Does International investment still make sense?

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rockstar
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Does International investment still make sense?

Post by rockstar » Mon Feb 10, 2020 3:04 pm

A few things bug me about international investment. First, other than EM, rates look mostly negative. Second, good chunk of international concentrated in financial companies. Finally, with rates so low, the US dollar is strong versus international currencies. How can I expect to make a reasonable return given those conditions? What do you guys think? Am I overthinking this one?

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Re: Does International investment still make sense?

Post by Steadfast » Mon Feb 10, 2020 3:20 pm

This is a very frequent topic, use the search function to find the hundreds of threads about it.

Meanwhile, I'll just leave this here...

Image

Full disclosure, I'm a U.S. investor and I invest at global market cap (~47% international equities).
We don't see things as they are, we see things as we are.

DB2
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Re: Does International investment still make sense?

Post by DB2 » Mon Feb 10, 2020 3:21 pm

Please, do a search on this topic. There are so many international threads, thanks.

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Re: Does International investment still make sense?

Post by Northern Flicker » Mon Feb 10, 2020 3:38 pm

I won’t assume that int’l diversification is right for your particular situation, but the reasons you give seem to be to be arguments that are more for int’l diversification at present than against it.

A strong dollar means you have more buying power to buy non-US shares at present. And that the largest sector outside the US is not the tech sector would provide some sector diversification for the US market.
Last edited by Northern Flicker on Mon Feb 10, 2020 4:01 pm, edited 1 time in total.
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Re: Does International investment still make sense?

Post by fortyofforty » Mon Feb 10, 2020 3:41 pm

rockstar wrote:
Mon Feb 10, 2020 3:04 pm
A few things bug me about international investment. First, other than EM, rates look mostly negative. Second, good chunk of international concentrated in financial companies. Finally, with rates so low, the US dollar is strong versus international currencies. How can I expect to make a reasonable return given those conditions? What do you guys think? Am I overthinking this one?
You might not make a reasonable return in international equities. I choose to do it, anyway. There is no right answer knowable in advance. Either way is a gamble.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Vanguard Diehards

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Re: Does International investment still make sense?

Post by jhfenton » Mon Feb 10, 2020 3:42 pm

If I could only invest in one of US equities or ex-US equities, I'd invest in the one that folks were asking whether they should own or not.

We're 50% US, 25% developed ex-US, 25% emerging.

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Re: Does International investment still make sense?

Post by Schlabba » Mon Feb 10, 2020 3:50 pm

rockstar wrote:
Mon Feb 10, 2020 3:04 pm
A few things bug me about international investment. First, other than EM, rates look mostly negative. Second, good chunk of international concentrated in financial companies. Finally, with rates so low, the US dollar is strong versus international currencies. How can I expect to make a reasonable return given those conditions? What do you guys think? Am I overthinking this one?
Would you have listed all those argument if the US underperformed the past 10 years?

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Re: Does International investment still make sense?

Post by Taylor Larimore » Mon Feb 10, 2020 3:53 pm

rockstar wrote:
Mon Feb 10, 2020 3:04 pm
A few things bug me about international investment. First, other than EM, rates look mostly negative. Second, good chunk of international concentrated in financial companies. Finally, with rates so low, the US dollar is strong versus international currencies. How can I expect to make a reasonable return given those conditions? What do you guys think? Am I overthinking this one?
rockstar:

I gave my opinion in this link: How Much International? A Suggestion.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Holdings of non-U.S. stocks should be limited to no more than 20% of equities.
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Re: Does International investment still make sense?

Post by abuss368 » Mon Feb 10, 2020 4:57 pm

Steadfast wrote:
Mon Feb 10, 2020 3:20 pm
This is a very frequent topic, use the search function to find the hundreds of threads about it.

Meanwhile, I'll just leave this here...

Image

Full disclosure, I'm a U.S. investor and I invest at global market cap (~47% international equities).
That is an interesting table. Thank you for sharing.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: Does International investment still make sense?

Post by abuss368 » Mon Feb 10, 2020 4:59 pm

I wonder at what point, if ever, Vanguard will simply recommend (and adjust the Target and LifeStrategy funds) to 50% of stock for international and 50% of bonds for international.

