"Why Jack Bogle Doesn't Own Non-U.S. Stocks"

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Robert T
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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by Robert T » Tue Oct 16, 2018 10:19 pm

.
04/1998 to 9/2018 (since inception of DFA Emerging Markets Value) - over the past 20+ years

Annualized return/ Sharpe Ratio

..9.7% / 0.47 = DFA US Small Value
..9.2% / 0.49 = DFA International Small Value
10.1% / 0.44 = DFA Emerging Markets Value
10.1% / 0.52 = 50:37:13 DFA US Small Value:DFA Intl Small Value:DFA EM Value

..7.1% / 0.41 = Vanguard [US] Total Stock Market

https://www.portfoliovisualizer.com/bac ... ion3_3=100
https://www.portfoliovisualizer.com/bac ... ion4_2=100

A globally diversified smaller cap value tilted portfolio has not been terrible.

Robert
.

jibantik
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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by jibantik » Tue Oct 16, 2018 10:41 pm

venkman wrote:
Tue Oct 16, 2018 9:50 pm
"Nobody knows nothin'. Except when it comes to whether or not you should own international stocks."
+1
lostdog wrote:
Tue Oct 16, 2018 10:01 pm
"Buy the haystack!" except for international...
+2

Go total world sheeple. It is THE boglehead fund.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by jibantik » Tue Oct 16, 2018 10:54 pm

oldzey wrote:
Tue Oct 16, 2018 10:07 pm
Thanks, Taylor!

I always appreciate having a new Jack Bogle video to add to the list:

Why Jack Bogle Doesn't Own Non-U.S. Stocks

Here's Why Jack Bogle Doesn't Like Investing In Foreign Markets

Vanguard Founder Jack Bogle on Mutual Funds, Common Sense Investing and the Stock Market

Jack Bogle on Market Index Funds (2014)

Bogle: Why I Don't Invest Overseas

Why Bogle Doesn't 'Do' International Investing

Jack Bogle consistently makes compelling arguments for NOT investing in ex-US, as a US investor! :beer
But, he makes compelling arguments FOR investing internationally. I mean his whole fundamental philosophy would indicate as much. It's like he pioneered a great investment philosophy and then put an asterisk on it where the asterisk contradicts the whole philosophy.

I am sorry, I've said it before but I will say it again, you CANNOT be a boglehead unless your equity portion has somewhat near market-weight international exposure. I guess we could settle for 20% minimum exposure, as a compromise boglehead threshold, since some people seem to arbitrarily choose that number.

Bogleheads aren't stock pickers, if you want to be a stock picker then become a smart-vestor pro and get your 12% real returns.

WanderingDoc
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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by WanderingDoc » Tue Oct 16, 2018 10:57 pm

cj2018 wrote:
Tue Oct 16, 2018 9:49 pm
WanderingDoc wrote:
Tue Oct 16, 2018 9:36 pm
kadibex1 wrote:
Tue Oct 16, 2018 2:34 pm
bligh wrote:
Tue Oct 16, 2018 2:04 pm
To save everyone the effort of repeating all the back and forth that has happened on the prior threads I will summarize the counter arguments:

1) The future may not look like the past
2) Australia has outperformed the US historically
3) Plenty of good companies outside the US too
4) If you are okay with single country risk - We remind you of Japan
5) Currency risk can also be reframed as currency diversification. If the Dollar can rise against the other currencies, it can also fall.
6) If higher risk has been priced into International stocks you aren't really getting a bad deal.
7) While we are restricting ourselves geographically and politically based on past performance... why not replace 100% US, with say 100% West coast (FANGTA)? Or say companies only from the top 5 or 10 most innovative states historically? Let's go back to active management while we are at it.

Listen, I am no one to disagree with people of Taylor or Jack's stature. But before you go 100% stock make sure you have a good reason to strike out all of the above reasons. Remember those of us who invest internationally usually never say you should "underweight" the US. We are either overweighting the US or holding it at market weight.

Being 100% US isn't bad but it isn't better.
1) The future may not look like the past

Response: funnily enough they said the same thing after the crash of 1929 and America has done just fine over the last almost 90 years

2) Australia has outperformed the US historically

Response: provide some links to back-up your statement

3) Plenty of good companies outside the US too.

Response: yes, companies which are not subject to U.S. laws nor regulations. All U.S. publicly traded companies are at the mercy of the SEC.

4) If you are okay with single country risk - We remind you of Japan

Response: see my response in paragraph 8)

5) Currency risk can also be reframed as currency diversification. If the Dollar can rise against the other currencies, it can also fall.

Response: if currency hedging is what you’re talking about than one can simply do U.S. commodities since they’re invariably tied to the U.S. dollar. When the dollar goes north commodities go south and vice versa. You also get additional benefit of inflation hedging with commodities.

6) If higher risk has been priced into International stocks you aren't really getting a bad deal.

Response: is the risk really worth the reward? I think not. You’re taking enough risk with U.S. stocks

8) While we are restricting ourselves geographically and politically based on past performance... why not replace 100% US, with say 100% West coast (FANGTA)? Or say companies only from the top 5 or 10 most innovative states historically? Let's go back to active management while we are at it.

