fri Nov 24, 2017 12:18 pm

Prior to this year, international had been a dog since the recession. Vanguard upping the percentage in the combined funds didn't strike me as performance chasing (at least not in the way the word is normally used).

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Re: Why does everyone keep increasing their international stock %?

Post by fire5soon » Fri Nov 24, 2017 12:24 pm

Is there any research showing what portion of equity markets are owned by which countries, or US versus ex-US investors? In other words, is the US equity market owned by 75% US investors and 25% non-US? Also for foreign markets... for example are, say, 35% of ex-US equities owned by US investors? Hopefully my question made sense... :confused
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Re: Why does everyone keep increasing their international stock %?

Post by KyleAAA » Fri Nov 24, 2017 12:36 pm

There are good reasons for this. Foreign stock markets account for about half the global equity market cap and efficient market logic demands that overweighting the US amounts to an active investment decision. Furthermore, while there was always a theoretical argument for international diversification there were practical barriers in Bogle’s heyday, cost being chief among them. But those barriers have largely disappeared over the last few decades and that’s a big part of why increased international allocations have become he norm.

There is cognitive dissonance here between what Bogle says he believes (market weighting) and what he does (not market weighting) given the new realities. In short, Bogle is just flat-out, unambiguously wrong on this one. But that doesn’t mean he’s wrong about everything else.

Dottie57
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Re: Why does everyone keep increasing their international stock %?

Post by Dottie57 » Fri Nov 24, 2017 12:49 pm

Because after watching the bogleheads conference video, I learned that economic growth accompanies population growth. The U.S. s not forcasting much population growth. Hence international in portfolio needs to be a bigger percent.

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TD2626
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Re: Why does everyone keep increasing their international stock %?

Post by TD2626 » Fri Nov 24, 2017 12:52 pm

In some ways global cap weighting is a self-fulfilling prophecy - in mt opinion it becomes more and more reasonable to have a higher international allocation if global markets are more interconnected (so there are fewer costs and frictions associated with international investment). More people investing internationally could make markets more globalized, and could strengthen the argument for global investment.

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Re: Why does everyone keep increasing their international stock %?

Post by spectec » Fri Nov 24, 2017 12:57 pm

Not everyone is increasing their international %. Mine has remained at -0- because I don't want to skew it away from the natural international exposure already built into the TSMX/VTI. I'm relying upon the management of the multi-national companies in that index to do the due diligence regarding currency risk, regulatory risk, etc that I'm not capable of doing. They have a lot of real-time insider information regarding the countries they do business in that I will never see.
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Re: Why does everyone keep increasing their international stock %?

Post by grettman » Fri Nov 24, 2017 1:02 pm

AlohaJoe wrote:
Thu Nov 23, 2017 8:58 pm
You could try searching the forum and seeing the 10,000 previous threads of the topic of international investing.
For that matter, who needs the forums? just about every topic has been covered and we should just lock the whole thing down to read only... I mean why stop with this post?

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Re: Why does everyone keep increasing their international stock %?

Post by cfs » Fri Nov 24, 2017 1:03 pm

digarei wrote:
Thu Nov 23, 2017 11:26 pm
cfs wrote:
Thu Nov 23, 2017 10:42 pm
Good sell signal!
How much will you be selling?
Just a few, but I don't have that much in internationals anyway. Good luck. Merry Christmas. Thanks for reading.
~ Donating Member ~

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SimpleGift
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Re: Why does everyone keep increasing their international stock %?

Post by SimpleGift » Fri Nov 24, 2017 1:25 pm

Just to add more background on the expanding universe of global stocks in recent decades. In 1990, it appears there were about 22,000 listed companies worldwide — while by 2010 there were about 45,000 companies listed on global exchanges.
Of course, not all of these stocks were "investable" in the free-float indexes. In 1990, about 12% of all listed companies worldwide were included in the MSCI global indexes (table below) — while by 2010 about 32% of all listed companies were included in the MSCI indexes (including developed, emerging and frontier markets):
  • ...............................................................1990.........................2010
    Number of Listed Companies................22,000.......................45,000
    Number of Companies Indexed...……….1,840........................14,605
    % of Listed Companies Indexed...…..……12%………..…….……….32%
    Source: MSCI
So it appears that as the universe of listed stocks has expanded worldwide in recent decades, the number of companies available to ordinary index investors has more than kept pace — and international stock allocations have expanded accordingly.
Cordially, Todd

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Re: Why does everyone keep increasing their international stock %?

Post by Silverado » Fri Nov 24, 2017 2:21 pm

columbia wrote:
Fri Nov 24, 2017 12:18 pm
Prior to this year, international had been a dog since the recession. Vanguard upping the percentage in the combined funds didn't strike me as performance chasing (at least not in the way the word is normally used).
Seems a lot like it to me. It's gone way up? Buy. It's gone way down? Sell. Weird. What has changed fundamentally in the global market that warrants a change? Nothing likely, just the performance, which has little to do what asset allocation one chooses.