The last few years, Vanguard has only gone in one direction - up!

International Stocks - 20%, then 30%, and now 40%

International Bonds - 20% and now 30%
Last edited by abuss368 on Mon Feb 10, 2020 5:02 pm, edited 1 time in total.
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Re: Does International investment still make sense?

Post by columbia » Mon Feb 10, 2020 5:01 pm

What was your rationale for buying ex-US in the first place? Setting aside returns - which I think you should in this new analysis - have any of those reasons changed? If not, what would be the justification for making a change?

Disclaimer: I don’t invest in ex-US.
If you leave your head in the sand for too long, you might get run over by a Jeep.

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Re: Does International investment still make sense?

Post by vitaflo » Mon Feb 10, 2020 5:05 pm

columbia wrote:
Mon Feb 10, 2020 5:01 pm
What was your rationale for buying ex-US in the first place? Setting aside returns - which I think you should in this new analysis - have any of those reasons changed? If not, what would be the justification for making a change?

Disclaimer: I don’t invest in ex-US.
Same reason I buy VTI instead of just the US tech sector. Diversity.

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Re: Does International investment still make sense?

Post by rockstar » Mon Feb 10, 2020 5:13 pm

columbia wrote:
Mon Feb 10, 2020 5:01 pm
What was your rationale for buying ex-US in the first place? Setting aside returns - which I think you should in this new analysis - have any of those reasons changed? If not, what would be the justification for making a change?

Disclaimer: I don’t invest in ex-US.
I think I made a mistake. I allocated a tiny portion to IEFA. It’s basically a low ER ETF that tracks EAFE. I put it in an IRA as it yields more than 3%. The valuation looked good compared to US equities, and it gave me International exposure. And then the Fed raised rates, and the spot USD shot up. My first year in it was a losing year. Last year, the Fed backed off on rates, and the USD wasn’t as aggressive. I made back most of my loss with the dividend yield offsetting the rest. From both an AA stand point and valuation standpoint, I thought I was making the right decision. Now, I’m questioning it going into year three. Do I really want currency risk in my portfolio when I can buy the S&P 500 that has plenty of multinationals in it already?

That’s my strategy, my result, and my anxiety. I get staying the course, but I have to acknowledge the psychological aspect as well. This is like buyers regret. The anxiety is around the items stated in my OP.

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Re: Does International investment still make sense?

Post by KlangFool » Mon Feb 10, 2020 5:19 pm

OP,

If everything that you buy is doing well, you have no diversification.

KlangFool

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Re: Does International investment still make sense?

Post by columbia » Mon Feb 10, 2020 5:27 pm

rockstar wrote:
Mon Feb 10, 2020 5:13 pm
columbia wrote:
Mon Feb 10, 2020 5:01 pm
What was your rationale for buying ex-US in the first place? Setting aside returns - which I think you should in this new analysis - have any of those reasons changed? If not, what would be the justification for making a change?

Disclaimer: I don’t invest in ex-US.
I think I made a mistake. I allocated a tiny portion to IEFA. It’s basically a low ER ETF that tracks EAFE. I put it in an IRA as it yields more than 3%. The valuation looked good compared to US equities, and it gave me International exposure. And then the Fed raised rates, and the spot USD shot up. My first year in it was a losing year. Last year, the Fed backed off on rates, and the USD wasn’t as aggressive. I made back most of my loss with the dividend yield offsetting the rest. From both an AA stand point and valuation standpoint, I thought I was making the right decision. Now, I’m questioning it going into year three. Do I really want currency risk in my portfolio when I can buy the S&P 500 that has plenty of multinationals in it already?

That’s my strategy, my result, and my anxiety. I get staying the course, but I have to acknowledge the psychological aspect as well. This is like buyers regret. The anxiety is around the items stated in my OP.
Hmmmm...it doesn’t sound like you have enough ex-US for it to ever matter. Perhaps hold on to and see how you feel about it in another year.