Response: cause there is a real resiliency about the U.S. We’ll come close to the edge of falling off the cliff only to completely rebound

In conclusion, if you folks are content with following the herd about international investing without doing any investigation, then by all mean. Better you than me.

I’ll stick with the Vanguard Balanced Index fund.
Empires and currencies don't last forever. Both fall, every. single. time. Don't be naive.
It might fall but you as an individual most likely won’t outlive the lifespan of the current dominate nation so if I were you I wouldn’t worry about this lol.

FWIW, US has really just dominated over the last 100 years or so economically and has frankly been a successful social experiment given being American represents neither race or ethnicity but rather a belief in private properties, rule of laws, freedom of speech and individual liberty.

i stand with Jack on being 100% US equities and im 28yr with 6-figure investable portfolio living in a liberal west coast state :)
The fact that U S. has been the dominant empire for the last hundred years should tell you that it's much less likely that they will be the dominant power the next 100 years.

I'm slowly working my way into international real estate holdings, and tackling the hard Asian languages one at a time. Not out of fear, out of excitement and interest and for diversification/hedge.
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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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by visualguy » Tue Oct 16, 2018 10:58 pm

bondsr4me wrote:
Tue Oct 16, 2018 2:47 pm
I'm with Jack on this one all the way.
+1

Can't bring myself to invest in something that has had such poor performance over the long run.

There's no credible doom-and-gloom scenario for the US in my lifetime, and definitely not one where the US market collapses, while foreign ones don't.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by WanderingDoc » Tue Oct 16, 2018 10:59 pm

jibantik wrote:
Tue Oct 16, 2018 10:54 pm
oldzey wrote:
Tue Oct 16, 2018 10:07 pm
Thanks, Taylor!

I always appreciate having a new Jack Bogle video to add to the list:

Why Jack Bogle Doesn't Own Non-U.S. Stocks

Here's Why Jack Bogle Doesn't Like Investing In Foreign Markets

Vanguard Founder Jack Bogle on Mutual Funds, Common Sense Investing and the Stock Market

Jack Bogle on Market Index Funds (2014)

Bogle: Why I Don't Invest Overseas

Why Bogle Doesn't 'Do' International Investing

Jack Bogle consistently makes compelling arguments for NOT investing in ex-US, as a US investor! :beer
But, he makes compelling arguments FOR investing internationally. I mean his whole fundamental philosophy would indicate as much. It's like he pioneered a great investment philosophy and then put an asterisk on it where the asterisk contradicts the whole philosophy.

I am sorry, I've said it before but I will say it again, you CANNOT be a boglehead unless your equity portion has somewhat near market-weight international exposure. I guess we could settle for 20% minimum exposure, as a compromise boglehead threshold, since some people seem to arbitrarily choose that number.

Bogleheads aren't stock pickers, if you want to be a stock picker then become a smart-vestor pro and get your 12% real returns.
12-18% returns. Dave Ramsey told me so.
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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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by WanderingDoc » Tue Oct 16, 2018 11:07 pm

Robert T wrote:
Tue Oct 16, 2018 10:19 pm
.
04/1998 to 9/2018 (since inception of DFA Emerging Markets Value) - over the past 20+ years

Annualized return/ Sharpe Ratio

..9.7% / 0.47 = DFA US Small Value
..9.2% / 0.49 = DFA International Small Value
10.1% / 0.44 = DFA Emerging Markets Value
10.1% / 0.52 = 50:37:13 DFA US Small Value:DFA Intl Small Value:DFA EM Value

..7.1% / 0.41 = Vanguard [US] Total Stock Market

https://www.portfoliovisualizer.com/bac ... ion3_3=100
https://www.portfoliovisualizer.com/bac ... ion4_2=100

A globally diversified smaller cap value tilted portfolio has not been terrible.

Robert
.
Fascinating. I have never heard of DFA. If I wanted to replicate this in a taxable account, do I have to use DFA or is there another option? My only "brokerage" is with Vanguard.
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

Elysium
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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by Elysium » Tue Oct 16, 2018 11:10 pm

Robert T wrote:
Tue Oct 16, 2018 10:19 pm
.
04/1998 to 9/2018 (since inception of DFA Emerging Markets Value) - over the past 20+ years

Annualized return/ Sharpe Ratio

..9.7% / 0.47 = DFA US Small Value
..9.2% / 0.49 = DFA International Small Value
10.1% / 0.44 = DFA Emerging Markets Value
10.1% / 0.52 = 50:37:13 DFA US Small Value:DFA Intl Small Value:DFA EM Value

..7.1% / 0.41 = Vanguard [US] Total Stock Market

https://www.portfoliovisualizer.com/bac ... ion3_3=100
https://www.portfoliovisualizer.com/bac ... ion4_2=100

A globally diversified smaller cap value tilted portfolio has not been terrible.

Robert
.
This is of course very time dependent. I can attest to some personal experience as someone who is invested in these DFA funds through retirement plans since late 2004. My returns were initially better than US TSM from these funds, but since the recovery of 2009, US has just outpaced everything. Perhaps they will come back??? no idea. Anyway, I did not receive those returns from 1998, and cannot go back in time to get it, so here it is from 2005 the first full year I have had them. One can only hope future will be better.

