For those concerned about International Stocks...

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Gort
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Re: For those concerned about International Stocks...

Post by Gort »

AerialWombat wrote: Sun Sep 13, 2020 7:49 pm 100 years from now, Bogleheads will be debating allocation between Earth and off-Earth companies. And should companies on Callisto even be included in a Planetary Index, since it’s a moon?

This debate will never end, just the players will change.

:sharebeer
Even today, planets get kicked out if the others determine they are not up to snuff. Poor Pluto, it was such a nice place for a stop over.
Cheers,
Gort
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Stef
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Re: For those concerned about International Stocks...

Post by Stef »

If you truely believe in index investing, there is no way around VT. But if you base your SAA on past performance, why not just be 100% QQQ?
LongTermInvestor88
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Re: For those concerned about International Stocks...

Post by LongTermInvestor88 »

Flextruck wrote: Tue Apr 21, 2020 11:16 am I'll soon be out of International markets. Jack Bogle was on record speaking about simply investing in bonds and the domestic market. If it was good enough for Mr. Bogle, it's certainly good enough for me.

I believe in the American way, the American worker, the American technology, the American system and on and on. I'll soon be 70% VTSAX and 30% VBTLX and I will be better for it...I don't think International markets are a bad thing, I just don't think they're as good as the American markets.
Such a lack of understanding of the markets. If your right and 'American way' and 'American markets so superior' then it's all priced in already. That's why we diversify why risk putting all your eggs in one basket. I recommend you you read this board a bit more and do a bit more travelling.
langlands
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Re: For those concerned about International Stocks...

Post by langlands »

LongTermInvestor88 wrote: Mon Sep 14, 2020 1:29 am
Flextruck wrote: Tue Apr 21, 2020 11:16 am I'll soon be out of International markets. Jack Bogle was on record speaking about simply investing in bonds and the domestic market. If it was good enough for Mr. Bogle, it's certainly good enough for me.

I believe in the American way, the American worker, the American technology, the American system and on and on. I'll soon be 70% VTSAX and 30% VBTLX and I will be better for it...I don't think International markets are a bad thing, I just don't think they're as good as the American markets.
Such a lack of understanding of the markets. If your right and 'American way' and 'American markets so superior' then it's all priced in already. That's why we diversify why risk putting all your eggs in one basket. I recommend you you read this board a bit more and do a bit more travelling.
How can you be so confident it’s priced in? The notion of American exceptionalism is controversial and politically charged even in the US. In any case, both Bogle and Buffett have expressed similar thoughts in the past so Flextruck isn’t exactly in bad company.
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Stef
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Re: For those concerned about International Stocks...

Post by Stef »

So Bogle and Buffet are some kind of gods or what? Please, this deification is absurd.

If Bogle said that you just jump from a bridge, would you do it too?
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LiveSimple
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Re: For those concerned about International Stocks...

Post by LiveSimple »

Stef wrote: Mon Sep 14, 2020 2:37 am So Bogle and Buffet are some kind of gods or what? Please, this deification is absurd.

If Bogle said that you just jump from a bridge, would you do it too?
Yes I will, I am sure they will NOT say to jump from the bridge, knowing that they will not do and they will not ask me to something that they will not do.
These two legends shared their wisdom, with no intention to sell anything to me, so I will follow their advice.Your mileage may vary, YMMV.
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Re: For those concerned about International Stocks...

Post by Valuethinker »

visualguy wrote: Sun Sep 13, 2020 5:21 pm The concern I always have when looking at the ex-US index is that I find that it damages my trust in the Bogleheads strategy. Here's a very large and diversified index where holding it passively for decades has simply not been a good strategy. A nominal CAGR of less than 4% for the last 30 years is awful, especially when considering the volatility.

I ignore the under-performance relative to the US, and just look at the absolute performance. It just shakes my confidence in expecting necessarily decent returns for the risk if I stick to the strategy for decades.
I am pretty sure the international index has had total returns of greater than 4% nominal since 1990?

Can you source that? The number looks wrong.

Since 2000 is another matter - dot com bubble hit really hard in Europe (telcos, Nokia etc). Also slow recovery (of economy & stocks) post 2008.
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Re: For those concerned about International Stocks...

Post by Valuethinker »

Flextruck wrote: Tue Apr 21, 2020 11:16 am I'll soon be out of International markets. Jack Bogle was on record speaking about simply investing in bonds and the domestic market. If it was good enough for Mr. Bogle, it's certainly good enough for me.

I believe in the American way, the American worker, the American technology, the American system and on and on. I'll soon be 70% VTSAX and 30% VBTLX and I will be better for it...I don't think International markets are a bad thing, I just don't think they're as good as the American markets.
We believe, here, in efficient markets.

So the valuation of international stocks would reflect worse outlook. And, by and large, it does. Much lower Price to Earnings ratios. A big part of this is the US tech sector - those 5 companies have outperformed everything else by a big margin -- that is what has driven the US market higher, especially in the last 2 years or so.

You can't make money by choosing a sector-specific (i.e. an S&P 500 or equivalent) fund, in an efficient market. The US may be best, but that's already priced in.

BTW your average European multinational is as shareholder focused as its US equivalent. I note Warren Buffett is starting to invest in Japan, so he sees value there, and a change in the mentality of Japanese companies re shareholders (tilting more towards).
Last edited by Valuethinker on Mon Sep 14, 2020 3:42 am, edited 1 time in total.
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Re: For those concerned about International Stocks...

