'Stay the course' with international stock but give up on value?

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'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 10:10 am

For a long while now, many posters here have been seriously questioning whether they should give up on international stock due to its underperformance compared to U.S., and they have generally been advised to 'stay the course'.

But at the same time, many have also been questioning the value premium and its underperformance compared to the total market (in the U.S.) and whether they should give up on it. However, it seems to me that relatively few here are advising such investors to 'stay the course' and have actually advised others to trade in their value tilt for total market funds.

Perhaps this is merely my perception and not objectively accurate, a possibility I will readily admit to. I wonder whether others have noted this phenomenon as well.

If this is indeed happening, it would seem to be logically inconsistent to me. Is this because Bogle himself usually eschewed factors (e.g. a value tilt)? But if this is the driving force, why then are posters being advised to 'stay the course' with regard to international stock, which Bogle held in disdain?

Maybe I'm missing something here.
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Re: 'Stay the course' with international stock but give up on value?

Post by Elysium » Thu Oct 03, 2019 10:18 am

There is nothing mysterious or inconsistent here. It is very consistent with the view that holding broad market portfolio is the most efficient form, and tilting to factors such as value is unnecessary, especially since the market portfolio contains both value and growth as determined by the market in their correct proportions. International investing recommendation on the other hand fits in with holding the broad market portfolio, just that it may not be necessary since the expected returns are likely to be same for the broad EAFE vs the US TSM over long periods. That said, Jack Bogle has said holding up to 20% in the broad EAFE portfolio is probably fine. That is why if someone has already made the decision to do so they are given the advice to stay the course.

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Re: 'Stay the course' with international stock but give up on value?

Post by DonIce » Thu Oct 03, 2019 10:20 am

It seems to me that holding international is consistent with the "buy the haystack" philosophy if held at up to ~50% of your total equities. I'm sure if someone was overweight in international, say 80%, many here would suggest that they may want to cut back. Same goes for value tilts and other factors. If you hold TSM, you already have the market weight of value companies.

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Re: 'Stay the course' with international stock but give up on value?

Post by Silk McCue » Thu Oct 03, 2019 10:22 am

I expect that for many it is because that they value maximum diversification without picking winners and losers that comes from holding the "total" market whether US or Intl in the percentage that they are comfortable with. Tilting "violates" that by concentrating more in a portion of the market. I also expect that most folks here don't tilt but may very well hold Intl and thus the different approaches suggested.

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Re: 'Stay the course' with international stock but give up on value?

Post by donaldfair71 » Thu Oct 03, 2019 10:29 am

I think you have a point. I am in the camp of "Gave up on factor tilting but not on International", and I can tell you my reasoning. Whether that's everyone else's I don't know.

I acknowledge that long-term, through an entire cycle, factors have at least a 50/50 likelihood at outperformance of the alternative, say the S&P500 or a Wilshire 5000 fund. However, the tracking error would have me monthly, quarterly, yearly, questioning why I am deviating from market beta when I can't be sure it is gonna deliver. It doesn't satisfy two areas that I am certain are necessary in my portfolio: Broad diversification, but at the lowest cost possible.

While a tilt doesn't meet the criteria, International diversification in the form of a broad index, does meet the criteria. Tilting might be good for me. Might not. But it's not the end game that I have in mind, or being results-oriented, that concerns me. But more that, in 20+ years, I will be able to live with lower than US-only returns because I believe the theory/practice in International diversification was, and is, sound. I would not be able to live with paying more to achieve lower than market returns in that time.

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Re: 'Stay the course' with international stock but give up on value?

Post by rascott » Thu Oct 03, 2019 10:34 am

willthrill81 wrote:
Thu Oct 03, 2019 10:10 am
For a long while now, many posters here have been seriously questioning whether they should give up on international stock due to its underperformance compared to U.S., and they have generally been advised to 'stay the course'.

But at the same time, many have also been questioning the value premium and its underperformance compared to the total market (in the U.S.) and whether they should give up on it. However, it seems to me that relatively few here are advising such investors to 'stay the course' and have actually advised others to trade in their value tilt for total market funds.

Perhaps this is merely my perception and not objectively accurate, a possibility I will readily admit to. I wonder whether others have noted this phenomenon as well.

If this is indeed happening, it would seem to be logically inconsistent to me. Is this because Bogle himself usually eschewed factors (e.g. a value tilt)? But if this is the driving force, why then are posters being advised to 'stay the course' with regard to international stock, which Bogle held in disdain?

Maybe I'm missing something here.

You aren't missing anything.... the juxtaposition is odd. There is arguably stronger data to support a value tilt than holding international funds.... but the standard advice is just the opposite.

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Re: 'Stay the course' with international stock but give up on value?

Post by H-Town » Thu Oct 03, 2019 10:38 am

I think not many investors have conviction to stick with an investing strategy. They either chase performance when things are good (with SCV, international, etc.) or run for cover when things are bad (a few years of under-performance).

That's why Taylor's advice to stick with broad index funds (Total Stock Market) is applicable to majority of investors.

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Re: 'Stay the course' with international stock but give up on value?

Post by asif408 » Thu Oct 03, 2019 10:57 am

My observation is that, at least on this board, sentiment is very low with regards to international investing (maybe nearing a nadir?), and not far behind with value. I think most of the frequent posters here advocate for some international diversification, but not necessarily a value tilt. So your perception may be accurate.