There’s no right choice in asset allocation, so feeling comfortable with it is pretty darned important. Good luck in whatever you decide.
If you leave your head in the sand for too long, you might get run over by a Jeep.

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Re: Does International investment still make sense?

Post by Northern Flicker » Mon Feb 10, 2020 5:32 pm

abuss368 wrote:
Mon Feb 10, 2020 4:59 pm
I wonder at what point, if ever, Vanguard will simply recommend (and adjust the Target and LifeStrategy funds) to 50% of stock for international and 50% of bonds for international.

The last few years, Vanguard has only gone in one direction - up!

International Stocks - 20%, then 30%, and now 40%

International Bonds - 20% and now 30%
I don’t think it is trend or inertia-driven.
Risk provides no guarantee of return.

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Re: Does International investment still make sense?

Post by Luckywon » Mon Feb 10, 2020 5:46 pm

I found 5 threads on this topic in this forum in this year alone. You could look through those. The odds that something new will pop up in this thread are not high.

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Re: Does International investment still make sense?

Post by White Coat Investor » Mon Feb 10, 2020 5:49 pm

rockstar wrote:
Mon Feb 10, 2020 3:04 pm
A few things bug me about international investment. First, other than EM, rates look mostly negative. Second, good chunk of international concentrated in financial companies. Finally, with rates so low, the US dollar is strong versus international currencies. How can I expect to make a reasonable return given those conditions? What do you guys think? Am I overthinking this one?
Does small value still make sense? Do bonds still make sense? Does real estate still make sense? Isn't it weird that people keep trying to justify portfolio changes that basically cause them to invest in whatever did best recently?

Yes, the case for international, if anything, is better than it was a year ago, 5 years ago, and 10 years ago. Certainly no worse.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: Does International investment still make sense?

Post by zonto » Mon Feb 10, 2020 6:46 pm

If you think about asking this question as anything other than a U.S. investor, it's almost laughable. That should tell you something: the logic in a U.S. only portfolio isn't sound. The U.S. is not special, and if you are not allocating meaningfully internationally, it's because you are misinformed and/or have succumbed to home bias and/or recency bias.

International investing has always made sense and will always make sense, especially given how easy and cheap it is now.

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Re: Does International investment still make sense?

Post by fortyofforty » Mon Feb 10, 2020 6:51 pm

abuss368 wrote:
Mon Feb 10, 2020 4:59 pm
I wonder at what point, if ever, Vanguard will simply recommend (and adjust the Target and LifeStrategy funds) to 50% of stock for international and 50% of bonds for international.

The last few years, Vanguard has only gone in one direction - up!

International Stocks - 20%, then 30%, and now 40%

International Bonds - 20% and now 30%
abuss,

I've wondered if Vanguard was drifting not towards 50/50 but towards a simple market weight (whatever it is at any given point in time).
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Vanguard Diehards

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Re: Does International investment still make sense?

Post by z3r0c00l » Mon Feb 10, 2020 7:00 pm

If you think a country with 4.5% (and falling) of the global population will hold half or more of the global market cap for decades to come, then by all means stick to US. I want to prepare for the probability that won't happen.

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Re: Does International investment still make sense?

Post by JBTX » Mon Feb 10, 2020 7:06 pm

If you believe you should always go all in with the hottest performing investments with the best narrative, regardless of valuations, and avoid lesser valued beaten down markets, then yes, avoid international.

The same logic would have avoided US markets at its low points in late 70s and early 80s and went all in on the white hot Japan market.

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Re: Does International investment still make sense?

Post by rascott » Mon Feb 10, 2020 7:25 pm

z3r0c00l wrote:
Mon Feb 10, 2020 7:00 pm
If you think a country with 4.5% (and falling) of the global population will hold half or more of the global market cap for decades to come, then by all means stick to US. I want to prepare for the probability that won't happen.
Companies and money have no borders. Unless US based firms start getting blocked out of intl markets, population %s are irrelevant. 40-50% revenue of the SP500 firms already comes from outside the US.

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Re: Does International investment still make sense?

