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

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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 » Fri Aug 17, 2018 12:45 pm

bligh wrote:
Thu Aug 16, 2018 6:34 pm
9 pages in. I have to ask. Has a single person changed their position having read or participated in this thread? :shock: :oops:


:sharebeer
Yea, I'll increase % in international equity with new money. I was 30% international equity. Now I'm aiming 40% for the end of next year.

TM90
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by TM90 » Fri Aug 17, 2018 12:52 pm

This is the same as "why bonds?"..

Buy the market, stay the course that's all folks

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

Post by fennewaldaj » Fri Aug 17, 2018 1:04 pm

bligh wrote:
Thu Aug 16, 2018 6:34 pm
9 pages in. I have to ask. Has a single person changed their position having read or participated in this thread? :shock: :oops:


:sharebeer
While this thread did not change my mind reading some of the many prior similar threads did help me form my position when I was deciding on what I wanted to do.

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

Post by BlackHat » Fri Aug 17, 2018 1:46 pm

bligh wrote:
Thu Aug 16, 2018 6:34 pm
9 pages in. I have to ask. Has a single person changed their position having read or participated in this thread? :shock: :oops:


:sharebeer
Nope. It seems to me like, "Nobody, Knows, Nothin."
“Life is really simple, but we insist on making it complicated.” -- Confucius

Riley15
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Riley15 » Fri Aug 17, 2018 2:22 pm

bligh wrote:
Thu Aug 16, 2018 6:34 pm
9 pages in. I have to ask. Has a single person changed their position having read or participated in this thread? :shock: :oops:

:sharebeer

Very few people actually change their positions based on meaningful discussion when presented with the facts. Bogleheads or not most people just want confirmation bias and will keep reiterating what they already believe.
Last edited by Riley15 on Fri Aug 17, 2018 4:28 pm, edited 1 time in total.

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

Post by Tamalak » Fri Aug 17, 2018 2:23 pm

I rarely change my beliefs when I'm in an argument, because if I hold a position strongly enough to defend it in an argument, I'm not likely to let go of it.

But witnessing arguments is often very helpful to get me some perspective on an issue I'm not strong in.

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

Post by retiringwhen » Fri Aug 17, 2018 2:47 pm

MnD wrote:
Fri Aug 17, 2018 11:58 am
I've been reading this forum for 10 years and I am still waiting for a single "do what Jack Bogle says" adherent to post about selling 50% of their Total Bond Market position and replacing it with an intermediate term corporate bond index fund. That's what Jack says to do given that he considers the Total Bond Market Index to be "badly flawed". Likewise with Jack's advice to consider Social Security as $350,000 in bond holdings when determining your actual asset allocation to stocks and bonds. "Do what Jack says" seems to be very optional dogma unless some snippet confirms a particular cognitive bias.
Like jack I am no fan of mortgage backed securities, I hold 50% total bond index and 50% intermediate term bond index funds to halve my exposure. I also hold 20% international but funny, this thread is making me rethink that assumption. I will post my thoughts once they are researched appropriately. I am considering a marginal increase.

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willthrill81
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Fri Aug 17, 2018 3:37 pm

HuckFinn wrote:
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.
Since I am a trend follower, I am ambivalent to the U.S./international debate, contrary to what some may believe. Like many others, including this forum's namesake, I believe that it's unnecessary for investor to own any international stock if they don't want to. I personally believe that a repeat of Japan is very unlikely in the U.S., but it's not impossible. That, I believe, is the single best reason to diversify one's equity holdings across all borders: to minimize the risk of catastrophic loss.

That being said, if the U.S. 'goes down the tubes', I really believe that the undertow will take down the rest of the world. And I don't just mean that the U.S. falling by 90%, for instance, would result in the rest of the world falling by 50%. I think that they would all fall more or less in unison. The increasingly global economy is too interconnected, I think, for that to not happen. Yet even if the rest of the world only dropped half as much as the U.S., would a 20-50% holding in international be enough to save you from ruin? Maybe, maybe not. Perhaps more realistically, moving toward a global cap-weighted portfolio will, by definition, get you close to the world's equity returns, if that's what you're trying to achieve. Many are trying to achieve something else. There will certainly be periods going forward where U.S. outperforms the rest of the world and vice versa. And there are no guarantees that the two will have equivalent returns over any period of time, regardless of length (e.g. the U.S. may outperform international for the next 50 years in total or vice versa). You have to find a strategy, even if only a 'mental' one, to deal with this.

While equities seem risky, and indeed they are, they may be the least risky investment over the long-term of any out there, with the possible exception of TIPS. I'm a trend follower, mainly due to my desire to minimize downside risk. I have no desire to see my portfolio drop 50% and remain there for years, and I firmly believe that that could happen with U.S. or international equities. My chosen strategy might not prevent that, but to the extent that the future resembles the past, it's likely to. We'll see.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

steve321
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by steve321 » Fri Aug 17, 2018 3:58 pm

willthrill81 wrote:
Fri Aug 17, 2018 3:37 pm
I have no desire to see my portfolio drop 50% and remain there for years, and I firmly believe that that could happen with U.S. or international equities. My chosen strategy might not prevent that, but to the extent that the future resembles the past, it's likely to. We'll see.
How much would a portfolio using your strategy have dropped in the great depression?

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

Post by Ari » Fri Aug 17, 2018 4:13 pm

HuckFinn wrote:
Fri Aug 17, 2018 12:33 am
20+ years of inferior International performance... At what point does our own script change about International? If it lags for 30 years, 40 years? Never...?
Looking at Portfoliovisualizer of a graph of the last 20 years of US vs. World Ex US, What I can see is that World Ex US takes the lead, then has a larger drop in 2008 than US, but at the end of 2012 they're still basically equal. So I find it hard to look at this graph and see 20 years of outperformance of US equities. I see six. Or possibly ten. But counting the period of 1998-2007 as US outperformance, a period where US CAGR was 6.25% and Ex US 9.44%, doesn't quite seem right to me.

So perhaps we'll have to revisit this thread when we've seen 20+ years of US outperformance?

https://www.portfoliovisualizer.com/bac ... arket2=100
All in, all the time.

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willthrill81
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Fri Aug 17, 2018 4:14 pm

steve321 wrote:
Fri Aug 17, 2018 3:58 pm
willthrill81 wrote:
Fri Aug 17, 2018 3:37 pm
I have no desire to see my portfolio drop 50% and remain there for years, and I firmly believe that that could happen with U.S. or international equities. My chosen strategy might not prevent that, but to the extent that the future resembles the past, it's likely to. We'll see.
How much would a portfolio using your strategy have dropped in the great depression?
It's difficult to put a precise number on it due to the lack of precise data from that period, but from 'eyeballing it', I'd say about 20% (certainly would have sold all stocks by Oct., 1929, probably a month or two earlier), not counting any potential positive effects from moving into bonds. Back in 2008, my chosen strategy would have actually gained a few percent because bonds did well during that period.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by AerialWombat » Fri Aug 17, 2018 4:16 pm

bligh wrote:
Thu Aug 16, 2018 6:34 pm
9 pages in. I have to ask. Has a single person changed their position having read or participated in this thread? :shock: :oops:
:sharebeer
As I'm still a noob to the BH forum, and the BH philosophy, this was my first roll through a legendary "us vs. international" thread. It was quite educational, as I'm still trying to determine my US vs Int'l ratio and write my IPS.

