Investing in International Stocks

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grayfox
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Investing in International Stocks

Post by grayfox » Thu May 21, 2020 6:25 am

It appears that International stocks have lower valuations than U.S. stocks. E.g. lower P/E and P/B, higher dividend yield. Therefore I'm looking at investing in International stocks. We are all familiar with the U.S. stocks markets. U.S. stocks trade on the NYSE or NASDAQ exchanges. These are well known. In fact, I have been to the visitor's gallery of the NYSE back when that was allowed. I think it's closed to the public now.

But what about international stocks? Where do they trade? One thing I have learned recently is that there is no such thing as the Worldwide Stock Exchange where all the international stocks trade. Instead there are many separate stock exchanges all around the world in many countries on every continent. This article shows All of the World’s Stock Exchanges by Size. The article says that there are 60 major stock exchanges in the world with a total value of $69 trillion. I guess that means the market cap of all the stocks on each exchange.

The article goes on and breaks down the number of stock exchanges by seven regions. Here they are ranked by size: (including populations)

Code: Select all

Rank    Region          Population      Pop     Language Family             Exchanges   Value           Value
                        (millions)      (%)                                           (billions $)      (%)
1       North America    493.4           6.2%   Indo-European                    5      28059           40.4%   
2       Asia            4550.0          57.5%   Sino-Tibetan, Indo-European     17      23048           33.2%   
3       Europe           694.5           8.8%   Indo-European                   17      13589           19.6%   
4       Middle East      419.1           5.3%   Semitic                          9       1410            2.0%    
5       Australia/NZ      42.6           0.5%   Indo-European                    2       1207            1.7%    
6       Africa          1290.0          16.3%   Niger-Congo, Afro-Asiatic        5       1122            1.6%    
7       South America    428.2           5.4%   Indo-European                    5        933            1.3%    
        World           7917.9         100.0%   7,1111 known languages          60      69368          100.0%
More than half of the population of the world is in Asia. Second is Africa at 16%.

Who knew there were so many stock exchanges? North America has the biggest market cap of all seven regions, in five major stock exchanges, but only 6% of the population. Ranked by size: (including populations)

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Rank    Country         Pop             Pop     Language Family         Exchange                Founded Value   Value   
                        (millions)      (%)                                                            (bils $) (%)
1       U.S.            330.2           66.9%   English                 NYSE                    1792    18486   65.9%   
2       U.S.                                    English                 NASDAQ                  1971     7449   26.5%   
3       Canada           37.1            7.5%   English, French         TMX Group               2008     1697    6.0%
4       Mexico          126.2           25.6%   Romance – Spanish       Bolsa Mex. de Valores   1933     426     1.5%   
        North America   493.4          100.0%                                                           28058  100.0%
Two-thirds of the population of North America lives in the United States. Mexico has about one-quarter and Canada a mere 7.5%.

The great NYSE is the biggest in North America and the world. Nasdaq is second.
Whatever happened to the American Stock Exchange (AMEX)? I think there are other stocks exchanges in North America that didn't make the list. It think there is a Pacific Stock Exchange in LA , a Toronto Stock Exchange and Montreal Stock Exchange in Canada. I guess those are not considered to be major stock exchanges.

A good country to start with is our neighbor to the north Canada. I have been to Canada and it has a modern, developed economy, not all that different from the U.S. There is an ETF iShares MSCI Canada ETF (EWC) that invests in Canadian companies. It's been around since 1996, so that is decent amount of time. Maybe I'll do some research into Canadian companies and EWC.
Last edited by grayfox on Wed May 27, 2020 6:59 am, edited 1 time in total.
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jhsu802701
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Re: Investing in International Stocks

Post by jhsu802701 » Thu May 21, 2020 8:43 am

Because Vanguard Brokerage doesn't offer access to foreign stocks, I just buy foreign stock ETFs. My favorites are MOTI, DGRE, DFJ, DGS, IQIN, FNDC, and GWX.

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Re: Investing in International Stocks

Post by Valuethinker » Thu May 21, 2020 9:07 am

grayfox wrote:
Thu May 21, 2020 6:25 am
I'm looking into diversifying my stock portfolio by investing in International stocks. We are all familiar with the U.S. stocks markets. U.S. stocks trade on the NYSE or NASDAQ exchanges. These are well known. In fact, I have been to the visitor's gallery of the NYSE back when that was allowed. I think it's closed to the public now.

But what about international stocks? Where do they trade? One thing I have learned recently is that there is no such thing as the Worldwide Stock Exchange where all the international stocks trade. Instead there are many separate stock exchanges all around the world in many countries on every continent.
See comment re irony, below.

Given the US had a number of regional exchanges, this should not surprise you?
This article shows All of the World’s Stock Exchanges by Size. The article says that there are 60 major stock exchanges in the world with a total value of $69 trillion. I guess that means the market cap of all the stocks on each exchange.

The article goes on and breaks down the number of stock exchanges by seven regions. Here they are ranked by size:

Code: Select all

Rank    Country         Exchanges       Value           Percent
                                        (billions $)
1       North America           5       28059           40.45%
2       Asia                    17      23048           33.23%
3       Europe                  17      13589           19.59%
4       Middle East             9       1410            2.03%
5       Australia/NZ            2       1207            1.74%
6       Africa                  5       1122            1.62%
7       South America           5       933             1.35%

        World                   60      69368           100.00%%
Who knew there were so many stock exchanges? North America has the biggest market cap of all seven regions, and has five major stock exchanges. Ranked by size:

Code: Select all

Rank    Country Exchange                        Value           Percent
                                                (billions $)
1       U.S.    NYSE                            18486           65.88%
2       U.S.    NASDAQ                          7449            26.55%
3       Canada  TMX Group                       1697            6.05%
4       Mexico  Bolsa Mexicana de Valores       426             1.52%
5       Bermuda Bermuda Stock Exchange          1               0.0036%

        North America                           28059           100.00%
The great NYSE is the biggest in North America and the world. Nasdaq is second.
Whatever happened to the American Stock Exchange (AMEX)? I think there are other stocks exchanges in North America that didn't make the list. It think there is a Pacific Stock Exchange in LA , a Toronto Stock Exchange and Montreal Stock Exchange in Canada. I guess those are not considered to be major stock exchanges.

A good country to start with is our neighbor to the north Canada. I have been to Canada and it has a modern, developed economy, not all that different from the U.S. There is an ETF iShares MSCI Canada ETF (EWC) that invests in Canadian companies. It's been around since 1996, so that is decent amount of time. Maybe I'll do some research into Canadian companies and EWC.
Irony does not convey well in written posts, sometimes.

A stock exchange is just an electronic trading facility for stocks (there are also "dark pools" which are the same in function, but do not have the same public disclosure requirements on companies listed and people trading there). Any association with a particular location is historic.

So playing straight bat, as the English say:

TMX is the Toronto Stock Exchange (from memory it merged with Montreal quite a long time ago). There's also a venture exchange in Toronto. I think the Calgary and Vancouver SE have merged.

I highly doubt Vanguard indexes against the junior Canadian exchanges.

Has the Philadelphia Stock Exchange therefore ceased trading? They still have the semi-conductor stock index, however.

With Canada your best bet is to hold the global index, where it is about 5% of all stocks by value (different index makers use different ways of handling e.g. stocks with large family control positions). Note the Canadian index is about 40% banks (the big 5 - BMO, TD, Scotia, CIBC, RBC) + other financials and about 40% natural resources (mostly oil & gas). An ETF holding the top 30 or so stocks pretty much tracks it.

OMX is the Scandinavian exchange.

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Re: Investing in International Stocks

Post by jeffyscott » Thu May 21, 2020 9:35 am

I had seen that site from link in another discussion, but didn't read some of the excellent analysis before, such as:

Northern Dominance
From a geographical perspective, it is the Northern Hemisphere that is dominant. North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets, and the vast majority of Asia’s 33.3% lies north of the equator in places like Shenzhen, Hong Kong, Tokyo, and Shanghai.

Surprising to me that one half of the globe is so dominant. :wink: :wink: :wink:

That data is from early 2016, today North America is about 59% of Vanguard total world stock.

VTSAX is up about 65% since early 2016, while VTIAX is up about 23%. Using US return for North America, that differential in returns would put North America at about 48%. Is the rest of the differential between that ~48% vs. 59% in the Vanguard fund related to free float adjustment or something else?
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Ari
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Re: Investing in International Stocks

Post by Ari » Thu May 21, 2020 9:54 am

jeffyscott wrote:
Thu May 21, 2020 9:35 am
From a geographical perspective, it is the Northern Hemisphere that is dominant. North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets, and the vast majority of Asia’s 33.3% lies north of the equator in places like Shenzhen, Hong Kong, Tokyo, and Shanghai.