DFSVX 8.03% 0.43
DISVX 7.40% 0.42
DFEVX 7.95% 0.39

VTSMX 8.96% 0.60

Actually, I owned DFFVX (minor diff), DFA ISV until 2013 then DFA Intl Small as access to ISV changed (small diff), and DFEVX for the whole time.

Full disclosure: These 3 funds are only about 30% of my portfolio, and while I did not own US TSM, I did own the actively managed Primecap / Capital Opprtunity funds during same period and they performed very well. Future, no idea.
Last edited by Elysium on Tue Oct 16, 2018 11:19 pm, edited 2 times in total.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by IcedDog » Tue Oct 16, 2018 11:15 pm

jibantik wrote:
Tue Oct 16, 2018 10:54 pm
I am sorry, I've said it before but I will say it again, you CANNOT be a boglehead unless your equity portion has somewhat near market-weight international exposure. I guess we could settle for 20% minimum exposure, as a compromise boglehead threshold, since some people seem to arbitrarily choose that number.
"a compromise boglehead threshold" :mrgreen: :beer

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by tk1978 » Tue Oct 16, 2018 11:27 pm

As a US citizen born abroad who spent well over a half of his life in Europe, I find the general attitude in this thread somewhat disturbing. Perhaps I shouldn't be surprised given that 64% of the US population doesn't own a passport...

I have 20% of my assets in international + 5% in emerging markets. Wil I be better off in 30 years than if I were 100% US? I don't know, but I think so. It seems like a very Boglehead-y thing to do.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by CyclingDuo » Wed Oct 17, 2018 12:18 am

tk1978 wrote:
Tue Oct 16, 2018 11:27 pm
As a US citizen born abroad who spent well over a half of his life in Europe, I find the general attitude in this thread somewhat disturbing. Perhaps I shouldn't be surprised given that 64% of the US population doesn't own a passport...

I have 20% of my assets in international + 5% in emerging markets. Wil I be better off in 30 years than if I were 100% US? I don't know, but I think so. It seems like a very Boglehead-y thing to do.
:beer :moneybag
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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by oldzey » Wed Oct 17, 2018 12:48 am

OK, so if we're using readily-purchasable total market Vanguard index funds from the earliest comparable inception date:

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 10/16/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,161 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $27,308 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image

Obviously no guarantees.
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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by permport » Wed Oct 17, 2018 2:02 am

Buy the world and move on with more important things in your life.

It should also be noted that the whole international debate is only something a small part of the world's investors even bother with really discussing. Any investor outside of the U.S. (and of course the majority of people are outside) doesn't debate this at all. It's only relevant to U.S. citizens because the size of the U.S. markets relative to the world makes non-global investing tenable. The rest of us don't bother with this rigmarole and have long since moved on. :D

Buy the global haystack and just forget about it, my friends. :beer
Buy right and hold tight.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by visualguy » Wed Oct 17, 2018 2:11 am

permport wrote:
Wed Oct 17, 2018 2:02 am
Buy the global haystack and just forget about it, my friends. :beer
Can't afford it - I need a decent return on my money, which ex-US hasn't been able to provide over the long run. US bonds have provided similar return without the crazy volatility.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by permport » Wed Oct 17, 2018 2:24 am

Driving by looking in the rear view mirror. :D
Buy right and hold tight.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by visualguy » Wed Oct 17, 2018 2:38 am

permport wrote:
Wed Oct 17, 2018 2:24 am
Driving by looking in the rear view mirror. :D
That's all we have when studying the stock market. Betting that something that didn't work in the long run in the past will suddenly work for no apparent reason in the future is not a bet that I'm comfortable with.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by HongKonger » Wed Oct 17, 2018 2:41 am

tk1978 wrote:
Tue Oct 16, 2018 11:27 pm
As a US citizen born abroad who spent well over a half of his life in Europe, I find the general attitude in this thread somewhat disturbing. Perhaps I shouldn't be surprised given that 64% of the US population doesn't own a passport...

I have 20% of my assets in international + 5% in emerging markets. Wil I be better off in 30 years than if I were 100% US? I don't know, but I think so. It seems like a very Boglehead-y thing to do.
You'll get used to it. I think only Trump's Facebook page has more US exceptionalism, lol.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by permport » Wed Oct 17, 2018 2:51 am

visualguy wrote:
Wed Oct 17, 2018 2:38 am
permport wrote:
Wed Oct 17, 2018 2:24 am
Driving by looking in the rear view mirror. :D
That's all we have when studying the stock market. Betting that something that didn't work in the long run in the past will suddenly work for no apparent reason in the future is not a bet that I'm comfortable with.
Diversifying between domestic and international is the opposite of a bet.

Buying U.S. and ignoring international is making a bet.
Buy right and hold tight.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by visualguy » Wed Oct 17, 2018 3:14 am

permport wrote:
Wed Oct 17, 2018 2:51 am
visualguy wrote:
Wed Oct 17, 2018 2:38 am
permport wrote:
Wed Oct 17, 2018 2:24 am
Driving by looking in the rear view mirror. :D
That's all we have when studying the stock market. Betting that something that didn't work in the long run in the past will suddenly work for no apparent reason in the future is not a bet that I'm comfortable with.
Diversifying between domestic and international is the opposite of a bet.