We have been working semi-hard to rebalance from international to domestic. We let it get out of wack by about 15% or so. I thought doing around 1% a month would be fine and get us there pretty quick this year. But the growth has caused it to be taking a lot longer. No issue, I am comfortable anyway, just trying to get it to an arbitrary amount of equities. I like that we are harvesting some great gains. Shouldn't ignore it so long.

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Re: Why does everyone keep increasing their international stock %?

Post by lostdog » Fri Nov 24, 2017 3:44 pm

KyleAAA wrote:
Fri Nov 24, 2017 12:36 pm
There are good reasons for this. Foreign stock markets account for about half the global equity market cap and efficient market logic demands that overweighting the US amounts to an active investment decision. Furthermore, while there was always a theoretical argument for international diversification there were practical barriers in Bogle’s heyday, cost being chief among them. But those barriers have largely disappeared over the last few decades and that’s a big part of why increased international allocations have become he norm.

There is cognitive dissonance here between what Bogle says he believes (market weighting) and what he does (not market weighting) given the new realities. In short, Bogle is just flat-out, unambiguously wrong on this one. But that doesn’t mean he’s wrong about everything else.
+1. Well said.
Financial Independence is the best revenge. | "Our life is frittered away by detail. Simplify, simplify." -Thoreau

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Re: Why does everyone keep increasing their international stock %?

Post by Da5id » Fri Nov 24, 2017 4:12 pm

Silverado wrote:
Fri Nov 24, 2017 2:21 pm
columbia wrote:
Fri Nov 24, 2017 12:18 pm
Prior to this year, international had been a dog since the recession. Vanguard upping the percentage in the combined funds didn't strike me as performance chasing (at least not in the way the word is normally used).
Seems a lot like it to me. It's gone way up? Buy. It's gone way down? Sell. Weird. What has changed fundamentally in the global market that warrants a change? Nothing likely, just the performance, which has little to do what asset allocation one chooses.
On what basis do you say Vanguard performance chased? You can see some of the history here: https://www.bogleheads.org/wiki/Vanguar ... tegy_Funds

Vanguard upped to 40% international in 2015. Looking at the history, that was not at a time International was in the short or long term outperforming US. So any suggestion that they were performance chasing is bizarre. Market timing based on valuation? Maybe. Changing their view of what the allocation should be the long haul? That is what I think myself.

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TD2626
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Re: Why does everyone keep increasing their international stock %?

Post by TD2626 » Fri Nov 24, 2017 6:07 pm

grettman wrote:
Fri Nov 24, 2017 1:02 pm
AlohaJoe wrote:
Thu Nov 23, 2017 8:58 pm
You could try searching the forum and seeing the 10,000 previous threads of the topic of international investing.
For that matter, who needs the forums? just about every topic has been covered and we should just lock the whole thing down to read only... I mean why stop with this post?
There are new things that sometimes develop --- Vanguard's Global Wellesley and Wellington, etc. (Larry often writes about different factors, as well).

There is sometimes news, as well - changes in expense ratios, etc. Relevant to this thread - as costs of international have declined in recent decades, discussing that every so often, like once a year, (to see if lower ERs or regulatory changes justify changes in AA) is perfectly valid.

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JoMoney
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Re: Why does everyone keep increasing their international stock %?

Post by JoMoney » Fri Nov 24, 2017 6:11 pm

fire5soon wrote:
Fri Nov 24, 2017 12:24 pm
Is there any research showing what portion of equity markets are owned by which countries, or US versus ex-US investors? In other words, is the US equity market owned by 75% US investors and 25% non-US? Also for foreign markets... for example are, say, 35% of ex-US equities owned by US investors? Hopefully my question made sense... :confused
There is some Fed data that gives an idea, largely U.S. investment in foreign equity is significantly more than foreign investment in U.S. equity.
I'll try to dig up some links and edit them into this post.

https://www.federalreserve.gov/releases ... ent/z1.pdf
September 21, 2017 (2017:Q2 Release)
Market value of foreign equities held by U.S. residents (Includes American Depositary Receipts (ADRs)) :
$7,962.8 (Billions)
Foreign holdings of U.S. corporate equities :
$6,302.2 (Billions)
Last edited by JoMoney on Fri Nov 24, 2017 6:20 pm, edited 1 time in total.
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TD2626
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Re: Why does everyone keep increasing their international stock %?

Post by TD2626 » Fri Nov 24, 2017 6:11 pm

SimpleGift wrote:
Fri Nov 24, 2017 1:25 pm

So it appears that as the universe of listed stocks has expanded worldwide in recent decades, the number of companies available to ordinary index investors has more than kept pace — and international stock allocations have expanded accordingly.
Interesting - this appears to be in contrast to the much more often discussed decline in the number of US stocks. Some new markets of course don't have the history or regulatory protections of US or developed markets, but developed markets - countries such as Western Europe, Aust/NZ, Japan, Canada - have in general long histories and developed regulatory protections.

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Re: Why does everyone keep increasing their international stock %?

