Excluding International All Together?

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Boxtrap
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Excluding International All Together?

Post by Boxtrap »

I was messing around on Portfolio Visualizer recently just for my amusement, and I discovered this:

Over the last 25 years, a 90/10 portfolio consisting of equities held at 50% in S&P 500, 25% in mid cap value and 25% in small cap value - plus the 10% FI held in intermediate treasuries, returned almost 50 bps more than a 90/10 Total Stock/Total Bond lumper and with lower volatility. This was a bit eye opening for me, given that there was no international exposure whatsoever, with the exception of the exposure already baked into the S&P 500. It feels like everywhere I turn these days, I hear about international investing and in small caps in particular. The reasoning behind it seems sound, and yet, here's concrete data about the last quarter century that shows it made no difference. Of course, 25 years is only a blip in the pantheon of data, but still it's quite interesting that you could have avoided individual international exposure entirely over the last 25 years - and done better than a Total Market portfolio with less volatility - provided that you just tilted half your equities to mid/small value.

So, I'm curious, how many of you out there have chosen to exclude international holdings all together, and if so, why?
vu8
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Re: Excluding International All Together?

Post by vu8 »

Backtesting won't work for the future. 50% International 50% US is what I do. Everybody only wants to listen to stuff they like to hear in the first place. I used to be 100% in VOO. Then I added VXF and VTI, then I added 50% international. Because nobody can guarantee that the US won't be like Japan in the late 1980s.
02nz
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Re: Excluding International All Together?

Post by 02nz »

Try searching the forum. It's very, very hard to believe that there's anything left to be said on this topic.
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Boxtrap
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Re: Excluding International All Together?

Post by Boxtrap »

vu8 wrote: Thu Jun 20, 2019 12:14 pm Backtesting won't work for the future. 50% International 50% US is what I do. Everybody only wants to listen to stuff they like to hear in the first place. I used to be 100% in VOO. Then I added VXF and VTI, then I added 50% international. Because nobody can guarantee that the US won't be like Japan in the late 1980s.
Totally agree. I didn't mean to imply "backtesting say this, so this is what we should do". It was more just a prompt for a broad question about international investing and its merits, etc.
Dottie57
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Re: Excluding International All Together?

Post by Dottie57 »

Unfortunately, there is no right or wrong since we don’t know the future. Each investor needs to determine their own beliefs and then invest or not in international stocks.
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Dialectical Investor
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Re: Excluding International All Together?

Post by Dialectical Investor »

Use the quick-links burger menu in the upper left corner to perform a more advanced search:

Why International?
GJ48
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Re: Excluding International All Together?

Post by GJ48 »

We're comfortable letting Wellington navigate the markets.

Wellington can have up to 25% foreign securities. As of 5/31/2019 foreign holdings were 10.2% of its stocks and 5.1% of its bonds.
randomguy
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Re: Excluding International All Together?

Post by randomguy »

Boxtrap wrote: Thu Jun 20, 2019 12:13 pm I was messing around on Portfolio Visualizer recently just for my amusement, and I discovered this:

Over the last 25 years, a 90/10 portfolio consisting of equities held at 50% in S&P 500, 25% in mid cap value and 25% in small cap value - plus the 10% FI held in intermediate treasuries, returned almost 50 bps more than a 90/10 Total Stock/Total Bond lumper and with lower volatility. This was a bit eye opening for me, given that there was no international exposure whatsoever, with the exception of the exposure already baked into the S&P 500. It feels like everywhere I turn these days, I hear about international investing and in small caps in particular. The reasoning behind it seems sound, and yet, here's concrete data about the last quarter century that shows it made no difference. Of course, 25 years is only a blip in the pantheon of data, but still it's quite interesting that you could have avoided individual international exposure entirely over the last 25 years - and done better than a Total Market portfolio with less volatility - provided that you just tilted half your equities to mid/small value.

So, I'm curious, how many of you out there have chosen to exclude international holdings all together, and if so, why?
Look at the 25 years before the ones you looked at.:) International has had a bad 10 years. It has happened before and afterwards the returns have made up for it. Will they bounce back again and when? Who knows. As it is right now you are measuring a period with 2 times of US out performance (late 90s, 2010 on) and only one of international (mid 2000s). If we get another 4 or 5 year of international outperformance, the gaps will shrink back to where they were.

Variation of this discussion happen constantly. You either believe that past trends will happen (i.e. US and international will have about the same performance and both have runs where they outperform the other) or you believe the current trends will continue. You can do the same thing with size, value, and just about anything else. In 1999 the past 15 years of data looked like

https://www.portfoliovisualizer.com/bac ... total3=100

and you would see posts like why buy anything other than US large caps market? 8 years later you see posts like

https://www.portfoliovisualizer.com/bac ... total3=100

and why buy crappy large caps when you can get great international companies that are returning 50 basis points more and small value returning 100.
asif408
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Re: Excluding International All Together?

