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

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Nate79
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Nate79 » Tue Aug 14, 2018 9:36 am

Wow, a whole 10 years. Are you truly using 10 years of data to draw such a conclusion and consider it significant? And this particular 10 year period?

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

Post by Abe » Tue Aug 14, 2018 9:40 am

HuckFinn, I liked your monkey story. :happy
Slow and steady wins the race.

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

Post by willthrill81 » Tue Aug 14, 2018 9:41 am

I think that OP's mindset is an excellent example of a major problem with 'buy-and-hold': it's very difficult for many people to implement it. The urge to do something after years of underperformance compared to another strategy is just too great for many.
“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 KyleAAA » Tue Aug 14, 2018 9:44 am

You have to have a more compelling reason than "it underperformed over the last x years." Is there a sound basis for being confident that wasn't a fluke?

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

Post by willthrill81 » Tue Aug 14, 2018 9:44 am

TIAX wrote:
Tue Aug 14, 2018 9:35 am
Call_Me_Op wrote:
Tue Aug 14, 2018 6:04 am
The OP is suffering from a severe case of Recency Bias.
Please tell me there's a cure.
Not really. You can examine historic periods until the cows come home, but when you see that your chosen investments have fallen significantly behind another major market metric (e.g. S&P 500), it's exceedingly difficult for many people to sit on their hands. The same goes for professional money managers.

Buy-and-hold works for some, but it's not for everyone.
“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 visualguy » Tue Aug 14, 2018 9:51 am

Oldzey - exactly, this is not just a 10 year phenomenon. I think many here don't realize the degree of underperformance of ex-US, even in the long term.

If past (including long-term) performance doesn't justify investing in ex-US, then what does?

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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 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. As far as the whole international is a disaster thing, if you look at developed only vs submerging markets the calculation changes a bit. We should be looking at the fundamental characteristics of international stocks as an asset class, not chasing past performance. Developed international has attractive P/E ratios, and has been hammered by forex changes which tend to normalize over time.

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

Post by munemaker » Tue Aug 14, 2018 9:56 am

Recognizing that nobody knows nuttin, forecasts going forward show very low returns domestically and significantly higher returns internationally. If you sell out now, you might be selling at exactly the wrong time.

But who knows? That's why you go with a diversified portfolio.

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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 10:02 am

visualguy wrote:
Tue Aug 14, 2018 9:51 am
Oldzey - exactly, this is not just a 10 year phenomenon. I think many here don't realize the degree of underperformance of ex-US, even in the long term.

If past (including long-term) performance doesn't justify investing in ex-US, then what does?
John Bogle makes some good arguments about not investing in ex-US:

https://www.youtube.com/watch?v=hvgptl5-Kcc

https://www.youtube.com/watch?v=nWI64TKU64o#t=1h06m17s

https://www.youtube.com/watch?v=vMj4sHjF_kA#t=02m43s

https://www.morningstar.com/videos/3556 ... rseas.html

https://www.morningstar.com/videos/7186 ... sting.html
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by WhyNotUs » Tue Aug 14, 2018 10:03 am

An American investor can be perfectly happy with a low or no Int'l index portfolio. Both Buffett and Bogle have been cool to them. NYSE traded companies usually have int'l exposure. TSM is pretty diverse.

At the same time, there is nothing wrong with having Total Int'l in your mix. More diversification.

The recommended portfolios by VG are interesting and worth considering but not the Gospel. I am at 15% Int'l and that is right for me. Some additional intl in addition to US-based multinationals.

Sounds like the OP is going to develop an asset mix that will allow them to stay the course. The worry would be if you want to change it again.
I own the next hot stock- VTSAX

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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 10:03 am

jeffyscott wrote:
Tue Aug 14, 2018 8:56 am
I think rather than arbitrarily looking at the most recent 10 years, the sensible way to compare is to look from a market high to another high or from a low to a low. From the high in 2000 to the high in 2007 international won, same for the 2002 low to the 2009 low. All the outperformance of US is only due to the last 5 years or so.
Or we could look at all the data we have from the oldest international equity index.

Image

International stocks outperformed US stocks in 3 of the 4 full decades for which MSCI has tracked it.