Post by Valuethinker »

Gort wrote: Sun Sep 13, 2020 10:07 pm
AerialWombat wrote: Sun Sep 13, 2020 7:49 pm 100 years from now, Bogleheads will be debating allocation between Earth and off-Earth companies. And should companies on Callisto even be included in a Planetary Index, since it’s a moon?

This debate will never end, just the players will change.

:sharebeer
Even today, planets get kicked out if the others determine they are not up to snuff. Poor Pluto, it was such a nice place for a stop over.
Cheers,
Gort
When I am President of the Earth, this smeer on the reputation of the good planet Pluto shall be rectified.

(there is a Star Trek Voyager episode where the hologram doctor gets to play President of the Earth, in a riotous send-up of those 1930s adventure serials like Flash Gordon or Buck Rogers - aliens confuse what is happening on the holodeck for reality).
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Re: For those concerned about International Stocks...

Post by Robot Monster »

LiveSimple wrote: Mon Sep 14, 2020 3:04 am
Stef wrote: Mon Sep 14, 2020 2:37 am So Bogle and Buffet are some kind of gods or what? Please, this deification is absurd.

If Bogle said that you just jump from a bridge, would you do it too?
Yes I will...
Me too! I would totally do that, and much more! You know the Gimp from Pulp Fiction? I could see that kind of arrangement working out.
"Happiness comes from being connected in the right ways to: other people, your work, something larger than yourself."
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Re: For those concerned about International Stocks...

Post by atdharris »

rockstar wrote: Sun Sep 13, 2020 6:02 pm
atdharris wrote: Tue Apr 21, 2020 4:18 pm We know international did well in the early to mid 2000s, but nothing since then. I am still not sure what to do. I like emerging markets over developed, because I don't see any compelling investment opportunities in Europe, but I'm not really sure if I'll dump VEA to go all in on VWO or just stay the course in my taxable account. I think investing in China, India, Brazil and other developing nations presents more opportunities than anywhere else outside of the USA.
This followed the tech bubble and Buffet's article about how overvalued US equities were at the time. We also saw production grow in Asia during this time as well.

I think, we need a catalyst for international to outperform the US given that the strong growing tech companies are almost exclusively in the US. You have a few in China, but our relationship with China is strained at the moment. I'm not sure how that's going to impact performance.
There is also no guarantee that strong tech growth in China will translate into their stock market returns given the structure of their government. Obviously, Chinese economic growth has outpaced the US, but from 2009 onward, the S&P returned 14% annually while FXI returned 6%
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Re: For those concerned about International Stocks...

Post by hnd »

prior to my take over of my 401k i spent a good number of years in 100% OAAIX. which was 50/50 US/EXUS. I rolled that over and based off DR I went 25% international. I will say that rebalancing these last 7 years by just buying EXUS has been tough. to the point where I changed my planned allocation to 20%. and as it sits today its at 18%. come december it will likely be even lower and i'll rebalance.
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Re: For those concerned about International Stocks...

Post by Robot Monster »

March2009 wrote: Sun Sep 13, 2020 7:26 pm
rockstar wrote: Sun Sep 13, 2020 7:20 pm
March2009 wrote: Sun Sep 13, 2020 7:17 pm The world tech monopolies (Apple, Amazon, Microsoft, Google, Facebook, etc.) are in the S&P500. That is the reason why the S&P500 is tech heavy compared to an international index and why it has beaten International the past 10 plus years. I'm heavy on American and Tech companies but I'm keeping my international exposure as well as exposure to other sectors (non-tech). There is a massive amount of development in AI outside of the US and I don't think we can assume the US will automatically dominate it.
The AI development outside the US is tied to Google. Deep Mind in the UK is apart of Google. The tech you use for AI is either NVIDIA or Google. When I build my neural networks I'm using either NVIDIA tech or Google tech. They pretty much own the space right now.
Thanks for sharing that. Since I'm not satisfied with any of the current AI/Robotics index ETFs, I have built my own AI Index portfolio and Google and NVIDIA are in my top 4 holdings. It is good to see my homemade index has these companies in it.
In the book AI Superpowers, 2018, by Kai-Fu Lee, seven leaders in artificial intelligence are identified: Google, Facebook, Amazon, Microsoft, Baidu, Alibaba, and Tencent. Lee calls them the Seven Giants of the AI age. "They're using billions of dollars in cash and dizzying stockpiles of data to gobble up available AI talent."

Among these, one is especially highlighted: Google.

"In terms of funding, Google dwarfs even its own government: U.S. federal funding for math and computer science research amounts to less than half Google's own R&D budget...Of the top one hundred AI researchers and engineers, around half are already working for Google."

The book discusses Nvidia a little, e.g. "The Ministry of Science and Technology is doling out large sums of money, naming as a specific goal the construction of a chip with performance and energy efficiency twenty times better than one of Nvidia's current offerings."

A review of the book itself,
https://seekingalpha.com/article/435148 ... ook-review

March2009, does your homemade index include ASML? What is in your homemade index? (If it's a secret, I'll certainly respect that.)
"Happiness comes from being connected in the right ways to: other people, your work, something larger than yourself."
langlands
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Re: For those concerned about International Stocks...