Surprising to me that one half of the globe is so dominant. :wink: :wink: :wink:
Not sure if those winks signify irony? Anyway, 88% of the world's population live in the northern hemisphere, says Internet.
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Re: Investing in International Stocks

Post by tibbitts » Thu May 21, 2020 10:13 am

I think most people where aware that there were stock exchanges around the world, and doubt anybody thought there was a single "international stock exchange" (implying ex-US, I guess?) And some stocks trade on "foreign" (to them) exchanges, for example through ADRs.

But I don't understand the point - what does "start" with Canada or any of the other ones mean? Start what?

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Re: Investing in International Stocks

Post by firebirdparts » Thu May 21, 2020 10:15 am

tibbitts wrote:
Thu May 21, 2020 10:13 am
But I don't understand the point - what does "start" with Canada or any of the other ones mean? Start what?
I am thinking somebody should point out there are 10,000 arguments about global investment that already occurred.
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Re: Investing in International Stocks

Post by SimpleGift » Thu May 21, 2020 10:44 am

jeffyscott wrote:
Thu May 21, 2020 9:35 am
North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets...
By market cap, the stock exchanges in North America and Europe are certainly dominant today, but this obscures the explosion in the number of new listed companies worldwide since the 1970s — most notably in East Asia and the Pacific (in red, chart below). While some of this growth is state-controlled enterprises going public, the large majority has been new enterprises.
Granted, about two-thirds of these companies are either too small or don't have enough free-float shares to be indexed, but the other one-third — about 14,600 companies today — are currently included in the MSCI All-cap World index. In short, outside of the United States, the global "haystack" of new listed companies has been expanding rapidly.

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Re: Investing in International Stocks

Post by grayfox » Thu May 21, 2020 12:30 pm

jeffyscott wrote:
Thu May 21, 2020 9:35 am
I had seen that site from link in another discussion, but didn't read some of the excellent analysis before, such as:

Northern Dominance
From a geographical perspective, it is the Northern Hemisphere that is dominant. North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets, and the vast majority of Asia’s 33.3% lies north of the equator in places like Shenzhen, Hong Kong, Tokyo, and Shanghai.

Surprising to me that one half of the globe is so dominant. :wink: :wink: :wink:
There is not really that much down there in the southern hemisphere. Most of the developed world is in the northern hemisphere.

Image

It looks like mostly water and the land is either covered by glaciers or is desert or jungle.

Image

Here is another link: World Federation of Exchanges. It says there are 53,000 listed companies on WFE Exchanges. That's a lot of annual reports to read.
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Re: Investing in International Stocks

Post by jeffyscott » Thu May 21, 2020 1:07 pm

Ari wrote:
Thu May 21, 2020 9:54 am
jeffyscott wrote:
Thu May 21, 2020 9:35 am
From a geographical perspective, it is the Northern Hemisphere that is dominant. North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets, and the vast majority of Asia’s 33.3% lies north of the equator in places like Shenzhen, Hong Kong, Tokyo, and Shanghai.

Surprising to me that one half of the globe is so dominant. :wink: :wink: :wink:
Not sure if those winks signify irony? Anyway, 88% of the world's population live in the northern hemisphere, says Internet.
Yep :)
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Re: Investing in International Stocks

Post by galeno » Thu May 21, 2020 1:16 pm

As USA-NRAs we buy and sell our Ireland domiciled ETFs from Vanguard and Ishares on the LSE.

It's our best deal. We never use the USA exchanges.
USA-NRA. TER = 0.40%. Expected real CAGR = 2.00%. AWR = 4.00%.: Port: 50% World Stocks + 15% TIPS + 15% Corps + 15% US Treas + 5% CASH.

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Re: Investing in International Stocks

Post by vineviz » Thu May 21, 2020 1:16 pm

grayfox wrote:
Thu May 21, 2020 6:25 am


I'm looking into diversifying my stock portfolio by investing in International stocks.
....
A good country to start with is our neighbor to the north Canada. I have been to Canada and it has a modern, developed economy, not all that different from the U.S.
If the goal is diversification, the last country you’d want to add is the one most similar to the one you already invest in.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Investing in International Stocks

Post by jeffyscott » Thu May 21, 2020 1:19 pm

SimpleGift wrote:
Thu May 21, 2020 10:44 am
jeffyscott wrote:
Thu May 21, 2020 9:35 am
North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets...
By market cap, the stock exchanges in North America and Europe are certainly dominant today, but this obscures the explosion in the number of new listed companies worldwide since the 1970s — most notably in East Asia and the Pacific (in red, chart below). While some of this growth is state-controlled enterprises going public, the large majority has been new enterprises.
Granted, about two-thirds of these companies are either too small or don't have enough free-float shares to be indexed, but the other one-third — about 14,600 companies today — are currently included in the MSCI All-cap World index. In short, outside of the United States, the global "haystack" of new listed companies has been expanding rapidly.
That's an interesting chart. Also shows US and Europe shrinking in terms of the number of companies.

What happened in 2002-2003 for North America ex-USA to cause the number of companies to jump by what looks like about a factor of 3 or so?
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: Investing in International Stocks

Post by SimpleGift » Thu May 21, 2020 1:39 pm

jeffyscott wrote:
Thu May 21, 2020 1:19 pm
What happened in 2002-2003 for North America ex-USA to cause the number of companies to jump by what looks like about a factor of 3 or so?
Don't really know. Most likely, it was a classification change by S&P that included more North American stocks (perhaps adding the exchanges in Mexico?), rather than a rash of new company listings. The World Bank's details on their methodology only show a data discontinuity in the 2013-2015 time frame:
World Bank wrote:Stock market data were previously sourced from Standard & Poor's until they discontinued their "Global Stock Markets Factbook" and database in April 2013. Time series have been replaced in December 2015 with data from the World Federation of Exchanges and may differ from the previous S&P definitions and methodology.

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Re: Investing in International Stocks

Post by dru808 » Thu May 21, 2020 2:41 pm

I guess you’d be diversifying away from the US with a Canada etf, I just feel like they’re so closely correlated. How about a specialty etf such as EFAV ishares minimum volatility eafe etf? You’d get quite a bit more diversification and some “ease” into international. Is this just a first step, dip your toes into international test?
60% US equity | 25% International equity | 15% US Treasury bonds

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Re: Investing in International Stocks

Post by grayfox » Fri May 22, 2020 7:41 am

After Canada, maybe the next place to look would be Australia and New Zealand. They call that region of the world Oceania. Population: 41 million. Tiny population.

According to Wikipedia Oceania includes includes Australasia, Melanesia, Micronesia and Polynesia. Much of Oceania, including Australia and NZ, lies below the Equator in the southern hemisphere. So there is your southern stock market exposure. Melanesia includes New Guinea. But it does not include Indonesia and Malaysia. That's already Asia, on the Eurasia plate.

Micronesia and Polynesia have a bunch of famous islands from history and WWII: Easter Island, Pitcairn Islands, Tonga, Fiji, Soloman Islands (Guadalcanal!), American Samoa, Guam, Mashall Islands, even Hawaii.

Image

It would be worth investing here just to get the geography and history lesson. That would be interesting to learn about that part of the world. But there are only two stock exchanges. And from a previous chart, Oceania only makes up 1.74% of the world market cap. And the tiny population numbers. So not that important w.r.t. size.

Code: Select all

Rank    Country         Pop     Pop     Language Family        Exchange                 Founded         Value   Value   
                    (millions)  (%)                                                                 (billions $)  (%)
1       Australia       25.0    84.4%   English         Australian Securities Exchange  1987            1139     94.4%   
2       New Zealand      4.6    15.6%   English         NZX Limited                     2002              68      5.6%    
        Oceania         29.6    100.0%                                                                  1207    100.0%
And most of it is Australian Securities Exchange. NZX Limited is a tiny 5.63% of 1.74% of the world market cap.

But they are English-speaking and their laws and business practices probably derive from Great Britain, so there should be some familiarity to American investors. You would be able to read all their news, adverts, annual reports and other documents and it would all make sense.

There are ETFs from iShares: EWA for Australia and ENZL for New Zealand. So add those to the list, along with Canada EWC.

Image

Quiz: Which is Australia? Which is New Zealand?
Image Image
Last edited by grayfox on Wed May 27, 2020 7:06 am, edited 2 times in total.
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Re: Investing in International Stocks

Post by jeffyscott » Fri May 22, 2020 8:58 am

grayfox wrote:
Fri May 22, 2020 7:41 am
Much of Oceania, including Australia and NZ, lies below the Equator in the southern hemisphere. So there is your southern stock market exposure.
And Australia would provide the greatest geographic diversification, being the land mass that is closest to being on the opposite side of the world from the US.
But they are English-speaking and their laws and business practices probably derive from Great Britain, so there should be some familiarity to American investors.
And it even looks kinda like the US:
Image
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Re: Investing in International Stocks

Post by paveldatsyuk44 » Fri May 22, 2020 9:12 am

firebirdparts wrote:
Thu May 21, 2020 10:15 am
tibbitts wrote:
Thu May 21, 2020 10:13 am
But I don't understand the point - what does "start" with Canada or any of the other ones mean? Start what?
I am thinking somebody should point out there are 10,000 arguments about global investment that already occurred.
and you know this is a message board forum, right?