Here's what I got out of it:

1). Anybody can cherry pick a time period that will prove their point.
2). Past performance is no guarantee of future results.
3). The US markets may or may not be at their peak, may or may not be ready to tank, and may or may not have another 20 years of bull left to go.
4). International markets may or may not be at their bottom, may or may not be ready to tank, and may or may not be ready to take off into the stratosphere.

More than anything else, reading through my first hardcore "US vs Them" thread convinced me that nobody has a freakin' clue what's going to happen over the next 20 years.

Nobody.

So, I think I'm slowly but surely drifting towards the global cap weight crowd.

This morning, I bought more Vanguard Total World Market (VT) in my Solo 401k. I also added equally to my small VBR and VSS holdings, for that small cap tilt.

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

Post by WanderingDoc » Fri Aug 17, 2018 4:32 pm

Ari wrote:
Fri Aug 17, 2018 4:13 pm
HuckFinn wrote:
Fri Aug 17, 2018 12:33 am
20+ years of inferior International performance... At what point does our own script change about International? If it lags for 30 years, 40 years? Never...?
Looking at Portfoliovisualizer of a graph of the last 20 years of US vs. World Ex US, What I can see is that World Ex US takes the lead, then has a larger drop in 2008 than US, but at the end of 2012 they're still basically equal. So I find it hard to look at this graph and see 20 years of outperformance of US equities. I see six. Or possibly ten. But counting the period of 1998-2007 as US outperformance, a period where US CAGR was 6.25% and Ex US 9.44%, doesn't quite seem right to me.

So perhaps we'll have to revisit this thread when we've seen 20+ years of US outperformance?

https://www.portfoliovisualizer.com/bac ... arket2=100
I agree. I am seeing exactly what you are seeing. US equities outperform for the last 6 years only. That is literally the blink of an eye. And this makes intuitive sense as the CAPE ratios are roughly double for US stocks. The US Stock Market is overvalued by most measures, as much as we want to convince ourselves otherwise.
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

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

Post by Rowan Oak » Fri Aug 17, 2018 4:33 pm

AerialWombat wrote:
Fri Aug 17, 2018 4:16 pm
bligh wrote:
Thu Aug 16, 2018 6:34 pm
9 pages in. I have to ask. Has a single person changed their position having read or participated in this thread? :shock: :oops:
:sharebeer
More than anything else, reading through my first hardcore "US vs Them" thread convinced me that nobody has a freakin' clue what's going to happen over the next 20 years.

Nobody.
I agree.

A very good suggestion:
Taylor Larimore wrote:
Tue Aug 14, 2018 1:32 pm
Bogleheads:

This is a post I made two years ago which may be helpful:

How Much International Stock? A Suggestion.

Best wishes
Taylor
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

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 » Fri Aug 17, 2018 4:36 pm

willthrill81 wrote:
Fri Aug 17, 2018 4:14 pm
steve321 wrote:
Fri Aug 17, 2018 3:58 pm
willthrill81 wrote:
Fri Aug 17, 2018 3:37 pm
I have no desire to see my portfolio drop 50% and remain there for years, and I firmly believe that that could happen with U.S. or international equities. My chosen strategy might not prevent that, but to the extent that the future resembles the past, it's likely to. We'll see.
How much would a portfolio using your strategy have dropped in the great depression?
It's difficult to put a precise number on it due to the lack of precise data from that period, but from 'eyeballing it', I'd say about 20% (certainly would have sold all stocks by Oct., 1929, probably a month or two earlier), not counting any potential positive effects from moving into bonds. Back in 2008, my chosen strategy would have actually gained a few percent because bonds did well during that period.
In a crash, stocks fell quickly. It even rises quicker when it's recovering. Trend followers (theoretically) try to avoid both of those. But how do trend followers avoid such flash crash? 200-day moving average will tell you a story, but it's not a guarantee as to what market will do, particularly with events such as Black Friday or Black Tuesday.

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

Post by cheezit » Fri Aug 17, 2018 4:42 pm

Ari wrote:
Fri Aug 17, 2018 4:13 pm
HuckFinn wrote:
Fri Aug 17, 2018 12:33 am
20+ years of inferior International performance... At what point does our own script change about International? If it lags for 30 years, 40 years? Never...?
Looking at Portfoliovisualizer of a graph of the last 20 years of US vs. World Ex US, What I can see is that World Ex US takes the lead, then has a larger drop in 2008 than US, but at the end of 2012 they're still basically equal. So I find it hard to look at this graph and see 20 years of outperformance of US equities. I see six. Or possibly ten. But counting the period of 1998-2007 as US outperformance, a period where US CAGR was 6.25% and Ex US 9.44%, doesn't quite seem right to me.

So perhaps we'll have to revisit this thread when we've seen 20+ years of US outperformance?

https://www.portfoliovisualizer.com/bac ... arket2=100
Thank you for posting this. I have two quibbles here:

1) We're all automatically investing/dollar cost averaging rather than putting in a lump sum and sitting on it
2) Portfoliovisualizer has data for international going back further than 1998, so we can test the "20 30 years of drastic outperformance!" claims that were advanced later in the thread

Here are the results of this slightly-closer-to-real-life analysis.

For fun, you will notice I have added a third portfolio that is
a) tilted (since that got brought up earlier in this thread, and since many people do that)
b) has an international component close to what seems to be the average of what people in this thread actually hold and is not far outside Bogle's recommendation
c) has a nonzero bond component, with the particular type chosen based on my incomplete understanding of Boglehead author Larry Swedroe's advice about bond selection.

My conclusion is that I wish I had been born thirty years earlier because gosh those CAGR numbers seem really high, even for the worst portfolio of the three.

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willthrill81
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Fri Aug 17, 2018 4:43 pm

thangngo wrote:
Fri Aug 17, 2018 4:36 pm
willthrill81 wrote:
Fri Aug 17, 2018 4:14 pm
steve321 wrote:
Fri Aug 17, 2018 3:58 pm
willthrill81 wrote:
Fri Aug 17, 2018 3:37 pm
I have no desire to see my portfolio drop 50% and remain there for years, and I firmly believe that that could happen with U.S. or international equities. My chosen strategy might not prevent that, but to the extent that the future resembles the past, it's likely to. We'll see.
How much would a portfolio using your strategy have dropped in the great depression?
It's difficult to put a precise number on it due to the lack of precise data from that period, but from 'eyeballing it', I'd say about 20% (certainly would have sold all stocks by Oct., 1929, probably a month or two earlier), not counting any potential positive effects from moving into bonds. Back in 2008, my chosen strategy would have actually gained a few percent because bonds did well during that period.
In a crash, stocks fell quickly. It even rises quicker when it's recovering. Trend followers (theoretically) try to avoid both of those. But how do trend followers avoid such flash crash? 200-day moving average will tell you a story, but it's not a guarantee as to what market will do, particularly with events such as Black Friday or Black Tuesday.
Yes, flash crashes are a real problem for trend following strategies. In most situations, they rebound very quickly. 1929 was a big exception, although the market continued to plunge after Black Tuesday. My chosen trend following strategy would likely have had me sell prior to Black Tuesday though. It uses both the 12 month moving for the unemployment rate and the 7 month (~140 day) moving average for stocks to determine when to buy/sell. The UER was above its 12 MMA by mid-1929, and the 7 MMA for stocks crossed in early Oct. I believe. When both indicators are 'on', my strategy calls for me to move into cash/bonds. When either is 'off', I move back into stocks, so it's definitely more 'long biased' than most trend following strategies.