Buying U.S. and ignoring international is making a bet.
It's a bet either way. You're betting on a combination of US and ex-US, and I'm betting only on US. You're betting that the relevant period in the future will be different from the past, while I'm betting that it won't. You are making the braver bet because you are betting on a change from long history, and I'm betting that such change won't happen in the time frame that I care about.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by vineviz » Wed Oct 17, 2018 3:26 am

visualguy wrote:
Wed Oct 17, 2018 2:11 am
permport wrote:
Wed Oct 17, 2018 2:02 am
Buy the global haystack and just forget about it, my friends. :beer
Can't afford it - I need a decent return on my money, which ex-US hasn't been able to provide over the long run. US bonds have provided similar return without the crazy volatility.
I have little hope that most US-only investors will ever pay much attention at the actual data, but here it is again anyway.

Image
"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: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by visualguy » Wed Oct 17, 2018 3:38 am

What matters is the long-term return. You can find a decade here and there where ex-US did better, but in the long run it has been a lousy investment - low return with high volatility.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by WanderingDoc » Wed Oct 17, 2018 4:06 am

oldzey wrote:
Wed Oct 17, 2018 12:48 am
OK, so if we're using readily-purchasable total market Vanguard index funds from the earliest comparable inception date:

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 10/16/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,161 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $27,308 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image

Obviously no guarantees.
This chart just urges me to put even more into international. 8-)
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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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by fennewaldaj » Wed Oct 17, 2018 4:37 am

visualguy wrote:
Wed Oct 17, 2018 2:38 am
permport wrote:
Wed Oct 17, 2018 2:24 am
Driving by looking in the rear view mirror. :D
That's all we have when studying the stock market. Betting that something that didn't work in the long run in the past will suddenly work for no apparent reason in the future is not a bet that I'm comfortable with.
And betting that the US will continue to do better when global returns are there for the taking is not a bet I am comfortable with. This seems to be an area where people talk past each other because it reflects a difference in outlook and a difference in how we approach uncertainty.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by indexonlyplease » Wed Oct 17, 2018 4:45 am

I am only 20% international in my 3 fund. But my thinking is how can the Pro's at Vanguard, that know way more than anyone on this blog can be so wrong. Vangaurd believes in market cap in the Target Dated Funds. So with all the research they believe the percent in us/no-us is correct for the investor. Sure they could only go with the 20% non us but they go higher.

I will stilck with my 20%, and maybe will not evern reballance this year and just let everything balance themselves us/no-us. But for my millennial 22 yr old son we went with the Target Dated Fund and the higher % international.

So, how does someone go against Vangurard believing they know more.

At the end of the year before I rebalance I will be asking this question: for someone like me that is retired (also retired early) have my AA set, why would I reballance between the us and non us stock. Can I just let those 2 ride the market. This way they take care of themselves. Yes, I will keep my AA at 50/50 or close to that percent which I feel is all the risk I need.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by vineviz » Wed Oct 17, 2018 5:00 am

visualguy wrote:
Wed Oct 17, 2018 3:38 am
What matters is the long-term return. You can find a decade here and there where ex-US did better, but in the long run it has been a lousy investment - low return with high volatility.
Are you being sarcastic?

A decade here and there?

Seriously?
"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: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by lostdog » Wed Oct 17, 2018 7:29 am

I would go as far as saying the 100% U.S. only crowd are stock pickers making bets on a sector. Based on the boglehead philosophy, they're not truly bogleheads.

In the future Vanguard will change their 60/40 recommendation to world market cap at some point in the next decade. This is a guess of course.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by lostdog » Wed Oct 17, 2018 7:33 am

WanderingDoc wrote:
Wed Oct 17, 2018 4:06 am
oldzey wrote:
Wed Oct 17, 2018 12:48 am
OK, so if we're using readily-purchasable total market Vanguard index funds from the earliest comparable inception date:

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 10/16/2018, if you had invested $10,000 in both funds on 4/30/1996, you would currently have $65,161 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $27,308 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Image

Obviously no guarantees.
This chart just urges me to put even more into international. 8-)
+1. Nalied it!

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by Peculiar_Investor » Wed Oct 17, 2018 7:35 am

lostdog wrote:
Tue Oct 16, 2018 10:01 pm
venkman wrote:
Tue Oct 16, 2018 9:50 pm
"Nobody knows nothin'. Except when it comes to whether or not you should own international stocks."
"Buy the haystack!" except for international...
Best answer ever. Short and concise, as simply as possible but no simpler. I totally agree that everyone should just buy the global haystack.
Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by lostdog » Wed Oct 17, 2018 7:43 am

permport wrote:
Wed Oct 17, 2018 2:02 am
Buy the world and move on with more important things in your life.