Post by langlands »

Stef wrote: Mon Sep 14, 2020 2:37 am So Bogle and Buffet are some kind of gods or what? Please, this deification is absurd.

If Bogle said that you just jump from a bridge, would you do it too?
Did I say that? I said he wasn't in bad company. If Flextruck has "such a lack of understanding of markets" for believing in American (economic) exceptionalism, then by the same logic, Bogle and Buffett also lack such an understanding. I'm pretty confident both know way more about markets than that poster.

It's interesting seeing the heated responses to this though. It's another data point that there is really no obvious right answer regarding international/US. Undoubtedly, one's views of the US vs. Europe vs. China on a cultural or political dimension will inform one's views of the US vs. Europe vs. China on an economic dimension, which will ultimately influence one's asset allocation.
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Re: For those concerned about International Stocks...

Post by GaryA505 »

Using Portfolio Visualizer, since 1986 ex-us equity has under-performed US equity by 3.74% per year. That's 34 years.
$10,000 in 1986 would now be $322,348 for US and $281,570 for ex-US.
So, how many years would ex-US equity now need to out-perform US equity just to break even, and if that happens, will you or your immediate heirs still be alive? My point is that, assuming there is a cycle, if the full period of this cycle is 100 years, what good is that to anyone alive now?

Maybe someone has data that goes farther back.
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Ramjet
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Re: For those concerned about International Stocks...

Post by Ramjet »

Serious question. When international does outperform U.S., on average, how much is it by?
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Re: For those concerned about International Stocks...

Post by asif408 »

GaryA505 wrote: Mon Sep 14, 2020 10:37 am Using Portfolio Visualizer, since 1986 ex-us equity has under-performed US equity by 3.74% per year. That's 34 years.
$10,000 in 1986 would now be $322,348 for US and $281,570 for ex-US.
So, how many years would ex-US equity now need to out-perform US equity just to break even, and if that happens, will you or your immediate heirs still be alive? My point is that, assuming there is a cycle, if the full period of this cycle is 100 years, what good is that to anyone alive now?

Maybe someone has data that goes farther back.
For the 38 year period from 1970-2007 international equities outperformed US equities, according to our Bogleheads wiki, and any US allocation was a drag on performance: https://www.bogleheads.org/wiki/File:US ... erging.png

So my 38 year period beats your 34 year period. Now the question is what the next 34 and 38 years will look like. If you know which one will win let me know and I'll go 100% in.
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Re: For those concerned about International Stocks...

Post by GaryA505 »

asif408 wrote: Mon Sep 14, 2020 10:45 am
GaryA505 wrote: Mon Sep 14, 2020 10:37 am Using Portfolio Visualizer, since 1986 ex-us equity has under-performed US equity by 3.74% per year. That's 34 years.
$10,000 in 1986 would now be $322,348 for US and $281,570 for ex-US.
So, how many years would ex-US equity now need to out-perform US equity just to break even, and if that happens, will you or your immediate heirs still be alive? My point is that, assuming there is a cycle, if the full period of this cycle is 100 years, what good is that to anyone alive now?

Maybe someone has data that goes farther back.
For the 38 year period from 1970-2007 international equities outperformed US equities, according to our Bogleheads wiki, and any US allocation was a drag on performance: https://www.bogleheads.org/wiki/File:US ... erging.png

So my 38 year period beats your 34 year period. Now the question is what the next 34 and 38 years will look like. If you know which one will win let me know and I'll go 100% in.
That's great news, so maybe it will flip in 76 years instead of 100!
I guess it doesn't matter though, because I'll be dead and my kids will certainly have spend their inheritance by then. :wink:
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Re: For those concerned about International Stocks...

Post by asif408 »

Ramjet wrote: Mon Sep 14, 2020 10:42 am Serious question. When international does outperform U.S., on average, how much is it by?
From 2002-2007, it was 8% for developed markets and about 20% for emerging markets: https://www.portfoliovisualizer.com/bac ... ion3_3=100

Another calculation I did from 1971-1988 of EAFE returns vs. S&P yielded a return of EAFE stocks of 16.5% vs. 10.5% for the S&P, so 6% CAGR outperformance over 17 years. I don't have a clue what the average is, but when one outperforms the other it appears to be by quite a bit, enough to lure investors into chasing performance. It's even more dramatic for individual countries, as Japan's Nikkei outperformed the S&P for 4 straight decades from 1950-1990, and a large majority of the investable countries beat the US market in the 1970s and 1980s, a number by double digits, according to the Ibbotson book of global returns.
Last edited by asif408 on Mon Sep 14, 2020 11:11 am, edited 1 time in total.
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Stef
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Re: For those concerned about International Stocks...

Post by Stef »

Performance chasing is a bad thing. But if it's US performance chasing, then it's a good thing. EMH works, but only for US. Only the US has a free market and democracy.
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Re: For those concerned about International Stocks...

Post by asif408 »

GaryA505 wrote: Mon Sep 14, 2020 10:53 am I guess it doesn't matter though, because I'll be dead and my kids will certainly have spend their inheritance by then. :wink:
True, most big inheritances get blown anyway within a generation or two, so your kids and grandkids will probably be more concerned with spending the money than our esoteric conversations about whether or not US vs. international investing will win in the future.
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Re: For those concerned about International Stocks...