The other part of my strategy is to invest in only the top performing stock class (e.g. LCG, LCV, SCV, Int'l, EM) from the prior seven months as long as I should be invested in stocks (see above for when that is).
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by Walkure » Fri Aug 17, 2018 4:53 pm

nisiprius wrote:
Wed Aug 15, 2018 4:12 pm
"Disaster" is a strong word. I've been invested in international stocks since roughly the year 2000 or so at roughly 20-25% of my total stock allocation, so I have some skin in the game. My position, fairly consistent I think, is that there is no evidence that international stocks have ever made much difference one way or the other; i.e. I'm pretty much a skeptic on the value of international stock investing. But, a disaster?

I decided to look at the performance of VTIAX (Total International, Admiral shares) in a slightly different way. This is the average return (CAGR) that would have been obtained from an investment in VTIAX, made at various starting dates, and held until 7/31/2018. (Hmmm... apparently Morningstar splices in the data for VGTSX before inception of VTIAX, so it's actually a mix; sorry...)

Image

And here are my observations. The time span covers 266 months.
  • For any starting point before 12/1/2017, the investment made money; there was no loss.
  • Thus, for 261 out of 266 possible starting months, or 98% of all starting points, the investment made money.
  • For 95% of all possible starting months, the investment earned an average (CAGR) of over 2%/year.
  • For 83% of all possible starting months, the investment earned an average (CAGR) of over 4%/year.
  • For 63% of all possible starting months, the investment earned an average (CAGR) of over 5%/year.
Nothing to write home about, and I'm not bothering to compare US stocks or explore whether they had a valuable diversification effect (they didn't), or whether we should expect a juicy mean reversion, etc.

But I don't think it has been any "disaster." For example, nobody who's been holding for a year or more has lost money. And unless you were fairly unlucky in the time you invested the money, you would have earned an average 4-5% per year.
I've been watching this superthread go back and forth for the last few days and found a lot of great points to ponder, but this chart from Nisiprius is in a whole other league. By extending CAGR backward from the present day for a given asset it provides a vast amount of information. First, it demonstrates visually the insignificance of recent results - wild swings in both directions that end up being meaningless noise over the course of decades. Second, although it could theoretically be extended back as far as historical data exists, it is easy to see that the weighted average to present becomes increasingly hard to move from its long term trend line around that 5%, so at some point looking back ever further tells you nothing useful about present conditions.

Where I would disagree with Nisiprius, and am more sympathetic to the OP, is in the interpretation. "[A]n average 4-5% per year" (I'm assuming that's nominal, not real return) is hardly commensurate with a multi-decade equity expectation. Ignoring the bugaboo of comparison to US equity, I'd say that's closer to long term nominal bond returns. Moreover, given the vast risk-adjusted disparity, if one had taken a position in long term bonds and levered it up to the volatility experienced by stocks, one could theoretically expect a much better return over that same time period. Obviously, that's not really helpful given practical constraints on margin, and perhaps made better by the 30 year bull market for bonds (how am I the first one in this thread to mention it? Do I get a prize?), but it's still a sobering comparison. Especially considering that the bonds would have performed even better on the "fear of contagion/correlation with US equity" metric and provided better rebalancing opportunity.

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

Post by SavageAmusement » Fri Aug 17, 2018 5:29 pm

Debates about international stocks remind me a lot of debates about the existence of God. Each side can trot out all the “evidence” they want, but believers are going to believe and non-believers aren’t. The whole exercise strikes me as a giant waste of time. If you like international stocks, knock yourself out. If not, don’t buy them. Who the heck cares what others are thinking or doing. I know I don’t.

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

Post by bgf » Fri Aug 17, 2018 5:40 pm

cheezit wrote:
Fri Aug 17, 2018 4:42 pm
Ari wrote:
Fri Aug 17, 2018 4:13 pm
HuckFinn wrote:
Fri Aug 17, 2018 12:33 am
20+ years of inferior International performance... At what point does our own script change about International? If it lags for 30 years, 40 years? Never...?
Looking at Portfoliovisualizer of a graph of the last 20 years of US vs. World Ex US, What I can see is that World Ex US takes the lead, then has a larger drop in 2008 than US, but at the end of 2012 they're still basically equal. So I find it hard to look at this graph and see 20 years of outperformance of US equities. I see six. Or possibly ten. But counting the period of 1998-2007 as US outperformance, a period where US CAGR was 6.25% and Ex US 9.44%, doesn't quite seem right to me.

So perhaps we'll have to revisit this thread when we've seen 20+ years of US outperformance?

https://www.portfoliovisualizer.com/bac ... arket2=100
Thank you for posting this. I have two quibbles here:

1) We're all automatically investing/dollar cost averaging rather than putting in a lump sum and sitting on it
2) Portfoliovisualizer has data for international going back further than 1998, so we can test the "20 30 years of drastic outperformance!" claims that were advanced later in the thread

Here are the results of this slightly-closer-to-real-life analysis.

For fun, you will notice I have added a third portfolio that is
a) tilted (since that got brought up earlier in this thread, and since many people do that)
b) has an international component close to what seems to be the average of what people in this thread actually hold and is not far outside Bogle's recommendation
c) has a nonzero bond component, with the particular type chosen based on my incomplete understanding of Boglehead author Larry Swedroe's advice about bond selection.

My conclusion is that I wish I had been born thirty years earlier because gosh those CAGR numbers seem really high, even for the worst portfolio of the three.
does the CAGR exclude the contributions?
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by AK_Kiter » Fri Aug 17, 2018 5:42 pm

I've been lurking over the past 10 pages of posts with a great deal of interest over the last few days. I began 'serious' (BH) investing in ~2010 and somewhat arbitratrily set my equity AA at 50% US, 30% Intl and 20% EM, primarily based upon what I saw as the individual country PE's and expected global growth. It's been tough to hold the course with this AA amid the headwinds of a strengthening dollar and overall Int'l returns, but I've been a good BH.

Valuations of US vs global equities has been discussed multiple times here, but I refer to the link below quite often when I get close to changing up my AA based upon ongoing returns and perceived 'risk' of US vs international. Based on the 3 components listed here (GDP growth, dividend yield, and the controversial 'reversion to the mean') the future of Int'l certainly seems bright. I wonder what the arguments would be for upping Int'l AA if they do indeed outperform significantly over the next 10 years.
https://www.gurufocus.com/global-market-valuation.php

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

Post by UpperNwGuy » Fri Aug 17, 2018 5:48 pm

AK_Kiter wrote:
Fri Aug 17, 2018 5:42 pm
"... the future of Int'l certainly seems bright."
It doesn't seem very bright to me. Case in point: this past week's declines of international funds after the US announced new economic sanctions on Turkey, causing a 20% devaluation of the Turkish currency, causing problems for Northern European banks who had loaned money to Turkey. This is the new normal. Even the successful European economies are linked to the unsuccessful ones. Those members of this forum who say International might suddenly achieve better performance than the US don't seem to be taking into account the long-term complications of the current European situation.
Last edited by UpperNwGuy on Fri Aug 17, 2018 5:58 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 jibantik » Fri Aug 17, 2018 5:58 pm

I am sorry, but I have a heck of a time calling someone a Boglehead if they do not hold any international equities, ESPECIALLY when the decision is made based on past performance. We need a purge :twisted: :P

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

Post by UpperNwGuy » Fri Aug 17, 2018 5:59 pm

jibantik wrote:
Fri Aug 17, 2018 5:58 pm
I am sorry, but I have a heck of a time calling someone a Boglehead if they do not hold any international equities, ESPECIALLY when the decision is made based on past performance. We need a purge :twisted: :P
For the record, I hold 25% international equities.