Will the recent underperformance be reversed? Hard to say for sure, but the odds sure look good .
"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 vineviz » Tue Aug 14, 2018 10:04 am

oldzey wrote:
Tue Aug 14, 2018 10:02 am
visualguy wrote:
Tue Aug 14, 2018 9:51 am
Oldzey - exactly, this is not just a 10 year phenomenon. I think many here don't realize the degree of underperformance of ex-US, even in the long term.

If past (including long-term) performance doesn't justify investing in ex-US, then what does?
John Bogle makes some good arguments about not investing in ex-US:

https://www.youtube.com/watch?v=hvgptl5-Kcc

https://www.youtube.com/watch?v=nWI64TKU64o#t=1h06m17s

https://www.youtube.com/watch?v=vMj4sHjF_kA#t=02m43s

https://www.morningstar.com/videos/3556 ... rseas.html

https://www.morningstar.com/videos/7186 ... sting.html
Bogle is a smart guy with a lot of integrity.

He’s also wrong some times, and this subject is one of those times.
"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 rkhusky » Tue Aug 14, 2018 10:05 am

willthrill81 wrote:
Tue Aug 14, 2018 9:41 am
I think that OP's mindset is an excellent example of a major problem with 'buy-and-hold': it's very difficult for many people to implement it. The urge to do something after years of underperformance compared to another strategy is just too great for many.
Those folks should invest in a target date or other type of balanced fund.

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

Post by triceratop » Tue Aug 14, 2018 10:05 am

Heads up: I just bought $1k of International Small-cap. For a young investor just starting out this "disaster" looks more like an opportunity.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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

Post by willthrill81 » Tue Aug 14, 2018 10:08 am

rkhusky wrote:
Tue Aug 14, 2018 10:05 am
willthrill81 wrote:
Tue Aug 14, 2018 9:41 am
I think that OP's mindset is an excellent example of a major problem with 'buy-and-hold': it's very difficult for many people to implement it. The urge to do something after years of underperformance compared to another strategy is just too great for many.
Those folks should invest in a target date or other type of balanced fund.
I think that's a very good option for many, perhaps even most. But they're still going to see a lot of volatility in performance, and this is hard for many to stomach.

The 'problem' with buy-and-hold is that it undermines the basic human tendency to chase after performance. Some have a very hard time overcoming this; I'm not convinced that everyone can.
“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 Nate79 » Tue Aug 14, 2018 10:11 am

vineviz wrote:
Tue Aug 14, 2018 10:03 am
jeffyscott wrote:
Tue Aug 14, 2018 8:56 am
I think rather than arbitrarily looking at the most recent 10 years, the sensible way to compare is to look from a market high to another high or from a low to a low. From the high in 2000 to the high in 2007 international won, same for the 2002 low to the 2009 low. All the outperformance of US is only due to the last 5 years or so.
Or we could look at all the data we have from the oldest international equity index.

Image

International stocks outperformed US stocks in 3 of the 4 full decades for which MSCI has tracked it.

Will the recent underperformance be reversed? Hard to say for sure, but the odds sure look good .
Any chance you have the data for every available 10 year period (vs arbitrarily using decade data)?

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

Post by ignition » Tue Aug 14, 2018 10:16 am

willthrill81 wrote:
Tue Aug 14, 2018 9:44 am
TIAX wrote:
Tue Aug 14, 2018 9:35 am
Call_Me_Op wrote:
Tue Aug 14, 2018 6:04 am
The OP is suffering from a severe case of Recency Bias.
Please tell me there's a cure.
Not really. You can examine historic periods until the cows come home, but when you see that your chosen investments have fallen significantly behind another major market metric (e.g. S&P 500), it's exceedingly difficult for many people to sit on their hands. The same goes for professional money managers.

Buy-and-hold works for some, but it's not for everyone.
Yes, even I am tempted to go 100% US and I live in Europe! It does make it a little better when I look at the global returns yearbook and I see that Europe outperformed USA from 1968 to 2017.

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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 10:17 am

willthrill81 wrote:
Tue Aug 14, 2018 10:08 am
rkhusky wrote:
Tue Aug 14, 2018 10:05 am
willthrill81 wrote:
Tue Aug 14, 2018 9:41 am
I think that OP's mindset is an excellent example of a major problem with 'buy-and-hold': it's very difficult for many people to implement it. The urge to do something after years of underperformance compared to another strategy is just too great for many.
Those folks should invest in a target date or other type of balanced fund.
I think that's a very good option for many, perhaps even most. But they're still going to see a lot of volatility in performance, and this is hard for many to stomach.