Post by GaryA505 »

Does anyone have the CAGR for US and ex-US for 1970-present?
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Re: For those concerned about International Stocks...

Post by Robot Monster »

GaryA505 wrote: Mon Sep 14, 2020 11:24 am Does anyone have the CAGR for US and ex-US for 1970-present?
I have both. I keep the US CAGR on a display shelf next to a bunch of trophies. The ex-US CAGR I've got to wipe off from the bottom of my shoe with a stick.
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Re: For those concerned about International Stocks...

Post by rascott »

Stef wrote: Mon Sep 14, 2020 11:08 am Performance chasing is a bad thing. But if it's US performance chasing, then it's a good thing. EMH works, but only for US. Only the US has a free market and democracy.
It's only performance chasing if you are actually chasing. Many of us never held large allocations to international equities. I've bounced between 15-25% over time, but rarely far off from 20%
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Re: For those concerned about International Stocks...

Post by Ciel »

GaryA505 wrote: Mon Sep 14, 2020 10:37 am Using Portfolio Visualizer, since 1986 ex-us equity has under-performed US equity by 3.74% per year. That's 34 years.
$10,000 in 1986 would now be $322,348 for US and $281,570 for ex-US.
So, how many years would ex-US equity now need to out-perform US equity just to break even, and if that happens, will you or your immediate heirs still be alive? My point is that, assuming there is a cycle, if the full period of this cycle is 100 years, what good is that to anyone alive now?

Maybe someone has data that goes farther back.
Your ex-US total is way off. $10,000 invested in ex-US in 1986 would be $97,698 today (6.8% CAGR) compared to $322,348 invested in US (10.54% CAGR).
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Re: For those concerned about International Stocks...

Post by Steadfast »

lostdog wrote: Tue Apr 21, 2020 5:00 pm Hold VTWAX, a decent bond fund, some cash for emergencies and walk away.

I've seen Rick Ferri recommend VTWAX several times.

I don't even see US and international indexes as a separate asset class.

Most of the time the bickering between international and US is about personal ideologies and performance chasing.
This. Every time I see these threads, I think, thank goodness I have the minerals to just "VT & chill". I never worry about my intra-equity allocation any more. There are millions of investors working on it for me, and I pay almost nothing for it.

Cheers.
We don't see things as they are, we see things as we are.
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Re: For those concerned about International Stocks...

Post by GaryA505 »

Ciel wrote: Mon Sep 14, 2020 12:33 pm
GaryA505 wrote: Mon Sep 14, 2020 10:37 am Using Portfolio Visualizer, since 1986 ex-us equity has under-performed US equity by 3.74% per year. That's 34 years.
$10,000 in 1986 would now be $322,348 for US and $281,570 for ex-US.
So, how many years would ex-US equity now need to out-perform US equity just to break even, and if that happens, will you or your immediate heirs still be alive? My point is that, assuming there is a cycle, if the full period of this cycle is 100 years, what good is that to anyone alive now?

Maybe someone has data that goes farther back.
Your ex-US total is way off. $10,000 invested in ex-US in 1986 would be $97,698 today (6.8% CAGR) compared to $322,348 invested in US (10.54% CAGR).
I was just checking to see if anyone was paying attention. :twisted:

But seriously, I just grabbed the wrong number, or something.

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

Now, can we get someone to provide this for a longer time frame? At least from 1970 on.
Last edited by GaryA505 on Mon Sep 14, 2020 1:01 pm, edited 1 time in total.
Robot Monster
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Re: For those concerned about International Stocks...

Post by Robot Monster »

Ciel wrote: Mon Sep 14, 2020 12:33 pm
GaryA505 wrote: Mon Sep 14, 2020 10:37 am Using Portfolio Visualizer, since 1986 ex-us equity has under-performed US equity by 3.74% per year. That's 34 years.
$10,000 in 1986 would now be $322,348 for US and $281,570 for ex-US.
So, how many years would ex-US equity now need to out-perform US equity just to break even, and if that happens, will you or your immediate heirs still be alive? My point is that, assuming there is a cycle, if the full period of this cycle is 100 years, what good is that to anyone alive now?

Maybe someone has data that goes farther back.
Your ex-US total is way off. $10,000 invested in ex-US in 1986 would be $97,698 today (6.8% CAGR) compared to $322,348 invested in US (10.54% CAGR).
asif408 made an interesting point regarding ex-US in the late 80's. He points the finger at Japan for the poor performance since then, since it dominated the index, and began at nosebleed valuations; by my read, Japan's CAPE in 1986 was about 60 or 70. Meanwhile, the US that year had a CAPE starting at 11.72. Today S&P's CAPE ratio is 31, which is higher than most other countries. So we're in a different place now than 1986.

International CAPEs
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Re: For those concerned about International Stocks...

Post by asif408 »

GaryA505 wrote: Mon Sep 14, 2020 12:58 pm
Ciel wrote: Mon Sep 14, 2020 12:33 pm
GaryA505 wrote: Mon Sep 14, 2020 10:37 am Using Portfolio Visualizer, since 1986 ex-us equity has under-performed US equity by 3.74% per year. That's 34 years.
$10,000 in 1986 would now be $322,348 for US and $281,570 for ex-US.
So, how many years would ex-US equity now need to out-perform US equity just to break even, and if that happens, will you or your immediate heirs still be alive? My point is that, assuming there is a cycle, if the full period of this cycle is 100 years, what good is that to anyone alive now?