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

Post by stemikger » Fri Aug 17, 2018 6:01 pm

UpperNwGuy wrote:
Fri Aug 17, 2018 5:59 pm
jibantik wrote:
Fri Aug 17, 2018 5:58 pm
I am sorry, but I have a heck of a time calling someone a Boglehead if they do not hold any international equities, ESPECIALLY when the decision is made based on past performance. We need a purge :twisted: :P
For the record, I hold 25% international equities.
So I guess you can't call Jack Bogle a Boglehead. He definitely does not make the decision based on past performance, but he still holds no international. So, maybe we should start another forum called Jack Bogle is not a Boglehead. :twisted: :P

For the record, I hold 0% international.😊
Last edited by stemikger on Fri Aug 17, 2018 6:04 pm, edited 2 times 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 oldzey » Fri Aug 17, 2018 6:03 pm

Bob Dylan said it well:

Sailin’ round the world in a dirty gondola
Oh, to be back in the land of Coca-Cola!
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vitaflo » Fri Aug 17, 2018 6:07 pm

MnD wrote:
Fri Aug 17, 2018 11:07 am
This graph and article from The Economist on market capitalization and GDP sums up nicely is why I'll never take on single country risk and bets and haven't done so for decades. With broad diversification including ex-US equity I've met and exceeded all my financial goals for accumulation and am retiring in November right on my long-held schedule. I sleep much better at night knowing I don't have all my eggs in one country basket.
Exactly how I feel. The way I see it there are only two cons to international investing:

- Higher ER
- Uncompensated currency risk

But there is a larger con (IMO) to being US only:

- Single country risk

Everyone needs to make their own decisions on whether they want to take that risk but there is no way I'm taking all my risk in one country, even the US. Too many things can change much too fast (black swans, etc) for me to feel comfortable with that. I would much rather just buy the haystack and take what the market gives. Then I don't need to choose sides, the market will do that for me.

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

Post by vineviz » Fri Aug 17, 2018 6:13 pm

UpperNwGuy wrote:
Fri Aug 17, 2018 5:48 pm
AK_Kiter wrote:
Fri Aug 17, 2018 5:42 pm
"... the future of Int'l certainly seems bright."
It doesn't seem very bright to me. Case in point: this past week's declines ...
That's the past, not the future.
"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 visualguy » Fri Aug 17, 2018 6:27 pm

Walkure wrote:
Fri Aug 17, 2018 4:53 pm
Where I would disagree with Nisiprius, and am more sympathetic to the OP, is in the interpretation. "[A]n average 4-5% per year" (I'm assuming that's nominal, not real return) is hardly commensurate with a multi-decade equity expectation. Ignoring the bugaboo of comparison to US equity, I'd say that's closer to long term nominal bond returns. Moreover, given the vast risk-adjusted disparity, if one had taken a position in long term bonds and levered it up to the volatility experienced by stocks, one could theoretically expect a much better return over that same time period. Obviously, that's not really helpful given practical constraints on margin, and perhaps made better by the 30 year bull market for bonds (how am I the first one in this thread to mention it? Do I get a prize?), but it's still a sobering comparison. Especially considering that the bonds would have performed even better on the "fear of contagion/correlation with US equity" metric and provided better rebalancing opportunity.
+1

This is what really bothers me about ex-US. Such low return on 30 years of a highly-volatile investment disqualifies it for me. This trio of low return, long investment period, and high volatility is a killer. I can take one or two out of the three, but not all three at the same time. If I'm in it for 30 years, and it's a roller coaster ride, it had better be worth it at the end. Could it be different in the next 30 years? Sure, but life is too short to make that bet on something that already showed that it can be such a poor long-term performer.

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

Post by WhiteMaxima » Fri Aug 17, 2018 6:34 pm

I checked last 10 year return of US, int'l market. The US returned average 8% and intl 5%. That 3% difference is not big for 1 year but makes big difference in 10 years. Though previous performance not guarantee future return. But last 10 year average tells you something. I would not put US/Int'l at 50/50 AA. I might do 80/20.

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

Post by lostdog » Fri Aug 17, 2018 6:37 pm

AerialWombat wrote:
Fri Aug 17, 2018 4:16 pm
bligh wrote:
Thu Aug 16, 2018 6:34 pm
9 pages in. I have to ask. Has a single person changed their position having read or participated in this thread? :shock: :oops:
:sharebeer
As I'm still a noob to the BH forum, and the BH philosophy, this was my first roll through a legendary "us vs. international" thread. It was quite educational, as I'm still trying to determine my US vs Int'l ratio and write my IPS.

Here's what I got out of it:

1). Anybody can cherry pick a time period that will prove their point.
2). Past performance is no guarantee of future results.
3). The US markets may or may not be at their peak, may or may not be ready to tank, and may or may not have another 20 years of bull left to go.
4). International markets may or may not be at their bottom, may or may not be ready to tank, and may or may not be ready to take off into the stratosphere.

More than anything else, reading through my first hardcore "US vs Them" thread convinced me that nobody has a freakin' clue what's going to happen over the next 20 years.

Nobody.

So, I think I'm slowly but surely drifting towards the global cap weight crowd.

This morning, I bought more Vanguard Total World Market (VT) in my Solo 401k. I also added equally to my small VBR and VSS holdings, for that small cap tilt.


https://www.youtube.com/watch?v=LwTHLtu ... sECXiqVFpI
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Noobvestor » Fri Aug 17, 2018 7:35 pm

stemikger wrote:
Tue Aug 14, 2018 12:16 pm
Grt2bOutdoors wrote:
Tue Aug 14, 2018 9:32 am
stemikger wrote:
Tue Aug 14, 2018 8:41 am
I never invested in international, but not because it is not doing well it is because years ago I read Common Sense on Mutual Funds and John Bogle's chapter on that subject resonated with me so much that I felt it wasn't necessary.

Having said that, just when you stop investing in it, it will do better than the U.S. I will not invest in international even if that is the case because I just don't feel it is worth it and also believe the U.S. has a fair amount of built in international without the currency risk, the sovereign risk and the lack of regulation.

Don't chase the market returns, if you are a long term investor, and really thought about why you are doing things, it is easier to stay the course. On the other hand if you don't like international for other reasons, it may be time to do what I did and go all U.S. because that is what helps you stay the course.

For most long term investors there will be times when you will hate one or more of your assets because it is not doing well, but that is the point of a diversified portfolio and not a reason to change your strategy.

For the record, 3 very smart men don't think international is necessary for regular folks saving for the long term. John Bogle, Warren Buffett and Jim Collins.

Good Luck!
Look more closely, Warren owns foreign companies.
Yes, he does, but that is for Berkshire. When he talks to the Know-Nothing Investor (his words), he simply says 10% in cash and 90% in the S&P. That is what he is doing for his wife when he dies. Everyone here already knows this, but when I quote it, they look at what he is doing for Berkshire, but who among us can do what Warren does when it comes to Berkshire?
Buffet's claim to fame - the only reason anyone would listen to his investing advice - is his success with Berkshire. It seems awfully convenient to ignore what he does in favor of what he says. What does he know about what's good for a know-nothing investor?
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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

Post by columbia » Fri Aug 17, 2018 8:30 pm

Quick question:

What happens to the opinion of the global cap diehards, if the US outperformance extends to 40 or 50 years? Stay the course?