Post by bikechuck » Fri Nov 24, 2017 6:18 pm

teigers wrote:
Thu Nov 23, 2017 9:43 pm
Because the correct allocation is the one that approximates the market portfolio (which is about 55% international), but there is still a lot of home bias that people are getting over.
Investing in international has exchange rate risk so you need to be right about the investment performance and right and or lucky about currency fluctuations.

The currency risk is the primary reason that I limit my exposure to international equities to 20% and avoid them entirely in the fixed income portion of my portfolio.

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Re: Why does everyone keep increasing their international stock %?

Post by Hyperborea » Fri Nov 24, 2017 6:32 pm

JoMoney wrote:
Fri Nov 24, 2017 6:11 pm
fire5soon wrote:
Fri Nov 24, 2017 12:24 pm
Is there any research showing what portion of equity markets are owned by which countries, or US versus ex-US investors? In other words, is the US equity market owned by 75% US investors and 25% non-US? Also for foreign markets... for example are, say, 35% of ex-US equities owned by US investors? Hopefully my question made sense... :confused
There is some Fed data that gives an idea, largely U.S. investment in foreign equity is significantly more than foreign investment in U.S. equity.
I'll try to dig up some links and edit them into this post.

https://www.federalreserve.gov/releases ... ent/z1.pdf
September 21, 2017 (2017:Q2 Release)
Market value of foreign equities held by U.S. residents (Includes American Depositary Receipts (ADRs)) :
$7,962.8 (Billions)
Foreign holdings of U.S. corporate equities :
$6,302.2 (Billions)
I could see at least one reason for such a skew. An investor in a smaller economy will likely want a minimum amount in their home market to track local inflation. Perhaps a minimum of 10-20% in their home market. A US investor with a market balance portfolio has 45% - 55% home market already and needs no more.

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Re: Why does everyone keep increasing their international stock %?

Post by TinkerPDX » Fri Nov 24, 2017 6:54 pm

AlohaJoe wrote:
Thu Nov 23, 2017 8:58 pm
You could try searching the forum and seeing the 10,000 previous threads of the topic of international investing.
!l :sharebeer

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TinkerPDX
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Re: Why does everyone keep increasing their international stock %?

Post by TinkerPDX » Fri Nov 24, 2017 6:56 pm

bikechuck wrote:
Fri Nov 24, 2017 6:18 pm
teigers wrote:
Thu Nov 23, 2017 9:43 pm
Because the correct allocation is the one that approximates the market portfolio (which is about 55% international), but there is still a lot of home bias that people are getting over.
Investing in international has exchange rate risk so you need to be right about the investment performance and right and or lucky about currency fluctuations.

The currency risk is the primary reason that I limit my exposure to international equities to 20% and avoid them entirely in the fixed income portion of my portfolio.
Seems like hedging is cheap enough now that if one believes in the value of holding international, currency risk can just be hedged out.

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TinkerPDX
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Re: Why does everyone keep increasing their international stock %?

Post by TinkerPDX » Fri Nov 24, 2017 6:57 pm

bikechuck wrote:
Fri Nov 24, 2017 6:18 pm
teigers wrote:
Thu Nov 23, 2017 9:43 pm
Because the correct allocation is the one that approximates the market portfolio (which is about 55% international), but there is still a lot of home bias that people are getting over.
Investing in international has exchange rate risk so you need to be right about the investment performance and right and or lucky about currency fluctuations.

The currency risk is the primary reason that I limit my exposure to international equities to 20% and avoid them entirely in the fixed income portion of my portfolio.
Currency hedging is cheap enough now that if one believes in the value of holding international, currency risk can just be hedged out (which most ex-US funds used by folks on this forum do). Not a meaningful problem.

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Re: Why does everyone keep increasing their international stock %?

Post by TropikThunder » Fri Nov 24, 2017 7:05 pm

FrugalInvestor wrote:
Fri Nov 24, 2017 11:22 am
One reason I admire Jack so much is that he doesn't feel obligated to follow or agree with the current trend, although he doesn't hesitate to start one if he believes it's right! It seems that everyone is arguing with Jack these days about the wisdom of holding a significant percentage of one's portfolio in international stocks but Jack isn't going for it. I understand all the arguments, but I also think that if they were as overwhelmingly convincing as most would have us believe that Jack would come around. I know that Jack is human and that humans make mistakes, but I also know that Jack has one of the best investing minds (and guts) in the world. For that reason I'm very comfortable sticking with Jack's recommendation of "at most 20%."
Another way of putting it is, he refuses to include new information in his decision-making process. History is littered with people (often authority figures) who cling to outdated beliefs despite often overwhelming new evidence to the contrary. I'm not saying that in a pejorative way, just to point out that "sticking to your guns" is sometimes a character flaw rather than a strength.

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Re: Why does everyone keep increasing their international stock %?

