It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

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JackoC
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by JackoC » Tue Aug 14, 2018 2:59 pm

I have semi-stayed the course with international in recent years. To me 'stay the course' implies rebalancing. I've just allowed non-US stock allocation to shrink as it has underpeformed. Also, small liquidations (retired, not reinvesting dividends cover most expenses) have been non US because those have the least appreciation so minimize cap gains. Large proportion is taxable, tax deferred reserved for things that don't work well at all in taxable (TIPS, QSPIX, etc).

People who stuck to just US think they had good reasons for that, but that they turned out right is not necessarily because of those reasons. They just turned out right, so far in recent history, that's all you can really say IMO.

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unclescrooge
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by unclescrooge » Tue Aug 14, 2018 3:00 pm

kosomoto wrote:
Tue Aug 14, 2018 2:23 pm
HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:15 pm
visualguy wrote:
Tue Aug 14, 2018 2:00 pm
TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.
Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.

The rest of your post is excellent as well.
Which is why every international investor should consider (1) adding a hedged currency index fund (e.g. DBAW) and (2) tilting small (e.g. SCZ)

Does international hedging really make a difference? Hedged returns for the last 25 years have been worse than unhedged.

Image
Hedging isn't free. This makes intuitve sense.

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vineviz
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Tue Aug 14, 2018 3:01 pm

triceratop wrote:
Tue Aug 14, 2018 2:50 pm
HEDGEFUNDIE wrote:
Tue Aug 14, 2018 2:47 pm
What is worse in terms of diversification, an investor going through a 10-year international drought and reducing his allocation to international, or reducing currency exposure & getting a moderately higher return over the same 10 years, just enough not to panic?
There is another option: become educated enough as an investor so that asset allocation and investor behavior are decorrelated and one can make proper decisions in each regime.
On days like today I feel like if we can just stop letting folks instill in new investors an irrational fear of international stocks that we'd have an accomplishment worth celebrating.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

hightower
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by hightower » Tue Aug 14, 2018 3:09 pm

Agree that no one knows what the future holds. International could outperform everything in the years to come, who knows. FWIW, I don't personally feel particularly inclined to hold much in international. I keep just 10% in my portfolio. Lately I've been glad that I don't own more the way it's been getting pummeled.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by lostdog » Tue Aug 14, 2018 3:14 pm

Steadfast wrote:
Tue Aug 14, 2018 1:02 pm
Plenty of good advice in this thread.

But, I hold the global equity market in market proportions, because I don't have a good reason to do anything else. So if you're selling international, I'm buying.
+1

I don't believe US and International stocks are separate asset classes.

Anything outside of world market cap is a bet. I am not going to invest U.S. only because Jack, Warren and Jim Collins are making opinions...I mean bets.

Rwsawbones
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Rwsawbones » Tue Aug 14, 2018 3:19 pm

Looking at ten year periods is interesting. Looking next year with 2008 taken out will be interesting for both US and international returns. In 1999 a variable annuities salesperson showed me the 25 year return from1974 as a reason to go all in in US stock market in his proposed annuity. As you might guess I turned this proposal down

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Portfolio7
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Portfolio7 » Tue Aug 14, 2018 3:20 pm

300bigboys wrote:
Tue Aug 14, 2018 9:35 am
Help me understand something,

The purpose of holding international (and bonds) in a 3-fund portfolio is not entirely about maximizing returns, but rather places a premium on stability and insurance against complete collapse. Right?
My understanding: Bonds, yes - but I wouldn't describe the international allocation that way. As you allude to, your bonds essentially determine your level of risk (volatility). With respect to equities it's about obtaining the most efficient portfolio (highest level of return) relative to the risk (volatility) you have decided to accept. Once you've decided how much volatility you can handle, and thus how much of your portfolio should be in bonds, then you have to decide what stocks to own. The core idea is that the most efficient equity portfolio is the Market Portfolio (all equities, including international equities.) I believe this basic approach comes from Markowitz, is described as Modern Portfolio Theory, and earned him a Nobel Prize. Others may explain it better, and/or add nuances I missed, but hope this helps.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by michaeljc70 » Tue Aug 14, 2018 3:26 pm

kosomoto wrote:
Tue Aug 14, 2018 2:14 pm
visualguy wrote:
Tue Aug 14, 2018 2:00 pm
TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.

Absolutely.

You also need to look at the volatility you had to endure over those 22 years for this 4.84%, which makes it even more painful.

The rest of your post is excellent as well.
I concur, after 22 years the equity premium needs to show up. Why invest internationally if you can get higher returns from preferred stocks or high yield bonds? Both of which have less volatility.
Because no one knows when it will turn higher. You have no idea if you can get higher returns in the future.

One thing I find amusing is we have all these "the US market is high/overvalued...I'm selling" and then we have this where they are selling the lower valued international because it is underperforming.

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bligh
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Tue Aug 14, 2018 3:32 pm

cj2018 wrote:
Tue Aug 14, 2018 1:39 pm

To play devil's advocate, contrary to company or industry diversification, diversify at a country-level is sound in theory but hard in practice for the following reasons:
  • Most likely, you are born and have lived in the same country in your whole life
  • The friction or uprooting and moving to a new country in case of political or economic shift is challenging
  • You don't care if 1 or 10 out of your 1000 company stocks in your portfolio get wiped out, but you sure as hell will care more if your country gets toasted for whatever reason
  • Most likely, your bank account, brokerage, passport, house, car, friends, family, everything you own and cherish are in one country and how do you diversify from that?
For those reasons, that's why i suspect Bogle or Warren don't bother recommending international portfolio for U.S. based investors since the perceived tangible benefit is hard to realize and in the case you need it, how can you attain it when you can't flee the country and your bank account is frozen?
A Japanese investor could use these exact points and have invested only in Japan. In fact, if I were to guess, compared to a US investor, a Japanese investor is even MORE likely to have :
  • Been born and lived in the same country
  • Have even more friction uprooting and moving to a new country
I would also argue that a Japanese investor would also :
  • Care as much if their country went toast
  • Be at least as likely to have their back account, brokerage, passport, house, car, friends, family and everything they own and cherish in that one country
.

Why is it that we would recommend to the Japanese investor, or the Chinese Investor, or the German investor to invest globally but tell the US investor it is okay to go 100% US?