Maybe someone has data that goes farther back.
Your ex-US total is way off. $10,000 invested in ex-US in 1986 would be $97,698 today (6.8% CAGR) compared to $322,348 invested in US (10.54% CAGR).
I was just checking to see if anyone was paying attention. :twisted:

But seriously, I just grabbed the wrong number, or something.

https://www.portfoliovisualizer.com/bac ... sisResults

Now, can we get someone to provide this for a longer time frame? At least from 1970 on.
Here's the data going back to 1970 for EAFE and S&P, I'll let you or someone else do the work of putting into Excel and calculating CAGRs: https://www.brighthousefinancial.com/co ... s-Idea.pdf
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Re: For those concerned about International Stocks...

Post by inittowinit »

I hold market weight in international (~40%).

After 10 years of small value tilts, emerging market tilts, and other slice and dice-style adjustments to my portfolio, I've come to the conclusion that the utter simplicity of a market weight portfolio is worth the possibility of "missing out" on better long-term returns.

I arrived at this decision because investing at market weight is the only method that gives me permission to "check out" from investing and LIVE MY LIFE. It allows me to avoid the emotional rollercoaster of constant analysis and research and second-guessing and (at times) panic-induced reactivity that punctuated my investing lifestyle for years.

To pre-empt the inevitable: No, I have not spent the past 10 years buying and selling into new fads every other month. I started reading Boglehead-style investing books and perusing this forum on a daily basis at age 20. Since investing my first dollar in 2011 I've remained fully invested, never sought to time the market, and used only low-cost, highly diversified index funds. I am now a Certified Financial Planner. My point here is that I'm DEEPLY familiar with the ad nauseum debates about portfolio tilts, international vs domestic, DFA funds, Fama-French factors, etc, etc, etc.

Here's the problem I found: The debates. Never. End. They likely never will! And in the meantime, intelligent people will continue releasing compelling-sounding arguments on both (all!) sides that you will need to constantly sift through and analyze if you are still entertaining the notion of anything but a market-weight portfolio. Trying to invest intelligently under these conditions becomes much more like a major hobby or side job than a "passive" activity where you can "set it and forget it."

At the end of the day, having spent the first 10 years of what (if I'm lucky) will be a 65-year investing career trying to develop the "perfect" portfolio, I've realized that my personal priority is not actually to "outperform" over the long term, but to make investing as painless and low-stress as possible so I can enjoy my life without constantly agonizing over it. Other people will have different preferences and priorities, which is ok.

My favorite investing quote is still "Nobody knows nothing." That quote + market weight portfolio = I sleep great.

(FWIW, as a layperson-turned-CFP and lifelong Boglehead, I will take this opportunity to express my wholehearted agreement that the vast vast majority of investors are better off using free resources like Bogleheads and learning to manage their investments on their own. I will also note that I don't work as an investment advisor, which hopefully makes this sound less hypocritical :D )
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Re: For those concerned about International Stocks...

Post by abuss368 »

Robot Monster wrote: Mon Sep 14, 2020 12:05 pm
GaryA505 wrote: Mon Sep 14, 2020 11:24 am Does anyone have the CAGR for US and ex-US for 1970-present?
I have both. I keep the US CAGR on a display shelf next to a bunch of trophies. The ex-US CAGR I've got to wipe off from the bottom of my shoe with a stick.
Priceless! I believe international outperformed US during the 2000 - 2010 years correct?
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Re: For those concerned about International Stocks...

Post by abuss368 »

inittowinit wrote: Mon Sep 14, 2020 1:15 pm I hold market weight in international (~40%).

After 10 years of small value tilts, emerging market tilts, and other slice and dice-style adjustments to my portfolio, I've come to the conclusion that the utter simplicity of a market weight portfolio is worth the possibility of "missing out" on better long-term returns.

I arrived at this decision because investing at market weight is the only method that gives me permission to "check out" from investing and LIVE MY LIFE. It allows me to avoid the emotional rollercoaster of constant analysis and research and second-guessing and (at times) panic-induced reactivity that punctuated my investing lifestyle for years.

To pre-empt the inevitable: No, I have not spent the past 10 years buying and selling into new fads every other month. I started reading Boglehead-style investing books and perusing this forum on a daily basis at age 20. Since investing my first dollar in 2011 I've remained fully invested, never sought to time the market, and used only low-cost, highly diversified index funds. I am now a Certified Financial Planner. My point here is that I'm DEEPLY familiar with the ad nauseum debates about portfolio tilts, international vs domestic, DFA funds, Fama-French factors, etc, etc, etc.

Here's the problem I found: The debates. Never. End. They likely never will! And in the meantime, intelligent people will continue releasing compelling-sounding arguments on both (all!) sides that you will need to constantly sift through and analyze if you are still entertaining the notion of anything but a market-weight portfolio. Trying to invest intelligently under these conditions becomes much more like a major hobby or side job than a "passive" activity where you can "set it and forget it."

At the end of the day, having spent the first 10 years of what (if I'm lucky) will be a 65-year investing career trying to develop the "perfect" portfolio, I've realized that my personal priority is not actually to "outperform" over the long term, but to make investing as painless and low-stress as possible so I can enjoy my life without constantly agonizing over it. Other people will have different preferences and priorities, which is ok.