Post by asif408 »

I agree with 02nz. Plenty of posts from Bogleheads about 0% international allocations and why they have those. A more interesting (and less asked) question is does anyone exclude US stocks from their allocation, or overweight international relative to world market cap, and why?

I also would like to know if you can tell us what the previous 25 years (1970-1994) of performance of EAFE vs US stocks was, and if based on that information you change your mind.
rascott
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Re: Excluding International All Together?

Post by rascott »

Seems I've seen several of these threads on here lately. Makes me wonder if I shouldn't up my international allocation....Seems everyone hates the asset class right now. :D
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Orbuculum Nongata
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Re: Excluding International All Together?

Post by Orbuculum Nongata »

Boxtrap wrote: Thu Jun 20, 2019 12:13 pm
...So, I'm curious, how many of you out there have chosen to exclude international holdings all together, and if so, why?
I haven't chosen to exclude international holdings so maybe I shouldn't be replying but I can tell you why I haven't (instead of why I have). In short:

A) I don't care about what happened before I became an investor.

and

B) The notion that I could "optimize" my return by eliminating entire markets is a road that, for me, has no end. It deviates from my already winning strategy. I would like higher returns, but I might not get them... The grass is always greener.
Potential - distraction = performance.
tibbitts
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Re: Excluding International All Together?

Post by tibbitts »

Boxtrap wrote: Thu Jun 20, 2019 12:13 pm It feels like everywhere I turn these days, I hear about international investing and in small caps in particular.
Everywhere? On Bogleheads we keep seeing posts like yours, searching for ways to justify 0% international.
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Steve Reading
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Re: Excluding International All Together?

Post by Steve Reading »

Boxtrap wrote: Thu Jun 20, 2019 12:13 pm ...and yet, here's concrete data about the last quarter century that shows it made no difference. Of course, 25 years is only a blip in the pantheon of data,
So which is it?
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oldzey
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Re: Excluding International All Together?

Post by oldzey »

Boxtrap wrote: Thu Jun 20, 2019 12:13 pm /snip

So, I'm curious, how many of you out there have chosen to exclude international holdings all together, and if so, why?
As a U.S. Investor, 0% international works for me.

Why?


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 6/24/2019, if you had invested $10,000 in both funds on 4/29/1996, you would currently have $68,872 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $28,568 in your Total International Stock Index Fund.

Image

Of course, there are no guarantees going forward...

I'd also add that If you're a U.S. investor, invested in a S&P 500 or Total Market U.S.index fund, half of your revenues already come from outside the U.S.

So, you already have an international fund, minus the risks (e.g. currency, sovereign) and fees associated with investing in international funds.
JoMoney wrote: Fri Mar 30, 2018 8:07 pm MarketWatch(2015): S&P 500 companies generate barely over half their revenue at home
Image
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buhlaxtus
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Re: Excluding International All Together?

Post by buhlaxtus »

An advantage of only 0,5% (tiny) derived only from 25 years backtesting is essentially meaningless. You can't expect that to come out the same in future.
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Re: Excluding International All Together?

Post by jhawktx »

Over the last decade, those equal or overweight in International have lost so much ground vs. 100% US they will likely not break even in their lifetime. Sad, but true. Now if you are a new investor starting today, who knows.
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Watty
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Re: Excluding International All Together?

Post by Watty »

Compared to a lot of posters here I am not a prolific international traveler but I have taken a couple of trips over the last few years and being oversea recently really makes it easy to see how strong the dollar is right now. Even ten years ago it was not nearly this strong.

One of the pitfalls in the backtesting the stock performance like you did is that you may not realize that you are testing two things at the same time. The international stock markets and the relative exchange rates.

It could also be argued that the last 25 years has been atypical investing times since it includes the dot com bubble, the housing bust, the 2008 financial crisis, quantitative easing, and a record breaking 10 year bull market. I sure hope that the next 25 years of investing are not that eventful!
rascott wrote: Thu Jun 20, 2019 1:06 pm Seems I've seen several of these threads on here lately. Makes me wonder if I shouldn't up my international allocation....Seems everyone hates the asset class right now. :D
+1

I use the Vanguard Target Date funds which have international bonds in them and there has been a lot of negative sentiment about them on the boards. I am not entirely comfortable with international bonds but in an odd way the negative sentiments actually makes me feel a bit better about them at least not being overpriced.