Post by abuss368 » Mon Feb 10, 2020 7:44 pm

rascott wrote:
Mon Feb 10, 2020 7:25 pm
z3r0c00l wrote:
Mon Feb 10, 2020 7:00 pm
If you think a country with 4.5% (and falling) of the global population will hold half or more of the global market cap for decades to come, then by all means stick to US. I want to prepare for the probability that won't happen.
Companies and money have no borders. Unless US based firms start getting blocked out of intl markets, population %s are irrelevant. 40-50% revenue of the SP500 firms already comes from outside the US.
I would agree with your observation.
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Re: Does International investment still make sense?

Post by columbia » Mon Feb 10, 2020 8:15 pm

z3r0c00l wrote:
Mon Feb 10, 2020 7:00 pm
If you think a country with 4.5% (and falling) of the global population will hold half or more of the global market cap for decades to come, then by all means stick to US. I want to prepare for the probability that won't happen.
There’s approximately one billion more people in India than the US, so have at it:
https://www.ishares.com/us/products/239 ... -india-etf
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Re: Does International investment still make sense?

Post by 1789 » Mon Feb 10, 2020 8:37 pm

KlangFool wrote:
Mon Feb 10, 2020 5:19 pm
OP,

If everything that you buy is doing well, you have no diversification.

KlangFool
This is such an important thing to remember about diversification
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Re: Does International investment still make sense?

Post by Triple digit golfer » Mon Feb 10, 2020 8:43 pm

1789 wrote:
Mon Feb 10, 2020 8:37 pm
KlangFool wrote:
Mon Feb 10, 2020 5:19 pm
OP,

If everything that you buy is doing well, you have no diversification.

KlangFool
This is such an important thing to remember about diversification
This is such a quickly forgotten concept, for me included.

I see so many posts where people talk about high market valuations and fear about future returns. If a good chunk of your equities are in international, a good chunk of your equity portfolio is not valued extremely high right now. That is a good thing. I fully expect that international will outperform U.S. for a significant time period. Look at the graph shown up above. It always happens. There's no reason to think it won't.

I'm at 30% of equities in international and have been since I started investing 13 years ago. I have considered moving to 40%, effectively selling high and buying low. Then I realize that would be market timing and I just keep buying international to stay at 30%.

I also see nothing wrong with being 100% U.S. either. Regardless of high valuations, corporate America will deliver. 100% U.S. just isn't the allocation for me.

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Re: Does International investment still make sense?

Post by 1789 » Mon Feb 10, 2020 9:35 pm

Triple digit golfer wrote:
Mon Feb 10, 2020 8:43 pm
1789 wrote:
Mon Feb 10, 2020 8:37 pm
KlangFool wrote:
Mon Feb 10, 2020 5:19 pm
OP,

If everything that you buy is doing well, you have no diversification.

KlangFool
This is such an important thing to remember about diversification
This is such a quickly forgotten concept, for me included.

I see so many posts where people talk about high market valuations and fear about future returns. If a good chunk of your equities are in international, a good chunk of your equity portfolio is not valued extremely high right now. That is a good thing. I fully expect that international will outperform U.S. for a significant time period. Look at the graph shown up above. It always happens. There's no reason to think it won't.

I'm at 30% of equities in international and have been since I started investing 13 years ago. I have considered moving to 40%, effectively selling high and buying low. Then I realize that would be market timing and I just keep buying international to stay at 30%.

I also see nothing wrong with being 100% U.S. either. Regardless of high valuations, corporate America will deliver. 100% U.S. just isn't the allocation for me.
I agree. Over very long terms US/ex US oscillates and the other takes the lead. I don't have international but i am aware that US stocks might be due for RTM. That is something Bogle mentioned in Taylor’s book even thou he wasn't a fan of ex US investing. Anyway he could be just wrong moving forward, who knows.
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Re: Does International investment still make sense?

Post by mrspock » Mon Feb 10, 2020 9:44 pm

Full disclosure: I’m 100% US equity investor.

That said, I think if you’ve been betting on international for the last 5 or 10 years, the hole is probably so deep you’d best stick with it so reversion to mean can help dig you out of it. After that, maybe reassess if you prefer the roller coaster of 100% US vs the gentler ride with international (which may underperform the US at times).