Again, I look at that explanation and see it as a reason FOR investing internationally instead of an argument against it. Due to all the reasons you stated above, I already have most of my eggs in the USA basket! You know how people are advised not to invest money in the same sector they work in? It is considered risky because if there is a downturn in the sector your job and your portfolio may get hit at the same time. You face a similar risk concentration with your country.

As another example, California is, economically, the biggest state in the union. I live in California. Yet, if I put all my bond money in to a single state California municipal bond fund, despite the tax advantage, it would be considered a risky move. Too much single state exposure. I would be advised to diversify into a multi state municipal bond fund and into treasuries.

Lastly, In the event that bank accounts are frozen, and I am contemplating fleeing my country, it probably wont matter that I even HAVE a portfolio, let alone whether it is globally diversified or not.

MichCPA
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by MichCPA » Tue Aug 14, 2018 3:45 pm

columbia wrote:
Tue Aug 14, 2018 2:46 pm
MichCPA wrote:
Tue Aug 14, 2018 9:52 am
One of the most dangerous things we are going to start seeing for investors is that 2008 is falling off of the 10 years look back period most people consider long term. Keep in mind this means we aren't capturing a complete economic cycle....
The general consensus is that how much international a US investor owns probably won’t much of a difference in the long run, so using the word “dangerous” seems excessive.
"Dangerous" was in reference to using recent performance and was a general statement that using the past ten years as a long term expectation is going to get more dicey if the full ten years is post-recession economic expansion. We haven't had expansions this long before and using 10 years isn't giving a full economic cycle like it normally would. Specific to international stocks, Vanguard has a study recommending 30-50% international as a way to reduce volatility. If I were to use just the past 10 years to choose a future asset allocation I would be in all US growth stocks and high yield bonds. That might work going forward, but I think a more cautious approach is warranted.

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Tycoon
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Tycoon » Tue Aug 14, 2018 3:55 pm

oldzey wrote:
Tue Aug 14, 2018 9:38 am
The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VGTSX) was 4/29/1996.

Per Morningstar, as of 8/13/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,648 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $28,165 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

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VaR
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by VaR » Tue Aug 14, 2018 3:56 pm

kosomoto wrote:
Tue Aug 14, 2018 11:37 am
oldzey wrote:
Tue Aug 14, 2018 9:38 am
The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VGTSX) was 4/29/1996.

Per Morningstar, as of 8/13/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,648 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $28,165 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image
I find it amusing everyone here is ignoring your post. This is not an arbitrary data set you provided. It's literally providing data since inception of funds you could actually invest in, not theoretical indexes. You would have more than DOUBLE the funds from US only vs international after investing since inception of the funds.
I don't think people are actively ignoring the post, but rather I think one of two things might be operating:
1. It stands as decent objective data. As such, there's no need to refute it. OTOH, the fact that US has outperformed international developed + international EM over both the past 10 years and the past 20 years doesn't mean that you should trend-follow. Unless one has a rock-solid reason why one believes that US will outperform international developed + international EM, to let your asset allocation be driven by past returns is just a poor strategy.
2. It is objectively true that in the past 10 years, US has vastly outperformed international developed + international EM. In the 12 years prior to that, it outperformed it a bit. But the problem with looking as the 20 year return as *corroborating* one's conclusion from the 10 year return is that the 20 year return *includes* the 10 year return. For example, imagine that every year you decide to toss a coin. The past 10 years, it has come up heads. Do you then look at the 20 year results and say that it's remarkable that the coin toss has come up heads 15 out of the past 20 tosses? No, it's not.

@Nate79's 10 year rolling data is interesting. Again, though, you have to be careful about how the 10 year tear that the U.S. has been on vs international developed + international EM. This is a statistical problem with looking at statistics on overlapping rolling periods.

@vineviz's non-overlapping decade-based data has fewer problems. One interesting aspect to consider is that the MSCI World index is a large cap + mid cap developed market index. One good thing about it is that it is mostly investable and doesn't suffer from the investability problem that some indices have. OTOH, it is a different index from that covered by the Vanguard Total International funds mentioned by the OP (which track the FTSE Global All Cap ex US Index, which is 20% emerging markets, includes small caps, and has included China A shares since 2015, I believe.

Disclosure: My equity allocation is 80% US/20% international.
Last edited by VaR on Tue Aug 14, 2018 3:59 pm, edited 1 time in total.

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UpsetRaptor
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by UpsetRaptor » Tue Aug 14, 2018 3:58 pm

Returns for given US:international AA ratio
Portfolio 1: 100:0
Portfolio 2: 75:25
Portfolio 3: 50:50

Image

Conclusion: Pick a #, go have a beer, and stop worrying about it.

H-Town
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by H-Town » Tue Aug 14, 2018 4:01 pm

TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
0% international here. By international, I mean ex-US.

Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.

Whatever you are getting with international, you are not getting a different flavor of the same thing. There seems to be this implicit assumption that the US has great companies, and International has great companies. Wouldn't you want to diversify then? Like Chocolate ice cream to vanilla ice cream. Wouldn't you want to diversify if that were the case? Yes, I probably would.

But that implicit assumption is simply wrong. International is not, nor can it be, the same thing as "another version" of US stocks. I don't care how good the companies are, the entire legal edifice and trade barriers render it such that moving capital from losers to winners cannot be guaranteed. There are significant impediments to allocative efficiency that exist in the international market, that do not exist in a unified market.

In the United States, capital outflows from one industry due to lack of competitiveness can quickly be taken over by another. The same cannot be said of international necessarily because you're talking about different parts of the world. Just because a british company is inefficient doesn't mean some hot new startup in Malaysia can take its place. There are trade barriers, tariffs, differences in tax systems, differences in legal systems, currency risks, and frankly just limits to globalization. The Malaysian company cannot readily take over the trade in Britain the same way a texas company can take over production for a detroit factory.

There are so many legal and practical barriers between the disparate elements of the international market, that its impossible for any single person to understand it all. The next best thing is to look at the data. 4.84% for 22 years. On the other hand, the US market has averaged about 10% in the same time.

That difference is too much. There is something fundamentally different going on. It may be for the reasons I ascribed. But those looking to invest in international because it is the global allocation is not alone a good enough reason.

Let me put things another way to the international folk.

Consider your international investments right now, their performance, and their character.

Now consider if "international" became this monolithic entity, without national borders, tariffs, legal or other trade barriers.

Would your international investments change? Or would it stay exactly the same?

To me it seems indisputable that if the world were to unify in such a way, call it "the international zone", that the international market would change fundamentally in character, and could reach a level of efficiency it never could before. It seems impossible that there would be no difference from international as we see it today.