Other websites are much worse but even on these boards there have been way too many post at various times about 100% stocks, emerging markets, small cap value, etc and I am very skeptical when there are lots of posts either for or against and asset class.
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JoMoney
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Re: Excluding International All Together?

Post by JoMoney »

I don't have an international allocation. Why?
Simplicity/avoiding behaviorial mistakes, expenses, taxes, risks...

Notice I didn't say anything about past returns, or even my expectations on future returns for some particular period. I'm really not good at predicting returns, neither are those that do so professionally. "International" stocks currently are cheaper than U.S. stocks by a lot of different measures, that could be an opportunity for higher performance going forward from here. It might also be an indication that the market sees a lot more uncertainty and risks around international stocks and have priced that in. Regardless, trying to pick and choose what I think will have the best performance isn't a game I'm trying to play.
The past decade or so has been very good to my simple portfolio, it wasn't looking quite as good the decade before that but I still bought into it. Back in 2007-2008, I don't think I was even aware that International stocks had been having a period of higher returns, unless I'm still hanging around this board trying to defend my position I doubt I would otherwise notice when they have a similar period in the future.
My expectations, are that periods of higher performance and under-performance relative to each other will come and go, you could pick a specific period that shows one way or another, but largely it will average out over time. I avoid the traps that come with people changing their allocations trying to "over balance" or tactically rebalance to whatever they think will be better. I pay the lowest fees relative to any other portfolio I've ever seen. I don't have any foreign tax withholding impacts, and in my taxable account all the dividends are 100% "qualified dividends" and very tax efficient. I sleep better not trying to figure out what it is I "own" when it comes to some of the "Emerging Market" stocks.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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pokebowl
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Re: Excluding International All Together?

Post by pokebowl »

jhawktx wrote: Mon Jun 24, 2019 11:06 pm Over the last decade, those equal or overweight in International have lost so much ground vs. 100% US they will likely not break even in their lifetime. Sad, but true. Now if you are a new investor starting today, who knows.
If someone did a lump sum into a total U.S market index fund, say VTI a decade ago they would have an effective CAGR of ~13.83%. If someone held global market weights (roughly the equal weights you point out), the CAGR only lowers to ~10.03%. Adding monthly contributions to the calculations doesn't change this picture either.

I wouldn't call that as dire as you point out above. Going back a decade earlier than this tells another unfavorable story completely for those who held only U.S.
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Re: Excluding International All Together?

Post by Vanguard Fan 1367 »

I really appreciate Bogle's books. One of the reasons I don't do anymore international is because in 2014 I read Jack for the first time. I understand that he wasn't too excited about international investing. I have done quite well since 2014 with Vanguard's Total US Stock Market fund.
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visualguy
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Re: Excluding International All Together?

Post by visualguy »

Boxtrap wrote: Thu Jun 20, 2019 12:13 pm So, I'm curious, how many of you out there have chosen to exclude international holdings all together, and if so, why?
0% ex-US indexing for me. No compelling reason to hold it - it hasn't performed well in the past in the long run (especially when taking into account the high volatility for such meager returns), and life is too short to wait for the world to change.
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Re: Excluding International All Together?

Post by AerialWombat »

Here we go again...

Can one of the many other US v ex-US threads just be “pinned” to the top of the board?
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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Re: Excluding International All Together?

Post by tea_pirate »

oldzey wrote: Mon Jun 24, 2019 10:24 pm I'd also add that If you're a U.S. investor, invested in a S&P 500 or Total Market U.S.index fund, half of your revenues already come from outside the U.S.

So, you already have an international fund, minus the risks (e.g. currency, sovereign) and fees associated with investing in international funds.
Red herring. A large portion of the revenues of international companies come from the US. But you never see anybody arguing that you don't need to invest in the US since you're already exposed to it via international funds. Wonder why that is? :confused

People here need to just admit the "international hate" for what it is - performance chasing and curve fitting, with an (un)healthy dose of outdated, WWII-era US exceptionalism.

Thankfully for the newer Bogleheads, people like lostdog and myself apparently never get tired of responding to these threads. It would be unfortunate and most likely a huge mistake for a 30 year old investor to get swept up in the 100% US fervor here.
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Re: Excluding International All Together?

Post by tea_pirate »

AerialWombat wrote: Tue Jun 25, 2019 6:51 am Here we go again...

Can one of the many other US v ex-US threads just be “pinned” to the top of the board?
It's the cognitive dissonance in action. As a result the "100% US forever and ever" crowd needs constant reinforcement of their views. The world market cap folks essentially seem to participate in these threads so it's not just a wall of misleading information which is toxic to newcomers. IMO it's clear to me which side is truly content with their decision.