I think both camps (US only vs US+ International) will make out just fine, if both stay the course. At the end of the day, I don’t think there is a clear winner here — hence the constant debates on the forums.

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Re: Does International investment still make sense?

Post by nisiprius » Mon Feb 10, 2020 9:51 pm

Nothing has changed. If it ever made sense, it still makes sense.
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Re: Does International investment still make sense?

Post by rockstar » Mon Feb 10, 2020 9:53 pm

mrspock wrote:
Mon Feb 10, 2020 9:44 pm
Full disclosure: I’m 100% US equity investor.

That said, I think if you’ve been betting on international for the last 5 or 10 years, the hole is probably so deep you’d best stick with it so reversion to mean can help dig you out of it. After that, maybe reassess if you prefer the roller coaster of 100% US vs the gentler ride with international (which may underperform the US at times).

I think both camps (US only vs US+ International) will make out just fine, if both stay the course. At the end of the day, I don’t think there is a clear winner here — hence the constant debates on the forums.
It's more like what's the best way to invest internationally. I don't think I went about it the right way. Maybe sticking with multinationals in USD would have made more sense. Maybe investing in EM bonds would make more sense. There are a lot of different ways to approach International.

What I'm concerned about is negative rates and their effect on European banks.
Last edited by rockstar on Mon Feb 10, 2020 11:41 pm, edited 2 times in total.

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Re: Does International investment still make sense?

Post by DB2 » Mon Feb 10, 2020 9:56 pm

rascott wrote:
Mon Feb 10, 2020 7:25 pm

Companies and money have no borders. Unless US based firms start getting blocked out of intl markets, population %s are irrelevant. 40-50% revenue of the SP500 firms already comes from outside the US.
Sure, but that is still not the same as owning international equities.

According to a conversation on Bloomberg recently ( I think it was the show, This Week) the two guests claimed it's really been tech stocks that have propelled the U.S. over International the last 10 years. Other U.S. sectors have been similar to those in International it was claimed - not sure if that is true or not.

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Re: Does International investment still make sense?

Post by rascott » Mon Feb 10, 2020 10:10 pm

DB2 wrote:
Mon Feb 10, 2020 9:56 pm
rascott wrote:
Mon Feb 10, 2020 7:25 pm

Companies and money have no borders. Unless US based firms start getting blocked out of intl markets, population %s are irrelevant. 40-50% revenue of the SP500 firms already comes from outside the US.
Sure, but that is still not the same as owning international equities.

According to a conversation on Bloomberg recently ( I think it was the show, This Week) the two guests claimed it's really been tech stocks that have propelled the U.S. over International the last 10 years. Other U.S. sectors have been similar to those in International it was claimed - not sure if that is true or not.

Tech has certainly helped..... particularly in last couple years..... but even deep value US equities have destroyed international..... heck.... even the often bemoaned small cap value (as anti- tech as we can get).... destroyed it.

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

And that's the issue.... it's not that the intl lagged a bit..... it's lagged just atrociously.

I don't want to invest in Europe and Japan. Nothing the least bit appealing to me looking outwards the next several decades, other than more pain. China will continue to grow into a force, but actually investing in it is questionable, to be gentle about it. I'm at 15% intl and shrinking.... and will let it continue to wither away.

I hold a lot of small and mid cap US.... with a value tilt. That gives me enough diversification from mega cap to sleep well. To each their own.

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Re: Does International investment still make sense?

Post by visualguy » Mon Feb 10, 2020 10:20 pm

rascott wrote:
Mon Feb 10, 2020 10:10 pm
DB2 wrote:
Mon Feb 10, 2020 9:56 pm
rascott wrote:
Mon Feb 10, 2020 7:25 pm

Companies and money have no borders. Unless US based firms start getting blocked out of intl markets, population %s are irrelevant. 40-50% revenue of the SP500 firms already comes from outside the US.
Sure, but that is still not the same as owning international equities.