The 'problem' with buy-and-hold is that it undermines the basic human tendency to chase after performance. Some have a very hard time overcoming this; I'm not convinced that everyone can.
+1 - Excellent points.
"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 vineviz » Tue Aug 14, 2018 10:19 am

Nate79 wrote:
Tue Aug 14, 2018 10:11 am
Any chance you have the data for every available 10 year period (vs arbitrarily using decade data)?
The last time I checked, decades are fairly commonly defined the way I used them.

Which arbitrary period do you prefer?
"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 abuss368 » Tue Aug 14, 2018 10:21 am

I would have invested the $2 million in Apple when the split adjusted price was 0.39 a share! That would be $410 MILLION today! Imagine living off that yield.

Hindsight is a beautiful thing.
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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 10:22 am

I would also expect based on current values that there may be better upside with international.
Last edited by abuss368 on Tue Aug 14, 2018 1:19 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 3funder » Tue Aug 14, 2018 10:24 am

I believe Buffet once said (keep context in mind) something about price having a substantial impact on forward expected returns. This is not a plug for market timing; however, you'd be wise to keep this in mind. Diversifying globally takes the guesswork and faith out of the equation. If international equities gain 50% over the next year, you'll be singing a different tune re: past returns. Why? Because you're human.
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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 10:24 am

willthrill81 wrote:
Tue Aug 14, 2018 9:41 am
I think that OP's mindset is an excellent example of a major problem with 'buy-and-hold': it's very difficult for many people to implement it. The urge to do something after years of underperformance compared to another strategy is just too great for many.
Indeed. Avoiding cognitive errors is extremely difficult, even when we are intellectually aware of them.

Having studied and worked with some very successful investors, I'm convinced that an inability to be rattled by informational noise and a health dose of luck are the two primary characteristics.
"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 mike_slc » Tue Aug 14, 2018 10:25 am

Lots of risk in international - Brexit in March, potential Euro collapse, China finally going the way of the rest of the Asian economies...

Luckily as an investor you are compensated for risk (usually). That's what makes it investing. :D

I will say fundamentally I don't believe in most other countries' ability to allow most of the benefits of risk taking to accrue to capital. Returns get diverted to labor, government, the social contract, or just plain old graft. In the US it's all about the capital. That's why I chose 25% and even there I hold my nose when I have to buy.

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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 10:28 am

Abe wrote:
Tue Aug 14, 2018 9:40 am
HuckFinn, I liked your monkey story. :happy
Thanks Abe, I cannot tell you how many times that silly story pops up into my head through so many variable situations in life.

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

Post by Nate79 » Tue Aug 14, 2018 10:30 am

vineviz wrote:
Tue Aug 14, 2018 10:19 am
Nate79 wrote:
Tue Aug 14, 2018 10:11 am
Any chance you have the data for every available 10 year period (vs arbitrarily using decade data)?
The last time I checked, decades are fairly commonly defined the way I used them.

Which arbitrary period do you prefer?
Every 10 year period from fund inception.

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

Post by retiringwhen » Tue Aug 14, 2018 10:33 am

vineviz wrote:
Tue Aug 14, 2018 10:04 am
He’s also wrong some times, and this subject is one of those times.
Actually, I hate it when folks say that he is wrong. His statements are factually correct and reasonably well argued that the risk reward is not so clear. My analogy it is like asking Woody Hayes why Ohio State (possibly apocryphal) almost never threw a forward pass. His response "Three things can happen when you throw the ball, and two of them are bad."

Bogle has consistently said the following with different emphases depending on the interview, paper or book.

1.) (get a first down) Positively, that International provided diversification and lower correlation with US Stocks with the possibility of evening returns over the long-term, as seen in several decade long runs over the past 40 years.
2.) (interception) Negatively, Legal, regulatory and Governmental risks are higher outside of the US. This is objectively true over the past 120 years, for the future YMMV.
3.) (fumble/dropped pass) - Even if the returns are solid, currency exchange rates can take it all back.