It should also be noted that the whole international debate is only something a small part of the world's investors even bother with really discussing. Any investor outside of the U.S. (and of course the majority of people are outside) doesn't debate this at all. It's only relevant to U.S. citizens because the size of the U.S. markets relative to the world makes non-global investing tenable. The rest of us don't bother with this rigmarole and have long since moved on. :D

Buy the global haystack and just forget about it, my friends. :beer
+1

Exactly. It's all you need and it's really that simple. When you get older just pick a decent bond fund.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by Elysium » Wed Oct 17, 2018 7:47 am

vineviz wrote:
Wed Oct 17, 2018 3:26 am
visualguy wrote:
Wed Oct 17, 2018 2:11 am
permport wrote:
Wed Oct 17, 2018 2:02 am
Buy the global haystack and just forget about it, my friends. :beer
Can't afford it - I need a decent return on my money, which ex-US hasn't been able to provide over the long run. US bonds have provided similar return without the crazy volatility.
I have little hope that most US-only investors will ever pay much attention at the actual data, but here it is again anyway.

Image
How much of that is the currency effect and how much is actual returns from foreign stocks? When you do that, you'll find actual equity returns are probably slightly better for US, and what you really are getting is movements in currency. The more I look at international the more I am getting closer to the truth that international investing diversification is a big hoax about getting into currency risk bet, and calling the ramdon currency movements as evidence of diversification.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by tadamsmar » Wed Oct 17, 2018 7:55 am

John Bogle does own non-U.S. stocks.

"He has a very small portion of his equity assets in a few sentimental holdings that happen to be active funds. These include the Vanguard Wellington and Vanguard Wellesley Income Funds."

https://www.investopedia.com/articles/f ... -money.asp

The Vanguard Wellington Fund (VWELX) invests in non-U.S. securities;

"The fund typically invests a limited portion, up to 25%, of its assets in foreign securities. Foreign securities may be traded on U.S. or foreign markets."

"The fund may enter into forward foreign currency exchange contracts, which are types of derivative contracts. A forward foreign currency exchange contract is an agreement to buy or sell a country’s currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date."

https://investor.vanguard.com/mutual-fu ... olio/vwelx

(You have to click on the "strategy and policy" link to get the popup that is quoted above.)

The Vanguard Wellesly Income Fund (VWINX) has these same investment policies:

https://investor.vanguard.com/mutual-fu ... olio/vwinx

"The equity side is mostly in Total Stock Market Index (VTSMX), but I still have a little bit in the Wellington Fund (VWELX), which I’ve been investing in for many decades. I don’t ever want to sever that relationship."

https://www.reuters.com/article/us-colu ... LI20120911


John Bogle has also owned the Vanguard Windsor Fund (VWNDX) and Explorer Fund (VEXPX):

https://www.mymoneyblog.com/jack-bogles ... folio.html

"The fund may invest up to 30% of its assets in foreign securities and may engage in currency transactions with respect to such investments."

"The fund may enter into forward foreign currency exchange contracts, which are a type of derivative. A forward foreign currency exchange contract is an agreement to buy or sell a country’s currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Managers of funds that invest in foreign securities can use these contracts to guard against unfavorable changes in currency exchange rates. These contracts, however, would not prevent the fund’s securities from falling in value during foreign market downswings. Foreign exchange forward contracts subject the fund to counterparty risk, which is the risk of non-performance by the counterparty, potentially resulting in delayed, partial, or even non-payment of amounts due under contract. The fund may also invest in stock futures, stock index futures, and options contracts, which are all types of derivatives."

https://investor.vanguard.com/mutual-fu ... olio/vwndx

"Although the fund typically does not make significant investments in foreign securities, it reserves the right to invest up to 25% of its assets this way, which may subject the fund to country and currency risks."

"The fund may enter into forward foreign currency exchange contracts, which are types of derivative contracts. A forward foreign currency exchange contract is an agreement to buy or sell a country’s currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date. Managers of funds that invest in foreign securities can use these contracts to guard against unfavorable changes in U.S. dollar/foreign currency exchange rates. These contracts, however, would not prevent the fund’s securities from falling in value during foreign market downswings."

https://investor.vanguard.com/mutual-fu ... olio/vexpx

Sources indicate that he has a small investment in non-U.S. stock in 2018. But the record seems to indicate that he had a much larger allocation to some of these Vanguard active funds in the past. However, I am not sure if the investment policy of these funds has always been to hold up to 20%+ non-U.S. securities.

Wellington Fund held Swift International Company in 1934:

https://www.vanguard.com/bogle_site/sp2 ... onbth.html

Not sure if it was a US company. Sources seem to indicate that is was a international spin off of a US company. From what I find, US corporations spin off international companies in order to avoid some US regulations that would apply if they were a single unit.
Last edited by tadamsmar on Wed Oct 17, 2018 9:17 am, edited 1 time in total.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by tibbitts » Wed Oct 17, 2018 7:55 am

columbia wrote:
Tue Oct 16, 2018 7:32 pm
I’m at 25% international....

From the perspective of a US investor, what’s the allure of owning the global cap weight of Europe and Japan? I see a series of demographic issues, which seem unlikely to improve.
All the experts who, back in the '80s, told us Japan would dominate the world economy going forward, were aware of those demographic issues, and apparently found them to be advantages.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by bondsr4me » Wed Oct 17, 2018 7:58 am

visualguy wrote:
Tue Oct 16, 2018 10:58 pm
bondsr4me wrote:
Tue Oct 16, 2018 2:47 pm
I'm with Jack on this one all the way.
+1

Can't bring myself to invest in something that has had such poor performance over the long run.