My favorite investing quote is still "Nobody knows nothing." That quote + market weight portfolio = I sleep great.

(FWIW, as a layperson-turned-CFP and lifelong Boglehead, I will take this opportunity to express my wholehearted agreement that the vast vast majority of investors are better off using free resources like Bogleheads and learning to manage their investments on their own. I will also note that I don't work as an investment advisor, which hopefully makes this sound less hypocritical :D )
Very well said thoughts. I agree and have worked hard to simplify our financial lives with total market index funds. Now we are focusing on simplifying further both the financial and non-financial aspects of life!

Sectors and styles come and go. The debates will always come and go.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: For those concerned about International Stocks...

Post by Northern Flicker »

Crushtheturtle wrote: Tue Apr 21, 2020 10:55 am According to Jack Bogle, International outperforms 9 out of 16 years (56% of the time).

The implication is clear: Why hold U.S.?
The point of diversification is not to try to pick the winner.
Risk is not a guarantor of return.
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Re: For those concerned about International Stocks...

Post by Robot Monster »

abuss368 wrote: Mon Sep 14, 2020 1:27 pm
Robot Monster wrote: Mon Sep 14, 2020 12:05 pm
GaryA505 wrote: Mon Sep 14, 2020 11:24 am Does anyone have the CAGR for US and ex-US for 1970-present?
I have both. I keep the US CAGR on a display shelf next to a bunch of trophies. The ex-US CAGR I've got to wipe off from the bottom of my shoe with a stick.
Priceless! I believe international outperformed US during the 2000 - 2010 years correct?
True, but that ended a whole ten years ago, and that period only lasted ten years, so...not sure where I was going with this...
"Happiness comes from being connected in the right ways to: other people, your work, something larger than yourself."
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Re: For those concerned about International Stocks...

Post by Robot Monster »

Northern Flicker wrote: Mon Sep 14, 2020 1:34 pm
Crushtheturtle wrote: Tue Apr 21, 2020 10:55 am According to Jack Bogle, International outperforms 9 out of 16 years (56% of the time).

The implication is clear: Why hold U.S.?
The point of diversification is not to try to pick the winner.
That's a quote right there!
"Happiness comes from being connected in the right ways to: other people, your work, something larger than yourself."
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Re: For those concerned about International Stocks...

Post by abuss368 »

Robot Monster wrote: Mon Sep 14, 2020 1:45 pm
abuss368 wrote: Mon Sep 14, 2020 1:27 pm
Robot Monster wrote: Mon Sep 14, 2020 12:05 pm
GaryA505 wrote: Mon Sep 14, 2020 11:24 am Does anyone have the CAGR for US and ex-US for 1970-present?
I have both. I keep the US CAGR on a display shelf next to a bunch of trophies. The ex-US CAGR I've got to wipe off from the bottom of my shoe with a stick.
Priceless! I believe international outperformed US during the 2000 - 2010 years correct?
True, but that ended a whole ten years ago, and that period only lasted ten years, so...not sure where I was going with this...
Do you invest in US only?
John C. Bogle: “Simplicity is the master key to financial success."
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Re: For those concerned about International Stocks...

Post by Robot Monster »

abuss368 wrote: Mon Sep 14, 2020 1:50 pm
Robot Monster wrote: Mon Sep 14, 2020 1:45 pm
abuss368 wrote: Mon Sep 14, 2020 1:27 pm
Robot Monster wrote: Mon Sep 14, 2020 12:05 pm
GaryA505 wrote: Mon Sep 14, 2020 11:24 am Does anyone have the CAGR for US and ex-US for 1970-present?
I have both. I keep the US CAGR on a display shelf next to a bunch of trophies. The ex-US CAGR I've got to wipe off from the bottom of my shoe with a stick.
Priceless! I believe international outperformed US during the 2000 - 2010 years correct?
True, but that ended a whole ten years ago, and that period only lasted ten years, so...not sure where I was going with this...
Do you invest in US only?
75% ex-US / 25% US stocks allocation. But, important to note: I have a small stock allocation. Mostly everything is tied up in Treasuries, so the small amount of international diversification, that I do get, is stuffed into my small stock allocation.
"Happiness comes from being connected in the right ways to: other people, your work, something larger than yourself."
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Re: For those concerned about International Stocks...

Post by Stef »

inittowinit wrote: Mon Sep 14, 2020 1:15 pm I hold market weight in international (~40%).

After 10 years of small value tilts, emerging market tilts, and other slice and dice-style adjustments to my portfolio, I've come to the conclusion that the utter simplicity of a market weight portfolio is worth the possibility of "missing out" on better long-term returns.

I arrived at this decision because investing at market weight is the only method that gives me permission to "check out" from investing and LIVE MY LIFE. It allows me to avoid the emotional rollercoaster of constant analysis and research and second-guessing and (at times) panic-induced reactivity that punctuated my investing lifestyle for years.

To pre-empt the inevitable: No, I have not spent the past 10 years buying and selling into new fads every other month. I started reading Boglehead-style investing books and perusing this forum on a daily basis at age 20. Since investing my first dollar in 2011 I've remained fully invested, never sought to time the market, and used only low-cost, highly diversified index funds. I am now a Certified Financial Planner. My point here is that I'm DEEPLY familiar with the ad nauseum debates about portfolio tilts, international vs domestic, DFA funds, Fama-French factors, etc, etc, etc.