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Re: Investing in International Stocks

Post by vineviz » Fri May 22, 2020 9:21 am

grayfox wrote:
Fri May 22, 2020 7:41 am
After Canada, maybe the next place to look would be Australia and New Zealand. They call that region of the world Oceania. Population: 41 million. Tiny population.
I want to point out - again - to the people following along at home that this strategy is the opposite of the best way to pursue international diversification.

Diversification DEPENDS on the addition of assets which are uncorrelated with the assets you already own. If the goal is diversification, the last country you’d want to add is the one most similar to the one you already invest in.

Plus, single-country ETFs are insanely expensive compared to diversified funds. Like 5x the cost.

The best place to start with international diversification is a broad, low-cost fund like iShares Core MSCI Total Intl Stk ETF (IXUS) or Vanguard Total International Stock ETF (VXUS). Investors who to maximize their international diversificaiton could choose a fund like SPDR Portfolio Emerging Markets ETF (SPEM) or Vanguard FTSE Emerging Markets ETF (VWO), either of which would be infinitely superior to a single-country ETF like EWA.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Investing in International Stocks

Post by Valuethinker » Fri May 22, 2020 9:24 am

jeffyscott wrote:
Thu May 21, 2020 9:35 am
I had seen that site from link in another discussion, but didn't read some of the excellent analysis before, such as:

Northern Dominance
From a geographical perspective, it is the Northern Hemisphere that is dominant. North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets, and the vast majority of Asia’s 33.3% lies north of the equator in places like Shenzhen, Hong Kong, Tokyo, and Shanghai.

Surprising to me that one half of the globe is so dominant. :wink: :wink: :wink:
Roughly speaking 70% of the world's land mass is north of the equator?

The English and the Dutch invented modern stock market capitalism. It is by and large their former colonies who are the ones that have the largest stock markets.

The interesting question is one of GDP, relative to their populations, sub Saharan Africa is very small.

There are a whole host of reasons for that, and I recommend Jared Diamond's Guns, Germs & Steel for a comprehensive argument on the advantages of geographical location.
That data is from early 2016, today North America is about 59% of Vanguard total world stock.

VTSAX is up about 65% since early 2016, while VTIAX is up about 23%. Using US return for North America, that differential in returns would put North America at about 48%. Is the rest of the differential between that ~48% vs. 59% in the Vanguard fund related to free float adjustment or something else?
I am not sure I follow the calculation. Can you explain what you are doing? Don't you need to know the starting percentage? Or are you back-casting to get that 48%?

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Re: Investing in International Stocks

Post by jeffyscott » Fri May 22, 2020 10:27 am

^The starting percentage is the 40% from the link . That would have become about 48%, based on the returns since then. So that is quite a bit below what the vanguard fund has in North America.

Perhaps an annual or semi-annual report for Vanguard total world from early 2016 might another way to compare?
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Re: Investing in International Stocks

Post by grayfox » Sat May 23, 2020 10:23 am

Moving on to Europe. This is a region I know quite a bit about. I have spent much time there, mostly in central and eastern Europe--the old German, Austro-Hugarian, and Russian empires that ended in 1918. And I have visited most European countries.

Many European countries, like UK and Germany, are modern developed countries like the U.S. with modern, productive economies. Better than the U.S. when it comes to some things like infrastructure. However, Europe is more diverse than the U.S. There are numerous ethnic groups all with their own language, culture, religion, cuisine, literature, movies, television, national heroes, etc. I do find there are similarities among groups that are related by history and language, e.g. Germanic, Slavic, Romance.

Then you have Great Britain. Is it even a part of Europe? It is more of a separate entity on its own island, Brittania.

Here are the stock exchanges of Europe, ranked by size: (includes date founded)

Code: Select all

Rank    Country                 Language Family      Exchange                   Founded Value   Percent 
                                                                                        (billions $)    
1       FR,NL,BE,PT,IE,NO       Romance         Euronext                        2000    3379    24.87%  
2       UK                      English         London Stock Exchange           1571    3272    24.09%  
3       Germany                 Germanic        Deutsche Börse                  1992    1738    12.79%  
4       Switzerland             Germanic        SIX Swiss Exchange              1850    1479    10.89%  
5       Sweden                  Germanic        NASDAQ OMX Nordic Exchange      2003    1253     9.22%   
6       Spain                   Romance         BME Spanish Exchanges           1831     833     6.13%   
7       Italy                   Romance         Borsa Italia                    1808     653     4.81%   
8       Russia                  Slavic          Moscow Exchange                 2011     447     3.29% 

Code: Select all

9       Norway                  Germanic        OSLO Bors                       1819     201     1.48%   
10      Ireland                 English         Irish Stock Exchange            1793     134     0.99%   
11      Austria                 Germanic        Wiener Börse                    1771      96     0.71%   
12      Luxembourg              Germanic        Luxembourg Stock Exchange       1928      49     0.36%   
13      Greece                  Hellenic        Athens Stock Exchange           1876      27     0.20%   
14      Hungary                 Finnic          Budapest Stock Exchange         1864      17     0.13%   
15      Slovenia                Slavic          Ljubljana Stock Exchange        1989       6     0.04%   
        Europe                                                                          13584          100.00%




The biggest is Euronext, which is headquartered in France, but has branches in the Netherlands, Belgium, Portugal, Ireland, and Norway.

Second biggest is the London Stock Exchange. It has been around for while, founded in 1571! I would certainly add UK to my list of potential investments. Great Britain is where the industrial revolution started about 1760 or so. And why not round out the English-speaking countries with Ireland. The iShares ETF are EWU and EIRL.

Here's a chart showing the Anglosphere. I would consider all as potential investment opportunities.
Image

I would also consider all the Germanic countries: Germany, Switzerland, Sweden, Norway, Austria. Germans are world famous for science and engineering. I won't list them, but there are iShares ETF for all of them.

When I think of Romance countries, what comes to mind is Joie de vivre. Serious business, not so much. An exception is France, which I found to be more functional and efficient. Also, I know that a lot of software development is done in Romania because there are educated people and the cost for labor is low. So I'll give them all a look.

What about the Slavic countries? I've spent a lot of time in the former communist countries of Eastern Europe. Good people. But they were behind the iron curtain for much of the 20th Century. After the wall fell in 1989, the oligarchs grabbed everything. A lot of corruption. In some places, the oligarchs, politicians and mafia are one and the same. Ordinary people have been trying to catch up since about 1990. There are iShares ETFs for some, if you are inclined. I'll look at them, but will probably stay away. I would make exceptions for some of the Slavic countries that have always leaned toward the west: Czech republic, Slovakia, Slovenia, Croatia, Poland.

In Greece, there was the Greek debt crisis in 2010. As I recall, nobody paid their income taxes. And due to geography, Greece is also on the front lines of the illegal migrant crisis. That's another strike against them.

In the Finnic-Ugric group, Finland is akin to Sweden in regards to business. And Estonia has high tech industry. But Lithuania and Latvia have been bleeding young population going west. Finally, I would consider Hungary.

:arrow: To summarize, some of the countries in Europe that I would consider: UK, France, Switzerland, Germany, Austria, Netherlands, Sweden, Denmark, Finland, Norway, Ireland, Austria, Czech Republic, Poland, Hungary, Slovenia, Croatia.


Image Image

I would have sworn that Ireland's flag was green with a harp on it.
Image

Weg!
Last edited by grayfox on Mon May 25, 2020 11:22 am, edited 2 times in total.
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Re: Investing in International Stocks

Post by vineviz » Sat May 23, 2020 11:25 am

grayfox wrote:
Sat May 23, 2020 10:23 am
Here's a chart showing the Anglosphere. I would consider all as potential investment opportunities.
Image
I'm glad to see somebody making a case for avoiding International investing that doesn't rely on xenophobic tropes.
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Re: Investing in International Stocks

Post by 1789 » Sat May 23, 2020 10:45 pm

grayfox wrote:
Thu May 21, 2020 6:25 am
I'm looking into diversifying my stock portfolio by investing in International stocks. We are all familiar with the U.S. stocks markets. U.S. stocks trade on the NYSE or NASDAQ exchanges. These are well known. In fact, I have been to the visitor's gallery of the NYSE back when that was allowed. I think it's closed to the public now.