There's no credible doom-and-gloom scenario for the US in my lifetime, and definitely not one where the US market collapses, while foreign ones don't.
+1

Agree wholeheartedly.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by Valuethinker » Wed Oct 17, 2018 8:01 am

In an Efficient Market, all the (factual & anecdotal) evidence presented here is known.

It is the marginal buyer and seller who set the price in the market.

At the margin, informed buyers and sellers know these factors US vs. international etc.

What do we, here, know that the informed buyer and seller that sets the price not know?

Or are we arguing that the stock market is inefficient? That someone with publicly available information can outperform?

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by harvestbook » Wed Oct 17, 2018 8:09 am

What if Jack Bogle were Japanese and spent his entire investing career there? Would he be 100 percent Japan stocks today? What if he'd lived in the UK and watched its steep fall from the world stage during his lifetime?

Sometimes recency bias has a long arc.

That said, you could do worse than going 100 percent US, such as wasting time debating this topic! Everyone has made up their minds and we are each so brilliant that we know in our hearts we are right. And it's feelings about money that matter most, isn't it?
I'm not smart enough to know, and I can't afford to guess.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by samsdad » Wed Oct 17, 2018 8:15 am

I wonder why the heat is turned on for this topic but not for any other nearly to this extent. I don’t recall the small-value tilters or age-in-bonds folks looking down their noses nearly as much as I see the “globalists” do when this topic comes up every week. I’ve never seen a small-value tilter disparage another’s choice to not tilt as being small-minded (or non-small-minded as it were). I’ve never seen a 100% equities person called a “non-boglehead”. I’ve never seen people call people who rebalance “market-timers” or any other pejorative.

But, every time the “internationalists” meet someone who doesn’t want to transfer wealth to the rest of the world, they deride this decision with ageist remarks about Jack Bogle, or remarks about how “provincial” it is. “Provincial” is a polite way of saying “stupid”.

I’m trying to figure out why. Any thoughts?

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by Hyperborea » Wed Oct 17, 2018 9:08 am

samsdad wrote:
Wed Oct 17, 2018 8:15 am
I wonder why the heat is turned on for this topic but not for any other nearly to this extent. I don’t recall the small-value tilters or age-in-bonds folks looking down their noses nearly as much as I see the “globalists” do when this topic comes up every week. I’ve never seen a small-value tilter disparage another’s choice to not tilt as being small-minded (or non-small-minded as it were). I’ve never seen a 100% equities person called a “non-boglehead”. I’ve never seen people call people who rebalance “market-timers” or any other pejorative.

But, every time the “internationalists” meet someone who doesn’t want to transfer wealth to the rest of the world, they deride this decision with ageist remarks about Jack Bogle, or remarks about how “provincial” it is. “Provincial” is a polite way of saying “stupid”.

I’m trying to figure out why. Any thoughts?
I think you've got it backwards. It's the US only tilters who are vehemently opposed to holding the entire market basket of stocks. This thread and most of the past ones are started by the US only tilters who can't believe that others aren't blindly following St. Jack.
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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by MnD » Wed Oct 17, 2018 9:18 am

samsdad wrote:
Wed Oct 17, 2018 8:15 am
But, every time the “internationalists” meet someone who doesn’t want to transfer wealth to the rest of the world, they deride this decision with ageist remarks about Jack Bogle, or remarks about how “provincial” it is. “Provincial” is a polite way of saying “stupid”.
Fractional owners of any company receive dividends, voting rights and rights to a share of any capital gains when selling which reflect expectations of future cash flows. US shareholder ownership of ex-US companies is largely about US investors capturing a share of the profits of these companies. Posts in this thread which refer to US investors investing in ex-US companies as "foreign aid" and "transfer wealth to the rest of the world" would fall into the quaint and provincial category - not to mention largely wrong.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by cheezit » Wed Oct 17, 2018 9:21 am

willthrill81 wrote:
Tue Oct 16, 2018 8:45 pm
I wonder how many have changed their position as a direct result of this endless U.S./international equities issue. :?: I suspect that I know the answer.
During the last iteration of this thread (the one with "DISASTER" in the title), I ended up reading some of the papers that got linked in the discussion. I ruminated over the points made in the thread and by Vanguard and some other companies' research departments, looked at data going back as far as I could, and ended up changing my equity allocation from 0% international to 25%.

I picked that level because it seemed to be near the historic sweet spot in terms of diversification benefit, and also in terms of regret minimization - at a 25%-of-equities allocation, I won't be kicking myself for missing out if international takes off over the next few decades nor sweating the effect on overall returns if it's a dog going forward. Tilting towards my home country (without going 100%) also made sense to me because foreign-denominated stocks carry uncompensated exchange rate risk which USD-denominated stocks do not, and going with a currency-hedged international fund is not feasible for me now as my 401k doesn't offer one, and I haven't done a partial rollover to my Vanguard Roth yet where I might be able to find an ETF with palatable expenses (HEFA has potential with an ER of 0.35 through the next year at least, though it's still substantially worse than VGTSX in that regard, and I haven't looked at its composition in-depth yet).