Here's the problem I found: The debates. Never. End. They likely never will! And in the meantime, intelligent people will continue releasing compelling-sounding arguments on both (all!) sides that you will need to constantly sift through and analyze if you are still entertaining the notion of anything but a market-weight portfolio. Trying to invest intelligently under these conditions becomes much more like a major hobby or side job than a "passive" activity where you can "set it and forget it."

At the end of the day, having spent the first 10 years of what (if I'm lucky) will be a 65-year investing career trying to develop the "perfect" portfolio, I've realized that my personal priority is not actually to "outperform" over the long term, but to make investing as painless and low-stress as possible so I can enjoy my life without constantly agonizing over it. Other people will have different preferences and priorities, which is ok.

My favorite investing quote is still "Nobody knows nothing." That quote + market weight portfolio = I sleep great.

(FWIW, as a layperson-turned-CFP and lifelong Boglehead, I will take this opportunity to express my wholehearted agreement that the vast vast majority of investors are better off using free resources like Bogleheads and learning to manage their investments on their own. I will also note that I don't work as an investment advisor, which hopefully makes this sound less hypocritical :D )
It took me luckily just 4 months to realize that. I'm 60% US, 30% Developed & 10% Emerging Markets. The moment I chose this VT-approach was the moment I stopped caring about the markets. Now I'm focusing more on my job, studying and life in general.
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Re: For those concerned about International Stocks...

Post by asif408 »

Robot Monster wrote: Mon Sep 14, 2020 1:01 pm asif408 made an interesting point regarding ex-US in the late 80's. He points the finger at Japan for the poor performance since then, since it dominated the index, and began at nosebleed valuations; by my read, Japan's CAPE in 1986 was about 60 or 70. Meanwhile, the US that year had a CAPE starting at 11.72. Today S&P's CAPE ratio is 31, which is higher than most other countries. So we're in a different place now than 1986.

International CAPEs
Correct, you can see the effect of Japan by looking at the performance difference of the Vanguard European vs. Vanguard Pacific funds (which has a heavy Japan weighting), which were started in 1990, near the peak of the Japan bubble: https://www.portfoliovisualizer.com/bac ... ion3_3=100.

Any comparison of US vs foreign stocks beginning in the late 1980s or early to mid 1990s to today has the common Bogleheads issue of picking starting and ending points that make data look very good or bad, depending on the argument you are trying to win. Foreign CAPE ratios in the late 1980s/early to mid 1990s were in the 30-40 range, while US equities were in the mid to upper teens: https://www.gmo.com/contentassets/b3da1 ... ibit-4.png. Now we basically have the opposite, with the US in the mid 30s and foreign stocks in the mid teens. So valuations in the US have doubled since the 1980s while valuations in foreign stocks have fallen by more than half. Yet many still say valuations don't matter.

If you do an analysis of US vs foreign stocks you should always be considering what the starting and ending valuations were. For instance in the early 1970s Japanese companies were selling at P/E ratios of on average 3, while US companies were in the mid 20s. Japanese stocks dramatically outperformed US stocks in the 1970s and 1980s, aided largely by a massive increase in valuations. US stock valuations fell during those two decades.
By the end of 1989 Japanese companies were selling at nosebleed valuations (P/E ratios in the 70-100 range), while US and European stocks were much more reasonable in the mid-teens. IIRC the Nikkei beat the S&P by 10% CAGR for the 20 year period of 1970-1989, and also outperformed it in the 1950s and 1960s (4 straight decades).
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Re: For those concerned about International Stocks...

Post by tibbitts »

ValuationsMatter wrote: Tue Apr 21, 2020 5:54 pm Imagine COVID killed 2% of the entire population, and most of it was elderly without any social distancing measures whatsoever, what effect would/should that have on stock prices? Perhaps somewhat less than the 2%, since the elderly are disproportionately affected?
I would guess that substantially reducing the entire U.S. population over 65 or 70 would result in a massive surge in stock prices, since an entire generation of Social Security payments and medicare payments would be largely wiped out. It would result in some sector rotation for sure but I assume that overall the effect would be extremely positive.
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Re: For those concerned about International Stocks...

Post by Ciel »

asif, that is insightful information, thank you.
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Re: For those concerned about International Stocks...

Post by Robot Monster »

asif408 wrote: Mon Sep 14, 2020 2:24 pm
Robot Monster wrote: Mon Sep 14, 2020 1:01 pm asif408 made an interesting point regarding ex-US in the late 80's. He points the finger at Japan for the poor performance since then, since it dominated the index, and began at nosebleed valuations; by my read, Japan's CAPE in 1986 was about 60 or 70. Meanwhile, the US that year had a CAPE starting at 11.72. Today S&P's CAPE ratio is 31, which is higher than most other countries. So we're in a different place now than 1986.

International CAPEs
Correct, you can see the effect of Japan by looking at the performance difference of the Vanguard European vs. Vanguard Pacific funds (which has a heavy Japan weighting), which were started in 1990, near the peak of the Japan bubble: https://www.portfoliovisualizer.com/bac ... ion3_3=100.