It would be equivalent to calling the Eurozone pointless--that an diversified allocation of companies across Europe would have grown exactly the same way if Europe remained separate as it did unified.
https://novelinvestor.com/asset-class-returns/

See the chart.

Let's use the data on this website. You can stick with U.S. Large Cap with 7.96% return with a swing from 32.4% best to -37% worst. Or you can choose a diversified portfolio with 7.03% return with a swing from 24.6% best to 22.4% worst.

With diversification, you cannot beat the best performance asset class but you won't be the worst loser either. With a discipline rebalancing, an investor can gain premium from buy low and sell high.

Stick to U.S. equity if it works for you. A globally diversified portfolio has been working very well for me.

catfish48084
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by catfish48084 » Tue Aug 14, 2018 4:02 pm

The VXUS chart looks great! Increased to 27% of holdings today. Buy low.

https://finance.yahoo.com/chart/VXUS#ey ... FydCJ9fX19

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bligh
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Tue Aug 14, 2018 4:08 pm

kosomoto wrote:
Tue Aug 14, 2018 11:37 am
oldzey wrote:
Tue Aug 14, 2018 9:38 am
The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VGTSX) was 4/29/1996.

Per Morningstar, as of 8/13/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,648 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $28,165 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image
I find it amusing everyone here is ignoring your post. This is not an arbitrary data set you provided. It's literally providing data since inception of funds you could actually invest in, not theoretical indexes. You would have more than DOUBLE the funds from US only vs international after investing since inception of the funds.
I remember my co-workers showing me charts like that as they were loading up on houses back in 2006. Just last year I had a buddy show me the chart for Bitcoin since its inception.. I saw a trend there too. I could also show you a graph of Amazon or Apple over the same period and you'd be very impressed too.

Meanwhile we discuss things like reversion to mean and efficient market hypothesis while also believing that the market is valuing American stocks all right, and international stocks all wrong. Yeah, of course you will look at U.S stocks right now with their second highest CAPE 10 in history and go "Nuff Said! Look at those gorgeous returns! You'd be a fool to invest in any thing else." Very much like how I could have done the same with Japanese stocks back in 1989-1990!

The Question is, how do you know that the next 20 years are going to look like that last 20? How did you know back when the funds came out that the US returns would be more than DOUBLE the international returns?

If you can know this, why can't you know what sector to put your money into? If you can know what sector to put your money into, why can't you know what company in that sector is going to do the best? If you can know that, why are you investing in Index funds. After all, aren't only a handful of companies responsible for the vast majority of gains in the S&P 500? Why bother buying the under performers. Let's just pull up their 20 year charts and have a look. Should be easy.
Last edited by bligh on Tue Aug 14, 2018 4:11 pm, edited 1 time in total.

DavidRoseMountain
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by DavidRoseMountain » Tue Aug 14, 2018 4:10 pm

We really can't predict the future so therefore there's no point in jumping out of international.

One way that International can beat the US markets going forward is if Germany gets away from the economic theory of austerity with respect to the budgets of the individual Euro countries, and move toward a more expansionary approach for those Euro countries that are experiencing declining GDP growth. Another way international can beat the US is if many countries start to develop free trade agreements with each other and thereby attain greater economic growth.

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oldzey
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by oldzey » Tue Aug 14, 2018 4:11 pm

UpsetRaptor wrote:
Tue Aug 14, 2018 3:58 pm
Returns for given US:international AA ratio
Portfolio 1: 100:0
Portfolio 2: 75:25
Portfolio 3: 50:50

Image

Conclusion: Pick a #, go have a beer, and stop worrying about it.
I'll pick 100:0 (which is what I actually do). :beer

Cheers! :beer

Image
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Tue Aug 14, 2018 4:16 pm

bligh wrote:
Tue Aug 14, 2018 4:08 pm
kosomoto wrote:
Tue Aug 14, 2018 11:37 am
oldzey wrote:
Tue Aug 14, 2018 9:38 am
The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VGTSX) was 4/29/1996.

Per Morningstar, as of 8/13/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,648 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $28,165 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image
I find it amusing everyone here is ignoring your post. This is not an arbitrary data set you provided. It's literally providing data since inception of funds you could actually invest in, not theoretical indexes. You would have more than DOUBLE the funds from US only vs international after investing since inception of the funds.
I remember my co-workers showing me charts like that as they were loading up on houses back in 2006. Just last year I had a buddy show me the chart for Bitcoin since its inception.. I saw a trend there too. I could also show you a graph of Amazon or Apple over the same period and you'd be very impressed too.

Meanwhile we discuss things like reversion to mean and efficient market hypothesis while also believing that the market is valuing American stocks all right, and international stocks all wrong. Yeah, of course you will look at U.S stocks right now with their second highest CAPE 10 in history and go "Nuff Said! Look at those gorgeous returns! You'd be a fool to invest in any thing else." Very much like how I could have done the same with Japanese stocks back in 1989-1990!

The Question is, how do you know that the next 20 years are going to look like that last 20? How did you know back when the funds came out that the US returns would be more than DOUBLE the international returns?

If you can know this, why can't you know what sector to put your money into? If you can know what sector to put your money into, why can't you know what company in that sector is going to do the best? If you can know that, why are you investing in Index funds. After all, aren't only a handful of companies responsible for the vast majority of gains in the S&P 500? Why bother buying the under performers. Let's just pull up their 20 year charts and have a look. Should be easy.
Your post is implying that international cape ratio isn’t historically high as well.

Dave55
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Dave55 » Tue Aug 14, 2018 4:34 pm

All the lazy portfolio's have International stock in them. See: https://www.marketwatch.com/lazyportfolio
I think there is a good reason that professional's like Rick Ferri, Allan Roth, Bill Schultheis, Ted Aronoson, Dr. William Bernstein, David Swensen & many others suggest using International as part of an asset allocation.

Dave

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bligh
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Tue Aug 14, 2018 4:35 pm

kosomoto wrote:
Tue Aug 14, 2018 4:16 pm
Your post is implying that international cape ratio isn’t historically high as well.
It uses that as one argument. Yes.

Is the international cape ratio the second highest its ever been too?

The essence of my point is that you are comparing US stock market performance at (possibly) the tail end of one of the longest bull markets in its history and using it to guide your investing decisions for the next 20 years. This is classic performance chasing.