Post by columbia » Fri Nov 24, 2017 7:28 pm

TinkerPDX wrote:
Fri Nov 24, 2017 6:56 pm
bikechuck wrote:
Fri Nov 24, 2017 6:18 pm
teigers wrote:
Thu Nov 23, 2017 9:43 pm
Because the correct allocation is the one that approximates the market portfolio (which is about 55% international), but there is still a lot of home bias that people are getting over.
Investing in international has exchange rate risk so you need to be right about the investment performance and right and or lucky about currency fluctuations.

The currency risk is the primary reason that I limit my exposure to international equities to 20% and avoid them entirely in the fixed income portion of my portfolio.
Seems like hedging is cheap enough now that if one believes in the value of holding international, currency risk can just be hedged out.
Not much of a track record, but the iShares HACW (hedged ACWI index) is a pretty simple way to own the world in one fund and hedge. There might be a cheaper way - I honestly don't know.

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Re: Why does everyone keep increasing their international stock %?

Post by dwickenh » Fri Nov 24, 2017 7:47 pm

livesoft wrote:
Thu Nov 23, 2017 9:26 pm
I think the main reason for recent increases is chasing performance. After all, international funds have finally outperformed US funds in 2017. It may be time to start rebalancing out of international funds for that reason.
+1 or just not chase performance in the first place!
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

darrvao777
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Re: Why does everyone keep increasing their international stock %?

Post by darrvao777 » Fri Nov 24, 2017 8:33 pm

Everything has its day in the sun

Last year, it seemed like those with a small value tilt really did well

This year, those with a higher % dedicated to international stock seem to be doing better

My asset allocation has stayed the same

1/3 bonds
1/3 total stock market
1/3 international stock market

Have done just fine over the last 2 years (and beyond)

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JoMoney
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Re: Why does everyone keep increasing their international stock %?

Post by JoMoney » Fri Nov 24, 2017 8:39 pm

TropikThunder wrote:
Fri Nov 24, 2017 7:05 pm
FrugalInvestor wrote:
Fri Nov 24, 2017 11:22 am
One reason I admire Jack so much is that he doesn't feel obligated to follow or agree with the current trend, although he doesn't hesitate to start one if he believes it's right! It seems that everyone is arguing with Jack these days about the wisdom of holding a significant percentage of one's portfolio in international stocks but Jack isn't going for it. I understand all the arguments, but I also think that if they were as overwhelmingly convincing as most would have us believe that Jack would come around. I know that Jack is human and that humans make mistakes, but I also know that Jack has one of the best investing minds (and guts) in the world. For that reason I'm very comfortable sticking with Jack's recommendation of "at most 20%."
Another way of putting it is, he refuses to include new information in his decision-making process. History is littered with people (often authority figures) who cling to outdated beliefs despite often overwhelming new evidence to the contrary. I'm not saying that in a pejorative way, just to point out that "sticking to your guns" is sometimes a character flaw rather than a strength.
Yes, like the way people cling to the idea that international diversification will improve risk adjusted returns despite decades of evidence contradicting that, or puzzling over some perceived 'home country bias' that seems a puzzle only if you believe in a faulty premise like the Efficient Market Hypothesis. Sovereign laws and currencies exist and do not flow freely without limits across borders and without costs and restrictions. There are quite simple and empirical reasons it's less risky for someone to invest within an area where they actually have rights under the law. It shouldn't be a puzzle at all the "market portfolio" as it's actually weighted in the portfolios of actual individuals includes a hefty weighting in their own area and not weighted as some average that represents the aggregate but no real individual.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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TD2626
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Re: Why does everyone keep increasing their international stock %?

Post by TD2626 » Fri Nov 24, 2017 8:43 pm

TinkerPDX wrote:
Fri Nov 24, 2017 6:57 pm
bikechuck wrote:
Fri Nov 24, 2017 6:18 pm
teigers wrote:
Thu Nov 23, 2017 9:43 pm
Because the correct allocation is the one that approximates the market portfolio (which is about 55% international), but there is still a lot of home bias that people are getting over.
Investing in international has exchange rate risk so you need to be right about the investment performance and right and or lucky about currency fluctuations.

The currency risk is the primary reason that I limit my exposure to international equities to 20% and avoid them entirely in the fixed income portion of my portfolio.
Currency hedging is cheap enough now that if one believes in the value of holding international, currency risk can just be hedged out (which most ex-US funds used by folks on this forum do). Not a meaningful problem.
Um.....

International bond funds are generally hedged, but I thought international stock funds generally were not hedged. Do you know what the actual costs of hedging are (e.g. how many basis points, for example)? They're not zero, but it has gotten lower.

A good Vanguard white paper on this topic is this:https://personal.vanguard.com/pdf/ISGCMC.pdf

MnD
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Re: Why does everyone keep increasing their international stock %?

Post by MnD » Fri Nov 24, 2017 9:09 pm

bikechuck wrote:
Fri Nov 24, 2017 6:18 pm
teigers wrote:
Thu Nov 23, 2017 9:43 pm
Because the correct allocation is the one that approximates the market portfolio (which is about 55% international), but there is still a lot of home bias that people are getting over.
Investing in international has exchange rate risk so you need to be right about the investment performance and right and or lucky about currency fluctuations.
With a many decades long investing timeline like everyone serious about investing should be on, one does not have to be "right and/or lucky" about currency fluctuations. That's market timer thinking.