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

Post by UpperNwGuy » Fri Aug 17, 2018 9:21 pm

vineviz wrote:
Fri Aug 17, 2018 6:13 pm
UpperNwGuy wrote:
Fri Aug 17, 2018 5:48 pm
AK_Kiter wrote:
Fri Aug 17, 2018 5:42 pm
"... the future of Int'l certainly seems bright."
It doesn't seem very bright to me. Case in point: this past week's declines ...
That's the past, not the future.
Sorry, but you're wrong. It is not the past. It is the present. And the future appears to be very similar to the present.

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

Post by Noobvestor » Fri Aug 17, 2018 9:23 pm

Took a while, but I just finished reading through this ten-page thread, and have a few thoughts and responses:

Concerns about currency are (predictably) overblown - setting aside all other assets (SS, pensions, houses, etc...) a typical 60/40 Boglehead that is 50/50 US/international within stocks has only 30% exposure to foreign currencies - not a huge gamble, more like a hedge.

The idea that because international has lost over the past 30 years in aggregate seems very weak to me, too - there were a bunch of headlines in 2011 about bonds beating stocks for 30 years (all while being safer!) but no one tried to argue for going all-bond on that basis.

Holding only US is a conscious decision. The market is global, accessible and affordable. Almost all of the arguments I've seen in this thread are appeals to (US) authority (Jack and Warren) or ones that could be made for states or sectors or individual stocks (performance-based).
willthrill81 wrote:
Thu Aug 16, 2018 8:31 pm
jibantik wrote:
Thu Aug 16, 2018 7:27 pm
visualguy wrote:
Thu Aug 16, 2018 1:42 pm
columbia wrote:
Thu Aug 16, 2018 1:15 pm
So now one of the arguments for international is that the US dollar might collapse, while the rest of the world hums along....surely no one actually believes that.
Folks are working hard to find some reason to hold ex-US... The normal Boglehead argument that it does well if you keep it for the long run can't be used after the poor performance over the last 30 years.
Wait... back up, beep beep beep. You realize that holding market weight is the default position. It takes no work to justify holding it, that is the entire point.

You are claiming a different strategy so the burden of proof is on you. Your argument is based on past performance, which is an EXTREMELY weak argument. Not enough to convince me to switch strategies. IIRC you also do quite a bit of cherry picking to make your points.
Actually, the 'default position' is a market cap weighting of the world's stocks, bonds, real estate, cryptocurrency, etc. I doubt that anyone holds such a position.
Please let's use the principle of charity here at least. Investing in real estate (outside of the REITs) and cryptocurrencies can be challenging, inefficient and/or expensive, too. We're also specifically talking about the stock market, not bonds.
wesgreen wrote:
Fri Aug 17, 2018 11:00 am
I would like to revisit this thread in 5 years, and then again in another 5 years, and then see who changes their minds. At least I was smart enough to stop rebalancing into Int. ca. 12 years ago. Going against John Bogle's advice on this was the biggest mistake of my investing career, and I probably won't be able to recoup the loss (compared to staying 100% Total US) in my lifetime. I must have lost over $125.000, which I could have really used in retirement. I've held on, not wanting to sell low, waiting for Int. to bounce up again, and plan to dump it then. Meanwhile it's been rebalancing itself down in my portfolio.
On the other hand, If I were 18 years old now, I might want to hedge against massive changes in the world order during my lifetime, and would probably go with 20% Int.
To each his own. The lesson I took away is: I better stay with what John Bogle advises. There are lots of smart people on the web with opinions and theories, but when they go against Bogle, they neither have evidence to back them up, nor his track record of being right, and it could become expensive for you to follow their advice.
Presumably you had good reasons to choose your allocation. Why do you now consider it a mistake? The real trick is to dive in, read up and make an informed decision so you're not stuck wondering what you should have done differently. Outcome != strategy. Stay the course.

I shifted into a Boglehead approach close to a decade ago and have no actual regrets about my international allocation or my bond allocation (both of which have lost to US stocks). Sure, I'd rather have more money, but I don't see any fault in the logic that shaped my portfolio.

Incidentally, Bogle made a name for himself as a developer of mutual funds and an associated company, not as a forecaster. And if you're going based on his predictions, last time I heard him talk in person he offhandedly put even odds on US versus ex-US (see link below).

He also said ""If there's one place I don't want people to take my advice, it's international. I want you to think it through for yourself."

viewtopic.php?t=104781
AerialWombat wrote:
Fri Aug 17, 2018 4:16 pm
bligh wrote:
Thu Aug 16, 2018 6:34 pm
9 pages in. I have to ask. Has a single person changed their position having read or participated in this thread? :shock: :oops:
:sharebeer
As I'm still a noob to the BH forum, and the BH philosophy, this was my first roll through a legendary "us vs. international" thread. It was quite educational, as I'm still trying to determine my US vs Int'l ratio and write my IPS.

Here's what I got out of it:

1). Anybody can cherry pick a time period that will prove their point.
2). Past performance is no guarantee of future results.
3). The US markets may or may not be at their peak, may or may not be ready to tank, and may or may not have another 20 years of bull left to go.
4). International markets may or may not be at their bottom, may or may not be ready to tank, and may or may not be ready to take off into the stratosphere.

More than anything else, reading through my first hardcore "US vs Them" thread convinced me that nobody has a freakin' clue what's going to happen over the next 20 years.

Nobody.

So, I think I'm slowly but surely drifting towards the global cap weight crowd.

This morning, I bought more Vanguard Total World Market (VT) in my Solo 401k. I also added equally to my small VBR and VSS holdings, for that small cap tilt.
This is a great distillation of the thread, IMHO. You see all the arguments back and forth, realize you can't know the future, and diversify accordingly. The onus is on the camp that wants to reduce diversification, and (to me) they don't make a compelling case.
columbia wrote:
Fri Aug 17, 2018 8:30 pm
Quick question:

What happens to the opinion of the global cap diehards, if the US outperformance extends to 40 or 50 years? Stay the course?
Yup. Purely theoretically, the odds of that are presumably around 50/50 (same for any nation vs a basket of all other nations). Should a US-only investor today look back and overweight Australia or South Africa based on 100 years? Invest for the future, and take what the market gives.

:sharebeer
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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

Post by willthrill81 » Fri Aug 17, 2018 9:27 pm

Noobvestor wrote:
Fri Aug 17, 2018 9:23 pm
willthrill81 wrote:
Thu Aug 16, 2018 8:31 pm
Actually, the 'default position' is a market cap weighting of the world's stocks, bonds, real estate, cryptocurrency, etc. I doubt that anyone holds such a position.
Please let's use the principle of charity here at least. Investing in real estate (outside of the REITs) and cryptocurrencies can be challenging, inefficient and/or expensive, too. We're also specifically talking about the stock market, not bonds.
Charity? Someone arguing to "buy the world" should stand by that argument or else not attempt to invoke it. And there's no reason why "buy the world" should only refer to stocks. The fact that it's just easier to buy the "world of stocks" is not an excuse. Global bonds can be purchased with ease, and global REITs are available too. So are precious metals funds, and cryptocurrency funds are probably around the corner. And the list goes on and on.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by cheezit » Fri Aug 17, 2018 9:33 pm

bgf wrote:
Fri Aug 17, 2018 5:40 pm
cheezit wrote:
Fri Aug 17, 2018 4:42 pm
Ari wrote:
Fri Aug 17, 2018 4:13 pm
HuckFinn wrote:
Fri Aug 17, 2018 12:33 am
20+ years of inferior International performance... At what point does our own script change about International? If it lags for 30 years, 40 years? Never...?
Looking at Portfoliovisualizer of a graph of the last 20 years of US vs. World Ex US, What I can see is that World Ex US takes the lead, then has a larger drop in 2008 than US, but at the end of 2012 they're still basically equal. So I find it hard to look at this graph and see 20 years of outperformance of US equities. I see six. Or possibly ten. But counting the period of 1998-2007 as US outperformance, a period where US CAGR was 6.25% and Ex US 9.44%, doesn't quite seem right to me.