According to a conversation on Bloomberg recently ( I think it was the show, This Week) the two guests claimed it's really been tech stocks that have propelled the U.S. over International the last 10 years. Other U.S. sectors have been similar to those in International it was claimed - not sure if that is true or not.

Tech has certainly helped..... particularly in last couple years..... but even deep value US equities have destroyed international..... heck.... even the often bemoaned small cap value (as anti- tech as we can get).... destroyed it.

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

And that's the issue.... it's not that the intl lagged a bit..... it's lagged just atrociously.
Right - even as someone who has stayed away from ex-US for over 20 years now, I'm surprised by how poorly it has done. Pretty sobering.

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Re: Does International investment still make sense?

Post by zonto » Mon Feb 10, 2020 10:25 pm

Nothing like good old recency bias. ^^

Perhaps we should take a stroll through memory lane: viewtopic.php?t=253686

And:
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Re: Does International investment still make sense?

Post by visualguy » Mon Feb 10, 2020 10:44 pm

zonto wrote:
Mon Feb 10, 2020 10:25 pm
Nothing like good old recency bias. ^^

Perhaps we should take a stroll through memory lane: viewtopic.php?t=253686

And:
Image
This has to be debunked again and again on every thread on this topic. It's not a recency issue. ex-US has lagged US significantly for 30, 50, 100 years - pick your very long period. I guess it's recency if you are a geologist. Limited periods of out-performance don't change the long-term picture of under-performance. As to the future - Europe and Japan (most of ex-US) look like an even worse bet now if anything.

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Re: Does International investment still make sense?

Post by zonto » Mon Feb 10, 2020 10:47 pm

“Diversification is about accepting good enough while missing out on great but avoiding terrible.” - Ben Carlson

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Re: Does International investment still make sense?

Post by visualguy » Mon Feb 10, 2020 10:55 pm

zonto wrote:
Mon Feb 10, 2020 10:47 pm
It is your assertion that needs debunking.

https://seekingalpha.com/amp/article/16 ... -long-term

https://mobile.twitter.com/mebfaber/sta ... 84?lang=en
You can pick periods when ex-US beat US like I said - just select the right start and end years, but over time ex-US still lagged significantly. Read the Credit Suisse Global Investment Returns Yearbooks.

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Re: Does International investment still make sense?

Post by FIREchief » Mon Feb 10, 2020 10:56 pm

I believe that the Donner Party "stayed the course." Just sayin....
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

visualguy
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Re: Does International investment still make sense?

Post by visualguy » Mon Feb 10, 2020 11:14 pm

FIREchief wrote:
Mon Feb 10, 2020 10:56 pm
I believe that the Donner Party "stayed the course." Just sayin....
:D Indeed staying the course can be a poor strategy, such as when the course is so bad that you may become the "course"! Kind of reminds me of investing in the Chinese stock market index, and wondering where that money goes. :wink:

pascalwager
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Re: Does International investment still make sense?

Post by pascalwager » Mon Feb 10, 2020 11:23 pm

abuss368 wrote:
Mon Feb 10, 2020 4:59 pm
I wonder at what point, if ever, Vanguard will simply recommend (and adjust the Target and LifeStrategy funds) to 50% of stock for international and 50% of bonds for international.

The last few years, Vanguard has only gone in one direction - up!

International Stocks - 20%, then 30%, and now 40%

International Bonds - 20% and now 30%
Their economic forecast model portfolios are now 40/60, US/int'l stocks, for Slowdown, Recession, and High-Growth portfolios.
Retired, pension, no SS | 55/45 | <1% cash | 20% rebalancing band

Lee_WSP
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Re: Does International investment still make sense?

Post by Lee_WSP » Mon Feb 10, 2020 11:30 pm

Using Simba's back testing chart, the only period where international really kicks US butt is during the 70's which was IIRC not a great time for America. If you start the back testing from 1975, neither international, US/international, or US deviates much from each other until 2009. Small exception for Japan, but we all know how that turned out.

DB2
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Re: Does International investment still make sense?