But what about international stocks? Where do they trade? One thing I have learned recently is that there is no such thing as the Worldwide Stock Exchange where all the international stocks trade. Instead there are many separate stock exchanges all around the world in many countries on every continent. This article shows All of the World’s Stock Exchanges by Size. The article says that there are 60 major stock exchanges in the world with a total value of $69 trillion. I guess that means the market cap of all the stocks on each exchange.

The article goes on and breaks down the number of stock exchanges by seven regions. Here they are ranked by size:

Code: Select all

Rank    Country         Exchanges       Value           Percent
                                        (billions $)
1       North America           5       28059           40.45%
2       Asia                    17      23048           33.23%
3       Europe                  17      13589           19.59%
4       Middle East             9       1410            2.03%
5       Australia/NZ            2       1207            1.74%
6       Africa                  5       1122            1.62%
7       South America           5       933             1.35%

        World                   60      69368           100.00%%
Who knew there were so many stock exchanges? North America has the biggest market cap of all seven regions, and has five major stock exchanges. Ranked by size:

Code: Select all

Rank    Country Exchange                        Value           Percent
                                                (billions $)
1       U.S.    NYSE                            18486           65.88%
2       U.S.    NASDAQ                          7449            26.55%
3       Canada  TMX Group                       1697            6.05%
4       Mexico  Bolsa Mexicana de Valores       426             1.52%
5       Bermuda Bermuda Stock Exchange          1               0.0036%

        North America                           28059           100.00%
The great NYSE is the biggest in North America and the world. Nasdaq is second.
Whatever happened to the American Stock Exchange (AMEX)? I think there are other stocks exchanges in North America that didn't make the list. It think there is a Pacific Stock Exchange in LA , a Toronto Stock Exchange and Montreal Stock Exchange in Canada. I guess those are not considered to be major stock exchanges.

A good country to start with is our neighbor to the north Canada. I have been to Canada and it has a modern, developed economy, not all that different from the U.S. There is an ETF iShares MSCI Canada ETF (EWC) that invests in Canadian companies. It's been around since 1996, so that is decent amount of time. Maybe I'll do some research into Canadian companies and EWC.
Why not to keep it simple and buy an ex US index ETF like VXUS? In any year any country can come out ahead of another one. So holding onto Canada doesn’t in addition to US is not much diversification.
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Re: Investing in International Stocks

Post by 1789 » Sat May 23, 2020 10:45 pm

grayfox wrote:
Thu May 21, 2020 6:25 am
I'm looking into diversifying my stock portfolio by investing in International stocks. We are all familiar with the U.S. stocks markets. U.S. stocks trade on the NYSE or NASDAQ exchanges. These are well known. In fact, I have been to the visitor's gallery of the NYSE back when that was allowed. I think it's closed to the public now.

But what about international stocks? Where do they trade? One thing I have learned recently is that there is no such thing as the Worldwide Stock Exchange where all the international stocks trade. Instead there are many separate stock exchanges all around the world in many countries on every continent. This article shows All of the World’s Stock Exchanges by Size. The article says that there are 60 major stock exchanges in the world with a total value of $69 trillion. I guess that means the market cap of all the stocks on each exchange.

The article goes on and breaks down the number of stock exchanges by seven regions. Here they are ranked by size:

Code: Select all

Rank    Country         Exchanges       Value           Percent
                                        (billions $)
1       North America           5       28059           40.45%
2       Asia                    17      23048           33.23%
3       Europe                  17      13589           19.59%
4       Middle East             9       1410            2.03%
5       Australia/NZ            2       1207            1.74%
6       Africa                  5       1122            1.62%
7       South America           5       933             1.35%

        World                   60      69368           100.00%%
Who knew there were so many stock exchanges? North America has the biggest market cap of all seven regions, and has five major stock exchanges. Ranked by size:

Code: Select all

Rank    Country Exchange                        Value           Percent
                                                (billions $)
1       U.S.    NYSE                            18486           65.88%
2       U.S.    NASDAQ                          7449            26.55%
3       Canada  TMX Group                       1697            6.05%
4       Mexico  Bolsa Mexicana de Valores       426             1.52%
5       Bermuda Bermuda Stock Exchange          1               0.0036%

        North America                           28059           100.00%
The great NYSE is the biggest in North America and the world. Nasdaq is second.
Whatever happened to the American Stock Exchange (AMEX)? I think there are other stocks exchanges in North America that didn't make the list. It think there is a Pacific Stock Exchange in LA , a Toronto Stock Exchange and Montreal Stock Exchange in Canada. I guess those are not considered to be major stock exchanges.

A good country to start with is our neighbor to the north Canada. I have been to Canada and it has a modern, developed economy, not all that different from the U.S. There is an ETF iShares MSCI Canada ETF (EWC) that invests in Canadian companies. It's been around since 1996, so that is decent amount of time. Maybe I'll do some research into Canadian companies and EWC.
Why not to keep it simple and buy an ex US index ETF like VXUS? In any year any country can come out ahead of another one. So holding onto Canada doesn’t in addition to US is not much diversification.
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Re: Investing in International Stocks

Post by grayfox » Sun May 24, 2020 6:47 am

1789 wrote:
Sat May 23, 2020 10:45 pm

Why not to keep it simple and buy an ex US index ETF like VXUS? In any year any country can come out ahead of another one. So holding onto Canada doesn’t in addition to US is not much diversification.
That's a good suggestion. For the U.S. stock market, index funds work very well. Instead of picking stocks, buy every stock. Some stocks will do well and some stocks will do poorly. But the winners more than make up for the losers, and you come out far ahead.

That's the basic idea that John Bogle had when he started Vanguard and the S&P500 Index Fund. And I can vouch for you that indexing the U.S. Stock Market works.

Now if I bought a broad international fund like VXUS, I would have to assume that indexing the whole international stock market will also work. Some countries will do well and some counties will do poorly. The winners make up for the losers and you come out far head like with U.S. stocks in the S&P 500.

The question is, can I assume that indexing works for international stocks? One thing I'm learning here is that while U.S. stocks are one market, Interntional stocks are not one market. They are 60 major markets and I don't know how many minor markets. They have their own rules and regulations. Maybe indexing works for some of those 60 markets and not for others. It's possible that the losers will lose more than the winners win, and you do poorly overall.

Hypothesis H0: Indexing has worked for international stock markets.**

If this H0 is true, then just buy a total international fund like VXUS. But if there is evidence that the H0 is false, you have to reject H0. Then you have to decide if you should pick and choose countries or do the simple thing and stick with the U.S. stock market.

** "Indexing has worked" needs to be defined. To me, it means that the winners win more than the losers lose, and that over the long haul you end up with a total return that is comparable to U.S. stocks at a similar amount of risk.

[Spoiler alert: I think there is evidence that indexing hasn't work for every stock market in the World.]
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Re: Investing in International Stocks

Post by galeno » Sun May 24, 2020 7:12 am

FTSE all cap world equiy index (VT) =
55% USA + 35% non USA dev + 10% EM.

It's a bet on world economic growth. It IS the WHOLE haystack.

Is tilting 100% USA a bad idea? No. So far it's beating non USA by a wide margin.

But why stop there? You just rejected 45% of the above world equity index. Why not tilt INSIDE the USA TSM index also? Why not just tilt to 100% USA dividend growth (SCHD) or 100% USA SCV?

It's a slippery slope.
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Re: Investing in International Stocks

Post by grayfox » Mon May 25, 2020 7:18 am

All of the World’s Stock Exchanges by Size.