So perhaps we'll have to revisit this thread when we've seen 20+ years of US outperformance?

https://www.portfoliovisualizer.com/bac ... arket2=100
Thank you for posting this. I have two quibbles here:

1) We're all automatically investing/dollar cost averaging rather than putting in a lump sum and sitting on it
2) Portfoliovisualizer has data for international going back further than 1998, so we can test the "20 30 years of drastic outperformance!" claims that were advanced later in the thread

Here are the results of this slightly-closer-to-real-life analysis.

For fun, you will notice I have added a third portfolio that is
a) tilted (since that got brought up earlier in this thread, and since many people do that)
b) has an international component close to what seems to be the average of what people in this thread actually hold and is not far outside Bogle's recommendation
c) has a nonzero bond component, with the particular type chosen based on my incomplete understanding of Boglehead author Larry Swedroe's advice about bond selection.

My conclusion is that I wish I had been born thirty years earlier because gosh those CAGR numbers seem really high, even for the worst portfolio of the three.
does the CAGR exclude the contributions?
I'm not absolutely certain how PortfolioVisualizer is doing it, but I suspect the displayed CAGR numbers are not correctly accounting for the contributions. Wonder if there's a way for me to file a bug report.

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

Post by willthrill81 » Fri Aug 17, 2018 9:37 pm

cheezit wrote:
Fri Aug 17, 2018 9:33 pm
bgf wrote:
Fri Aug 17, 2018 5:40 pm
cheezit wrote:
Fri Aug 17, 2018 4:42 pm
Ari wrote:
Fri Aug 17, 2018 4:13 pm
HuckFinn wrote:
Fri Aug 17, 2018 12:33 am
20+ years of inferior International performance... At what point does our own script change about International? If it lags for 30 years, 40 years? Never...?
Looking at Portfoliovisualizer of a graph of the last 20 years of US vs. World Ex US, What I can see is that World Ex US takes the lead, then has a larger drop in 2008 than US, but at the end of 2012 they're still basically equal. So I find it hard to look at this graph and see 20 years of outperformance of US equities. I see six. Or possibly ten. But counting the period of 1998-2007 as US outperformance, a period where US CAGR was 6.25% and Ex US 9.44%, doesn't quite seem right to me.

So perhaps we'll have to revisit this thread when we've seen 20+ years of US outperformance?

https://www.portfoliovisualizer.com/bac ... arket2=100
Thank you for posting this. I have two quibbles here:

1) We're all automatically investing/dollar cost averaging rather than putting in a lump sum and sitting on it
2) Portfoliovisualizer has data for international going back further than 1998, so we can test the "20 30 years of drastic outperformance!" claims that were advanced later in the thread

Here are the results of this slightly-closer-to-real-life analysis.

For fun, you will notice I have added a third portfolio that is
a) tilted (since that got brought up earlier in this thread, and since many people do that)
b) has an international component close to what seems to be the average of what people in this thread actually hold and is not far outside Bogle's recommendation
c) has a nonzero bond component, with the particular type chosen based on my incomplete understanding of Boglehead author Larry Swedroe's advice about bond selection.

My conclusion is that I wish I had been born thirty years earlier because gosh those CAGR numbers seem really high, even for the worst portfolio of the three.
does the CAGR exclude the contributions?
I'm not absolutely certain how PortfolioVisualizer is doing it, but I suspect the displayed CAGR numbers are not correctly accounting for the contributions. Wonder if there's a way for me to file a bug report.
You should be referencing the MWRR (money-weighted rate of return) instead of the CAGR when making contributions over time; it's two columns to the right of CAGR. TWRR refers to time-weighted rate of return, which is what funds use in their reporting.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Noobvestor » Fri Aug 17, 2018 9:50 pm

willthrill81 wrote:
Fri Aug 17, 2018 9:27 pm
Noobvestor wrote:
Fri Aug 17, 2018 9:23 pm
willthrill81 wrote:
Thu Aug 16, 2018 8:31 pm
Actually, the 'default position' is a market cap weighting of the world's stocks, bonds, real estate, cryptocurrency, etc. I doubt that anyone holds such a position.
Please let's use the principle of charity here at least. Investing in real estate (outside of the REITs) and cryptocurrencies can be challenging, inefficient and/or expensive, too. We're also specifically talking about the stock market, not bonds.
Charity? Someone arguing to "buy the world" should stand by that argument or else not attempt to invoke it. And there's no reason why "buy the world" should only refer to stocks. The fact that it's just easier to buy the "world of stocks" is not an excuse. Global bonds can be purchased with ease, and global REITs are available too. So are precious metals funds, and cryptocurrency funds are probably around the corner. And the list goes on and on.
The principle of charity I'm referencing roughly states that you should interpret the argument in a rational way. I doubt the person meant you should hold door knobs and beanie babies and every conceivable commodity in proportion to their market weights.

But OK, let's digress: cryptocurrencies are a rounding error as global investable assets. Real estate is illiquid, has high transaction costs and complexities, and geographical concentration risks (unless we're talking about REITs, which are in the market already). Precious metals have transaction and holding costs and unique physical risks, plus, even if held in fund form: no expected return (not a productive asset class). International bonds have low yields, currently less than the inflation rate - I might reconsider if that changed.

The overall point is that starting from an 'everything possible' standpoint, it's easy to eliminate many asset classes for these kinds of reasons and get down to bonds and stocks. From there (returning to the main topic of the thread), one question becomes: US-only versus global stocks? And this is clearly not a question of 'why add international?' (we started with the total world market) but rather 'why subtract international?'
Last edited by Noobvestor on Fri Aug 17, 2018 9:56 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 willthrill81 » Fri Aug 17, 2018 9:54 pm

Noobvestor wrote:
Fri Aug 17, 2018 9:50 pm
willthrill81 wrote:
Fri Aug 17, 2018 9:27 pm
Noobvestor wrote:
Fri Aug 17, 2018 9:23 pm
willthrill81 wrote:
Thu Aug 16, 2018 8:31 pm
Actually, the 'default position' is a market cap weighting of the world's stocks, bonds, real estate, cryptocurrency, etc. I doubt that anyone holds such a position.
Please let's use the principle of charity here at least. Investing in real estate (outside of the REITs) and cryptocurrencies can be challenging, inefficient and/or expensive, too. We're also specifically talking about the stock market, not bonds.
Charity? Someone arguing to "buy the world" should stand by that argument or else not attempt to invoke it. And there's no reason why "buy the world" should only refer to stocks. The fact that it's just easier to buy the "world of stocks" is not an excuse. Global bonds can be purchased with ease, and global REITs are available too. So are precious metals funds, and cryptocurrency funds are probably around the corner. And the list goes on and on.
The principle of charity I'm referencing roughly states that you should interpret the argument in a rational way. I doubt the person meant you should hold door knobs and beanie babies and every conceivable commodity in proportion to their market weights.