To me the biggest difference is that one strategy omits dozens of countries and concentrates your investments in one country, while the other limits, but doesn't eliminate your investments in growth stocks. So if an investor holds US and international indexes but doesn't tilt to value that is much less of an issue from a "worst case" scenario" than one who only owns US stocks and fixates on their value tilts in the US while ignoring the rest of the world.

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Re: 'Stay the course' with international stock but give up on value?

Post by Ferdinand2014 » Thu Oct 03, 2019 11:03 am

willthrill81 wrote:
Thu Oct 03, 2019 10:10 am
For a long while now, many posters here have been seriously questioning whether they should give up on international stock due to its underperformance compared to U.S., and they have generally been advised to 'stay the course'.

But at the same time, many have also been questioning the value premium and its underperformance compared to the total market (in the U.S.) and whether they should give up on it. However, it seems to me that relatively few here are advising such investors to 'stay the course' and have actually advised others to trade in their value tilt for total market funds.

Perhaps this is merely my perception and not objectively accurate, a possibility I will readily admit to. I wonder whether others have noted this phenomenon as well.

If this is indeed happening, it would seem to be logically inconsistent to me. Is this because Bogle himself usually eschewed factors (e.g. a value tilt)? But if this is the driving force, why then are posters being advised to 'stay the course' with regard to international stock, which Bogle held in disdain?

Maybe I'm missing something here.
Perhaps an international allocation is considered more of a structural difference that can not be arbitraged away relative to a factor tilt. I am a S&P 500 simpleton so my view probably doesn't hold much water. I tend to think of my investments as owning a slice of all business enterprises held forever (in the currency I live with), rather then a strategy of trying to deviate from the market or 'outsmart' the market. As a result, I would understand the rational for international diversification because you are adding more business enterprises to your portfolio. I struggle with factor tilts however, because your goal is to deviate from market beta to gain an advantage which is a risky proposition that could do better, but will likely do worse more often then not as with any strategy that deviates with beta.
Last edited by Ferdinand2014 on Thu Oct 03, 2019 12:19 pm, edited 1 time in total.
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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 11:17 am

Where the disconnect seems to be occurring to me is that 'stay the course' only seems to apply to what's in the 3-fund portfolio (i.e. total U.S. stocks, total ex-U.S. stock, and total bonds). If someone owns something else and appears to be wavering in their resolve to hold it, they are seemingly encouraged to abandon their holdings in lieu of the 3-funds. But I fail to see how a value tilt is in conflict with the Boglehead philosophy, even if Bogle himself didn't care for it, although he actually did indirectly due to his preference for dividend stocks.
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Re: 'Stay the course' with international stock but give up on value?

Post by firebirdparts » Thu Oct 03, 2019 11:25 am

My advice is to always ignore your perceptions of how "all the other posters/bogle/whomever are hypocrites". It's a fools errand. Hypocrites are likely to be right either in what they say or what they do. When it comes to mean reversion, of course, they're right twice, you just have to pick the right time to see that they're right. This is why it's okay to stay the course.

When it comes to tilting a portfolio, of course, it doesn't really matter if you do or don't. Other decisions overwhelm that one.

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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 11:27 am

firebirdparts wrote:
Thu Oct 03, 2019 11:25 am
My advice is to always ignore your perceptions of how "all the other posters/bogle/whomever are hypocrites". It's a fools errand.
Perhaps, but if they are giving poor advice to uninformed investors, that's difficult for me to ignore.

I'm not necessarily saying that it is poor advice, but it seems to at least be inconsistent. It's directly implying that 'staying the course' is less important than owning the 'right' assets.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: 'Stay the course' with international stock but give up on value?

Post by TropikThunder » Thu Oct 03, 2019 11:45 am

willthrill81 wrote:
Thu Oct 03, 2019 11:17 am
Where the disconnect seems to be occurring to me is that 'stay the course' only seems to apply to what's in the 3-fund portfolio (i.e. total U.S. stocks, total ex-U.S. stock, and total bonds).
If I understand correctly, your concern is not whether international investing is advisable or not, or whether a value tilt is advisable or not per se, but rather whether one should maintain the allocation they selected (for presumably good reason) or bail out on the underperforming portion of their portfolio. If so, then I agree it’s odd.

If I made an educated decision to select investment strategies A and B after thorough research into their relative risks and rewards, and both are lagging a more purist allocation, I should dump A since it’s never going to work, but I should maintain B because I just need to give it more time. And different commenters can choose which one is A and which one is B. :P

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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 11:48 am

TropikThunder wrote:
Thu Oct 03, 2019 11:45 am
willthrill81 wrote:
Thu Oct 03, 2019 11:17 am
Where the disconnect seems to be occurring to me is that 'stay the course' only seems to apply to what's in the 3-fund portfolio (i.e. total U.S. stocks, total ex-U.S. stock, and total bonds).
If I understand correctly, your concern is not whether international investing is advisable or not, or whether a value tilt is advisable or not per se, but rather whether one should maintain the allocation they selected (for presumably good reason) or bail out on the underperforming portion of their portfolio. If so, then I agree it’s odd.
Precisely.
TropikThunder wrote:
Thu Oct 03, 2019 11:45 am
If I made an educated decision to select investment strategies A and B after thorough research into their relative risks and rewards, and both are lagging a more purist allocation, I should dump A since it’s never going to work, but I should maintain B because I just need to give it more time. And different commenters can choose which one is A and which one is B. :P
That's my exact concern. Some seem to be talking out of both sides of their mouth, condoning that investors abandon their value tilt while advocating that they 'stay the course' when it comes to international holdings, likely on the basis of whether the one providing the advice personally 'likes' international but not value.
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Re: 'Stay the course' with international stock but give up on value?