Code: Select all

Rank    Country         Exchanges       Value           Percent
                                        (billions $)
1       North America           5       28059           40.45%
2       Asia                    17      23048           33.23%
3       Europe                  17      13589           19.59%
4       Middle East             9       1410            2.03%
5       Australia/NZ            2       1207            1.74%
6       Africa                  5       1122            1.62%
7       South America           5       933             1.35%

        World                   60      69368           100.00%%
Next up is Asia, which accounts for a third of the world stock market capitalization. Here are the stock exchanges of Asia, ranked by size:

Code: Select all

Rank    Country         Language Family         Exchange                                Founded Value   Percent
                                                                                                (billions $)
1       Japan           Japanese                Japan Exchange Group                    1878    4910    21.28%
2       China           Mandarin                Shanghai Stock Exchange                 1990    4460    19.33%
3       China           Mandarin                Shenzhen Stock Exchange                 1987    3424    14.84%
4       Hong Kong       Cantonese, English      Hong Kong Exchanges and Clearing        2000    3165    13.72%
5       India           Standard Hindi          BSE India Limited                       1877    1482     6.42%
6       India           Standard Hindi          National Stock Exchange of India        1992    1450     6.29%
7       Korea           Korean                  Korea Exchange                          2005    1265     5.48%  
8       Taiwan          Mandarin                Taiwan Stock Exchange Corp              1961     750     3.25%
9       Singapore       Malay, Chinese, Tamil   Singapore Exchange                      1999     639     2.77%
10      Malaysia        Malay                   Bursa Malaysia                          1964     380     1.65%

Code: Select all

11      Thailand        Thai                    Stock Exchange of Thailand              1975     368     1.60%
12      Indonesia       Indonesian (Malay)      Indonesia Stock Exchange                2007     347     1.50%
13      Philippines     Tagalog, English        Philippine Stock Exchange               1927     238     1.03%
14      Taiwan          Mandarin                Taipei Exchange                         1994      82     0.36%
15      Vietnam         Vietnamese              Ho Chi Minh Stock Exchange              2000      50     0.22%
16      Kazakhstan      Khazak, Russian         Kazakhstan Stock Exchange               1993      39     0.17%
17      Sri Lanka       Sinhala, Tamil          Colombo Stock Exchange                  1985      21     0.09%
        Asia                                                                                   23070   100.00%
I don't know all that much about Asia. What I do know is Toyota, Mitsibushi, Honda, Sony, Canon, Hyundai, Samsung. Many of the best consumer electronics products and automobiles come from Japan and South Korea. Japan is the Germany of the east with science and technology. Remarkable country and people. Taiwan makes semiconductors. I would consider investing in many of the Pacific Rim countries.

In South Asia, there is India and Sri Lanka. I've never been there, but everyone I've met from India, Sri Lanka, Bangladesh, etc. was highly educated: engineer, computer scientist, medical doctor, Phd, university professor. All speak better English than most Americans. Probably due to the many years they were a British colony. And have you seen the math test Indian students must pass to graduate? Few American public school students could pass it. But then I see on TV that there is great poverty in that part of the world. Wages are low there and they all want H1-B visas to come to work in the U.S. I get the feeling there is a brain drain that can't be good for those countries. So I would probably pass on putting money there.

Then there is China. Known for poor quality control. Manufacturer of cheap stuff for Walmart that breaks or falls apart soon after you buy it. The opposite of Japan and Korea. And China is a communist dictatorship. yet they have embraced the free market to overtake the west because I guess they know communism doesn't work. But what happens to your investments in China when they decide that the free market experiment is over and back to communist economy?

:idea: I think investing in a communist dictatorship is dangerous. I think in the long run it will end badly.

Hong Kong would be a great place to invest in. Unfortunately, Communist China seems intent on swallowing it up. So Hong Kong is in grave danger,
Vietnam is still a communist country.
Kazakhstan is one of the former Soviet Republics, like Russia, Belarus, Ukraine, Moldova and Georgia. The national language is Kazakh, but when you get there, you'll find everyone speaks Russian in public places.

:arrow: I would consider investing in the modern, free market countries on the Pacific Rim like Japan, South Korea, Taiwan, Singapore, Philippines. They are all covered by iShares
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Re: Investing in International Stocks

Post by grayfox » Tue May 26, 2020 6:30 am

Middle East. Only 2.03% of the world market cap.

Code: Select all

Rank    Country         Language Family         Exchange                        Founded Value   Percent
                                                                                        (billions $)
1       Saudi Arabia    Semitic – Arabic        Saudi Stock Exchange            2007    442     33.97%
2       Israel          Semitic – Hebrew        Tel-Aviv Stock Exchange         1953    237     18.22%
3       Turkey          Turkic -  Turkish       Borsa Istanbul                  1866    197     15.14%  
4       Qatar           Semitic – Arabic        Qatar Stock Exchange            1995    146     11.22%
5       UAE             Semitic – Arabic        Abu Dhabi Securities Exchange   2000    110      8.46%
6       UAE             Semitic – Arabic        Dubai Financial Markets         2000     87      6.69%
7       Oman            Semitic – Arabic        Muscat Securities Market        1988     38      2.92%
8       Jordan          Semitic – Arabic        Amman Stock Exchange            1999     24      1.84%
9       Bahrain         Semitic – Arabic        Bahrain Bourse                  1987     20      1.54%
        Middle East                                                                    1301    100.00%
Oil, Monarchies, dictators, insurgencies, civil wars, bombings, rocket attacks. The middle east seems like a very risky region in the world to invest in. An investor should require a huge return like 10x to make it worthwhile.

The biggest stock market is the Saudi Stock Exchange or Tadawul in Kingdom of Saudi Arabia on the Arabian peninsula. Saudi Arabia is a monarchy and Saudi is the dynastic name of the royal family. So the country is named after the ruling family. That would be like us being called the United States of Trump. How weird is that? Their fortune is from oil, the same way Jed Clampet struck it rich. In other words luck of the draw. I don't think resource-rich countries are a good place to invest.

Second is Tel-Aviv Stock Exchange in Israel. No oil. Instead, their success is from the industriousness of the Israel people. I would rather invest in that kind of wealth building. I think that it is the only democracy in the middle east.

Third is Borsa Istanbul in Turkey, the oldest in the Middle East, founded in 1866. The only problem is Turkey's dictator Erdogan seems to be on a power trip wanting to re-create the Ottoman Empire with him as the new sultan. I don't see how that can bode well for investors. He's been to be threatening his neighbors with his military. He is no Attaturk. Forget it.

The others are all too new to have a track record and many have the same kind of resource-based economy as Saudi Aabia.

:arrow: The only country I would consider investing in would be Israel.
Last edited by grayfox on Tue May 26, 2020 6:39 am, edited 1 time in total.
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Re: Investing in International Stocks

Post by columbia » Tue May 26, 2020 6:39 am

Grayfox, one can limit a lot of concerns through a developed markets fund, although you get Singapore and Hong Kong. (Not advocating - I wouldn’t do it myself - just pointing it out.)
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Re: Investing in International Stocks

Post by grayfox » Tue May 26, 2020 6:45 am

columbia wrote:
Tue May 26, 2020 6:39 am
Grayfox, one can limit a lot of concerns through a developed markets fund, although you get Singapore and Hong Kong. (Not advocating - I wouldn’t do it myself - just pointing it out.)
Yes, I will consider a developed markets fund. iShares MSCI EAFE Index (EFA). That has all the developed countries in it.
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Re: Investing in International Stocks

Post by nisiprius » Tue May 26, 2020 7:09 am

The AMEX was absorbed into the NYSE in 2008.

The AMEX was slightly disreputable compared to the NYSE. It began as the "Curb Exchange" which literally took place outdoors. Although at least one financial paper published Curb listings, they included a warning notice:
It should be understood that no such reliability attaches to transactions on the "Curb" as to those on the regularly organized stock exchanges... it is out of the question for anyone to vouch for the absolute trustworthiness of the record of "Curb" transactions, and we give it for what it may be worth.
It gradually acquired a building in 1921, cleaned up its act, and in 1953 became the "American Stock Exchange."

Even then, it was not the peer of the NYSE. When Wang Laboratories wanted to pull a fast one and create two share classes, one with full voting rights (held by the Wang family) and one with 1/10th voting rights (for everyone else), they had to move from the NYSE to the AMEX because the NYSE's listing rules didn't allow this, while AMEX was more permissive.
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Re: Investing in International Stocks

Post by nisiprius » Tue May 26, 2020 7:22 am

The correlation between developed markets and emerging markets, as represented by VTMGX and VEIEX, typing them into PortfolioVisualizer's correlation tool and accepting all defaults, has been 0.88. So in a total international index, you're talking about a roughly 20% allocation to something that has an 88% correlation with the other 80%.

The difference between the behavior and performance of VGTSX (total international) and VTMGX (developed only) hasn't, in my opinion, amounted to much.

Image

That means you can play it either way. I personally was never caught up in the enthusiasm for emerging markets, they're not my thing at all, but the way I play it is to shrug and say "eh, it doesn't matter, I don't know and I don't care," and go with Total International anyway. But I would also say that the evidence suggests that there's would have been no harm in leaving them out and sticking to developed markets, either.
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Re: Investing in International Stocks

Post by grayfox » Tue May 26, 2020 8:21 am

nisiprius wrote:
Tue May 26, 2020 7:22 am
The correlation between developed markets and emerging markets, as represented by VTMGX and VEIEX, typing them into PortfolioVisualizer's correlation tool and accepting all defaults, has been 0.88. So in a total international index, you're talking about a roughly 20% allocation to something that has an 88% correlation with the other 80%.

The difference between the behavior and performance of VGTSX (total international) and VTMGX (developed only) hasn't, in my opinion, amounted to much.
It seems to me that the countries in the emerging markets funds are far riskier than the countries in the developed markets fund. So if developed markets in the chart grew by 1.9x over 20 years, I would want to see emerging markets to grow by at least 10x over the same 20 years. Otherwise, why take the risk? I think EM got maybe they got 3.5x return over that period.