Notice how the 100% US side almost always starts these threads. I don't think a week has gone by without a "why international sucks" thread popping up. Meanwhile I can't even recall the last time I saw a thread started where the thesis was "why one should invest at world market cap weights."
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Re: Excluding International All Together?

Post by lostdog »

tea_pirate wrote: Tue Jun 25, 2019 7:17 am
oldzey wrote: Mon Jun 24, 2019 10:24 pm I'd also add that If you're a U.S. investor, invested in a S&P 500 or Total Market U.S.index fund, half of your revenues already come from outside the U.S.

So, you already have an international fund, minus the risks (e.g. currency, sovereign) and fees associated with investing in international funds.
Red herring. A large portion of the revenues of international companies come from the US. But you never see anybody arguing that you don't need to invest in the US since you're already exposed to it via international funds. Wonder why that is? :confused

People here need to just admit the "international hate" for what it is - performance chasing and curve fitting, with an (un)healthy dose of outdated, WWII-era US exceptionalism.

Thankfully for the newer Bogleheads, people like lostdog and myself apparently never get tired of responding to these threads. It would be unfortunate and most likely a huge mistake for a 30 year old investor to get swept up in the 100% US fervor here.
+1

If an early 20's young investors decides to follow the advice of the crystal ball weilding performance chasers who post decieving cherry picking charts, then misses out on a decade or more of international outperformance, it will hurt. This is why you diversify.

Sure, go ahead and go 100% U.S. and you might get lucky on your bet. If not, you'll be hand wringing, losing some sleep and post on here asking to get back in.

The young investor reading this. If I were you, listen to Vanguard on this. Not a bunch of arm chair experts.
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Trader Joe
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Re: Excluding International All Together?

Post by Trader Joe »

Boxtrap wrote: Thu Jun 20, 2019 12:13 pm I was messing around on Portfolio Visualizer recently just for my amusement, and I discovered this:

Over the last 25 years, a 90/10 portfolio consisting of equities held at 50% in S&P 500, 25% in mid cap value and 25% in small cap value - plus the 10% FI held in intermediate treasuries, returned almost 50 bps more than a 90/10 Total Stock/Total Bond lumper and with lower volatility. This was a bit eye opening for me, given that there was no international exposure whatsoever, with the exception of the exposure already baked into the S&P 500. It feels like everywhere I turn these days, I hear about international investing and in small caps in particular. The reasoning behind it seems sound, and yet, here's concrete data about the last quarter century that shows it made no difference. Of course, 25 years is only a blip in the pantheon of data, but still it's quite interesting that you could have avoided individual international exposure entirely over the last 25 years - and done better than a Total Market portfolio with less volatility - provided that you just tilted half your equities to mid/small value.

So, I'm curious, how many of you out there have chosen to exclude international holdings all together, and if so, why?
I am 100% invested in the U.S. stock market. Either Vanguard 500 Index Fund Admiral Shares (VFIAX) or Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). I am very happy with my choice.
columbia
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Re: Excluding International All Together?

Post by columbia »

Anywhere from zero to global cap is perfectly reasonable.

There are a few here who even overweight international; if that works for them, then :beer
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Carlos Danger
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Re: Excluding International All Together?

Post by Carlos Danger »

I've heavily considered ditching international, and have posted here a few times about my concrete reasons for believing the U.S. will outperform over the next few decades as a whole.

But I still have it, because I'm paranoid about being wrong. :happy

100% U.S./S&P 500 for equities in a 403(b). But use VT in our Vanguard accounts at the moment. Overall portfolio fluctuates between 15-20% international as a result.
Tamalak
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Re: Excluding International All Together?

Post by Tamalak »

Good reason to include international:
Diversification

Bad reason to include international:
P/E or CAPE ratio

Good reason to avoid international:
Taxation increases effective ER by 30 points, uncompensated currency volatility

Bad reason to avoid international:
Recent underperformance
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Tycoon
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Re: Excluding International All Together?

Post by Tycoon »

No international for me. Silly name calling and baseless assumptions about why aren't helpful.
Emotionless, prognostication free investing. Ignoring the noise and economists since 1979. Getting rich off of "smart people's" behavioral mistakes.
Ferdinand2014
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Re: Excluding International All Together?