JustinR
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Re: Why does everyone keep increasing their international stock %?

Post by JustinR » Fri Nov 24, 2017 11:33 pm

FrugalInvestor wrote:
Fri Nov 24, 2017 11:22 am
One reason I admire Jack so much is that he doesn't feel obligated to follow or agree with the current trend, although he doesn't hesitate to start one if he believes it's right! It seems that everyone is arguing with Jack these days about the wisdom of holding a significant percentage of one's portfolio in international stocks but Jack isn't going for it. I understand all the arguments, but I also think that if they were as overwhelmingly convincing as most would have us believe that Jack would come around. I know that Jack is human and that humans make mistakes, but I also know that Jack has one of the best investing minds (and guts) in the world. For that reason I'm very comfortable sticking with Jack's recommendation of "at most 20%."
Bogleheads: "We believe that we don't know how any holdings will perform, so we buy the market. *Except US vs International."

Bogleheads: "Don't blindly follow any one guru's advice! *Except John Bogle."

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Re: Why does everyone keep increasing their international stock %?

Post by vesalius » Fri Nov 24, 2017 11:44 pm

JoMoney wrote:
Fri Nov 24, 2017 8:39 pm
Yes, like the way people cling to the idea that international diversification will improve risk adjusted returns despite decades of evidence contradicting that, or puzzling over some perceived 'home country bias' that seems a puzzle only if you believe in a faulty premise like the Efficient Market Hypothesis. Sovereign laws and currencies exist and do not flow freely without limits across borders and without costs and restrictions. There are quite simple and empirical reasons it's less risky for someone to invest within an area where they actually have rights under the law. It shouldn't be a puzzle at all the "market portfolio" as it's actually weighted in the portfolios of actual individuals includes a hefty weighting in their own area and not weighted as some average that represents the aggregate but no real individual.
Bogleheads: “We do not use backtested portfolios that move away from a market cap portfolio because the past may never repeat and does not predict the future.” “Except US vs international or beta versus bonds.”

sambb
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Re: Why does everyone keep increasing their international stock %?

Post by sambb » Sat Nov 25, 2017 5:18 am

JustinR wrote:
Fri Nov 24, 2017 11:33 pm
FrugalInvestor wrote:
Fri Nov 24, 2017 11:22 am
One reason I admire Jack so much is that he doesn't feel obligated to follow or agree with the current trend, although he doesn't hesitate to start one if he believes it's right! It seems that everyone is arguing with Jack these days about the wisdom of holding a significant percentage of one's portfolio in international stocks but Jack isn't going for it. I understand all the arguments, but I also think that if they were as overwhelmingly convincing as most would have us believe that Jack would come around. I know that Jack is human and that humans make mistakes, but I also know that Jack has one of the best investing minds (and guts) in the world. For that reason I'm very comfortable sticking with Jack's recommendation of "at most 20%."
Bogleheads: "We believe that we don't know how any holdings will perform, so we buy the market. *Except US vs International."

Bogleheads: "Don't blindly follow any one guru's advice! *Except John Bogle."
brilliant comment

MnD
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Re: Why does everyone keep increasing their international stock %?

Post by MnD » Sat Nov 25, 2017 10:05 am

Silverado wrote:
Fri Nov 24, 2017 2:21 pm
We have been working semi-hard to rebalance from international to domestic. We let it get out of wack by about 15% or so. I thought doing around 1% a month would be fine and get us there pretty quick this year. But the growth has caused it to be taking a lot longer. No issue, I am comfortable anyway, just trying to get it to an arbitrary amount of equities. I like that we are harvesting some great gains. Shouldn't ignore it so long.
Here's another thing I don't miss since going to market-cap based indexing of global equity.
No more constantly refiguring and rebalancing the "bet" on the US versus rest of the world.
In the decades ahead maybe US share will remain around 50:50 or drop to 25% or grow to 75%.
I don't care and I don't do anything if it does - which is nice given I have no special knowledge or expertise with which to be constantly adjusting and rebalancing the US bet. Just keep buying and holding the haystack. Don't just do something - stand there!

Chances are the US-ex-US market cap split will change significantly. By fixing a certain % in US, one will always be shoveling large sums of money against the tide to maintain that arbitrary split (as in Exhibit A above). There is no "natural" US:ex-US % split or reversion to some mean. If US increases global market cap share (possibly for very sound global economic reasons) one is increasingly going to have to bet against the US by rebalancing out of US to maintain their arbitrary US %. Likewise if US share of global cap declines, again for possibly very sound global economic reasons, one is going to have to increasingly bet against that move by continual rebalancing towards US.

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fire5soon
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Re: Why does everyone keep increasing their international stock %?