In the end he says, you can try to diversify but be realistic about what you'll get (sometimes you'll get a touchdown, sometimes you'll lose the ball). In the end you are taking additional risks (or can be said different risks) and you MAY not get a return for it. His position continues to be fully 100% defensible even 25 years after I first heard the argument (1993's Bogle on Mutual Funds.)

https://quoteinvestigator.com/2011/10/04/pass-3-things/

Full disclosure: I am 20% of equities in VTIAX and variants.
Last edited by retiringwhen on Tue Aug 14, 2018 11:04 am, 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 3funder » Tue Aug 14, 2018 10:34 am

FRANK2009 wrote:
Tue Aug 14, 2018 9:02 am
Since investing by looking at the past isn't the best practice, I say 50% US equity/50% international. Mix in bonds in an amount that allows you to sleep well, and you're done. Stay the course as best you can. Yes I'm a simple man...
+1.

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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 10:38 am

mike_slc wrote:
Tue Aug 14, 2018 10:25 am
Lots of risk in international - Brexit in March, potential Euro collapse, China finally going the way of the rest of the Asian economies...

Luckily as an investor you are compensated for risk (usually). That's what makes it investing. :D

I will say fundamentally I don't believe in most other countries' ability to allow most of the benefits of risk taking to accrue to capital. Returns get diverted to labor, government, the social contract, or just plain old graft. In the US it's all about the capital. That's why I chose 25% and even there I hold my nose when I have to buy.
Lots of risk domestically too: trade wars, potential currency war, elections this fall. Having an excessive allocation to 40% of the global economy which is tied up in one country is taking a risk in and of itself. I have 35% in international with a specific emphasis on developed markets. That is still overweight US but it provides substantial protection.

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

Post by alter » Tue Aug 14, 2018 10:40 am

I think the moral of this thread is to stay the course.... unless you start losing, in that case, sell low and buy high.

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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 10:43 am

3funder wrote:
Tue Aug 14, 2018 10:34 am
FRANK2009 wrote:
Tue Aug 14, 2018 9:02 am
Since investing by looking at the past isn't the best practice, I say 50% US equity/50% international. Mix in bonds in an amount that allows you to sleep well, and you're done. Stay the course as best you can. Yes I'm a simple man...
+1.
+2. You need to take into account the fundamental characteristics of asset classes. There is no inherent reason Exxon has to be better than Shell or P&G has to be better than Unilever. The basic concept of indexing says I should own both.

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

Post by Leif » Tue Aug 14, 2018 10:48 am

I felt the same way about commodities. I started out with about 5% of the portfolio. Over the years it dropped about 70%. I finally dumped it. I figured it could reverse or not, but 5% (at that time 2%) will not make much difference in any case.

International is different. International is 50% of the world equity. Normally Bogleheads believe in diversification. But for some Bogleheads that idea ends at the water's edge. I will stay the course with international.
Last edited by Leif on Tue Aug 14, 2018 11:06 am, 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 ReformedSpender » Tue Aug 14, 2018 10:59 am

abuss368 wrote:
Tue Aug 14, 2018 10:22 am
I would also expect based on current values that their may be better upside with international.
Agreed.

VTIAX price/earning ratio of 14.1 compared to VTSAX at 20.8. Just saying.

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

Post by DetroitRick » Tue Aug 14, 2018 10:59 am

I don't mumble those sayings. Or any sayings. Or care what gurus think. My allocation is based on my needs and on general long-term expectations. By picking your timeframe, you can absolutely prove or disprove ANY asset allocation or the inclusion/exclusion of ANY possible investment segment. No math necessary. The only thing that would cause me, at this point, to totally flee international would be a belief in permanent economic doom for every major non-US region (that is a pretty broad swath of doom, by the way). Not likely to happen, and if it did, investing would be the least of my worries anyway. I'll tweak allocations, and change them as my needs change, but there is no likely circumstance that would cause me to completely exit U.S. equities, non-U.S. equities or fixed income. So I don't regard recent poor international market performance as anything all that concerning.

The problem is in prediction. Because international markets have provided both volatility reduction and superior earnings over my lifetime with my particular investments. They clearly have. Will they in the future? Who knows? Which ones? - I don't know for sure. But I don't look at Europe, or major Asian markets, or most emerging markets, and predict permanent economic failure. So bad stretches simply don't motivate me to pull out. Or even reduce exposure. At best, recent trends in international markets are pushing me towards a mild increase in position.