Post by Ferdinand2014 »

1.) I am a U.S. citizen and spend and earn in USD.
2. I am prone to behavioral mistakes of constantly fiddling e.g. one day I read an article and decide 10% international is good, next day 33.33%, next day market cap, next day none. Not based on performance per se, but based on my mood, article or study.
3.) I could reduce my behavioral tendencies by owning a TDF or life strategy fund, however I haven’t found a fund that has only what I would want - the closest so far is FFNOX (Fidelity Four In One Index Fund)
4.) I do not like emerging markets because it doesn’t pass the sleep well at night test for me. If and when individual countries become ‘developed’ then I would consider them as an investor.
5.) The U.S. market is currently the only market with the market cap size, sector diversity, number of stocks and shareholder rights that allow a home bias. Many countries have some of these, none have all of these except the U.S.
6.) I prefer to generally follow the advise by Benjamin Graham from the ‘Intelligent Investor’ for the defensive investor:

“Each company selected should be large, prominent, and conservatively financed. Indefinite as these adjectives must be, their general sense is clear”.

As a result this to me translates to the S&P 500 index as they are large, prominent and must demonstrate at least 4 quarters of positive earnings unlike a total stock market index.

7.) So my current portfolio resembles what Warren Buffett suggests with enough cash to sleep at night and the rest in an S&P 500 low cost index fund bought gradually over time. Is this ideal? Absolutely not. Is this as well diversified as a three fund portfolio? Nope. Will it do better or worse in the future then the three fund? No clue. Don’t care. Will it reduce my behavioral tendencies and keep me on task? Yep.
8.) My DW 403b only offers a high fee actively managed international fund, but does offer a low cost S&P 500 fund.

As Ben Carlson from ‘A Wealth of Common Sense’ and many others have pointed out:

“The real perfect portfolio is whatever approach allows you to stick with your investment plan without completely abandoning your strategy at the worst possible times. It's the portfolio that helps you eliminate any possible behavior gap that comes from chasing hot funds, buying high or selling low, and investing in products or markets that you don't understand”

Making assumptions and generalizations because I am 100% U.S. does not help the discussion progress in any way. I outlined per the OP why for me. Asset allocation and portfolio decisions boil down to a personal assessment of many factors that are just that, personal. Wether you are 0%, 20%, market cap or overweight international is all good in my mind. What’s most important is that whatever decision you make, you can be comfortable with it for years and not be swayed by the winds of opinion which most definitely would be wealth destroying.
Last edited by Ferdinand2014 on Tue Jun 25, 2019 2:24 pm, edited 1 time in total.
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RJC
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Re: Excluding International All Together?

Post by RJC »

Tycoon wrote: Tue Jun 25, 2019 9:03 am No international for me. Silly name calling and baseless assumptions about why aren't helpful.
+1. They seem to have a chip on their shoulder.

I don't think you can go wrong with an international allocation of 0-50%. It's a fraction of a fraction of your portfolio so staying the course and saving should have a greater impact.
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vineviz
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Re: Excluding International All Together?

Post by vineviz »

RJC wrote: Tue Jun 25, 2019 11:39 am
Tycoon wrote: Tue Jun 25, 2019 9:03 am No international for me. Silly name calling and baseless assumptions about why aren't helpful.
+1. They seem to have a chip on their shoulder.
I'm not sure who "they" are, and I doubt that name calling and making baseless assumptions is any more helpful in one direction than another.

But this is an investment advice forum, and some of us take the viewpoint that advice should - to the extent possible - be evidence-based and rational.

I can't speak for others but I'd say to investors who have concluded, for whatever reason, that 100% US is the right choice for them: more power to you. Your portfolio is your business.

There are many novice investors reading these threads though, and the problems start (IMHO) when misinformation masquerading as data appears. I feel some responsibility to make sure that novice investors are getting both accurate information and balanced analysis.

In a timely coincidence, this is the first paragraph of an article that appeared today on Morningstar.com:
Most U.S. investors’ stock portfolios aren’t global enough. Using total mutual fund assets as a proxy, the typical investor’s equity sleeve has about a 75%/25% split between U.S. and foreign equities. Most professional asset allocators would recommend a greater international weighting; the average target-date fund has about 35% of its stock sleeve overseas, and replicating the global market cap would suggest upping the foreign stake to roughly 45%. Keeping a globally diverse stock portfolio should improve diversification without sacrificing return over the long haul.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
assyadh
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Re: Excluding International All Together?

Post by assyadh »

I only hold VT (56% US, 44% US but fluctuates) because I don't know who's going to outperform who.

Anything else than this is a bet. Period.

Maybe people here think the US is exceptional? Guess what, the world is full of very smart people.

The world is full of companies leader in their scope.
Tencent
BMW
Mercedes
Toyota
Total
Nestlé etc etc.

You would be a fool not to try to capture this.

This American bias is mainly due to large tech stock performance. Well if these tech stocks were European would you say the same?

What tells you the next big tech change won't come from China, India or Europe?

The world is a big place.
Jacklh
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Re: Excluding International All Together?

Post by Jacklh »

JoMoney wrote: Mon Jun 24, 2019 11:30 pm I don't have an international allocation. Why?
Simplicity/avoiding behaviorial mistakes, expenses, taxes, risks...