Post by markcoop » Thu Oct 03, 2019 11:51 am

I think the disconnect is because more people invest in int'l vs small/value. Therefore, since both have recently under-performed, people are just recommending what they do (because that is what they believe). If you believe something, I wouldn't expect people to go against there own beliefs and tell them to stay the course.
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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 11:57 am

markcoop wrote:
Thu Oct 03, 2019 11:51 am
I think the disconnect is because more people invest in int'l vs small/value. Therefore, since both have recently under-performed, people are just recommending what they do (because that is what they believe). If you believe something, I wouldn't expect people to go against there own beliefs and tell them to stay the course.
Perhaps it's asking too much of people, but if a poster had clearly done their due diligence and believed that a U.S. large-cap growth tilt was what they originally wanted to hold for the long-term, I would not try to dissuade them from 'staying the course' with their strategy on the basis of recent underperformance.

Saying something to the effect of "Yes, you should abandon your value tilt because it's underperformed for X years, but you shouldn't abandon your international stock even though it's underperformed for X years" is, at best, illogical.
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Re: 'Stay the course' with international stock but give up on value?

Post by deikel » Thu Oct 03, 2019 12:00 pm

Maybe this is just definition picking (it probably is):

What makes a stock a value stock, short of the active fund manager saying so ?

It seems simpler to apply to international stocks since those are from a company incorporated outside the US (although in reality, the larger ones certainly do heavily operate inside the US market and hence the correlation between international stocks and US stocks is certainly not inverse)

Why stop there ? What about the small cap premium ?

The bogle wiki states that tilting of any kind is for advanced investors, as such I am not advanced. But I do international for the currency conversion play.

I think that is where the somewhat inconsistent advice comes from. Beginning investors should simplify to total market and stay that course, advanced might want to play with tilting and stay that course. If you start questioning the tilting, its probably not working for you so reverse to the total market (and that advice will not cause much damage or losses since the difference is marginal over the long term)

International seems different to me based on potential impact level and diversification degree - but its only different to a degree.
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Re: 'Stay the course' with international stock but give up on value?

Post by retiredjg » Thu Oct 03, 2019 12:14 pm

willthrill81 wrote:
Thu Oct 03, 2019 11:57 am
Saying something to the effect of "Yes, you should abandon your value tilt because it's underperformed for X years, but you shouldn't abandon your international stock even though it's underperformed for X years" is, at best, illogical.
If the same person is saying both of these things, it is illogical. I have not noticed anything like that myself.

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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 12:16 pm

deikel wrote:
Thu Oct 03, 2019 12:00 pm
Maybe this is just definition picking (it probably is):

What makes a stock a value stock, short of the active fund manager saying so ?

It seems simpler to apply to international stocks since those are from a company incorporated outside the US (although in reality, the larger ones certainly do heavily operate inside the US market and hence the correlation between international stocks and US stocks is certainly not inverse)

Why stop there ? What about the small cap premium ?

The bogle wiki states that tilting of any kind is for advanced investors, as such I am not advanced. But I do international for the currency conversion play.

I think that is where the somewhat inconsistent advice comes from. Beginning investors should simplify to total market and stay that course, advanced might want to play with tilting and stay that course. If you start questioning the tilting, its probably not working for you so reverse to the total market (and that advice will not cause much damage or losses since the difference is marginal over the long term)

International seems different to me based on potential impact level and diversification degree - but its only different to a degree.
Value can be defined in many ways, and it largely doesn't matter which definition is used. The results are basically the same.

I disagree with the Wiki regarding tilting, and many others do as well. One doesn't need to be 'advanced' to allocation 10% of one's portfolio to a low cost index (not active) small-cap value fund like VISVX. But I'm not trying to turn this into a 'pro-tilting' thread at all, as noted above.

What you seem to be saying is that we should treat all investors like novices, recommending them to stay with the 3-fund portfolio, and if they are truly committed, 'advanced' investors, they will ignore that advice and 'stay the course' with their chosen strategy. I don't like that line of thinking at all. But maybe that's just me.
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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 12:18 pm

retiredjg wrote:
Thu Oct 03, 2019 12:14 pm
willthrill81 wrote:
Thu Oct 03, 2019 11:57 am
Saying something to the effect of "Yes, you should abandon your value tilt because it's underperformed for X years, but you shouldn't abandon your international stock even though it's underperformed for X years" is, at best, illogical.
If the same person is saying both of these things, it is illogical. I have not noticed anything like that myself.
Perhaps it's a mis-perception on my part. But there seem to be at least a few prominent members who are basically making just that argument. I will not name names.
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Re: 'Stay the course' with international stock but give up on value?

Post by bloom2708 » Thu Oct 03, 2019 12:24 pm

Value is much squishier than US to International. Just my opinion.

We both look at a basket of stocks..point to the value stocks. It is subjective, different rules.