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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 11:01 am

Nate79 wrote:
Tue Aug 14, 2018 10:30 am
vineviz wrote:
Tue Aug 14, 2018 10:19 am
Nate79 wrote:
Tue Aug 14, 2018 10:11 am
Any chance you have the data for every available 10 year period (vs arbitrarily using decade data)?
The last time I checked, decades are fairly commonly defined the way I used them.

Which arbitrary period do you prefer?
Every 10 year period from fund inception.
It's an index, not a fund, and the chart I posted does include every 10 year period from the inception of the index (which IIRC was December 31, 1969). I'll update it on January 1, 2020 when the current 10 year period is complete.
"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 H-Town » Tue Aug 14, 2018 11:02 am

OP,

When it comes to investing, the biggest enemies is your thyself. It's too easy to look at past performance and chase the hot performers. Selling losers and buying winners is the second worst thing you can do to your portfolio.

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

Post by CurlyDave » Tue Aug 14, 2018 11:04 am

CFM300 wrote:
Tue Aug 14, 2018 2:09 am

...He should have invested 100% his equity portion in QQQ (Nasdaq 100). Then he would have been more than $2.5 million ahead.
Well, I am a guy who did very close to that 5 years ago. There were only two problems:

1. I didn't have $2M to put in, and

2. I didn't do it sooner.
Valuethinker wrote:
Tue Aug 14, 2018 3:15 am

...This is a classic bull market post. The US has done well, therefore it will always outperform.

Note the arbitrary choice of period. That's how you data mine.

And note the weighting drift. That is why we rebalance.
Well, when I was growing up my uncle always used to say: "Make hay while the sun shines." The sun has been shining in the US market for quite a while.

I know, it sounds like market timing, and maybe it is. And, I have had much derision for promoting it. But the results speak for themselves.

Recognizing when we are in a bull market and taking advantage of it sometimes works.

I think one has to venture into the board-forbidden area of politics to be successful, but like the song says: "...You don't have to be a weatherman to know which way the wind is blowing..." By recognizing that there is a business cycle and investing in ETFs that will take advantage of it, I can and have done better than straight index investing with a constant AA. Even if I suffer a 25% drop tomorrow, I will be better off than keeping a constant AA.
Last edited by CurlyDave on Tue Aug 14, 2018 11:20 am, edited 1 time in total.

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

Post by nedsaid » Tue Aug 14, 2018 11:04 am

DetroitRick wrote:
Tue Aug 14, 2018 10:59 am
I don't mumble those sayings. Or any sayings. Or care what gurus think. My allocation is based on my needs and on general long-term expectations. By picking your timeframe, you can absolutely prove or disprove ANY asset allocation or the inclusion/exclusion of ANY possible investment segment. No math necessary. The only thing that would cause me, at this point, to totally flee international would be a belief in permanent economic doom for every major non-US region (that is a pretty broad swath of doom, by the way). Not likely to happen, and if it did, investing would be the least of my worries anyway. I'll tweak allocations, and change them as my needs change, but there is no likely circumstance that would cause me to completely exit U.S. equities, non-U.S. equities or fixed income. So I don't regard recent poor international market performance as anything all that concerning.

The problem is in prediction. Because international markets have provided both volatility reduction and superior earnings over my lifetime with my particular investments. They clearly have. Will they in the future? Who knows? Which ones? - I don't know for sure. But I don't look at Europe, or major Asian markets, or most emerging markets, and predict permanent economic failure. So bad stretches simply don't motivate me to pull out. Or even reduce exposure. At best, recent trends in international markets are pushing me towards a mild increase in position.
This is an excellent post. Thank you.
A fool and his money are good for business.

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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 11:06 am

retiringwhen wrote:
Tue Aug 14, 2018 10:33 am
vineviz wrote:
Tue Aug 14, 2018 10:04 am
He’s also wrong some times, and this subject is one of those times.
His statements are factually correct and reasonably well argued that the risk reward is not so clear.
I disagree on both counts, obviously.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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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 11:30 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!
One of my favorite quotes comes from the What experts say about "Stay-the-Course" thread:

"We can become a successful investor the same way I became a successful sailor -- listen to experts and then do what they say".
-- Taylor Larimore
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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