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HuckFinn
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by HuckFinn » Tue Aug 14, 2018 4:39 pm

TomCat96 wrote:
Tue Aug 14, 2018 1:43 pm
0% international here. By international, I mean ex-US.

Let's talk VGTSX. Straight from Vanguard's own website, growth rate, 4.84% compounded since inception, 4/29/1996.
The year is 2018. 22 years.

I've said it before and I'll say it again. That is too long a period for such a low growth rate. If you made the same case at 5 or even 10 years, I would not agree. But 22 years is too long.

Whatever you are getting with international, you are not getting a different flavor of the same thing. There seems to be this implicit assumption that the US has great companies, and International has great companies. Wouldn't you want to diversify then? Like Chocolate ice cream to vanilla ice cream. Wouldn't you want to diversify if that were the case? Yes, I probably would.

But that implicit assumption is simply wrong. International is not, nor can it be, the same thing as "another version" of US stocks. I don't care how good the companies are, the entire legal edifice and trade barriers render it such that moving capital from losers to winners cannot be guaranteed. There are significant impediments to allocative efficiency that exist in the international market, that do not exist in a unified market.

In the United States, capital outflows from one industry due to lack of competitiveness can quickly be taken over by another. The same cannot be said of international necessarily because you're talking about different parts of the world. Just because a british company is inefficient doesn't mean some hot new startup in Malaysia can take its place. There are trade barriers, tariffs, differences in tax systems, differences in legal systems, currency risks, and frankly just limits to globalization. The Malaysian company cannot readily take over the trade in Britain the same way a texas company can take over production for a detroit factory.

There are so many legal and practical barriers between the disparate elements of the international market, that its impossible for any single person to understand it all. The next best thing is to look at the data. 4.84% for 22 years. On the other hand, the US market has averaged about 10% in the same time.

That difference is too much. There is something fundamentally different going on. It may be for the reasons I ascribed. But those looking to invest in international because it is the global allocation is not alone a good enough reason.

Let me put things another way to the international folk.

Consider your international investments right now, their performance, and their character.

Now consider if "international" became this monolithic entity, without national borders, tariffs, legal or other trade barriers.

Would your international investments change? Or would it stay exactly the same?

To me it seems indisputable that if the world were to unify in such a way, call it "the international zone", that the international market would change fundamentally in character, and could reach a level of efficiency it never could before. It seems impossible that there would be no difference from international as we see it today.

It would be equivalent to calling the Eurozone pointless--that an diversified allocation of companies across Europe would have grown exactly the same way if Europe remained separate as it did unified.
TomCat96, this is the OP. There are many good points made through this thread but there are certain reasons your response caught my attention. First, you tackle one of the issues that bothers me... 22 years of slow growth rate... that's too long! As a former Ohio citizen that's not just too long... that's Cleveland Browns futility too long! I can waste 16 Sundays a year watching a bad football team but does there not come a time when an investor or investors (collectively) have to step back and recognize that the path they traversed was perhaps not the right choice based not on a short term performance tick but Long Term futility? The last Championship the Browns won was in 1964! Get off the bus!

I do not know when "International Investing" became part of a common strategy in the US but I seem to recall the late 90's there was a movement towards incorporating International that I had not seen before. Add Target Date Funds and LifeStrategy Funds and that pulled more investors into the INT'L mix and you have billions and billions pouring into these funds. I am not the keenest financial wizard but I have to wonder just how much more poorly Internationals would have fared had it not been for Fidelity, Vanguard, T Rowe and others pumping billions and billions overseas. Or simply investors like me who were under the impression that adding a cheap, diversified International index fund was good long term strategy.

Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by VaR » Tue Aug 14, 2018 4:47 pm

Another interesting tidbit about the tear that U.S. markets have been on in the past decade:
1. Total market capitalization of the S&P 500 in 2008 - about $11 trillion.
2. Total market capitalization of the S&P 500 on 3/31/2018 - about $23.6 trillion
3. Market cap of Apple: 3/31/2008 =$123 billion ; 8/14/2018 = $1 trillion - increase: $875 billion
4. Market cap of Amazon: 3/31/2008 =$33 billion ; 8/14/2018 = $938 billion - increase: $905 billion
5. Market cap of Alphabet: 3/31/2008 =$150 billion ; 8/14/2018 = $869 billion - increase: $719 billion
6. Market cap of Microsoft: 3/31/2008 =$215 billion ; 8/14/2018 = $840 billion - increase: $635 billion
7. Market cap of Facebook: 3/31/2008 = not public, but IPO'd in 2012 with a $100 billion valuation ; 8/14/2018 = $522 billion - increase: $422 billion

8. Market cap of Berkshire Hathaway: 3/31/2008 =$200 billion ; 8/14/2018 = $509 billion - increase: $300 billion
9. Market cap of JPMorgan Chase: 3/31/2008 =$125 billion ; 8/14/2018 = $385 billion - increase: $260 billion
10. Market cap of ExxonMobil: 3/31/2008 =$359 billion ; 8/14/2018 = $331 billion - decrease: $28 billion

So for the top 7 companies that's $4.1 trillion in market cap of the 12.6 trillion increase in the S&P 500 market cap or about 33%. And I'm not even including a bunch of smaller marginal contributors like Netflix that "only" contributed $120 billion.

I don't think there's anything shocking or disastrous in the above data. And I've heard it said that it's almost always the case that the returns of the overall market can be attributed to a relatively narrow set of winners. I am posting it as an observation that the overperformance of U.S. equities over the past decade has been juiced up by the overperformance of a smallish set of companies in narrow sectors. I don't think this conclusion is compelling to any great degree, but it does give pause to any thinking that the continued overperformances of U.S. equities over international developed + international EM might not continue into the next decade. It might be a whole 'nother set of companies that are the stars by 2030. And those stars might be in the U.S., in developed international, in EM, or there may not be any particular stars, just a bunch of good performers and even performance between U.S. and international developed.

Note: Apologies for the slight date mismatches above.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Tue Aug 14, 2018 5:07 pm

HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
TomCat96, this is the OP. There are many good points made through this thread but there are certain reasons your response caught my attention. First, you tackle one of the issues that bothers me... 22 years of slow growth rate... that's too long!
There are two problems here.

One is that there aren't "22 years of slow growth rate": Vanguard Total Intl Stock Index Inv (VGTSX) has outperformed Vanguard Total Stock Mkt Idx Inv (VTSMX) in 10 of the 22 years they've both existed.