The world cap mix of US to Ex-US (International) also seems a bit squishy. I see 60%, 50%, 40%, 43%. Is US companies with large international markets (not counted) skewing the International cap? Maybe but International companies also have large US markets. So it probably evens out.

Is a value stock value if it is priced wrong and keeps going down or does it have to be value and go up to be value? You don't know until after the up and down.
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Re: 'Stay the course' with international stock but give up on value?

Post by MichCPA » Thu Oct 03, 2019 12:27 pm

Staying the course on international avoids tilting, giving up on the idea that value outperforms avoids tilting. I haven't seen anyone say, "Drop all value, the same way that has been a discussion topic with international. On the flip side, I get the impression that if someone wanted to own exclusively US large growth, the forum wouldn't be overly positive toward that.

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Re: 'Stay the course' with international stock but give up on value?

Post by Tamarind » Thu Oct 03, 2019 12:34 pm

MichCPA wrote:
Thu Oct 03, 2019 12:27 pm
Staying the course on international avoids tilting, giving up on the idea that value outperforms avoids tilting.
+1

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Re: 'Stay the course' with international stock but give up on value?

Post by MichCPA » Thu Oct 03, 2019 12:34 pm

bloom2708 wrote:
Thu Oct 03, 2019 12:24 pm
[...]

Is a value stock value if it is priced wrong and keeps going down or does it have to be value and go up to be value? You don't know until after the up and down.
Generally, stocks are classified as growth v value largely on the the P/E metric. If a P/E is low it means expected growth is low. Its certainly possible that this can reverse (change in management, just mis-priced, etc.) But keep in mind that 'value' is a sanitized term (like high-yield for junk bonds) that the industry uses to sell the securities (I wouldn't buy a "low expected growth" fund).

Those terms don't have much meaning in a vacuum, which may have been your point.

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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 12:35 pm

MichCPA wrote:
Thu Oct 03, 2019 12:27 pm
On the flip side, I get the impression that if someone wanted to own exclusively US large growth, the forum wouldn't be overly positive toward that.
That wouldn't be too far off from VTSAX, according to Morningstar.
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Re: 'Stay the course' with international stock but give up on value?

Post by whodidntante » Thu Oct 03, 2019 12:42 pm

I factor tilt and I invest in international stocks. If reassurance were air, I would suffocate on this site. But I didn't come looking for that and I have always been comfortable being different.

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Re: 'Stay the course' with international stock but give up on value?

Post by TomCat96 » Thu Oct 03, 2019 12:47 pm

willthrill81 wrote:
Thu Oct 03, 2019 10:10 am
For a long while now, many posters here have been seriously questioning whether they should give up on international stock due to its underperformance compared to U.S., and they have generally been advised to 'stay the course'.

But at the same time, many have also been questioning the value premium and its underperformance compared to the total market (in the U.S.) and whether they should give up on it. However, it seems to me that relatively few here are advising such investors to 'stay the course' and have actually advised others to trade in their value tilt for total market funds.

Perhaps this is merely my perception and not objectively accurate, a possibility I will readily admit to. I wonder whether others have noted this phenomenon as well.

If this is indeed happening, it would seem to be logically inconsistent to me. Is this because Bogle himself usually eschewed factors (e.g. a value tilt)? But if this is the driving force, why then are posters being advised to 'stay the course' with regard to international stock, which Bogle held in disdain?

Maybe I'm missing something here.

Don't take the characterization seriously. The pro-international crowd would like to cast the US crowd as succumbing to recency bias. As in "International is underperforming? Time to drop it." If you take that characterization seriously, and impute it to a factor, then yes there may be an inconsistency.

But I think the idea that International is underperforming therefore we should not invest in it is a complete mischaracterization of the opposing view to gain support.

Look at my old posts. Many of them try to probe at the philosophical question "what is the market?" Or rather, what is the central premise that bogle has stumbled onto?

No one I know here seriously advocates for "buying the haystack" in a ideologically pure manner. That would mean inclusion of a whole universe of other assets outside stocks and bonds, many of which any of us would be unfamiliar with. I for one don't know much about commodities, and I would not seek to purchase commodities in an attempt to retain the true essence of "buying the haystack"

The same goes for Derivatives and Options, International bonds, International Real Estate, and more.

Instead, the argument for buying the haystack appears to be ideologically contrived around equities.

The argument for International might quip

"Look at Nestle and Samsung, aren't those some great companies you want to own?"

But it won't go so far as "Look at all that gold and shale oil. Wouldn't you want a piece of that?"

Well, wouldn't you?

What's generally understood by both the pro-international and pro-us crowd is that there are certain asset classes where it's just not necessary to get into. Whether the pro-international crowd realizes it, and I think they do, you can construct a fine portfolio by not "buying the haystack" outside of equities.

Bogle had much the same philosophy. Bogle didn't advocate for the market weight of International and US. Just like pro-international crowd, don't seem to advocate the market weight of Stocks to Bonds that the Global capital markets collectively hold. Why is 55/45 magical when 70/30 is not?
There's an idea that enough is enough.

Bogle for his part, managed to do just fine with his convictions of 20% international.

But his argument, his rationale for holding that view was based on an underlying thought---that the International equities market was qualitatively something different than the US.


I have probed and probed at this question. And at this moment, I have to say I concur.
Whether it's frictional trading costs between nations, the hodgepodge of disparate legal frameworks, and yes finally the different manner in which International has performed, I concluded that whatever International provides is something different than what the US equity markets provides to the domestic investor.