Like when venture capitalist firms invest in startups, they expect to get 10x or 100x return. When you take great risk, if things work out, you should get great return.

:arrow: If someone has faith that indexing works in all 60 major stock markets in the world, then just buy Total International VGTSX.
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Re: Investing in International Stocks

Post by tibbitts » Tue May 26, 2020 8:35 am

grayfox wrote:
Tue May 26, 2020 8:21 am
nisiprius wrote:
Tue May 26, 2020 7:22 am
The correlation between developed markets and emerging markets, as represented by VTMGX and VEIEX, typing them into PortfolioVisualizer's correlation tool and accepting all defaults, has been 0.88. So in a total international index, you're talking about a roughly 20% allocation to something that has an 88% correlation with the other 80%.

The difference between the behavior and performance of VGTSX (total international) and VTMGX (developed only) hasn't, in my opinion, amounted to much.
It seems to me that the countries in the emerging markets funds are far riskier than the countries in the developed markets fund. So if developed markets in the chart grew by 1.9x over 20 years, I would want to see emerging markets to grow by at least 10x over the same 20 years. Otherwise, why take the risk? I think EM got maybe they got 3.5x return over that period.

Like when venture capitalist firms invest in startups, they expect to get 10x or 100x return. When you take great risk, if things work out, you should get great return.
There is a slippery slope there: there is nothng magic about the division between emerging and developed. Pretty soon you will be selecting a fund to invest in only the least risky single country, then individual stocks to invest in only the least risky single stock in that single country.

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Re: Investing in International Stocks

Post by jeffyscott » Tue May 26, 2020 8:42 am

nisiprius wrote:
Tue May 26, 2020 7:22 am
The correlation between developed markets and emerging markets, as represented by VTMGX and VEIEX, typing them into PortfolioVisualizer's correlation tool and accepting all defaults has been 0.88.
But yet returns and SDs are quite different. Substitute US stocks (VTSAX) for emerging and correlation is the same 0.88, but US returns were 6.7% vs. 3.5% for international developed and this was with nearly the same SDs. (These are good examples to demonstrate what "correlation" does and does not mean.) US vs EM has a bit lower correlation with US of 0.77. So it seems like if you are going to use correlations to exclude something, it might make more sense to leave out developed international markets and include only emerging.
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Re: Investing in International Stocks

Post by grayfox » Tue May 26, 2020 9:05 am

tibbitts wrote:
Tue May 26, 2020 8:35 am

There is a slippery slope there: there is nothng magic about the division between emerging and developed. Pretty soon you will be selecting a fund to invest in only the least risky single country, then individual stocks to invest in only the least risky single stock in that single country.
I think that's what a lot of people have done. They've concluded that the U.S. is the least risky country and it has gotten good returns so why not choose 100% U.S.

But there is no reason to go any further like fund the least risky individual stock because we agree that index investing works in the U.S. stock market.
Last edited by grayfox on Tue May 26, 2020 9:06 am, edited 1 time in total.
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Re: Investing in International Stocks

Post by Nicolas » Tue May 26, 2020 9:05 am

grayfox wrote:
Sat May 23, 2020 10:23 am
Here's a chart showing the Anglosphere. I would consider all as potential investment opportunities.
Image

This map leaves out Belize and Liberia, both have English as their official languages.

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Re: Investing in International Stocks

Post by grayfox » Tue May 26, 2020 9:19 am

Nicolas wrote:
Tue May 26, 2020 9:05 am
grayfox wrote:
Sat May 23, 2020 10:23 am
Here's a chart showing the Anglosphere. I would consider all as potential investment opportunities.
Image

This map leaves out Belize and Liberia, both have English as their official languages.
Languages of Liberia says that "Liberia is a multi-lingual country where more than thirty languages are spoken. English is the official language. None of the languages group forms a distinctive majority. The native languages can be grouped in four language families: Mande, Kru, Mel, and the divergent language Gola."

That is similar to Nigeria which has 500 native languages, but the official language is English.

I think there are a lot of countries where people have many different first languages that they speak at home with their family. But in public they all default to a common language, like English. In a lot of countries, Russian plays that role. The first time I went to some places I was surprised that everyone was speaking Russian in pubic, even though the official language was Ukrainian or Latvian or something. But it is convenient because you only have to know Russian and you can communicate with people in many countries.

Languages of Belize says English is the most common. I'm wondering how that came about.
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Re: Investing in International Stocks

Post by jeffyscott » Tue May 26, 2020 9:21 am

Nicolas wrote:
Tue May 26, 2020 9:05 am
grayfox wrote:
Sat May 23, 2020 10:23 am
Here's a chart showing the Anglosphere. I would consider all as potential investment opportunities.
Image

This map leaves out Belize and Liberia, both have English as their official languages.

There's also India and few others:

Image
https://en.wikipedia.org/wiki/Anglosphere
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Re: Investing in International Stocks

Post by grayfox » Tue May 26, 2020 9:40 am

Africa. Pop. 1,290 million. 16.3% of the world population. About 55 countries in Africa (exact number is disputed):

Algeria – Algiers
Angola – Luanda
Benin – Porto-Novo
Botswana – Gaborone
Burkina Faso – Ouagadougou
Burundi – Bujumbura
Cameroon – Yaounde
The Republic of Cabo Verde – Praia
The Central African Republic – Bangui
Chad – N’Djamena
Comoros – Moroni
Democratic Republic of Congo – Kinshasa
Republic of Congo – Brazzaville
Cote d’Ivoire – Yamoussoukro
Djibouti – Djibouti
Egypt – Cairo
Equatorial Guinea – Malabo
Eritrea – Asmara
Ethiopia – Addis Ababa
Gabon – Libreville
Gambia – Banjul
Ghana – Accra
Guinea – Conakry
Guinea-Bissau – Bissau
Kenya – Nairobi
Lesotho – Maseru
Liberia – Monrovia
Libya – Tripoli
Madagascar – Antananarivo
Malawi – Lilongwe
Mali – Bamako
Mauritania – Nouakchott
Mauritius – Port Louis
Morocco – Rabat
Mozambique – Maputo
Namibia – Windhoek
Niger – Niamey
Nigeria – Abuja
Rwanda – Kigali
Republic Arab Saharawi Democratic – Aauin
Sao Tome and Principe – Sao Tome
Senegal – Dakar
Seychelles – Victoria
Sierra Leone – Freetown
Somalia – Mogadishu
South Africa – Pretoria (Executive), Bloemfontein (Judicial), Capetown (Legislative)
South Sudan – Juba
Sudan – Khartoum
Swaziland – Lobamba (royal and legislative) Mbabane (Administrative)
Tanzania – Dar es Salaam (Traditional capital) Dodoma (Location of legislature)
Togo – Lomé
Tunisia – Tunis
Uganda – Kampala
Zambia – Lusaka
Zimbabwe – Harare

But only four five stock exchanges that I know about: (added Nairobi Securities Exchange in Kenya)

Code: Select all

Rank    Country         Pop     Pop     Language Family         Exchange                        Founded Value   Value
                     (millions) (%)                                                             (billions $)    (%)
1       South Africa     57.8   11.0%   10 languages + English  Johannesburg Stock Exchange     1887    790     84.4%
2       Egypt           102.0   19.5%   Semitic – Arabic        Egyptian Exchange               1883     53      5.7%
3       Nigeria         195.9   37.4%   English, 11 Var African Nigerian Stock Exchange         1961     47      5.0%
4       Morocco          36.7    7.0%   Semitic – Arabic        Bourse de Casablanca            1929     46      4.9%
5       Kenya            51.4   11.6%   English, Bantu Swahili  Nairobi Securities Exchange     1954     20      2.0%

        Africa          443.7   100.0%
Johannesburg Stock Exchange in South Africa is the largest. I've never been there, but I've met people from there in my travels. Everyone I met said they were trying to emigrate to another country because of the violent crime and other problems. Many South Africans want to move to Australia. Why more South Africans are leaving the country.

One of the reasons given is load shedding. Apparently the electric company Eskom is unable to supply power to the entire country at the same time.

South Africans are leaving the country in ‘big numbers’ – here’s why that’s not good

Economic prospects for a country can't be good when a lot of people want to leave. Especially when its a lot of skilled workers leaving. And a shrinking tax base. That will just create a downward spiral.

Second is Egypt and fourth is Morocco. Both are in north Africa, which seems more like the middle east than the rest of Africa.

Third and fifth is Nigera and Kenya. Nigeria was British Nigeria from 1800-1960. Kenya was British Kenya from 1888-1962. That would explain the English language spoken in those places.