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by tadamsmar » Wed Oct 17, 2018 9:24 am

samsdad wrote:
Wed Oct 17, 2018 8:15 am

But, every time the “internationalists” meet someone who doesn’t want to transfer wealth to the rest of the world, they deride this decision with ageist remarks about Jack Bogle, or remarks about how “provincial” it is. “Provincial” is a polite way of saying “stupid”.
Do you think owning a stock involves transferring wealth to some geographical location associated with the stock?

Has John Bogle ever espoused a belief in that notion? You are implying that he does espouse that.

Bogle has created many international stock funds. Do you think he is transferring wealth to the rest of the world?
Last edited by tadamsmar on Wed Oct 17, 2018 11:29 am, edited 1 time in total.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by MnD » Wed Oct 17, 2018 9:31 am

The hypocrisy in these endless anti-international investing threads, started and flogged ad-nauseum by the same relatively small group of posters is getting tiresome and are clearly intended to be divisive. I think it's more about getting in subtle and not so subtle digs against people and their institutions that happen to not be US versus any actionable and reasoned investment advice. Fear, suspicion and loathing of the foreign.

JB: Total bond market index is badly flawed. Sell 1/2 and put that in a corporate investment grade bond fund.
BH Oldies: :shock: :x

JB: Social security is like $300-$500K in bonds. Consider it as such and adjust your allocation to stocks accordingly.
BH Oldies: :shock: :x

JB: You don't need non-US stocks.
BH Oldies: :beer :happy

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by samsdad » Wed Oct 17, 2018 10:07 am

So if I buy a share of Petróleo Brasileiro S.A.—Petrobras—a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil, I’m not transferring my wealth to the Brazilian government? Really? Where does the money go?

If I buy a share of Vanguard International Value, which according to Morningstar owns approximately 3.7 million shares of Petrobas, you’re saying I’m not transferring my wealth, in part, to Petrobras and therefore, by extension the Brazilian government, through Vanguard? (I’m not picking on Brazil, or the company—it was literally the first international stock that popped into my quaint brain.)

So when Jack talks about international funds exposing one to sovereign risk, currency risk, etc. he’s talking about Malvern, Pennsylvania? Or do you think he’s talking about Rio de Janeiro? Looking at Malvern’s Wikipedia article, it looks a little too, shall we say, “provincial,” to be able to expose anyone to currency or sovereign risks. I mean, there’s only 3500 or so people that live in that little burg. How much power do you think they wield?

I personally could care less if anyone invests internationally. But I’ve never called anyone “un-American” or “unpatriotic” for doing so, nor have I seen any other 100% US investor doing so on this board (or anywhere else). Yet when a 100% US investor such as Jack explains why he doesn’t invest Internationally, feathers fly and Jack is basically called a hypocritical ignorant American dinosaur. I find it fascinating.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by nedsaid » Wed Oct 17, 2018 10:09 am

KJVanguard wrote:
Tue Oct 16, 2018 2:38 pm
The "they're riskier" argument works for Russian stock valuations and other emerging markets. I don't see that argument working for the UK, France, Germany or any other developed nation.

Bogle always talks about how US multinationals already give you US exposure. Well, don't you get US exposure from foreign multinationals that sell to the US as well?

Buying only US stocks is a bet. It's a bet that US stocks will be the best market, something which nobody can possibly know. Isn't it prudent not to put all your eggs in one US basket?
This is a good post. One area where I don't agree with Mr. Bogle. Investors, in my opinion, should be diversified globally.
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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by visualguy » Wed Oct 17, 2018 10:11 am

samsdad wrote:
Wed Oct 17, 2018 8:15 am
I wonder why the heat is turned on for this topic but not for any other nearly to this extent. I don’t recall the small-value tilters or age-in-bonds folks looking down their noses nearly as much as I see the “globalists” do when this topic comes up every week. I’ve never seen a small-value tilter disparage another’s choice to not tilt as being small-minded (or non-small-minded as it were). I’ve never seen a 100% equities person called a “non-boglehead”. I’ve never seen people call people who rebalance “market-timers” or any other pejorative.

But, every time the “internationalists” meet someone who doesn’t want to transfer wealth to the rest of the world, they deride this decision with ageist remarks about Jack Bogle, or remarks about how “provincial” it is. “Provincial” is a polite way of saying “stupid”.

I’m trying to figure out why. Any thoughts?
That's in the realm of human psychology. The results of the clash between believing strongly in something (such as global market weighting) and reality (significant long-term drag on the risky part of the portfolio).

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by tadamsmar » Wed Oct 17, 2018 10:15 am

oldzey wrote:
Tue Oct 16, 2018 10:07 pm
Jack Bogle consistently makes compelling arguments for NOT investing in ex-US, as a US investor! :beer
Why just US investors? Why aren't the arguments compelling to everyone? They are overpriced or too risky regardless of where you live.

The only argument he makes that does not apply to a UK citizen owning UK securities (for instance) would be the currency risk. But, Bogle was involved in creating international stock funds that hedge the currency risk (like for instance, the Vanguard Total International Fund). Bogle also owns and/or has owned some stock funds that, by policy, can own more than 20% international securities (Wellington, Wellsley, Windsor, Explorer) and these funds hedge currency risk.

I don't see that there is much difference between a US investor owning a currency-hedged stock fund and a foreign investor owning stock in their own country. A bad investment is a bad investment.