Time and time again I have tried to bring my objections to the forefront. I think there is this idea that the market should be able to handle everything. Any legal framework, any oddity or variation, the market has already compensated for it.

And based on what I've seen, this is simply not the case.

Whether it was based on my practical experience actively trading within markets of varying sizes, or seeing whether or not investors would actually be willing to put money in Greek and Venezuelan bonds because the market should have sufficiently discounted their political volatility, I just didn't see it.

The market is limited. The affairs of nation-states are deep complex political systems that no amount of market analysis by "Phds and wall street types" can penetrate, and above all that market regulations do matter---they can hamper or they can help.

The underperformance of International then, is not the reason to run for the hills; It is instead a data point in asserting the qualitative difference between the US and International equity markets.

The market works because of particular conditions--Conditions which are met in the United States.
They are likely met in a number of foreign countries as well.

But I don't believe they are met in a "buy the haystack" imputation across the board of all nations.

Some would argue that I'm just not looking at the data for long enough. Perhaps. But for now, the underperformance of International is the data point which supports my hypothesis that the International equities collectively are an impaired equities market--one with frictional trading costs the similarly sized US market is not hampered by. We are met with practical examples of this daily--China and Venezuela being in the recent news.

As per value; I personally do not invest in factors. I did however choose to overweight to 100% small and midcap.
The data however is quite clear that all the different facets of the US market are quite interrelated. One quick gut check, and I could immediately see "Small and Midcap" function like the rest of the US market. It's not identical, but it's the same character. 97% correlation.

Because both quantitatively and qualitatively the markets are so similar, I dismiss the underperformance of one to another. Various segments will underperform and overperform. I think the "inconsistency" you found speaks to that.

As I said, it's not the underperformance of International which is driving the argument. It is rather the underperformance on top of a host of other arguments(laws, political instability, tax regimes) which is driving the concern that the aggregate international market is something of a different character---and that's something that makes the wary domestic investor skittish.

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Re: 'Stay the course' with international stock but give up on value?

Post by rixer » Thu Oct 03, 2019 12:57 pm

Staying the course has been difficult for me in the past. That's why I chose a Lifestrategy fund when I retired. It keeps everything in balance and I don't have to make those emotional choices anymore. Right or wrong, it's taken the mental stress out of it for me. But that's just me.

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Re: 'Stay the course' with international stock but give up on value?

Post by deikel » Thu Oct 03, 2019 4:00 pm

willthrill81 wrote:
Thu Oct 03, 2019 12:16 pm
deikel wrote:
Thu Oct 03, 2019 12:00 pm
Maybe this is just definition picking (it probably is):

What makes a stock a value stock, short of the active fund manager saying so ?

It seems simpler to apply to international stocks since those are from a company incorporated outside the US (although in reality, the larger ones certainly do heavily operate inside the US market and hence the correlation between international stocks and US stocks is certainly not inverse)

Why stop there ? What about the small cap premium ?

The bogle wiki states that tilting of any kind is for advanced investors, as such I am not advanced. But I do international for the currency conversion play.

I think that is where the somewhat inconsistent advice comes from. Beginning investors should simplify to total market and stay that course, advanced might want to play with tilting and stay that course. If you start questioning the tilting, its probably not working for you so reverse to the total market (and that advice will not cause much damage or losses since the difference is marginal over the long term)

International seems different to me based on potential impact level and diversification degree - but its only different to a degree.
Value can be defined in many ways, and it largely doesn't matter which definition is used. The results are basically the same.

I disagree with the Wiki regarding tilting, and many others do as well. One doesn't need to be 'advanced' to allocation 10% of one's portfolio to a low cost index (not active) small-cap value fund like VISVX. But I'm not trying to turn this into a 'pro-tilting' thread at all, as noted above.

What you seem to be saying is that we should treat all investors like novices, recommending them to stay with the 3-fund portfolio, and if they are truly committed, 'advanced' investors, they will ignore that advice and 'stay the course' with their chosen strategy. I don't like that line of thinking at all. But maybe that's just me.
I did not equate small cap with value, you made that connection.

When you add small cap, then yes, you have another metric you can go by and define the small cap reasonably clean (and it can be value or growth or whatever soft metric you want to attach to it).

I highlighted your summary because that is exactly the advise that this board basically provides (I will stay out of it if I like it or not) and sometimes you have more in depth discussions of, for example, the small cap premium and if it shows or not or a sector tilt to healthcare etc....but the overwhelming amount of questions on this forum are basic and they help people to slowly learn and grow if they want to (including myself) or get a quick answer that is probably a safe bet.

Not sure whats wrong with that - compared to advice people would get from their advisor I think its pure gold

And there is no way you can convince people that think they are advanced to do anything but what they think it right anyway - so why waste time on those ?
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Re: 'Stay the course' with international stock but give up on value?

Post by BigJohn » Thu Oct 03, 2019 4:20 pm

I’ve read most of the value/tilt threads and would offer the following opinion. Most of the people saying abandon ship were never factor believers in the first place. Then add the fact that for whatever reason value/tilt discussions always generate much more emotion than international which makes those comments more pointed and direct. So I think the perceived difference is more about value/tilt non-believers taking trying to covert someone over to their way of thinking.