The second problem is that saying 22 years is "too long" lacks any objective basis as a criterion for anything.
HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
I do not know when "International Investing" became part of a common strategy in the US but I seem to recall the late 90's there was a movement towards incorporating International that I had not seen before.
I can tell you.

After two solid decades of US stocks underperforming international stocks (the 1970s and 1980s), investment professionals and investors realized that an under-diversified US-only equity portfolio might not be optimal.

Image

You think you feel pain now? Imagine how you'd have felt in 1989 after two decades of sitting on the sidelines with "real and valid reasons to question International Investing" while international stocks produced a portfolio that was literally twice as large as a US stock portfolio.

One advance that economists have made since the 1990s is a much greater understanding of the behavioral tendencies that investors have which, when left unchecked, tend to sabotage the long-run success of their investment strategies. Selling an asset based on poor past returns is one of these self-sabotaging tendencies. It's been well documented.

For the entirety of the 20th century, the best risk-adjusted equity returns came from having a globally diversified portfolio. That hasn't changed.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by WhiteMaxima » Tue Aug 14, 2018 5:10 pm

You can do US/int'l 80/20 which give you a little diverfication and strong corelation with US market.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by tibbitts » Tue Aug 14, 2018 5:13 pm

HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.
OP, can you honestly say you wouldn't have felt the same about holding domestic equities after suffering through two decades of international outperformance?

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Tue Aug 14, 2018 5:22 pm

tibbitts wrote:
Tue Aug 14, 2018 5:13 pm
HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.
OP, can you honestly say you wouldn't have felt the same about holding domestic equities after suffering through two decades of international outperformance?
Not OP, but I think it’s easier to accept 10% returns vs 15% returns over 20 years because you’ve likely still met your financial goals.

Accepting 5% returns vs 10% returns however is going to potentially leave people unable to meet their financial goals.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Tue Aug 14, 2018 5:31 pm

kosomoto wrote:
Tue Aug 14, 2018 5:22 pm
tibbitts wrote:
Tue Aug 14, 2018 5:13 pm
HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.
OP, can you honestly say you wouldn't have felt the same about holding domestic equities after suffering through two decades of international outperformance?
Not OP, but I think it’s easier to accept 10% returns vs 15% returns over 20 years because you’ve likely still met your financial goals.

Accepting 5% returns vs 10% returns however is going to potentially leave people unable to meet their financial goals.
However, someone saving for retirement over the past 10, 20, or 40 years wouldn't have seen anywhere CLOSE that magnitude of difference in their portfolio. They'd have had nearly the same return with lower volatility, thanks to the magic of diversification.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by tibbitts » Tue Aug 14, 2018 5:44 pm

kosomoto wrote:
Tue Aug 14, 2018 5:22 pm
tibbitts wrote:
Tue Aug 14, 2018 5:13 pm
HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.
OP, can you honestly say you wouldn't have felt the same about holding domestic equities after suffering through two decades of international outperformance?
Not OP, but I think it’s easier to accept 10% returns vs 15% returns over 20 years because you’ve likely still met your financial goals.

Accepting 5% returns vs 10% returns however is going to potentially leave people unable to meet their financial goals.
That's a valid point; it depends on whether the OP is focused on relative performance or in meeting goals. Some people are competitive and just can't stand to miss out on gains that others are enjoying, while others focus more on whether they are progressing at a reasonable pace toward their goals.

It's also true for example that many people didn't mind - or even notice - paying 3% in annual fees, back when they were still collecting consistent double-digit annual net returns year after year.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by H-Town » Tue Aug 14, 2018 5:45 pm

kosomoto wrote:
Tue Aug 14, 2018 5:22 pm
tibbitts wrote:
Tue Aug 14, 2018 5:13 pm
HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.
OP, can you honestly say you wouldn't have felt the same about holding domestic equities after suffering through two decades of international outperformance?
Not OP, but I think it’s easier to accept 10% returns vs 15% returns over 20 years because you’ve likely still met your financial goals.

Accepting 5% returns vs 10% returns however is going to potentially leave people unable to meet their financial goals.
If anyone use >5% rate of return for the purpose of retirement planning, they're doing something wrong. They should be conservative using lower rate of return and err on the side of saving more money.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Tue Aug 14, 2018 5:49 pm

kosomoto wrote:
Tue Aug 14, 2018 5:22 pm
tibbitts wrote:
Tue Aug 14, 2018 5:13 pm
HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.
OP, can you honestly say you wouldn't have felt the same about holding domestic equities after suffering through two decades of international outperformance?
Not OP, but I think it’s easier to accept 10% returns vs 15% returns over 20 years because you’ve likely still met your financial goals.

Accepting 5% returns vs 10% returns however is going to potentially leave people unable to meet their financial goals.
I haven't seen anyone advocating 100% ex-US. Even assuming the most aggressive 50/50 allocation between US and ex-US the difference is 10% (100% US vs ~7.5% (50%US/50%ex-US).

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by patrick013 » Tue Aug 14, 2018 5:53 pm

https://www.portfoliovisualizer.com/bac ... ion9_3=100

So domestic is beating Intl, SCG is beating SCV, there is no world currency,
foreign markets are segmented, explosive foreign growth is absent and
good results are thwarted by the currency casino (dollar at 91). Like
domestic stocks there's no fundamental spark to future foreign stock returns
when oldsters need the money. But I think domestic returns will still be higher
for the foreseeable future. S&P 500 at 3000 etc..
age in bonds, buy-and-hold, 10 year business cycle

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Tue Aug 14, 2018 5:57 pm

bligh wrote:
Tue Aug 14, 2018 5:49 pm
kosomoto wrote:
Tue Aug 14, 2018 5:22 pm
tibbitts wrote:
Tue Aug 14, 2018 5:13 pm
HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.
OP, can you honestly say you wouldn't have felt the same about holding domestic equities after suffering through two decades of international outperformance?
Not OP, but I think it’s easier to accept 10% returns vs 15% returns over 20 years because you’ve likely still met your financial goals.