:arrow: Africa sounds like a risky place to invest. The potential return would have to be like 40x to make it worth taking the risk.
Last edited by grayfox on Fri May 29, 2020 7:42 am, edited 1 time in total.
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Re: Investing in International Stocks

Post by grayfox » Thu May 28, 2020 6:15 am

South America. Pop. 428 million. 5.4% of the world population. 12 countries in South America:

Brazil Brasília 202,241,714
Colombia Bogotá 46,920,257
Argentina Buenos Aires 40,482,489
Venezuela Caracas 31,768,930
Peru Lima 29,132,013
Chile Santiago 16,928,873
Ecuador Quito 14,573,101
Bolivia La Paz and Sucre 9,863,224
Paraguay Asunción 6,831,306
Uruguay Montevideo 3,477,780
Guyana Georgetown 772,298
Suriname Paramaribo 472,155

Also 3 independent territories:

French Guiana (France) Cayenne (Préfecture) 221,591
Falkland Islands (UK) Stanley 3,140
South Georgia and the South Sandwich Islands (UK) King Edward Point 20

I would also include 8 countries of Central America which has a population of about 179.4 million:

Country Population (2020)
Mexico 128,932,753
Guatemala 17,915,568
Honduras 9,904,607
Nicaragua 6,624,554
El Salvador 6,486,205
Costa Rica 5,094,118
Panama 4,314,767
Belize 397,62

South America and Central America make up Latin America, which is mostly Spanish-speaking. In Brasil the official language is Portuguese. There are also numerous indigenous languages spoken throughout the region.

Latin America was colonized by Spain and Portugal, whereas the United States and Canada were colonized by the English, French and Dutch. The way both regions were colonized were completely different. U.S. and Canada the land was distributed among many small farmers who settled there. In Latin America, there were huge plantations and all the land was given to a few. Today throughout Latin America, there are a small number of upper class and a vast population of extremely poor.

There was also a difference between the way the Portuguese and Spanish colonized, which I will not get into. But it resulted in huge societal differences between Brazil and, say, Argentina.

There are five stock exchanges in South America:

Code: Select all

Rank    Country         Pop     Pop     Language Family         Exchange                        Founded Value   Value
                     (millions) (%)                                                                 (billions $) (%)
1       Brazil          209.5   59.1%   Romance – Portugese     B3 (formerly BM&F OCESPA)       1890    519     55.6%
2       Chile            18.7    5.3%   Romance – Spanish       Bolsa de Comerico de Santiago   1893    187     20.0%
3       Colombia         49.7   14.0%   Romance – Spanish       Bolsa de Valores de Colombia    1928     88      9.4%
4       Argentina        44.5   12.6%   Romance – Spanish       Bolsa de Comerico de B. Aires   1854     81      8.7%
5       Peru             32.0    9.0%   Romance – Spanish       Bolsa de Valores de Lima        1860     58      6.2%
        South America   354.3   100.0%                                                                  933     100.0%
Largest stock market by far is Brazil. More than half of the market cap of South America. Second is Chile which I know nothing about.

I'm familiar with Mexico, Argentina and Brasil. Much poorer than the U.S. And a lot of violent crime. I consider it a risky place to invest. I wouldn't be inclined to invest there unless there was a large payoff. I am not familiar with the rest of the South America.

:arrow: High risk. The potential return would have to be like 20x to make it worth taking the risk. Form your own opinions.
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Re: Investing in International Stocks

Post by occambogle » Thu May 28, 2020 9:29 am

grayfox wrote:
Tue May 26, 2020 9:40 am
But only four stock exchanges:
For the sake of accuracy, Kenya has a stock exchange too.... https://www.nse.co.ke/

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Re: Investing in International Stocks

Post by grayfox » Thu May 28, 2020 9:51 am

occambogle wrote:
Thu May 28, 2020 9:29 am
grayfox wrote:
Tue May 26, 2020 9:40 am
But only four stock exchanges:
For the sake of accuracy, Kenya has a stock exchange too.... https://www.nse.co.ke/
Thanks.

It looks like Kenya has a population if 51.39 million, 10x the population of South Carolina.
The official languages are English and Bantu Swahili (called Kiswahili).
Kenya is a former British colony (British Kenya, 1920-1963), so that's why English is an official language.
The Nairobi Securities Exchange (NSE) was founded in 1954.

The currency in Kenya is the Kenyan Shilling (KES) which is currently 106.85 KES = 1.00 USD

Market cap: 2,086.36 (KES Billions) which would be 19.52 billion USD

I don't know much about Kenya, except they got lions. Kenya: Where Can You See Lions? I don't know if there's a Kenyan ETF.

There are probably other countries that have stock exchanges that I missed because because it wasn't on chart I am using.
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Re: Investing in International Stocks

Post by grayfox » Fri May 29, 2020 7:55 am

That completes my survey of the world. Which countries would I consider investing in? I came up with 28 countries: The anglophone countries, most of northern Europe, some of the former communist countries that lean toward the west, the prosperous countries on the Pacific rim, Israel in the middle east. I also threw in Argentina and Kenya to have one from South America and one from Africa.

I also included the ticker symbol for those countries that have an iShares fund. (7 of the 28 countries on the list don't have funds.) Here's the list:

1. US - SPY
2. Canada - EWC
3. Australia - EWA
4. New Zealand - ENZL
5. UK - EWU
6. France - EWQ
7. Germany - EWG
8. Switzerland - EWL
9. Sweden - EWD
10. Norway - ENOR
11. Ireland - EIRL
12. Austria - EWO
13. Luxembourg - N/A
14. Czech Republic - N/A
15. Slovakia - N/A
16. Poland - EPOL
17. Hungary - N/A
18. Slovenia - N/A
19. Croatia - N/A
20. Japan - EWJ
21. Hong Kong - EWH
22. South Korea - EWY
23. Taiwan- EWT
24. Singapore - EWS
25. Philippines - EPHE
26. Israel - EIS
27. Argentina - AGT
28. Kenya - N/A

21 countries have their own ETFs. I wonder if there is some way I can run a hypothetical portfolio to track these ETFs. Google used to have that capability about 10 years ago, but I recall Google discontinuing it.
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Re: Investing in International Stocks

Post by grayfox » Sat May 30, 2020 8:32 am

Next step: Choosing weights for each country. I can think of a few ways to select the weights:

1. The easiest would be equal weighted. Put an equal dollar amount in each country fund.

2. Another way would be to over-weight some and underweight others using some kind of ad hoc method.

3. Or I could over/under-weight using something more systematic such as Mean-Variance Optimization MVO. About 8 or 9 years ago, I took a class in Financial Econometrics and another one in called Computation Finance where we did all that math and wrote the programs to solve those problems. In one course we used R and the other we used Python. Maybe I will dust off my R scripts from those classes. As I recall, the input was monthly or daily data for each stock or fund and output was the Tangency Portfolio (TP) and the Global Minimum Variance Portfolio (GMVP).

4. I could use the market-cap weights. If I did this, it would be easier to just buy a fund that tracks the MSCI indexes. They split it into two Indexes: MSCI EAFE Index for developed markets and MSCI Emerging Markets Index. EAFE acronym stands for Europe, Australasia and Far East. Canada is not included in EAFE. But anyway, here are MSCI Index funds weights from iShares.

MSCI EAFE Index

Code: Select all

Country         Weight  Fund    Inception
U.S.             0.00%  SPY     Feb, 1993
Japan           24.53%  EWJ     May, 1996
UK              16.47%  EWU     May, 1996
France          11.42%  EWQ     May, 1996
Switzerland      9.33%  EWL     May, 1996
Germany          8.65%  EWG     May, 1996
Australia        6.80%  EWA     May, 1996
Netherlands      3.97%  EWN     May, 1996
Hong Kong        3.49%  EWH     May, 1996
Spain            2.84%  EWP     May, 1996
Sweden           2.68%  EWD     May, 1996
Italy            2.34%  EWI     May, 1996

Code: Select all

Denmark          1.84%  EDEN    Feb, 2012
Singapore        1.28%  EWS     May, 1996
Belgium          0.99%  EWK     May, 1996
Finland          0.94%  EFNL    Feb, 2012
Norway           0.62%  ENOR    Feb, 2012
Ireland          0.59%  EIRL    Jun, 2010
Israel           0.56%  EIS     Apr, 2008
New Zealand      0.28%  ENZL    Oct, 2010
Austria          0.22%  EWO     May, 1996
Portugal         0.16%
Canada           0.00%  EWC     May, 1996
MSCI EAFE       100.00% EFA     Sep, 2001
Many of the EAFE funds were started in May-1996. Others were started later, some within the past 10 years. Not that long ago.

Japan has the largest weight at 25%, UK is second at 16%, and France third at 11%.
You could just buy EFA and get that weighting.