Post by Oddball » Tue Aug 14, 2018 11:35 am

randomguy wrote:
Tue Aug 14, 2018 1:30 am
https://www.portfoliovisualizer.com/bac ... alBond3=40


US investing has been a friggen disaster. International investor has 3.2 million. US investor has 2.6 million. That is 600k thousand dollars simply by choosing not to buy US stocks. I know people think I should be buying US stocks but screw that. I am going 100% international:)
I will say the Portfolio Visualizer pretty cool. When I picked out my AA I decided on 50% US stock, 25% International, and 25% bonds which seems like a pretty common AA. So I changed Portfolio B from 40/20/40 to my AA of 50/25/25 and then looked at how it performed against the other 2 portfolio RandomGuy had put in. Port A = 60% US/ 40% Bonds and Port C = 60% ex-US / 40% Bonds.

For every timeframe moving backwards Port A won, even with 15% less stocks than my AA. Port C was always behind the other 2.
2008 - 2018: Port A CAGR = 7.18% Port B = 6.18%
1998 - 2018: Port A CAGR = 6.82% Port B = 6.73%
1988 - 2018: Port A CAGR = 9.09% Port B = 8.48%
1978 - 2018: Port A CAGR = 8.87% Port B = 8.51%

I am going to keep chugging along with 50/25/25 because as many have said no one knows what will happen in the future, but it is pretty interesting given the extra 15% in stocks that it has still lost out over 10, 20, 30 and 40 year time frames compared to 60% US / 40% bonds. I did look at 5 year changes as well and the only one that 50/25/25 beat out against 60% US/40 was 2003-2018, all the other timepoints the 60/40 won out.

It isn't just Recency Bias.

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

Post by visualguy » Tue Aug 14, 2018 11:36 am

mike_slc wrote:
Tue Aug 14, 2018 10:25 am
Lots of risk in international - Brexit in March, potential Euro collapse, China finally going the way of the rest of the Asian economies...

Luckily as an investor you are compensated for risk (usually). That's what makes it investing. :D

I will say fundamentally I don't believe in most other countries' ability to allow most of the benefits of risk taking to accrue to capital. Returns get diverted to labor, government, the social contract, or just plain old graft. In the US it's all about the capital. That's why I chose 25% and even there I hold my nose when I have to buy.
Right, but why buy if you need to hold your nose? Do you think that the risk in other countries will start being rewarded from the shareholder perspective even though it hasn't in the past? There's no indication of such a transformation in their politics, economies, and stock markets. Seems like truly a long shot.

kosomoto
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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 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.

kosomoto
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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 11:39 am

Oddball wrote:
Tue Aug 14, 2018 11:35 am
randomguy wrote:
Tue Aug 14, 2018 1:30 am
https://www.portfoliovisualizer.com/bac ... alBond3=40


US investing has been a friggen disaster. International investor has 3.2 million. US investor has 2.6 million. That is 600k thousand dollars simply by choosing not to buy US stocks. I know people think I should be buying US stocks but screw that. I am going 100% international:)
I will say the Portfolio Visualizer pretty cool. When I picked out my AA I decided on 50% US stock, 25% International, and 25% bonds which seems like a pretty common AA. So I changed Portfolio B from 40/20/40 to my AA of 50/25/25 and then looked at how it performed against the other 2 portfolio RandomGuy had put in. Port A = 60% US/ 40% Bonds and Port C = 60% ex-US / 40% Bonds.

For every timeframe moving backwards Port A won, even with 15% less stocks than my AA. Port C was always behind the other 2.
2008 - 2018: Port A CAGR = 7.18% Port B = 6.18%
1998 - 2018: Port A CAGR = 6.82% Port B = 6.73%
1988 - 2018: Port A CAGR = 9.09% Port B = 8.48%
1978 - 2018: Port A CAGR = 8.87% Port B = 8.51%

I am going to keep chugging along with 50/25/25 because as many have said no one knows what will happen in the future, but it is pretty interesting given the extra 15% in stocks that it has still lost out over 10, 20, 30 and 40 year time frames compared to 60% US / 40% bonds. I did look at 5 year changes as well and the only one that 50/25/25 beat out against 60% US/40 was 2003-2018, all the other timepoints the 60/40 won out.