Accepting 5% returns vs 10% returns however is going to potentially leave people unable to meet their financial goals.
I haven't seen anyone advocating 100% ex-US. Even assuming the most aggressive 50/50 allocation between US and ex-US the difference is 10% (100% US vs ~7.5% (50%US/50%ex-US).
That’s fair, if you have a mix then your asset allocation isn’t going to be the reason you won’t meet your financial goals, it will be your savings rate. I still don’t like international stocks but I can admit a total world approach will probably be fine.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bgf » Tue Aug 14, 2018 6:01 pm

there appear to be two entrenched camps.

one starts with US as the status quo or fundamental portfolio and sees no reason to add or supplement or deworsify into international markets.

the other starts with global markets and sees no reason to reduce or ignore or avoid the dozens of other markets to remain invested in their single domestic market.

its turning into a religious quarrel around here.

I'm in the latter camp, but I can see the point of view of the former, just not for most of the reasons they normally provide.

at the end of the day, you either want to be invested in those foreign companies with US dollars or you dont.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by oldzey » Tue Aug 14, 2018 6:18 pm

Always a good time, these U.S. versus International posts... :P
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Tue Aug 14, 2018 6:21 pm

bgf wrote:
Tue Aug 14, 2018 6:01 pm
there appear to be two entrenched camps.

one starts with US as the status quo or fundamental portfolio and sees no reason to add or supplement or deworsify into international markets.

the other starts with global markets and sees no reason to reduce or ignore or avoid the dozens of other markets to remain invested in their single domestic market.
I think this sums it up beautifully.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by WanderingDoc » Tue Aug 14, 2018 6:31 pm

HuckFinn wrote:
Tue Aug 14, 2018 1:15 am
With a keen knowledge of the concept of "Stay the Course" and "Don't Buy High and Sell Low" and most importantly "Don't Try to Time the Market" I cannot simply put my head in the sand and pretend that the last ten years or more have been anything other then a disappointment for those of us with International exposure and for Vanguard who increased their clients exposure to International equities on their Target and Life strategy funds up to 40% over 3 years ago.

It's easy to stomach performance variables when they are described as "Growth of $10,000 over time" but what does this performance look like when applied to a larger number.... to real portfolio's for comfortable retirees or high net worth individuals?

Using Vanguard's Growth of $10,000 data for Total Stock Market (VTSMX) and Total International Market (VGTSX) I came up with a disheartening example using a larger portfolio below.
* I had to use Investor share class because Total International did not have an Admiral share class for ten years.

Example 1 -
10 years ago Investor A has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equities are solely invested in the Total US Stock Market Fund (VTSMX)
At the end of 10 years his equity position (if left untouched) grows to...
$3,578,284

Example 2 -
10 years ago Investor B has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equity is apportioned as 60% Total US Stock Market Fund = $780,000 (VTSMX) and 40% Total International Market $520,000 (VGTSX)

After ten years Total US Stock Market (VTSMX) grows to $2,146,970
After ten years Total International Market (VGTSX) grows to $720,552
Total equity after 10 years combining his US and INTL holdings = $2,867,522

Using actual ten year performance data Investor A, who chose not to invest Internationally ten years ago would be a whopping $710,762.00 ahead of the investor who went the 60/40 route.

I'll repeat... $710,762.00 ahead because he chose to invest simply in the US and not add an International Fund.

Ok, I know... for some this is the exact reason we might be tempted to re-balance and dump more into International. I get that! People said that 5 years ago, they said it three years ago.... and I think they will be saying it again ten years from now. I know it's foolish to chase performance in the rear view mirror but I also have to take an honest assessment and evaluate if the path I am on is the wisest course.

For the record I have slowly weened my personal Int'l exposure from about 35% to 14% over the years and am not adding to it.

PS... I do intend on reading this 10 years ago if it's still to be found.
The U.S. stock market is overvalued. By almost every objective metric. "We" were lucky the last 10 years. U.S. will not be on top forever. Law of averages. China and others are outworking, out-innovating, and out-procreating us. By 2040, America will be a mere shadow of its former self. No party will last forever.
I'm not looking to get rich quick (stocks), I'm not looking to get rich slow (indexing), I'm looking to get rich, for sure (real estate) | Don't wait to buy real estate. Buy real estate.. and wait.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Mountain Doc » Tue Aug 14, 2018 6:54 pm

I have two deeply held beliefs about investing: the past does not predict the future, and I don't know the future. Whether a US-only or a global stock portfolio will outperform going forward cannot be known. Ultimately, it probably won't make much difference which is chosen, but it might. The future is probabilistic, and we have to decide how much protection we want from tail risk (in this case, the unlikely chance of one doing far better than the other). So I settled the decision for myself by framing it like this:

1. Suppose I choose a US-only portfolio, and decades from now I look back and see that I was wrong (international stocks substantially outperformed US)
2. Suppose I choose a global portfolio, and decades from now I look back and see that I was wrong (US stocks substantially outperformed international)

Which scenario is more painful? For me, it is the former. Over-diversifying and being wrong seems a lot less painful than under-diversifying and being wrong. So I am invested at the global market weight for stocks, and I am content to take what the market gives.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by H-Town » Tue Aug 14, 2018 7:00 pm

WanderingDoc wrote:
Tue Aug 14, 2018 6:31 pm
No party will last forever.
Touche.

Persian Empire, Rome Empire, the Caliphate, Mongol Empire, and the British Empire were the five most powerful empires in history. Every great empire rises and falls.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by grayfox » Tue Aug 14, 2018 7:10 pm

cj2018 wrote:
Tue Aug 14, 2018 1:21 pm
grayfox wrote:
Tue Aug 14, 2018 1:13 pm
Oh, and by the way, That “Five Monkeys Experiment” Never Happened


What! no way! lol.

Whether the experiment were real or not, didn't the fact it's widespread already proved its point?

Cheers :sharebeer
There are actual scientific observations about monkeys that we can learn from.

There was one story about some scientists who were observing some kind of monkey that lived in a forest near a lagoon. The monkeys were usually in the thick forest and were difficult to observe. So the scientists put some kind of food like grapes out on the beach, to draw them into the open so they could observe their behavior. The monkeys liked the grapes, but the food would get covered in sand. One day a monkey discovered that if she took the grapes down to the water and washed them off in the lagoon, the sand would come off. The grapes tasted better without getting a mouthful of gritty sand.

Other monkeys observed her doing this and followed suit. Before long, the entire band of monkeys would wash off their food before eating it. This went on for years and eventually the original monkey passed away. However, the band of monkeys continued the learned behavior passing it on to their offspring. It became part of the cultural knowledge of the band of monkeys.

So monkeys can definitely learn things by watching other monkeys, and pass it on to their offspring.