MSCI Emerging Markets Index

Code: Select all

Country         Weight  Fund    Inception
China           34.28%  MCHI    Apr, 2011
South Korea     11.72%  EWY     Jun, 2000
Taiwan          11.70%  EWT     Jul, 2000
India            8.63%  INDA    Mar, 2012
Brazil           7.47%  EWZ     Aug, 2000
South Africa     4.74%  EZA     Mar, 2003
Russia           3.92%  ERUS    Dec, 2010
Saudi Arabia     2.59%  KSA     Oct, 2015
Thailand         2.58%  THD     May, 2008

Code: Select all

Mexico           2.28%  EWW     May, 1996
Indonesia        1.93%  EIDO    Jun, 2010
Malaysia         1.81%  EWM     May, 1996
Phillipines      0.95%  EPHE    Oct, 2010
Qatar            0.92%  QAT     Jun, 2014
Poland           0.88%  EPOL    Jun, 2010
Chile            0.74%  ECH     Dec, 2007
UAE              0.60%  UAE     Jun, 2014
Turkey           0.49%  TUR     Apr, 2008
Colombia         0.37%  ICOL    Jul, 2013

Code: Select all

Peru             0.34%  EPU     Jul, 2009
Hungary          0.30%
Greece           0.30%
Argentina        0.16%  AGT     May, 2017
Egypt            0.14%
Czech Republic   0.13%
Pakistan         0.03%
MSCI EM         100.00% EEM     May, 2003
Many of the Emerging Market funds were only started in the 2000's and some only in the 2010s. Not much of a track record. Mexico and Malaysia are older, and were started in May-1996

China has the largest weight at about 35%, with South Korea and Taiwan second and third, with about 12% each.
Again you could just buy EEM if you were happy that weighting.

But China being about 1/3 of the Emerging Markets is one reason I would not want to just buy that fund. I didn't include China on my list because, frankly, I don't trust them. They have taken over Hong Kong and Taiwan is in their sights next. They are looking more and more like the evil empire every day.
Last edited by grayfox on Mon Jun 01, 2020 7:57 am, edited 1 time in total.
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Re: Investing in International Stocks

Post by andrige » Sat May 30, 2020 10:48 am

SimpleGift wrote:
Thu May 21, 2020 10:44 am
jeffyscott wrote:
Thu May 21, 2020 9:35 am
North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets...
By market cap, the stock exchanges in North America and Europe are certainly dominant today, but this obscures the explosion in the number of new listed companies worldwide since the 1970s — most notably in East Asia and the Pacific (in red, chart below). While some of this growth is state-controlled enterprises going public, the large majority has been new enterprises.
Granted, about two-thirds of these companies are either too small or don't have enough free-float shares to be indexed, but the other one-third — about 14,600 companies today — are currently included in the MSCI All-cap World index. In short, outside of the United States, the global "haystack" of new listed companies has been expanding rapidly.
I guess this chart does bring up a concern with passive investing in international markets.

With VTSAX, it seems like we are close to buying the entire US market of publicly traded companies. However, we are nowhere close to buying the haystack for international. Even if we exclude the companies that are too small or don't have enough free-float shares (as you did), we are still only buying about half of the international stocks. Are we confident that we really are owning the 1-2% of stocks which will generate almost all of the returns for international stocks?

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Re: Investing in International Stocks

Post by jeffyscott » Sat May 30, 2020 11:34 am

andrige wrote:
Sat May 30, 2020 10:48 am
SimpleGift wrote:
Thu May 21, 2020 10:44 am
jeffyscott wrote:
Thu May 21, 2020 9:35 am
North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets...
By market cap, the stock exchanges in North America and Europe are certainly dominant today, but this obscures the explosion in the number of new listed companies worldwide since the 1970s — most notably in East Asia and the Pacific (in red, chart below). While some of this growth is state-controlled enterprises going public, the large majority has been new enterprises.
Granted, about two-thirds of these companies are either too small or don't have enough free-float shares to be indexed, but the other one-third — about 14,600 companies today — are currently included in the MSCI All-cap World index. In short, outside of the United States, the global "haystack" of new listed companies has been expanding rapidly.
I guess this chart does bring up a concern with passive investing in international markets.

With VTSAX, it seems like we are close to buying the entire US market of publicly traded companies. However, we are nowhere close to buying the haystack for international. Even if we exclude the companies that are too small or don't have enough free-float shares (as you did), we are still only buying about half of the international stocks. Are we confident that we really are owning the 1-2% of stocks which will generate almost all of the returns for international stocks?
I think the index funds include something like 98% by market cap. So, whatever the missing number of stocks is, they should only account for 2% of whatever your international allocation is, if you're investing via cap weighted index funds.
Time is your friend; impulse is your enemy. - John C. Bogle

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Re: Investing in International Stocks

Post by andrige » Sat May 30, 2020 1:10 pm

jeffyscott wrote:
Sat May 30, 2020 11:34 am
andrige wrote:
Sat May 30, 2020 10:48 am
SimpleGift wrote:
Thu May 21, 2020 10:44 am
jeffyscott wrote:
Thu May 21, 2020 9:35 am
North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets...
By market cap, the stock exchanges in North America and Europe are certainly dominant today, but this obscures the explosion in the number of new listed companies worldwide since the 1970s — most notably in East Asia and the Pacific (in red, chart below). While some of this growth is state-controlled enterprises going public, the large majority has been new enterprises.
Granted, about two-thirds of these companies are either too small or don't have enough free-float shares to be indexed, but the other one-third — about 14,600 companies today — are currently included in the MSCI All-cap World index. In short, outside of the United States, the global "haystack" of new listed companies has been expanding rapidly.
I guess this chart does bring up a concern with passive investing in international markets.

With VTSAX, it seems like we are close to buying the entire US market of publicly traded companies. However, we are nowhere close to buying the haystack for international. Even if we exclude the companies that are too small or don't have enough free-float shares (as you did), we are still only buying about half of the international stocks. Are we confident that we really are owning the 1-2% of stocks which will generate almost all of the returns for international stocks?
I think the index funds include something like 98% by market cap. So, whatever the missing number of stocks is, they should only account for 2% of whatever your international allocation is, if you're investing via cap weighted index funds.
This is probably true. However, only about 1.3% of firms account for all of the returns in excess of treasury bills (https://www.universal-investment.com/me ... ry%20Bills). If you also believe in the small cap premium, then these are more likely to be smaller stocks with lower market capitalization. Therefore, you are leaving a lot of market premium on the table by not being able to index to these companies.

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Re: Investing in International Stocks

Post by jeffyscott » Sat May 30, 2020 1:47 pm

andrige wrote:
Sat May 30, 2020 1:10 pm
jeffyscott wrote:
Sat May 30, 2020 11:34 am
andrige wrote:
Sat May 30, 2020 10:48 am
SimpleGift wrote:
Thu May 21, 2020 10:44 am
jeffyscott wrote:
Thu May 21, 2020 9:35 am
North America and Europe both hold 40.6% and 19.5% respectively of the world’s markets...
By market cap, the stock exchanges in North America and Europe are certainly dominant today, but this obscures the explosion in the number of new listed companies worldwide since the 1970s — most notably in East Asia and the Pacific (in red, chart below). While some of this growth is state-controlled enterprises going public, the large majority has been new enterprises.
Granted, about two-thirds of these companies are either too small or don't have enough free-float shares to be indexed, but the other one-third — about 14,600 companies today — are currently included in the MSCI All-cap World index. In short, outside of the United States, the global "haystack" of new listed companies has been expanding rapidly.
I guess this chart does bring up a concern with passive investing in international markets.

With VTSAX, it seems like we are close to buying the entire US market of publicly traded companies. However, we are nowhere close to buying the haystack for international. Even if we exclude the companies that are too small or don't have enough free-float shares (as you did), we are still only buying about half of the international stocks. Are we confident that we really are owning the 1-2% of stocks which will generate almost all of the returns for international stocks?
I think the index funds include something like 98% by market cap. So, whatever the missing number of stocks is, they should only account for 2% of whatever your international allocation is, if you're investing via cap weighted index funds.
This is probably true. However, only about 1.3% of firms account for all of the returns in excess of treasury bills (https://www.universal-investment.com/me ... ry%20Bills). If you also believe in the small cap premium, then these are more likely to be smaller stocks with lower market capitalization. Therefore, you are leaving a lot of market premium on the table by not being able to index to these companies.
But you would have to forgo market cap weighting for it to make much difference. Suppose there's 1000 missing stocks that account for the 2%, you would have an average of 0.002% in each. That'd be $20 for every million and if that stock had to grow by 10x or even 100x before getting included that's still only $180 or $1980 in forgone gains for each million invested in foreign stock.

You could get an idea of what the actual impact might be by looking at what the percentage is for the smallest included stock.
Time is your friend; impulse is your enemy. - John C. Bogle

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