Any comparison of US vs foreign stocks beginning in the late 1980s or early to mid 1990s to today has the common Bogleheads issue of picking starting and ending points that make data look very good or bad, depending on the argument you are trying to win. Foreign CAPE ratios in the late 1980s/early to mid 1990s were in the 30-40 range, while US equities were in the mid to upper teens: https://www.gmo.com/contentassets/b3da1 ... ibit-4.png. Now we basically have the opposite, with the US in the mid 30s and foreign stocks in the mid teens. So valuations in the US have doubled since the 1980s while valuations in foreign stocks have fallen by more than half. Yet many still say valuations don't matter.

If you do an analysis of US vs foreign stocks you should always be considering what the starting and ending valuations were. For instance in the early 1970s Japanese companies were selling at P/E ratios of on average 3, while US companies were in the mid 20s. Japanese stocks dramatically outperformed US stocks in the 1970s and 1980s, aided largely by a massive increase in valuations. US stock valuations fell during those two decades.
By the end of 1989 Japanese companies were selling at nosebleed valuations (P/E ratios in the 70-100 range), while US and European stocks were much more reasonable in the mid-teens. IIRC the Nikkei beat the S&P by 10% CAGR for the 20 year period of 1970-1989, and also outperformed it in the 1950s and 1960s (4 straight decades).
A gem of a post, which I will be weaponizing for future use in the neverending battle between domestic vs international.
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Re: For those concerned about International Stocks...

Post by UpperNwGuy »

If you want to hold market weight as in Total World, do so, but I won't join you.

If you want to tilt toward international above market weight, do so, but I won't join you.

If you want to hold 40% international as in Target Date and Life Strategy, do so, but I won't join you.

If you want to hold 20-30% international, do so, and I may join you.

If you want to hold all US, do so, and I may join you.

It's like religion. It's your decision to make for yourself. What others do is their business, not yours. Don't be an evangelist.
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Re: For those concerned about International Stocks...

Post by abuss368 »

UpperNwGuy wrote: Mon Sep 14, 2020 5:48 pm If you want to hold market weight as in Total World, do so, but I won't join you.

If you want to tilt toward international above market weight, do so, but I won't join you.

If you want to hold 40% international as in Target Date and Life Strategy, do so, but I won't join you.

If you want to hold 20-30% international, do so, and I may join you.

If you want to hold all US, do so, and I may join you.

It's like religion. It's your decision to make for yourself. What others do is their business, not yours. Don't be an evangelist.
There is a Boglehead you sent me a private message who owns Total Stock, US High Dividend, and US REIT, with Total Bond. They are very happy.
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Re: For those concerned about International Stocks...

Post by AlwaysLearningMore »

Stef wrote: Mon Sep 14, 2020 12:44 am If you truely believe in index investing, there is no way around VT. But if you base your SAA on past performance, why not just be 100% QQQ?

Some haystacks are better, more stable and safer to be around than others. Ask any farmer.

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Re: For those concerned about International Stocks...

Post by GaryA505 »

Robot Monster wrote: Mon Sep 14, 2020 1:45 pm
abuss368 wrote: Mon Sep 14, 2020 1:27 pm
Robot Monster wrote: Mon Sep 14, 2020 12:05 pm
GaryA505 wrote: Mon Sep 14, 2020 11:24 am Does anyone have the CAGR for US and ex-US for 1970-present?
I have both. I keep the US CAGR on a display shelf next to a bunch of trophies. The ex-US CAGR I've got to wipe off from the bottom of my shoe with a stick.
Priceless! I believe international outperformed US during the 2000 - 2010 years correct?
True, but that ended a whole ten years ago, and that period only lasted ten years, so...not sure where I was going with this...
I would love to see the data back as far as we can go, I really would.

I keep thinking 2-horse race analogies. Would you bet on the horse that has won most of the time, even though you know that means you'll be losing those races when the other horse sometimes wins? Or, in the interest of "diversification" and not making predictions, would you bet on them both 50% in every race?
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Re: For those concerned about International Stocks...

Post by GaryA505 »

OK, there's this from Fidelity.

https://imgur.com/a/T5LPCnO
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Re: For those concerned about International Stocks...

Post by rockstar »

Given how bad the yields are today on treasuries and corporate bonds in the US, have you guys consider emerging market bonds as an alternative way to play international instead of equities?
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Re: For those concerned about International Stocks...

Post by Semantics »

I don't know why people are citing data from the 1970s. Totally irrelevant to today's globalized and connected world. US has outperformed because big US companies have been siphoning trillions of dollars out of other countries, dominating in those markets just like they've dominated at home (where small cap value has also underperformed). Barring a major change in the world order, I see no reason to invest anywhere other than the US and China for the foreseeable future, although I do hold a few emerging markets tech stocks like SE as well.
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Re: For those concerned about International Stocks...

Post by Stef »

Semantics wrote: Mon Sep 14, 2020 9:50 pm I don't know why people are citing data from the 1970s. Totally irrelevant to today's globalized and connected world. US has outperformed because big US companies have been siphoning trillions of dollars out of other countries, dominating in those markets just like they've dominated at home (where small cap value has also underperformed). Barring a major change in the world order, I see no reason to invest anywhere other than the US and China for the foreseeable future, although I do hold a few emerging markets tech stocks like SE as well.
Do you know what the real return of Chinese stocks was in the last 40 years? Basically zero. The economy isn't the stock market and the stock market isn't the economy.
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