Notice I didn't say anything about past returns, or even my expectations on future returns for some particular period. I'm really not good at predicting returns, neither are those that do so professionally. "International" stocks currently are cheaper than U.S. stocks by a lot of different measures, that could be an opportunity for higher performance going forward from here. It might also be an indication that the market sees a lot more uncertainty and risks around international stocks and have priced that in. Regardless, trying to pick and choose what I think will have the best performance isn't a game I'm trying to play.
The past decade or so has been very good to my simple portfolio, it wasn't looking quite as good the decade before that but I still bought into it. Back in 2007-2008, I don't think I was even aware that International stocks had been having a period of higher returns, unless I'm still hanging around this board trying to defend my position I doubt I would otherwise notice when they have a similar period in the future.
My expectations, are that periods of higher performance and under-performance relative to each other will come and go, you could pick a specific period that shows one way or another, but largely it will average out over time. I avoid the traps that come with people changing their allocations trying to "over balance" or tactically rebalance to whatever they think will be better. I pay the lowest fees relative to any other portfolio I've ever seen. I don't have any foreign tax withholding impacts, and in my taxable account all the dividends are 100% "qualified dividends" and very tax efficient. I sleep better not trying to figure out what it is I "own" when it comes to some of the "Emerging Market" stocks.
My sentiments exactly. Over long periods, the gains should be similar minus the extra costs associated with holding foreign stocks. I also don't trust some foreign governments or want to support them in any way as I'm sure their priorities are not aligned with mine.
visualguy
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Re: Excluding International All Together?

Post by visualguy »

assyadh wrote: Tue Jun 25, 2019 1:18 pm I only hold VT (56% US, 44% US but fluctuates) because I don't know who's going to outperform who.

Anything else than this is a bet. Period.

Maybe people here think the US is exceptional? Guess what, the world is full of very smart people.

The world is full of companies leader in their scope.
Tencent
BMW
Mercedes
Toyota
Total
Nestlé etc etc.

You would be a fool not to try to capture this.

This American bias is mainly due to large tech stock performance. Well if these tech stocks were European would you say the same?

What tells you the next big tech change won't come from China, India or Europe?

The world is a big place.
The problem is that the same argument that you're providing has been true for decades, but it hasn't worked out for ex-US index investors. What's different now?

The Chinese and Indian stock markets still don't reflect their economies. Europe still has a multi-stakeholder strategy rather than focusing primarily on the shareholders as in the US. Japan still has an intractable demographic decline problem. The US is still the biggest magnet for talent from all over the world. What's different? Everything can change in the future, of course, but not so quickly, and life is too short to wait for that.
assyadh
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Re: Excluding International All Together?

Post by assyadh »

visualguy wrote: Tue Jun 25, 2019 1:44 pm
assyadh wrote: Tue Jun 25, 2019 1:18 pm I only hold VT (56% US, 44% US but fluctuates) because I don't know who's going to outperform who.

Anything else than this is a bet. Period.

Maybe people here think the US is exceptional? Guess what, the world is full of very smart people.

The world is full of companies leader in their scope.
Tencent
BMW
Mercedes
Toyota
Total
Nestlé etc etc.

You would be a fool not to try to capture this.

This American bias is mainly due to large tech stock performance. Well if these tech stocks were European would you say the same?

What tells you the next big tech change won't come from China, India or Europe?

The world is a big place.
The problem is that the same argument that you're providing has been true for decades, but it hasn't worked out for ex-US index investors. What's different now?

The Chinese and Indian stock markets still don't reflect their economies. Europe still has a multi-stakeholder strategy rather than focusing primarily on the shareholders as in the US. Japan still has an intractable demographic decline problem. The US is still the biggest magnet for talent from all over the world. What's different? Everything can change in the future, of course, but not so quickly, and life is too short to wait for that.
Well I could argue that the Cac40 is heavily focused on the shareholder as it's one of the developed markets with the highest dividend yields.

Over the last decades I could pick a lot of dates where ex US beat out the US. Nobody knows nothing. And arguing the opposite is foolish.
randomguy
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Re: Excluding International All Together?

Post by randomguy »

tea_pirate wrote: Tue Jun 25, 2019 7:27 am
AerialWombat wrote: Tue Jun 25, 2019 6:51 am Here we go again...

Can one of the many other US v ex-US threads just be “pinned” to the top of the board?
It's the cognitive dissonance in action. As a result the "100% US forever and ever" crowd needs constant reinforcement of their views. The world market cap folks essentially seem to participate in these threads so it's not just a wall of misleading information which is toxic to newcomers. IMO it's clear to me which side is truly content with their decision.