Post by fire5soon » Sat Nov 25, 2017 10:26 am

JoMoney wrote:
Fri Nov 24, 2017 6:11 pm
fire5soon wrote:
Fri Nov 24, 2017 12:24 pm
Is there any research showing what portion of equity markets are owned by which countries, or US versus ex-US investors? In other words, is the US equity market owned by 75% US investors and 25% non-US? Also for foreign markets... for example are, say, 35% of ex-US equities owned by US investors? Hopefully my question made sense... :confused
There is some Fed data that gives an idea, largely U.S. investment in foreign equity is significantly more than foreign investment in U.S. equity.
I'll try to dig up some links and edit them into this post.

https://www.federalreserve.gov/releases ... ent/z1.pdf
September 21, 2017 (2017:Q2 Release)
Market value of foreign equities held by U.S. residents (Includes American Depositary Receipts (ADRs)) :
$7,962.8 (Billions)
Foreign holdings of U.S. corporate equities :
$6,302.2 (Billions)
Thanks for the data! My hunch (hunches can be dangerous...) is that there is much more US ownership of ex-US equities than there is ex-US ownership of US equities. IOW home country bias isn't a uniquely American issue.

I could make an argument for anything between 0% to market cap ex-US allocation, but I typically keep about 1/3 of equity in ex-US. Not because I have any particularly strong convictions about it, but it just seems to be good enough.
A man is a success if he gets up in the morning and gets to bed at night, and in between he does what he wants to do. - Bob Dylan

chevca
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Re: Why does everyone keep increasing their international stock %?

Post by chevca » Sat Nov 25, 2017 10:45 am

JustinR wrote:
Fri Nov 24, 2017 11:33 pm
Bogleheads: "Don't blindly follow any one guru's advice! *Except John Bogle."
Well, yeah....

Always amazes me the folks get hammered for loving Mr. Bogles advice.... on a forum called BOGLEheads. :confused

spectec
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Re: Why does everyone keep increasing their international stock %?

Post by spectec » Sat Nov 25, 2017 10:54 am

Seems as though the definition of "blindly following" is being stretched to make an unsupportable argument. I don't blindly follow John Bogle's advice regarding international - I follow it because I've evaluated it and I think he's right.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

chevca
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Re: Why does everyone keep increasing their international stock %?

Post by chevca » Sat Nov 25, 2017 11:17 am

Very true... From the level of smarts shared on Bogleheads, I would doubt anyone "blindly follows" anyone or anything someone else says. Everyone has made a very reasonable decision for themselves and not blindly come to that decision, IMO.

But, it's the go to when someone doesn't agree with one's own decision....

MnD
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Re: Why does everyone keep increasing their international stock %?

Post by MnD » Sat Nov 25, 2017 1:28 pm

chevca wrote:
Sat Nov 25, 2017 10:45 am
Always amazes me the folks get hammered for loving Mr. Bogles advice.... on a forum called BOGLEheads. :confused
Why aren't the "loving Mr. Bogles advice" folks advocating for tilting heavily to corporate bonds or going 100% equity for those eligible for Social Security? Why are the vast majority of straw man threads about the horrors of increasing international such an attractant for "Jack Bogle says" thinking?


Jack Bogle states the total bond market index is deeply flawed and recommends individual investors hold 1/2 bond holdings in total bond market and the other 1/2 in a 100% corporate bond index fund.
http://www.nytimes.com/2013/04/28/your- ... lance.html

Jack Bogle states that social security investors should consider Social Security as $300K to $500K worth of fixed-income holdings and recommends they adjust their equity holding percentage upward to account for that. He has given the example of an investor holding their $400K portfolio 100% in stock but actually being 50:50 due to the bond-like characteristics of Social Security.
http://ibd.morningstar.com/article/arti ... ,%20brf295
Last edited by MnD on Sat Nov 25, 2017 4:18 pm, edited 1 time in total.

chevca
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Re: Why does everyone keep increasing their international stock %?

Post by chevca » Sat Nov 25, 2017 1:56 pm

MnD wrote:
Sat Nov 25, 2017 1:28 pm
chevca wrote:
Sat Nov 25, 2017 10:45 am
Always amazes me the folks get hammered for loving Mr. Bogles advice.... on a forum called BOGLEheads. :confused
Why aren't the "loving Mr. Bogles advice" folks advocating for tilting heavily to corporate bonds or going 100% equity for those eligible for Social Security? Why are the vast majority of straw man threads about the horrors of increasing international such an attractant for "Jack Bogle says" thinking?


Jack Bogle states the total bond market index is deeply flawed and recommends individual investors hold 1/2 bond holdings in total bond market and the other 1/2 in a 100% corporate bond index fund.
http://www.nytimes.com/2013/04/28/your- ... lance.html

Jack Bogle states that social security investors should consider Social Security as $300K to $500K worth of fixed-income holdings and recommends they adjust their equity holding percentage upward to account for that. He has given the example of an investor holding their $400K portfolio 100% in stock but actually being 50:50 due to the bond.
http://ibd.morningstar.com/article/arti ... ,%20brf295
Why do the international thread always argue Mr. Bogle is stuck in his ways, never changes his mind, and doesn't consider new numbers and thinking? :wink:

If someone did follow Mr. Bogle's advice on corporate bonds on a forum named Bogleheads, would or should they be dinged like those that like his advice on international?