Unfortunately, I don't know who to apply this knowledge to International Investing. :confused

Source: Yuval Harari. A Brief History of Humankind.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by jainn » Tue Aug 14, 2018 7:25 pm

https://finpage.blog/2017/03/25/investi ... ld-part-3/

I don’t like seeing the returns of our ‘Total international’ compared to ‘Total US’ but we are staying the course for the diversification. The future is full of unknowns. Currently at 67 US and 33 INTL.

I enjoyed reading this three part article.
Jainn

Conclusion

A fully domestic investment can deliver fairly good results, as anybody having invested in the US or Canada knows. It can even deliver very impressive results as Swedish citizens experienced in the past decades. But it can also put local investors in devastating situations, with decades-long drawdowns for both stocks and bonds (in real terms), and ruin even the most conservative retirement plans, as Spain, Italy and Japan investors went through.

We often say that “past performance is not an indicator of future success”. And yet the past is all we have to try to calibrate ourselves. The excellent Credit Suisse Global Investment Return Yearbook annual publication provides a long history of investment returns from numerous countries, and always includes the following warning:

There is an obvious danger of placing too much reliance on the excellent long-run past performance of US stocks. The New York Stock Exchange traces its origins back to 1792. At that time, the Dutch and UK stock markets were already nearly 200 and 100 years old, respectively. Thus, in just a little over 200 years, the USA has gone from zero to more than a majority share of the world’s equity markets. Extrapolating from such a successful market can lead to “success” bias. Investors can gain a misleading view of equity returns elsewhere, or of future equity returns for the USA itself. That is why this Yearbook focuses on global investment returns, rather than just US returns.

Instead of overly relying on the past history of the country we live in, we should try to open our minds to what happened to the rest of the world and learn from it. One could always argue if one specific comparison is significant or not, or if a coarse rule of thumb (e.g. 75% global) applies in every case, but at least, this represents a solid foundation of real-life facts and history to reflect upon. The author believes that this study makes a convincing case to seek a fairly high exposure to global (or international) equities, while keeping a significant tilt towards domestic equities. Some readers might perceive otherwise, but should at least have more factual material to refine their thinking and possibly question their home country bias.
Last edited by jainn on Tue Aug 14, 2018 7:38 pm, edited 1 time in total.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Fallible » Tue Aug 14, 2018 7:28 pm

HuckFinn wrote:
Tue Aug 14, 2018 1:15 am
With a keen knowledge of the concept of "Stay the Course" and "Don't Buy High and Sell Low" and most importantly "Don't Try to Time the Market" I cannot simply put my head in the sand and pretend that the last ten years or more have been anything other then a disappointment for those of us with International exposure and for Vanguard who increased their clients exposure to International equities on their Target and Life strategy funds up to 40% over 3 years ago.
...
Ok, I know... for some this is the exact reason we might be tempted to re-balance and dump more into International. I get that! People said that 5 years ago, they said it three years ago.... and I think they will be saying it again ten years from now. I know it's foolish to chase performance in the rear view mirror but I also have to take an honest assessment and evaluate if the path I am on is the wisest course.

For the record I have slowly weened my personal Int'l exposure from about 35% to 14% over the years and am not adding to it.[
/quote]
This seems less about staying the course, timing (or not) the market, chasing performance, buying high and selling low, or rebalancing and more about reassessing your personal risk tolerance, which is essentially what you did in "weening" international exposure. And it's justifiable to correct an allocation for tolerance, which is always changing.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by columbia » Tue Aug 14, 2018 7:30 pm

WanderingDoc wrote:
Tue Aug 14, 2018 6:31 pm
HuckFinn wrote:
Tue Aug 14, 2018 1:15 am
With a keen knowledge of the concept of "Stay the Course" and "Don't Buy High and Sell Low" and most importantly "Don't Try to Time the Market" I cannot simply put my head in the sand and pretend that the last ten years or more have been anything other then a disappointment for those of us with International exposure and for Vanguard who increased their clients exposure to International equities on their Target and Life strategy funds up to 40% over 3 years ago.

It's easy to stomach performance variables when they are described as "Growth of $10,000 over time" but what does this performance look like when applied to a larger number.... to real portfolio's for comfortable retirees or high net worth individuals?

Using Vanguard's Growth of $10,000 data for Total Stock Market (VTSMX) and Total International Market (VGTSX) I came up with a disheartening example using a larger portfolio below.
* I had to use Investor share class because Total International did not have an Admiral share class for ten years.

Example 1 -
10 years ago Investor A has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equities are solely invested in the Total US Stock Market Fund (VTSMX)
At the end of 10 years his equity position (if left untouched) grows to...
$3,578,284

Example 2 -
10 years ago Investor B has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equity is apportioned as 60% Total US Stock Market Fund = $780,000 (VTSMX) and 40% Total International Market $520,000 (VGTSX)

After ten years Total US Stock Market (VTSMX) grows to $2,146,970
After ten years Total International Market (VGTSX) grows to $720,552
Total equity after 10 years combining his US and INTL holdings = $2,867,522

Using actual ten year performance data Investor A, who chose not to invest Internationally ten years ago would be a whopping $710,762.00 ahead of the investor who went the 60/40 route.

I'll repeat... $710,762.00 ahead because he chose to invest simply in the US and not add an International Fund.

Ok, I know... for some this is the exact reason we might be tempted to re-balance and dump more into International. I get that! People said that 5 years ago, they said it three years ago.... and I think they will be saying it again ten years from now. I know it's foolish to chase performance in the rear view mirror but I also have to take an honest assessment and evaluate if the path I am on is the wisest course.

For the record I have slowly weened my personal Int'l exposure from about 35% to 14% over the years and am not adding to it.

PS... I do intend on reading this 10 years ago if it's still to be found.
The U.S. stock market is overvalued. By almost every objective metric. "We" were lucky the last 10 years. U.S. will not be on top forever. Law of averages. China and others are outworking, out-innovating, and out-procreating us. By 2040, America will be a mere shadow of its former self. No party will last forever.
This is where knowing the age of posters can be helpful. It doesn’t sound like you will be, but I’ll probably be dead by 2040...

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bligh
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Tue Aug 14, 2018 7:52 pm

columbia wrote:
Tue Aug 14, 2018 7:30 pm
WanderingDoc wrote:
Tue Aug 14, 2018 6:31 pm
HuckFinn wrote:
Tue Aug 14, 2018 1:15 am
With a keen knowledge of the concept of "Stay the Course" and "Don't Buy High and Sell Low" and most importantly "Don't Try to Time the Market" I cannot simply put my head in the sand and pretend that the last ten years or more have been anything other then a disappointment for those of us with International exposure and for Vanguard who increased their clients exposure to International equities on their Target and Life strategy funds up to 40% over 3 years ago.