Notice how the 100% US side almost always starts these threads. I don't think a week has gone by without a "why international sucks" thread popping up. Meanwhile I can't even recall the last time I saw a thread started where the thesis was "why one should invest at world market cap weights."
It will be "fun" to see what happens the next time international outperforms for 5 years.
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Re: Excluding International All Together?

Post by visualguy »

randomguy wrote: Tue Jun 25, 2019 1:57 pm It will be "fun" to see what happens the next time international outperforms for 5 years.
Nothing because it is so far behind. It outperformed during some periods in the past as well, but it was still bad in the long run - much more under-performance than out-performance.
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Re: Excluding International All Together?

Post by lostdog »

visualguy wrote: Tue Jun 25, 2019 2:11 pm
randomguy wrote: Tue Jun 25, 2019 1:57 pm It will be "fun" to see what happens the next time international outperforms for 5 years.
Nothing because it is so far behind. It outperformed during some periods in the past as well, but it was still bad in the long run - much more under-performance than out-performance.
Hi Visualguy,

Can you provide the data showing past underperformance you mention? Also, can you send us the link to your crystal ball?
Stocks-80% || Bonds-20% || VTI/VXUS/AOR
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Re: Excluding International All Together?

Post by jrbdmb »

Image

US has certainly been on a good run since 2010, but the idea of US perpetual dominance is not supported by the facts. I wonder what types of US vs. ex-US threads would have been on Bogleheads in 1990?
jibantik
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Re: Excluding International All Together?

Post by jibantik »

oldzey wrote: Mon Jun 24, 2019 10:24 pm
As a U.S. Investor, 0% international works for me.

Why?


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 6/24/2019, if you had invested $10,000 in both funds on 4/29/1996, you would currently have $68,872 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $28,568 in your Total International Stock Index Fund.

Image

Of course, there are no guarantees going forward...

As a U.S. Investor, investing in only AAPL works for me.

Why?


The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of AAPL was ... before that.

Per Morningstar, as of 6/24/2019, if you had invested $10,000 in both funds on 4/27/1992, you would currently have $1.74m in your AAPL stock, which would be more than nine times as much as the $123k in your Total Stock U.S. Stock Market Index Fund.

Image


Ironically, in the same post you advocated for no international based on performance chasing you give the exact reason why you should not base decisions on performance chasing:
oldzey wrote: Mon Jun 24, 2019 10:24 pm Of course, there are no guarantees going forward...
Exactly, could not agree more. Nobody knows nothing. Invest at market cap.
visualguy
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Re: Excluding International All Together?

Post by visualguy »

lostdog wrote: Tue Jun 25, 2019 2:38 pm Can you provide the data showing past underperformance you mention?
The data can be found in the Credit Suisse Yearbook. The latest one compares US-only with global (US with ex-US) which some here are fond of these days.

Since 2000, 2.9% US versus 2.1% global
Over the last fifty years, 1969-2018, 5.3% US versus 4.7% global
Since 1900, 119 years, 6.4% US versus 5.0% global

This was cited already (by nisiprius) in a previous thread on this topic. Ex-US has been a big drag in the long run, it's not just a recent thing.

Image
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Que1999
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Re: Excluding International All Together?

Post by Que1999 »

I hate reading these threads because they always get me second-guessing my investment strategies...... :annoyed
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Dialectical Investor
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Re: Excluding International All Together?

Post by Dialectical Investor »

I like how these threads go. A forum member questions the need for international stocks, and the same group enters to debate the question for the umpteenth time, using the same arguments, charts, and labels. OP typically disappears, leaving the usual suspects to argue amongst themselves. Once everything is regurgitated again, the thread falls down the page until it is forgotten, or, if that does not happen soon enough, it is locked by one LadyGeek. All remain eager to come back and repeat the show for the next forum member. My portfolio is of no consequence to anyone else, but I will say that I agree with most of the posts in this thread, as well as many of the other threads too.
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Re: Excluding International All Together?

Post by oldzey »

"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman
RandomWord
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Re: Excluding International All Together?

Post by RandomWord »

jrbdmb wrote: Tue Jun 25, 2019 3:04 pm Image

US has certainly been on a good run since 2010, but the idea of US perpetual dominance is not supported by the facts. I wonder what types of US vs. ex-US threads would have been on Bogleheads in 1990?
Funny, to me that chart pretty much does look like near-perpetual US dominance.

Sure, there's the downward spike in the 80s. That wasn't because of "international" though, that was just Japan. It was a huge bubble based on ridiculous valuations, and there were some weird theories in 1990s that it was somehow justified for them to have 100 PE because they would soon take over the entire global economy, or whatever. Then the bubble popped. So the lesson is... time the bubbles in international markets very well?