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Re: 'Stay the course' with international stock but give up on value?

Post by markcoop » Thu Oct 03, 2019 4:31 pm

Oddly enough, when I do see the abandon ship conversations, I know that area is going through a rough time and it makes me want to own more of it. Although my AA has remained somewhat stable as a whole over the past 20 years, as far as what I have owned and the percentages, I do sometimes tweak it. I recently upped my small value a bit.
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Re: 'Stay the course' with international stock but give up on value?

Post by Phineas J. Whoopee » Thu Oct 03, 2019 4:34 pm

OP: I believe what you're missing is the meaning of stay the course. The fact some posters are not doing that, which is what you asked about, doesn't change the principle.

Pick a course. Maybe it includes international. Maybe it includes a value tilt. Maybe it includes tilting away from equities in one's own industry. Pick a course.

If there's a personal situation reason to revise the course, revise it. In my case I wrote a plan to revise allocation based on wealth. I revised as planned. It is the course.

Having thoughtfully chosen a course, stay it.

PJW

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Re: 'Stay the course' with international stock but give up on value?

Post by columbia » Thu Oct 03, 2019 6:33 pm

If forced to choose, I’d actually stay the course with value over international, but that’s a personal choice thing.

I have a reasonable respect for value investing (see Wellington and Wellesley), but it shouldn’t be in any sense surprising that, on a website dedicated to promoting the investment philosophy of Jack Bogle, one would see skepticism of value, small, SCV, etc. approaches.

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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 6:36 pm

Phineas J. Whoopee wrote:
Thu Oct 03, 2019 4:34 pm
OP: I believe what you're missing is the meaning of stay the course. The fact some posters are not doing that, which is what you asked about, doesn't change the principle.

Pick a course. Maybe it includes international. Maybe it includes a value tilt. Maybe it includes tilting away from equities in one's own industry. Pick a course.

If there's a personal situation reason to revise the course, revise it. In my case I wrote a plan to revise allocation based on wealth. I revised as planned. It is the course.

Having thoughtfully chosen a course, stay it.

PJW
I'm not missing anything. I agree entirely with you that if an investor has already determined to have a tilt in a particular direction, then we should not be actively trying to encourage them to abandon it, regardless of our own personal feelings about whether such a tilt is in their favor or not.

In other words, I believe that 'stay the course' should take precedence over one's AA.
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Re: 'Stay the course' with international stock but give up on value?

Post by JoMoney » Thu Oct 03, 2019 7:04 pm

willthrill81 wrote:
Thu Oct 03, 2019 10:10 am
... Perhaps this is merely my perception and not objectively accurate, a possibility I will readily admit to. I wonder whether others have noted this phenomenon as well.

If this is indeed happening, it would seem to be logically inconsistent to me. Is this because Bogle himself usually eschewed factors (e.g. a value tilt)? ...
If you cant point to anyone specifically as an example of this "logical inconsistency", I would lean toward the idea that there was never any consensus on these things, and you're over generalizing the opinion of separate people.
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Re: 'Stay the course' with international stock but give up on value?

Post by Hector » Thu Oct 03, 2019 7:10 pm

I think total market is optimal stock portfolio. When we tilt, we increase turnover. IMO buy and hold is the best strategy when it comes to stocks for long term and turnover only hurts. Higher the turnover lesser the return. Even if I buy and hold value index fund, fund keeps selling securities which are not 'value' anymore and replaces them. If you hold individual stock portfolio, you will notice that stock never stay value or core or growth all the time. Even slowly, it changes for sure. Even most large companies were mid size once and small size before.

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Re: 'Stay the course' with international stock but give up on value?

Post by DonIce » Thu Oct 03, 2019 7:29 pm

willthrill81 wrote:
Thu Oct 03, 2019 6:36 pm
I'm not missing anything. I agree entirely with you that if an investor has already determined to have a tilt in a particular direction, then we should not be actively trying to encourage them to abandon it, regardless of our own personal feelings about whether such a tilt is in their favor or not.

In other words, I believe that 'stay the course' should take precedence over one's AA.
You're on the "Investing - Theory, News, and General forum". This isn't a forum where people are restricted to just offering basic investment advice or parroting "stay the course". People come here to express their viewpoints on various topics, and when someone starts discussing their various tilts, international allocation, etc, people will inevitably comment based on their own views and ideas, rather than just repeating a slogan.

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Re: 'Stay the course' with international stock but give up on value?

Post by columbia » Thu Oct 03, 2019 7:42 pm

DonIce wrote:
Thu Oct 03, 2019 7:29 pm
willthrill81 wrote:
Thu Oct 03, 2019 6:36 pm
I'm not missing anything. I agree entirely with you that if an investor has already determined to have a tilt in a particular direction, then we should not be actively trying to encourage them to abandon it, regardless of our own personal feelings about whether such a tilt is in their favor or not.

In other words, I believe that 'stay the course' should take precedence over one's AA.
You're on the "Investing - Theory, News, and General forum". This isn't a forum where people are restricted to just offering basic investment advice or parroting "stay the course". People come here to express their viewpoints on various topics, and when someone starts discussing their various tilts, international allocation, etc, people will inevitably comment based on their own views and ideas, rather than just repeating a slogan.
And charcuterie enthusiasts will experience some skepticism on a vegan cooking website.

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Re: 'Stay the course' with international stock but give up on value?