Post by DB2 » Mon Feb 10, 2020 11:38 pm

Lee_WSP wrote:
Mon Feb 10, 2020 11:30 pm
Using Simba's back testing chart, the only period where international really kicks US butt is during the 70's which was IIRC not a great time for America. If you start the back testing from 1975, neither international, US/international, or US deviates much from each other until 2009. Small exception for Japan, but we all know how that turned out.
EM significantly outperformed U.S. during the 2000s.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Lee_WSP
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Location: Arizona

Re: Does International investment still make sense?

Post by Lee_WSP » Mon Feb 10, 2020 11:40 pm

DB2 wrote:
Mon Feb 10, 2020 11:38 pm
Lee_WSP wrote:
Mon Feb 10, 2020 11:30 pm
Using Simba's back testing chart, the only period where international really kicks US butt is during the 70's which was IIRC not a great time for America. If you start the back testing from 1975, neither international, US/international, or US deviates much from each other until 2009. Small exception for Japan, but we all know how that turned out.
EM significantly outperformed U.S. during the 2000s.

https://www.portfoliovisualizer.com/bac ... ion2_2=100
EM by itself is much too volatile to even think of comparing to US or developed or total international.

ChrisBenn
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Re: Does International investment still make sense?

Post by ChrisBenn » Mon Feb 10, 2020 11:53 pm

Steadfast wrote:
Mon Feb 10, 2020 3:20 pm
This is a very frequent topic, use the search function to find the hundreds of threads about it.

Meanwhile, I'll just leave this here...

Image

Full disclosure, I'm a U.S. investor and I invest at global market cap (~47% international equities).

If we are assuming the trend described in that chart continues wouldn't it be trivial to market time something like that? (where market time = AA shifts evaluated at a yearly basis?). decade long periods of outperformance see very amenable to that type of strategy.

rascott
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Re: Does International investment still make sense?

Post by rascott » Tue Feb 11, 2020 12:05 am

Some would discount a century of outperformance as statistical noise. Others don't.

rascott
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Re: Does International investment still make sense?

Post by rascott » Tue Feb 11, 2020 12:07 am

ChrisBenn wrote:
Mon Feb 10, 2020 11:53 pm
Steadfast wrote:
Mon Feb 10, 2020 3:20 pm
This is a very frequent topic, use the search function to find the hundreds of threads about it.

Meanwhile, I'll just leave this here...

Image

Full disclosure, I'm a U.S. investor and I invest at global market cap (~47% international equities).

If we are assuming the trend described in that chart continues wouldn't it be trivial to market time something like that? (where market time = AA shifts evaluated at a yearly basis?). decade long periods of outperformance see very amenable to that type of strategy.

Trend following isn't too complicated. Look up the dual momentum strategy.

rascott
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Re: Does International investment still make sense?

Post by rascott » Tue Feb 11, 2020 12:11 am

DB2 wrote:
Mon Feb 10, 2020 11:38 pm
Lee_WSP wrote:
Mon Feb 10, 2020 11:30 pm
Using Simba's back testing chart, the only period where international really kicks US butt is during the 70's which was IIRC not a great time for America. If you start the back testing from 1975, neither international, US/international, or US deviates much from each other until 2009. Small exception for Japan, but we all know how that turned out.
EM significantly outperformed U.S. during the 2000s.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Decent case can be made for holding EM.... or even intl small cap. Really hard to justify holding something like total intl..... for a US investor. Very inefficient portfolios with too many highly correlated assets combined with uncompensated currency risk.

Luckywon
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Re: Does International investment still make sense?

Post by Luckywon » Tue Feb 11, 2020 12:58 am

Here's my effort to summarize this topic :)

An investor once came to this site
And witnessed a very odd fight
Son, diversify you must!
No, in U.S. we trust!
Woe, the same thing he saw the next night!

User avatar
FIREchief
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Re: Does International investment still make sense?

Post by FIREchief » Tue Feb 11, 2020 1:02 am

Luckywon wrote:
Tue Feb 11, 2020 12:58 am
Here's my effort to summarize this topic :)

An investor once came to this site
And witnessed a very odd fight
Son, diversify you must!
No, in U.S. we trust!
Woe, the same thing he saw the next night!
LOLOL You my friend are a genius!! :beer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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