International also did a bit better than the US in the aughts, then got clobbered by the 2008 crisis even worse than the US. Not very good on a risk-adjusted basis. I'm willing to take slightly-lower returns if it reduces crashes by that much.

Otherwise, the US has been ahead from roughly 1991-2003, and 2011-onwards. 22 years out of the last 29.

Incidentally, 1991 is an interesting data, since that's when the USSR broke up. Makes me wonder if it's become easier since that date for the US to use its power to boost its big corporations, in an unfair way that is not yet accounted for by standard finance models.
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Re: Excluding International All Together?

Post by azanon »

I'm so excited by just my general observation of the number of these types of threads, and how much they've picked up lately. The turnaround for international is probably just around the corner, given the final holdouts of globally-diversified portfolios are now capitulating despite "giants" (e.g. 5 Trillion AUM Vanguard) telling them it'd be a mistake. So I think I'm going to quit making a case for globally-diversified investing. Just go ahead and sell, and if you don't mind, choose "market order". Thanks!
jrbdmb
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Re: Excluding International All Together?

Post by jrbdmb »

RandomWord wrote: Tue Jun 25, 2019 4:06 pm
jrbdmb wrote: Tue Jun 25, 2019 3:04 pm Image

US has certainly been on a good run since 2010, but the idea of US perpetual dominance is not supported by the facts. I wonder what types of US vs. ex-US threads would have been on Bogleheads in 1990?
Funny, to me that chart pretty much does look like near-perpetual US dominance.

Sure, there's the downward spike in the 80s. That wasn't because of "international" though, that was just Japan. It was a huge bubble based on ridiculous valuations, and there were some weird theories in 1990s that it was somehow justified for them to have 100 PE because they would soon take over the entire global economy, or whatever. Then the bubble popped. So the lesson is... time the bubbles in international markets very well?

International also did a bit better than the US in the aughts, then got clobbered by the 2008 crisis even worse than the US. Not very good on a risk-adjusted basis. I'm willing to take slightly-lower returns if it reduces crashes by that much.

Otherwise, the US has been ahead from roughly 1991-2003, and 2011-onwards. 22 years out of the last 29.

Incidentally, 1991 is an interesting data, since that's when the USSR broke up. Makes me wonder if it's become easier since that date for the US to use its power to boost its big corporations, in an unfair way that is not yet accounted for by standard finance models.
I guess we must be looking at a different charts then. The periods 1974-1982, 1986-1990, and 2004-2010 don't look like "near-perpetual US dominance" to me. (I do agree that overall US has outperforned ex-us over that period.)
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Re: Excluding International All Together?

Post by hagridshut »

tea_pirate wrote: Tue Jun 25, 2019 7:27 am
AerialWombat wrote: Tue Jun 25, 2019 6:51 am Here we go again...

Can one of the many other US v ex-US threads just be “pinned” to the top of the board?
It's the cognitive dissonance in action. As a result the "100% US forever and ever" crowd needs constant reinforcement of their views. The world market cap folks essentially seem to participate in these threads so it's not just a wall of misleading information which is toxic to newcomers. IMO it's clear to me which side is truly content with their decision.

Notice how the 100% US side almost always starts these threads. I don't think a week has gone by without a "why international sucks" thread popping up. Meanwhile I can't even recall the last time I saw a thread started where the thesis was "why one should invest at world market cap weights."
I think there is a constant stream of justification because 100% US equities goes against one of the First Principles of Boglehead investing: own the entire haystack because nobody knows which individual pieces of the haystack will succeed. The haystack is global. Owning just US equity funds means not owning the entire haystack.

That said, I don't believe that allocating equities to 100% US stock funds is necessarily a bad thing. Having 100% of stocks in Total Stock Market or S&P500 is still very diverse. Some people sleep better at night and are less likely to make bad decisions if they have funds that avoid investments (like emerging markets) that make them nervous. I don't criticize anyone who just wants to buy US stock funds.

When I started investing in my 401k 15 years ago, I allocated 20% to an International Index, 10% to bonds, and 70% to US equities. That's what I've maintained for the most part over the years. Has it underperformed a theoretical allocation of 10% bonds and 90% US stocks? Yes. But I don't care. I still collected healthy overall returns and a more than satisfactory nest egg so far. Regretting 20% international is as pointless as regretting not putting my 70% US Market index funds into only FAANG (Facebook, Amazon, Apple, Netflicks, Google) stocks. My goal is to get a good return, not an optimized or perfect one. I still maintain 20% International Index. There's just no way to know what part of the haystack will grow best in coming years.
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