My point was simply that on a forum named Bogleheads, it shouldn't be so absurd to many that some like to follow the advice of Mr. Bogle himself. Rather, it's quite odd that so many don't...

And, if those loving Mr. Bogle's advice follow some, but not all of his advice they aren't really blindly following either...

How are they straw man threads, also? Hasn't he been right more than he's been wrong on the subject so far?

JustinR
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Re: Why does everyone keep increasing their international stock %?

Post by JustinR » Sat Nov 25, 2017 3:57 pm

chevca wrote:
Sat Nov 25, 2017 1:56 pm
MnD wrote:
Sat Nov 25, 2017 1:28 pm
chevca wrote:
Sat Nov 25, 2017 10:45 am
Always amazes me the folks get hammered for loving Mr. Bogles advice.... on a forum called BOGLEheads. :confused
Why aren't the "loving Mr. Bogles advice" folks advocating for tilting heavily to corporate bonds or going 100% equity for those eligible for Social Security? Why are the vast majority of straw man threads about the horrors of increasing international such an attractant for "Jack Bogle says" thinking?


Jack Bogle states the total bond market index is deeply flawed and recommends individual investors hold 1/2 bond holdings in total bond market and the other 1/2 in a 100% corporate bond index fund.
http://www.nytimes.com/2013/04/28/your- ... lance.html

Jack Bogle states that social security investors should consider Social Security as $300K to $500K worth of fixed-income holdings and recommends they adjust their equity holding percentage upward to account for that. He has given the example of an investor holding their $400K portfolio 100% in stock but actually being 50:50 due to the bond.
http://ibd.morningstar.com/article/arti ... ,%20brf295
Why do the international thread always argue Mr. Bogle is stuck in his ways, never changes his mind, and doesn't consider new numbers and thinking? :wink:

If someone did follow Mr. Bogle's advice on corporate bonds on a forum named Bogleheads, would or should they be dinged like those that like his advice on international?

My point was simply that on a forum named Bogleheads, it shouldn't be so absurd to many that some like to follow the advice of Mr. Bogle himself. Rather, it's quite odd that so many don't...

And, if those loving Mr. Bogle's advice follow some, but not all of his advice they aren't really blindly following either...

How are they straw man threads, also? Hasn't he been right more than he's been wrong on the subject so far?
It's hypocritical because the whole point of Bogleheads philosophy is that no person knows what the market will do, so you're supposed to "buy the market" and grow your money along with it instead of relying on the arbitrary and subjective opinion of any one person.

"Hasn't he been right more than he's been wrong on the subject so far?" I'm pretty sure I read in the Bogleheads book that you're supposed to disregard gurus, even if they're right sometimes, because that is really just luck and they always revert back to the mean.

MnD
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Re: Why does everyone keep increasing their international stock %?

Post by MnD » Sat Nov 25, 2017 4:05 pm

chevca wrote:
Sat Nov 25, 2017 1:56 pm
How are they straw man threads, also?
For starters, "everyone" is not in fact increasing their international stock %

DavidRoseMountain
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Re: Why does everyone keep increasing their international stock %?

Post by DavidRoseMountain » Sat Nov 25, 2017 4:15 pm

I'd be more inclined to do the even split of equities between international and US if I felt that the international business law was strong and fair and impartial. But contract law is still too murky in China and Russia and other countries throughout the globe.
Therefore my 20% allocation to international seems perfectly sensible.

sambb
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Re: Why does everyone keep increasing their international stock %?

Post by sambb » Sat Nov 25, 2017 4:23 pm

all of the theoretical concerns about risk in intl markets should already be factored into the pricing.

MnD
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Re: Why does everyone keep increasing their international stock %?

Post by MnD » Sat Nov 25, 2017 4:39 pm

DavidRoseMountain wrote:
Sat Nov 25, 2017 4:15 pm
I'd be more inclined to do the even split of equities between international and US if I felt that the international business law was strong and fair and impartial. But contract law is still too murky in China and Russia and other countries throughout the globe.
Therefore my 20% allocation to international seems perfectly sensible.
Yes China (2.6% of FTSE global all cap ex-US) and Russia (0.4%) are perfect proxies for the "other countries throughout the globe".
Here are the countries that make up more than 1% of global market cap and comprise 90% of the weighted index.
A real rogues gallery of murkiness - especially Netherlands - watch out for them! :mrgreen:

United States 52.1%
Japan 8.4%
United Kingdom 5.9%
Canada 3.1%
France 3.1%
Germany 3.1%
China 2.6%
Switzerland 2.6%
Australia 2.3%
Korea 1.8%
Taiwan 1.5%
Hong Kong 1.2%
India 1.2%
Netherlands 1.1%
Spain 1.1%
Sweden 1.1%
https://personal.vanguard.com/us/funds/ ... true#tab=2

The countries in green font rank higher than the US on the World Banks "Rule of Law" index
http://www.theglobaleconomy.com/rankings/wb_ruleoflaw/
Among countries with significant equity markets, US is a mid-packer rather than some gold standard in that regard.

chevca
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Re: Why does everyone keep increasing their international stock %?