Post by Silence Dogood » Thu Oct 03, 2019 7:45 pm

retiredjg wrote:
Thu Oct 03, 2019 12:14 pm
willthrill81 wrote:
Thu Oct 03, 2019 11:57 am
Saying something to the effect of "Yes, you should abandon your value tilt because it's underperformed for X years, but you shouldn't abandon your international stock even though it's underperformed for X years" is, at best, illogical.
If the same person is saying both of these things, it is illogical. I have not noticed anything like that myself.
I have not noticed this either.

Perhaps willthrill81 is reading too much into what people have written.

For example, Taylor has criticized factors, but I don't see where he has written, "if you are already following this strategy, you should abandon it." Instead, he simply points out that those who had previously changed strategy in order to chase past performance are probably not happy with the results.

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Re: 'Stay the course' with international stock but give up on value?

Post by stlutz » Thu Oct 03, 2019 8:04 pm

willthrill81 wrote:
Thu Oct 03, 2019 10:10 am

Maybe I'm missing something here.
We have people who who advocate for tilting to value and those those who advocate market weight. They debate with each other.

We have people here who advocate for including international stocks and those who advocate against it. They debate with each other.

We don't have anybody here arguing that one should eschew value stocks altogether. We also don't have anyone arguing that one should eschew US stocks altogether (or even go beyond market weight in international). If we did, that would be interesting.

Regardless, if one doesn't have an expectation that value will outperform in the future, I don't follow why you think that they should hold what they would view as a less diversified portfolio?

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Re: 'Stay the course' with international stock but give up on value?

Post by BlueMoonXD » Thu Oct 03, 2019 8:10 pm

willthrill81 wrote:
Thu Oct 03, 2019 11:48 am
That's my exact concern. Some seem to be talking out of both sides of their mouth, condoning that investors abandon their value tilt while advocating that they 'stay the course' when it comes to international holdings, likely on the basis of whether the one providing the advice personally 'likes' international but not value.
You're suggesting that all asset allocation strategies should be treated as inherently equal, but why should this be the case? If someone asked for a review of their strategy of tilting towards companies with purple branding, they would presumably be advised to abandon this strategy in favor of a broad market approach. This is because the logic for such a tilt is not very defensible.

So I would argue the reason there is less encouragement to "stay the course" with value tilt as compared to international tilt is for similar reasons. I think the reasoning for an international tilt (and I don't know if tilt is even the appropriate characterization if you are representing the international allocation in proportion to the total market) is fairly simple. If you want to own the whole market you definitionally need to include an international allocation. Some even advocate for investing in a two-fund portfolio with a total world market index representing 100% of the equity allocation.

A value tilt, on the other hand, is comparatively a lot more arbitrary. The reason for such an allocation is not to own a more accurate index of the total market, but instead to overweight a particular market segment. There are obviously good arguments in favor of taking this approach, and if one has conviction in them they should indeed "stay the course". But I don't think it's a mystery why this community would be more skeptical of this approach vs a total market strategy.

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Re: 'Stay the course' with international stock but give up on value?

Post by willthrill81 » Thu Oct 03, 2019 10:59 pm

Apparently very few posters have sensed what I have, so perhaps this was merely a mis-perception on my part.
Last edited by willthrill81 on Fri Oct 04, 2019 9:48 am, edited 1 time in total.
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Re: 'Stay the course' with international stock but give up on value?

Post by blessed » Fri Oct 04, 2019 12:08 am

willthrill81 wrote:
Thu Oct 03, 2019 10:10 am
For a long while now, many posters here have been seriously questioning whether they should give up on international stock due to its underperformance compared to U.S., and they have generally been advised to 'stay the course'.

But at the same time, many have also been questioning the value premium and its underperformance compared to the total market (in the U.S.) and whether they should give up on it. However, it seems to me that relatively few here are advising such investors to 'stay the course' and have actually advised others to trade in their value tilt for total market funds.

Perhaps this is merely my perception and not objectively accurate, a possibility I will readily admit to. I wonder whether others have noted this phenomenon as well.

If this is indeed happening, it would seem to be logically inconsistent to me. Is this because Bogle himself usually eschewed factors (e.g. a value tilt)? But if this is the driving force, why then are posters being advised to 'stay the course' with regard to international stock, which Bogle held in disdain?

Maybe I'm missing something here.
I think you are spot on and I feel the exact same, but it doesn't really change what I do and I don't really worry about it. My wife and I have recently talked about what you're referring to: the debates about to tilt or not tilt, intl or no intl are fine. It's the threads that are referencing the last 2 or 3 years of SCV underperformance as the "aha, I told you SCV was bad" that seem a little ridiculous. Especially when standing quietly unnoticed in the corner of the room is the long term underperformer intl. I've wondered why intl always gets a pass in those discussions. My assumption, which isn't worth much, is that the members that haven't observed what you're referring to might not be tilters, so it doesn't jump out at them like it does you and I.

So yes, I feel that 'stay the course' isn't very consistently applied here. I try to learn something new about this stuff as often as I can, and the one thing that I seem to consistently run across is that 'staying the course' is probably more important than AA. Others may disagree and that's fine.

At the end of the day, I think this forum is awesome!! I try to send as many people here as will listen to me. Wish I would have found it much sooner in life.

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Re: 'Stay the course' with international stock but give up on value?