But OK, let's digress: cryptocurrencies are a rounding error as global investable assets. Real estate is illiquid, has high transaction costs and complexities, and geographical concentration risks (unless we're talking about REITs, which are in the market already). Precious metals have transaction and holding costs and unique physical risks. International bonds have low yields and sub-zero, after-inflation upside.

The overall point is that starting from an 'everything possible' standpoint, it's easy to eliminate many asset classes for these kinds of reasons and get down to bonds and stocks. From there (returning to the main topic of the thread), one question becomes: US-only versus global stocks? And this is clearly not a question of 'why add international?' (we started with the total world market) but rather 'why subtract international?'
In the same vein that one could argue that international bonds aren't appropriate for the reasons you've outlined, they could argue that international equity's returns (in total) provide less 'upside potential' than U.S. equities. I'm not saying that's absolutely correct, but the argument is very similar.

I personally think that the 'own the world when it comes to stocks but not with anything else' is nonsense.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by cheezit » Fri Aug 17, 2018 9:55 pm

willthrill81 wrote:
Fri Aug 17, 2018 9:37 pm
cheezit wrote:
Fri Aug 17, 2018 9:33 pm
bgf wrote:
Fri Aug 17, 2018 5:40 pm
cheezit wrote:
Fri Aug 17, 2018 4:42 pm
Ari wrote:
Fri Aug 17, 2018 4:13 pm


Looking at Portfoliovisualizer of a graph of the last 20 years of US vs. World Ex US, What I can see is that World Ex US takes the lead, then has a larger drop in 2008 than US, but at the end of 2012 they're still basically equal. So I find it hard to look at this graph and see 20 years of outperformance of US equities. I see six. Or possibly ten. But counting the period of 1998-2007 as US outperformance, a period where US CAGR was 6.25% and Ex US 9.44%, doesn't quite seem right to me.

So perhaps we'll have to revisit this thread when we've seen 20+ years of US outperformance?

https://www.portfoliovisualizer.com/bac ... arket2=100
Thank you for posting this. I have two quibbles here:

1) We're all automatically investing/dollar cost averaging rather than putting in a lump sum and sitting on it
2) Portfoliovisualizer has data for international going back further than 1998, so we can test the "20 30 years of drastic outperformance!" claims that were advanced later in the thread

Here are the results of this slightly-closer-to-real-life analysis.

For fun, you will notice I have added a third portfolio that is
a) tilted (since that got brought up earlier in this thread, and since many people do that)
b) has an international component close to what seems to be the average of what people in this thread actually hold and is not far outside Bogle's recommendation
c) has a nonzero bond component, with the particular type chosen based on my incomplete understanding of Boglehead author Larry Swedroe's advice about bond selection.

My conclusion is that I wish I had been born thirty years earlier because gosh those CAGR numbers seem really high, even for the worst portfolio of the three.
does the CAGR exclude the contributions?
I'm not absolutely certain how PortfolioVisualizer is doing it, but I suspect the displayed CAGR numbers are not correctly accounting for the contributions. Wonder if there's a way for me to file a bug report.
You should be referencing the MWRR (money-weighted rate of return) instead of the CAGR when making contributions over time; it's two columns to the right of CAGR. TWRR refers to time-weighted rate of return, which is what funds use in their reporting.
Thank you for clearing up my misunderstanding :)

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

Post by Noobvestor » Fri Aug 17, 2018 10:31 pm

willthrill81 wrote:
Fri Aug 17, 2018 9:54 pm
In the same vein that one could argue that international bonds aren't appropriate for the reasons you've outlined, they could argue that international equity's returns (in total) provide less 'upside potential' than U.S. equities. I'm not saying that's absolutely correct, but the argument is very similar.

I personally think that the 'own the world when it comes to stocks but not with anything else' is nonsense.
I think you may be trying too hard to force a rigid philosophy on an approach that starts with theory but gets boiled down through common-sense analysis. The big picture is: diversify into large, low-cost asset classes with positive long-term expected returns in an efficient way. We then arrive at 'why subtract international?' The cases I've seen made are based on limited data ranges and/or beliefs in US exceptionalism. We know from the data that if you actually look long-term and at various countries the numbers favor international stock diversification.

We all have to draw the line somewhere. A rule of thumb (which I will admit is subjective): anything that's less than 5% of a portfolio adds excessive complexity for insufficient portfolio utility (plus tax headaches). For me: if it doesn't come from Vanguard, the US Treasury or US Bank it's not up for consideration - I'm not going to spin up a crypto trading account or collect art to get a sliver of a percent of something I'm missing.

"But," you say, "Vanguard does have international bond funds!" They do, but their only viable (total international) option is hedged, which adds cost and defeats currency diversification (not a pure "total world" play). And bonds are more predictable animals - their yields give us a pretty good idea of expected returns, and those are significantly higher in the US. But hey, if someone wants to buy international bonds, I don't see it as a huge problem either - lower yields probably won't break anyone's bank, but subpar single-national-market equity returns can and have before.

We all have to make our own decisions, of course. I have personal tilts based on beliefs in factors (small/value) and correlations (emerging) and the role of bonds being for safety (TIPS/Treasuries), but if some of those don't pan out (e.g. small/value aren't 'real' or emerging is too correlated with global markets to provide a diversification benefit) that's fine - I'll still get the market returns, more or less. The really big portfolio questions (in order) are, in my opinion: (1) allocation to stocks versus bonds, and (2) allocation to US versus international within stocks. /2 cents
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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

Post by willthrill81 » Fri Aug 17, 2018 10:34 pm

Noobvestor wrote:
Fri Aug 17, 2018 10:31 pm
willthrill81 wrote:
Fri Aug 17, 2018 9:54 pm
In the same vein that one could argue that international bonds aren't appropriate for the reasons you've outlined, they could argue that international equity's returns (in total) provide less 'upside potential' than U.S. equities. I'm not saying that's absolutely correct, but the argument is very similar.

I personally think that the 'own the world when it comes to stocks but not with anything else' is nonsense.
I think you may be trying too hard to force a rigid philosophy on an approach that starts with theory but gets boiled down through common-sense analysis.
We'll have to agree to disagree. What is one person's common sense is another person's nonsense. I rate the U.S./international argument as being one on very similar lines as the factor/TSM argument; there is no one objective 'truth' to whether/how to do it. I'm not going to change your view, and you aren't going to change mine. And that's a-OK!

Cheers, and have a great weekend! :beer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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

Post by Noobvestor » Fri Aug 17, 2018 10:39 pm

willthrill81 wrote:
Fri Aug 17, 2018 10:34 pm
Noobvestor wrote:
Fri Aug 17, 2018 10:31 pm
willthrill81 wrote:
Fri Aug 17, 2018 9:54 pm
In the same vein that one could argue that international bonds aren't appropriate for the reasons you've outlined, they could argue that international equity's returns (in total) provide less 'upside potential' than U.S. equities. I'm not saying that's absolutely correct, but the argument is very similar.

I personally think that the 'own the world when it comes to stocks but not with anything else' is nonsense.
I think you may be trying too hard to force a rigid philosophy on an approach that starts with theory but gets boiled down through common-sense analysis.
We'll have to agree to disagree. What is one person's common sense is another person's nonsense. I'm not going to change your view, and you aren't going to change mine. And that's a-OK!