Post by chevca » Sat Nov 25, 2017 7:28 pm

JustinR wrote:
Sat Nov 25, 2017 3:57 pm
chevca wrote:
Sat Nov 25, 2017 1:56 pm
MnD wrote:
Sat Nov 25, 2017 1:28 pm
chevca wrote:
Sat Nov 25, 2017 10:45 am
Always amazes me the folks get hammered for loving Mr. Bogles advice.... on a forum called BOGLEheads. :confused
Why aren't the "loving Mr. Bogles advice" folks advocating for tilting heavily to corporate bonds or going 100% equity for those eligible for Social Security? Why are the vast majority of straw man threads about the horrors of increasing international such an attractant for "Jack Bogle says" thinking?


Jack Bogle states the total bond market index is deeply flawed and recommends individual investors hold 1/2 bond holdings in total bond market and the other 1/2 in a 100% corporate bond index fund.
http://www.nytimes.com/2013/04/28/your- ... lance.html

Jack Bogle states that social security investors should consider Social Security as $300K to $500K worth of fixed-income holdings and recommends they adjust their equity holding percentage upward to account for that. He has given the example of an investor holding their $400K portfolio 100% in stock but actually being 50:50 due to the bond.
http://ibd.morningstar.com/article/arti ... ,%20brf295
Why do the international thread always argue Mr. Bogle is stuck in his ways, never changes his mind, and doesn't consider new numbers and thinking? :wink:

If someone did follow Mr. Bogle's advice on corporate bonds on a forum named Bogleheads, would or should they be dinged like those that like his advice on international?

My point was simply that on a forum named Bogleheads, it shouldn't be so absurd to many that some like to follow the advice of Mr. Bogle himself. Rather, it's quite odd that so many don't...

And, if those loving Mr. Bogle's advice follow some, but not all of his advice they aren't really blindly following either...

How are they straw man threads, also? Hasn't he been right more than he's been wrong on the subject so far?
It's hypocritical because the whole point of Bogleheads philosophy is that no person knows what the market will do, so you're supposed to "buy the market" and grow your money along with it instead of relying on the arbitrary and subjective opinion of any one person.

"Hasn't he been right more than he's been wrong on the subject so far?" I'm pretty sure I read in the Bogleheads book that you're supposed to disregard gurus, even if they're right sometimes, because that is really just luck and they always revert back to the mean.
And, very, very few Bogleheads buy the market as it is. About each of us tilts someway or adds something. So, we're all hypocritical, yeah?

None of us "disregard gurus". Very, very few in here came up with their strategy and plan all on their own. We all take what we like from gurus and disregard the rest.

chevca
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Re: Why does everyone keep increasing their international stock %?

Post by chevca » Sat Nov 25, 2017 7:29 pm

MnD wrote:
Sat Nov 25, 2017 4:05 pm
chevca wrote:
Sat Nov 25, 2017 1:56 pm
How are they straw man threads, also?
For starters, "everyone" is not in fact increasing their international stock %
Okay, I see what you mean. I agree there.

edge
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Re: Why does everyone keep increasing their international stock %?

Post by edge » Sat Nov 25, 2017 7:37 pm

Jack Bogle is a great man. However, I am not aware he has any specific investing prowess or ‘gut’.

In fact, his entire vision is predicated on individual investors not requiring investing ‘skills’.

As far as the OP, I’ve been at 40% non US equities since the 90s. Haven’t changed.
FrugalInvestor wrote:
Fri Nov 24, 2017 11:22 am
One reason I admire Jack so much is that he doesn't feel obligated to follow or agree with the current trend, although he doesn't hesitate to start one if he believes it's right! It seems that everyone is arguing with Jack these days about the wisdom of holding a significant percentage of one's portfolio in international stocks but Jack isn't going for it. I understand all the arguments, but I also think that if they were as overwhelmingly convincing as most would have us believe that Jack would come around. I know that Jack is human and that humans make mistakes, but I also know that Jack has one of the best investing minds (and guts) in the world. For that reason I'm very comfortable sticking with Jack's recommendation of "at most 20%."

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JoMoney
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Re: Why does everyone keep increasing their international stock %?

Post by JoMoney » Sat Nov 25, 2017 8:48 pm

sambb wrote:
Sat Nov 25, 2017 4:23 pm
all of the theoretical concerns about risk in intl markets should already be factored into the pricing.
If your theory was true, and the market is pricing in something for the risk of foreign holders of a stock, that would imply there's an even bigger premium for domestic holders of that same stock that don't have the same risks when holding stocks in their own currency, in a regime where they have legal recourse and not reliant on a series of derivative bank agreements and treaties, and able to take advantage of dividend franking and other tax situations unique to tax payers in a specific country.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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