It's easy to stomach performance variables when they are described as "Growth of $10,000 over time" but what does this performance look like when applied to a larger number.... to real portfolio's for comfortable retirees or high net worth individuals?

Using Vanguard's Growth of $10,000 data for Total Stock Market (VTSMX) and Total International Market (VGTSX) I came up with a disheartening example using a larger portfolio below.
* I had to use Investor share class because Total International did not have an Admiral share class for ten years.

Example 1 -
10 years ago Investor A has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equities are solely invested in the Total US Stock Market Fund (VTSMX)
At the end of 10 years his equity position (if left untouched) grows to...
$3,578,284

Example 2 -
10 years ago Investor B has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equity is apportioned as 60% Total US Stock Market Fund = $780,000 (VTSMX) and 40% Total International Market $520,000 (VGTSX)

After ten years Total US Stock Market (VTSMX) grows to $2,146,970
After ten years Total International Market (VGTSX) grows to $720,552
Total equity after 10 years combining his US and INTL holdings = $2,867,522

Using actual ten year performance data Investor A, who chose not to invest Internationally ten years ago would be a whopping $710,762.00 ahead of the investor who went the 60/40 route.

I'll repeat... $710,762.00 ahead because he chose to invest simply in the US and not add an International Fund.

Ok, I know... for some this is the exact reason we might be tempted to re-balance and dump more into International. I get that! People said that 5 years ago, they said it three years ago.... and I think they will be saying it again ten years from now. I know it's foolish to chase performance in the rear view mirror but I also have to take an honest assessment and evaluate if the path I am on is the wisest course.

For the record I have slowly weened my personal Int'l exposure from about 35% to 14% over the years and am not adding to it.

PS... I do intend on reading this 10 years ago if it's still to be found.
The U.S. stock market is overvalued. By almost every objective metric. "We" were lucky the last 10 years. U.S. will not be on top forever. Law of averages. China and others are outworking, out-innovating, and out-procreating us. By 2040, America will be a mere shadow of its former self. No party will last forever.
This is where knowing the age of posters can be helpful. It doesn’t sound like you will be, but I’ll probably be dead by 2040...
Not if the Chinese come up with a way to keep you young and healthy for longer! :D

Seriously though, I wouldn't bet against the US. Yes, every party comes to an end, but parties can go on much longer than you can imagine. Even if the US lasts half as long as the Roman empire, it would sill have a good 200 years ahead of it. Too many people have too gloomy an outlook for this country and I think they are wrong. There is a difference between underweighting the US and market weighting it. When you go 50/50 US/exUS you are market weighting the US. If you are going 80/20 you are overweighting it and if you are going 30/70 you are underweighting it. I think underweighting the US is making the same mistake as overweighting it.

asset_chaos
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by asset_chaos » Tue Aug 14, 2018 8:08 pm

Didn't read the entire thread, but I can see from its length that it's consonant with my reasons to make total world my core stock fund. I have stocks. The domestic-foreign split is one less thing to worry about, regret, or to agonize over.
Regards, | | Guy

typical.investor
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by typical.investor » Tue Aug 14, 2018 8:09 pm

WanderingDoc wrote:
Tue Aug 14, 2018 6:31 pm
By 2040, America will be a mere shadow of its former self. No party will last forever.
Nobody knows America's future. And I think it's beside the point anyway.

It won't take economic collapse to lower returns on US stocks which are priced at a premium for their (relative) safety and potential for growth. Even if the US remains the top economic power, it doesn't mean US stocks will be the best investment.

Take real estate in San Francisco for example. It's been on tear in recent years but what do some people there do instead of buying a house. They buy four or five properties in Texas and collect the rent because the returns are better than trying to do that in SF.

I really don't think the bay area has to collapse economically or culturally for it's real estate to cease being the best possible investment. And I don't know that the price there will stop going up.

I, too, am disappointed by Intl returns - especially emerging. My plan, though, was and still is to allocate to a desired exposure and maintain that exposure.

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vineviz
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Tue Aug 14, 2018 8:12 pm

typical.investor wrote:
Tue Aug 14, 2018 8:09 pm

I, too, am disappointed by Intl returns - especially emerging. My plan, though, was and still is to allocate to a desired exposure and maintain that exposure.
That’s the way to do it. I bought some international small caps myself today.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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abuss368
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by abuss368 » Tue Aug 14, 2018 8:20 pm

Bogleheads -

In my opinion there are many experts, who know a lot more about investing than I do, who recommend an allocation to internationals stocks. Some recommend an allocation to international bonds.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

jibantik
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by jibantik » Tue Aug 14, 2018 8:26 pm

I mean, if we are going to use past performance to make decisions about what to hold, let's all just go 100% into facebook and apple.

If you don't hold international, word of warning: remember Japan.

tibbitts
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by tibbitts » Tue Aug 14, 2018 8:27 pm

thangngo wrote:
Tue Aug 14, 2018 5:45 pm
kosomoto wrote:
Tue Aug 14, 2018 5:22 pm
tibbitts wrote:
Tue Aug 14, 2018 5:13 pm
HuckFinn wrote:
Tue Aug 14, 2018 4:39 pm
Also, you suggest that something "Fundamentally different is going on." Amen... that's another great concern of mine and that is one of the itches I am trying to scratch while reading through responses.

I think there is real and valid reasons to question International Investing - Why we ever went down this path and why we continue.
OP, can you honestly say you wouldn't have felt the same about holding domestic equities after suffering through two decades of international outperformance?
Not OP, but I think it’s easier to accept 10% returns vs 15% returns over 20 years because you’ve likely still met your financial goals.

Accepting 5% returns vs 10% returns however is going to potentially leave people unable to meet their financial goals.
If anyone use >5% rate of return for the purpose of retirement planning, they're doing something wrong. They should be conservative using lower rate of return and err on the side of saving more money.
Well, I would say that now, but when I'd gone through a good chunk of my adult life with savings accounts in the 5-6% range and equities pumping out double-digit annual returns year after year, it seemed unreasonable to base retirement on less than 5% nominal. And now, saving more money doesn't seem like a practical alternative after more than a decade of stagnating or declining real salaries.

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