It isn't just Recency Bias.
Exactly, people need to stop saying international underperformance is a recent thing only. Especially if you use funds you can actually invest in vs. theoretical indexes nobody could actually buy.

michaeljc70
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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 11:42 am

Bonds have been underperforming lately. Are you cutting back on those too? Perhaps you should consider buying only the top performing asset classes in the last 10 years and report back in 10 years how you did.

wolf359
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by wolf359 » Tue Aug 14, 2018 11:49 am

This is why investing is hard. You need to understand what you're investing in, and why. If you do not, you will not stay the course. You will get out of the individual components at the wrong time, and you will underperform the indices. It's not the specific asset allocation that has the greatest impact on portfolio performance. It's investor behavior.

If you're going to pick and choose among the individual components, then the 3 Fund portfolio is not for you. You could:
- Pick the target date fund, so all you get is a single performance number. Leave it up to someone else to manage your portfolio.
- Use a robo advisor. Let them worry about it.
- Use a single fund, like Total World or Total US Stock Market.

Some considerations:
- The last ten years has been a US bull market. The US recovered from the Great Recession faster than Europe or Asia, and has mostly an upward trajectory. I don't think I would predict that the US will continue to outperform over the next 10 years. International valuations are low relative to the US. It may make sense to own some international, because it has further to climb.
- The performance numbers change significantly if you are in accumulation mode, and are adding investments every month. The past performance chart only shows the return over the last 10 years, assuming no new money is added. Try rerunning the numbers using Portfolio Visualizer, including contributions at the level that you would make them. In my case, US still wins, but the gap is much closer. An all-equity portfolio of US/International of 100/0, 80/20, or 70/30 will have a different winner depending on when you stop. I believe this is because International tends to fluctuate more, providing a greater benefit for dollar cost averaging.
- 10 years is really a long if you go through time the long way around (by living it.) However, it's not so long when looking at past performance. There are results for 5, 10, 20 year stretches and more. People invest in stocks because they're looking at 30 year timeframes. You can't stop and change things at the 10 year mark -- if you do, you won't get the 30 year results. If you ran the same study from 1998-2008, you'd reach the conclusion that US stocks were a disaster, due to international's outperformance in 2007-2008.
- While you're at it, look at the relative performance of bonds. Spoiler: We're in a 10 year bull market. Bonds stink even worst than international. Have you gotten rid of your bonds already?

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

Post by HEDGEFUNDIE » Tue Aug 14, 2018 12:00 pm

wolf359 wrote:
Tue Aug 14, 2018 11:49 am

- While you're at it, look at the relative performance of bonds. Spoiler: We're in a 10 year bull market. Bonds stink even worst than international. Have you gotten rid of your bonds already?
This is not a good comparison. People hold equities for growth, bonds for safety. When you look back at the performance of VTIAX over the past 10 years and see that it's only returned 3% CAGR (same as bonds but much higher risk) I think people have a right to be concerned.

The sophisticated answer here is to hold International, but to hedge out some of the currency risk. I.e. hold half VTIAX and half DBEF.

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

Post by BogleMelon » Tue Aug 14, 2018 12:03 pm

michaeljc70 wrote:
Tue Aug 14, 2018 11:42 am
Bonds have been underperforming lately. Are you cutting back on those too? Perhaps you should consider buying only the top performing asset classes in the last 10 years and report back in 10 years how you did.
+1
OP: How about buying Bitcoins? :twisted:
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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 » Tue Aug 14, 2018 12:04 pm

vineviz wrote:
Tue Aug 14, 2018 10:04 am
oldzey wrote:
Tue Aug 14, 2018 10:02 am
visualguy wrote:
Tue Aug 14, 2018 9:51 am
Oldzey - exactly, this is not just a 10 year phenomenon. I think many here don't realize the degree of underperformance of ex-US, even in the long term.

If past (including long-term) performance doesn't justify investing in ex-US, then what does?
John Bogle makes some good arguments about not investing in ex-US:

https://www.youtube.com/watch?v=hvgptl5-Kcc

https://www.youtube.com/watch?v=nWI64TKU64o#t=1h06m17s

https://www.youtube.com/watch?v=vMj4sHjF_kA#t=02m43s

https://www.morningstar.com/videos/3556 ... rseas.html

https://www.morningstar.com/videos/7186 ... sting.html
Bogle is a smart guy with a lot of integrity.

He’s also wrong some times, and this subject is one of those times.
*mic drop*
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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