Cheers, and have a great weekend! :beer
Fair enough. FWIW, I do think it's worth considering everything, but then there's a matter of turning that consideration into action, and that's where feasibility, complexity, cost, etc... decisions come into play. No one can actually own a slice of everything :wink:

Regardless: have a great weekend, too! :beer
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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

Post by vineviz » Fri Aug 17, 2018 11:08 pm

UpperNwGuy wrote:
Fri Aug 17, 2018 9:21 pm
vineviz wrote:
Fri Aug 17, 2018 6:13 pm
UpperNwGuy wrote:
Fri Aug 17, 2018 5:48 pm
AK_Kiter wrote:
Fri Aug 17, 2018 5:42 pm
"... the future of Int'l certainly seems bright."
It doesn't seem very bright to me. Case in point: this past week's declines ...
That's the past, not the future.
Sorry, but you're wrong. It is not the past. It is the present. And the future appears to be very similar to the present.
There is no “present” in investing: only past and future.

This is arguably the most important lesson in Finance 101.
"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 desafinado » Fri Aug 17, 2018 11:20 pm

I feel like the US/Intl investing debate is actually informed by a deeper conviction about the purpose of investing. Specifically, US only investors seem to feel that the purpose of investing is primarily to have more money in the future than they have in the present. International investors seem to feel that the purpose of investing is more to move money across both time and contingencies. I think if you view the future as a multi-dimensional space (time + contingency) international investing begins to make a lot more sense (as do things like LMP). Maybe you can arrive at the same conclusion from regret minimization..?

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

Post by greenhill » Fri Aug 17, 2018 11:21 pm

columbia wrote:
Fri Aug 17, 2018 8:30 pm
Quick question:

What happens to the opinion of the global cap diehards, if the US outperformance extends to 40 or 50 years? Stay the course?
Absolutely fine for me as a boglehead from an emerging market. If US outperforms INTL, it is likely that total world will outperform my home country :happy If total world underperform my home country, I will just sleep well because it's too risky to invest only in my home country anyway. :happy

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

Post by oldzey » Fri Aug 17, 2018 11:46 pm

One of Taylor Larimore's favorite sayings is: "When experts disagree it is often because it does not make a foreseeable difference."

Steven Dunn's* remarks reinforce this observation (see #8 below), originally found at: http://socialize.morningstar.com/NewSoc ... 62377.aspx
Order of importance

As a rather sluggish slice and dice type, I think that issue versus going total stock market is way down the list of what is important in managing one's financial affairs. In order of priority, I would list what is important in the following order of priority:

1. How much you earn (the value of your human capital).
2. An intelligent insurance program.
3. Your savings rate.
4. Your allocation to stocks versus bonds.
5. Have a reasonable diversification to your portfolio (anything reasonable will do).
6. Rebalancing to manage risk.
7. Tax management.
8. International versus domestic
9. Value versus growth.
10. Small versus large.
11. Slice and dice.

After number 7, it just doesn't matter much IMO, for about 99% of investors. I say that as one who has watched the numbers pop up on my Quicken computer screen over the passing years. Some things matter a whole lot more than others as to what really influences those numbers.
*Dunn's Law: "When an asset class does well, an index fund in that asset class does even better." — Steven Dunn
"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 Noobvestor » Sat Aug 18, 2018 12:27 am

oldzey wrote:
Fri Aug 17, 2018 11:46 pm
One of Taylor Larimore's favorite sayings is: "When experts disagree it is often because it does not make a foreseeable difference."

Steven Dunn's* remarks reinforce this observation (see #8 below), originally found at: http://socialize.morningstar.com/NewSoc ... 62377.aspx
Order of importance

As a rather sluggish slice and dice type, I think that issue versus going total stock market is way down the list of what is important in managing one's financial affairs. In order of priority, I would list what is important in the following order of priority:

1. How much you earn (the value of your human capital).
2. An intelligent insurance program.
3. Your savings rate.
4. Your allocation to stocks versus bonds.
5. Have a reasonable diversification to your portfolio (anything reasonable will do).
6. Rebalancing to manage risk.
7. Tax management.
8. International versus domestic
9. Value versus growth.
10. Small versus large.
11. Slice and dice.

After number 7, it just doesn't matter much IMO, for about 99% of investors. I say that as one who has watched the numbers pop up on my Quicken computer screen over the passing years. Some things matter a whole lot more than others as to what really influences those numbers.
*Dunn's Law: "When an asset class does well, an index fund in that asset class does even better." — Steven Dunn
I mean I don't know how else to convince someone that (8) falls under (5) other than to mention Japan, which represented 45% of the global market in 1989, then fell and stayed down. Markets can do significantly better or worse than other markets. The US benefited from tailwinds throughout the 20th Century, not least of which was a war that devastated much of the developed world overseas. Maybe it's truly an exceptional snowflake of a nation that will always come out on top, but some people thought that about Japan, too ... the price of being wrong was high.

https://madison.com/business/investment ... 84ca1.html
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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

Post by permport » Sat Aug 18, 2018 12:38 am

Noobvestor wrote:
Sat Aug 18, 2018 12:27 am
oldzey wrote:
Fri Aug 17, 2018 11:46 pm
One of Taylor Larimore's favorite sayings is: "When experts disagree it is often because it does not make a foreseeable difference."

Steven Dunn's* remarks reinforce this observation (see #8 below), originally found at: http://socialize.morningstar.com/NewSoc ... 62377.aspx
Order of importance

As a rather sluggish slice and dice type, I think that issue versus going total stock market is way down the list of what is important in managing one's financial affairs. In order of priority, I would list what is important in the following order of priority:

1. How much you earn (the value of your human capital).
2. An intelligent insurance program.
3. Your savings rate.
4. Your allocation to stocks versus bonds.
5. Have a reasonable diversification to your portfolio (anything reasonable will do).
6. Rebalancing to manage risk.
7. Tax management.
8. International versus domestic
9. Value versus growth.
10. Small versus large.
11. Slice and dice.

After number 7, it just doesn't matter much IMO, for about 99% of investors. I say that as one who has watched the numbers pop up on my Quicken computer screen over the passing years. Some things matter a whole lot more than others as to what really influences those numbers.
*Dunn's Law: "When an asset class does well, an index fund in that asset class does even better." — Steven Dunn
I mean I don't know how else to convince someone that (8) falls under (5) other than to mention Japan, which represented 45% of the global market in 1989, then fell and stayed down. Markets can do significantly better or worse than other markets. The US benefited from tailwinds throughout the 20th Century, not least of which was a war that devastated much of the developed world overseas. Maybe it's truly an exceptional snowflake of a nation that will always come out on top, but some people thought that about Japan, too ... the price of being wrong was high.

https://madison.com/business/investment ... 84ca1.html
I agree completely and don't understand why people try to dispute this. The truth is that no one can predict the future, and wider diversification is really your only effective protection against that fact.

It's funny when I hear people like Bogle saying (paraphrased): "There's no need for international.. I mean the markets are so efficient that they arbitrage away all the excess overseas profit opportunity anyway!"

Yeah, gee, well you could make the same argument in reverse for why no one should expect the U.S. to perform better compared to the rest of the world in the future just because it did so in the past. And yet, in various interviews you hear him proclaiming how the U.S. is going to continue leading the rest of the world economically and how that's why our capital should be focused there. Highly self-contradictory it seems to me.
Buy right and hold tight.

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