PS: Bogle says "I have 0% in non-U.S." but, strictly speaking, that is not true. He owns some Vanguard funds that invest in foreign securities. I cannot find the exact percentage of non-U.S. stocks that he owns. Perhaps it currently rounds to 0%. In any case, it is certainly a small percentage.
Last edited by tadamsmar on Wed Oct 17, 2018 11:26 am, edited 4 times in total.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by cheezit » Wed Oct 17, 2018 10:17 am

permport wrote:
Wed Oct 17, 2018 2:02 am
It should also be noted that the whole international debate is only something a small part of the world's investors even bother with really discussing. Any investor outside of the U.S. (and of course the majority of people are outside) doesn't debate this at all. It's only relevant to U.S. citizens because the size of the U.S. markets relative to the world makes non-global investing tenable. The rest of us don't bother with this rigmarole and have long since moved on. :D
This is false. Home country bias is endemic everywhere. 100% home country allocations exist everywhere. Here's a paper from Vanguard going over home country bias in some of the "anglosphere" countries in brief, including data showing why it is rational to some extent for each country (for no country was the best looking spot on the efficient frontier equal to its global cap weight)

Some of this is real bias, and some of it is a reflection of the real costs and risks of investing across borders - as much as we'd like, there is no single world stock market where everything can be bought and sold with no friction or fees and everything is denominated in the same currency. Many of the friction points and costs are getting lower with time, but some persist and none are zero yet.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by visualguy » Wed Oct 17, 2018 10:22 am

nedsaid wrote:
Wed Oct 17, 2018 10:09 am
KJVanguard wrote:
Tue Oct 16, 2018 2:38 pm
The "they're riskier" argument works for Russian stock valuations and other emerging markets. I don't see that argument working for the UK, France, Germany or any other developed nation.

Bogle always talks about how US multinationals already give you US exposure. Well, don't you get US exposure from foreign multinationals that sell to the US as well?

Buying only US stocks is a bet. It's a bet that US stocks will be the best market, something which nobody can possibly know. Isn't it prudent not to put all your eggs in one US basket?
This is a good post. One area where I don't agree with Mr. Bogle. Investors, in my opinion, should be diversified globally.
The problem is that Mr. Bogle has been right so far on this. That has to mean something, and you have to give him credit for that.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by lostdog » Wed Oct 17, 2018 10:27 am

visualguy wrote:
Wed Oct 17, 2018 10:22 am
nedsaid wrote:
Wed Oct 17, 2018 10:09 am
KJVanguard wrote:
Tue Oct 16, 2018 2:38 pm
The "they're riskier" argument works for Russian stock valuations and other emerging markets. I don't see that argument working for the UK, France, Germany or any other developed nation.

Bogle always talks about how US multinationals already give you US exposure. Well, don't you get US exposure from foreign multinationals that sell to the US as well?

Buying only US stocks is a bet. It's a bet that US stocks will be the best market, something which nobody can possibly know. Isn't it prudent not to put all your eggs in one US basket?
This is a good post. One area where I don't agree with Mr. Bogle. Investors, in my opinion, should be diversified globally.
The problem is that Mr. Bogle has been right so far on this. That has to mean something, and you have to give him credit for that.
Yes, his BET was right.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by ReformedSpender » Wed Oct 17, 2018 10:36 am

visualguy wrote:
Tue Oct 16, 2018 10:58 pm

+1

Can't bring myself to invest in something that has had such poor performance over the long run.

There's no credible doom-and-gloom scenario for the US in my lifetime, and definitely not one where the US market collapses, while foreign ones don't.
Recency bias much?

I think this type of perspective is flawed. Yes, when the US crashes and burns, chances are high the RoW will too. But what if other plausible scenarios pan out? Tech (FAANG) has lead the US markets to ATH's and with it, valuations. Eventually, growth of those select few are going to sputter out. What if the US enters a multi year stagnate period while the shift into the next leading sector is underway? Will the growth internationally also stop when its markets have relied less on the likes of buybacks, FAANG or other high-fliers?

You have to believe saavy investors will/are eyeballing valuations of world stocks and future potential for returns and international stocks will (eventually) have their period(s) of outperformance once again.
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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Re: "Why Jack Bogle Doesn't Own Non-U.S. Stocks"

Post by tk1978 » Wed Oct 17, 2018 10:51 am

samsdad wrote:
Wed Oct 17, 2018 10:07 am
So if I buy a share of Petróleo Brasileiro S.A.—Petrobras—a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil, I’m not transferring my wealth to the Brazilian government? Really? Where does the money go?

If I buy a share of Vanguard International Value, which according to Morningstar owns approximately 3.7 million shares of Petrobas, you’re saying I’m not transferring my wealth, in part, to Petrobras and therefore, by extension the Brazilian government, through Vanguard? (I’m not picking on Brazil, or the company—it was literally the first international stock that popped into my quaint brain.)
I think the only instance where you could make some sort of argument that you are transferring wealth to outside of the US (which I don't understand why you are concerned about in the first place given that your taxes go to support countries such as Saudi Arabia every single year) is if you were participating in an IPO. Otherwise, if you are buying anything in the secondary market you are "transferring your wealth" to the seller, who may be American for all you know.

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