Post by Forester » Fri Oct 04, 2019 2:39 am

SCV is essentially level with large cap US since March 09, it's just bounced around more. And value is supposedly doing better ex-US.

Just relying on the S&P 500 alone for US stocks is a horrible strategy as we saw in the Dotcom bust.

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Re: 'Stay the course' with international stock but give up on value?

Post by harvestbook » Fri Oct 04, 2019 7:26 am

Recency bias explains a lot of positions, and some people feel the need to muster evidence to support their beliefs (confirmation bias.) I don't think it's all that important, except to recognize the psychological biases at work. I saw Larry Grantham throwing in the towel after 20 years of value belief and thought, "Maybe this guy knows something. Maybe this time it's different." Yet I didn't change anything.

I tilt because I was exposed to Merriman before I really got into Bogle, and so I had the Ultimate Buy-And-Hold portfolio before I really had heard of or understood the Three-Fund portfolio. If I had found this forum first, I might have a different philosophy, but oddly enough, the core principle of buy-and-hold overrode my other impulses--I figured it was better to ride out the tilts I already had than to guess which ones (or none) were right. I will make exceptions as my philosophy/experience/knowledge evolves. For example, I am going to sell my small Vanguard International Value fund next year because the expense ratio is too high for my tastes, and I've reduced my international tilt by 10 percent (now roughly 60/40 on equities--yes, a little home country bias, but I am a little persuaded that perhaps the US has some inherent geographic and resource advantages over many other countries.)

The truth is, I just don't know, and I don't think anyone else does, either. As long as I don't make any big moves, I won't make any big mistakes. It's not something I really feel is worth mustering up much passion about.
I'm not smart enough to know, and I can't afford to guess.

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Re: 'Stay the course' with international stock but give up on value?

Post by jdilla1107 » Fri Oct 04, 2019 8:46 am

This is a poor analogy and a straw man argument.

- International stocks are a sector of the world economy. By adding international stocks you are adding new companies to your portfolio. Adding new companies increases your diversification against idiosyncratic risk. (Whether it's necessary to lower this risk is debatable)
- Holding value is to overweight something already held.
- No one argues that international will deliver superior risk/reward like they do with value.
- No one is holding international because of some nice looking back test results and expecting outperformance.

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Re: 'Stay the course' with international stock but give up on value?

Post by asif408 » Fri Oct 04, 2019 8:48 am

stlutz wrote:
Thu Oct 03, 2019 8:04 pm
We also don't have anyone arguing that one should eschew US stocks altogether (or even go beyond market weight in international). If we did, that would be interesting.
I pretty much have held an extremely overweight international position since 2016 (<10% US stocks), but wouldn't dare argue for it, because I'd be battling too much recency bias and wouldn't find almost any supporters. I also own gold mining and energy stocks, which have been the worst sectors in the last decade. Maybe I should start a new post, though, to confirm or refute my suspicions......... :idea:

Easier to make a 100% of something or 0% of something argument when it's been the best (US growth stocks) or worst (international value stocks, gold mining and energy stocks), respectively, over the last decade. I think getting many investors here just to consider holding 40-50% in international stocks right now is an act of Congress.

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Re: 'Stay the course' with international stock but give up on value?

Post by jdilla1107 » Fri Oct 04, 2019 8:58 am

Forester wrote:
Fri Oct 04, 2019 2:39 am
Just relying on the S&P 500 alone for US stocks is a horrible strategy as we saw in the Dotcom bust.
Small Value was underweight technology going into the dotcom bust. Maybe this was predictive. Maybe it was an accident. But, were you really more diversified by being underweight technology in one of your positions?

Let's say my strategy were to hold each of the sp500 sectors separately. Look how much "more diversified" I would be:

https://eresearch.fidelity.com/eresearc ... erformance

Good thing I didn't hold too much energy!

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Re: 'Stay the course' with international stock but give up on value?

Post by rascott » Fri Oct 04, 2019 9:21 am

Forester wrote:
Fri Oct 04, 2019 2:39 am
SCV is essentially level with large cap US since March 09, it's just bounced around more. And value is supposedly doing better ex-US.

Just relying on the S&P 500 alone for US stocks is a horrible strategy as we saw in the Dotcom bust.

I agree..... holding only SP500/ Total Market Index (same thing) is leaving a lot of possible diversification on the table. At least factor investors can point to historical returns as an argument for including them in a portfolio.

International proponents are relying entirely on theoretical arguments as to the possible benefit in the future.

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Re: 'Stay the course' with international stock but give up on value?

Post by Forester » Fri Oct 04, 2019 9:27 am

jdilla1107 wrote:
Fri Oct 04, 2019 8:58 am
Forester wrote:
Fri Oct 04, 2019 2:39 am
Just relying on the S&P 500 alone for US stocks is a horrible strategy as we saw in the Dotcom bust.
Small Value was underweight technology going into the dotcom bust. Maybe this was predictive. Maybe it was an accident. But, were you really more diversified by being underweight technology in one of your positions?

Let's say my strategy were to hold each of the sp500 sectors separately. Look how much "more diversified" I would be:

https://eresearch.fidelity.com/eresearc ... erformance

Good thing I didn't hold too much energy!
This is why I like MSCI Min Vol, it doesn't make naive sector bets. I'm not aware of any major value funds which have a similar approach, I just checked IJS and it is indeed heavy in financials.

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