60

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:46 pm, edited 1 time in total.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:46 pm, edited 1 time in total.
columbia
Posts: 3023
Joined: Tue Aug 27, 2013 5:30 am

Re: Investing in International Stocks

Post by columbia »

Referring to discussion on previous page:

As an investor, I would think that the last thing one would want is additional four thousand companies in an ex-US index. You could save on the expense ratio and just give the money to a favorite charity.
User avatar
jeffyscott
Posts: 9449
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Investing in International Stocks

Post by jeffyscott »

columbia wrote: Sun May 31, 2020 7:26 am Referring to discussion on previous page:

As an investor, I would think that the last thing one would want is additional four thousand companies in an ex-US index. You could save on the expense ratio and just give the money to a favorite charity.
We can actually see that adding nearly 4000 stocks has made little difference. Vanguard FTSE all world ex-US (VFWAX) holds 3409 stocks, while Total International (VTIAX) holds 7373 stocks. Performance over the past 10 years has been nearly identical. I would assume that adding thousands more even smaller stocks to those already included in VTIAX would make even less of a difference.

Going back further there is some difference in favor of VFWAX, the one with fewer stocks (however, there have been a number of changes to the index tracked by VTIAX and one change to the index tracked by VFWAX, so not sure if the older difference could be ascribed to the inclusion of more small caps or not). Most of the difference appears to have occurred in the recovery after the 2008/2009 decline, FWIW. At that time VTWAX followed the FTSE All-World Index (through December 18, 2011) and VTIAX followed the MSCI EAFE + Emerging Markets Index (from August 31, 2006 to December 15, 2010).

The ERs are identical at 0.11% (and 0.08% for the ETF share classes). So no savings due to the exclusion of 4000 small stocks, of course that does not necessarily mean that adding thousands of even smaller stocks would not add to costs.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:46 pm, edited 1 time in total.
occambogle
Posts: 693
Joined: Thu Dec 12, 2019 4:58 am

Re: Investing in International Stocks

Post by occambogle »

grayfox wrote: Mon Jun 01, 2020 8:18 am I'll post the data in subsequent posts, and we'll see how these countries stack up.
Sounds very interesting.... looking forward to it...
asif408
Posts: 2268
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: Investing in International Stocks

Post by asif408 »

grayfox wrote: Mon Jun 01, 2020 8:18 am I'll use portfoliovisualizer.com to make the calculations. The holding period will be May-1996 to Dec-2019. I'm leaving out the current 2020 bear market so it doesn't end on a temporary downturn making things look worse than they are.

To assess risk, I'll look at Max Drawdown because drawdown during big bear markets is mostly what I care about. I don't care about daily, weekly, monthly or annual volatility. So for me annual standard deviation is not that important. I barely notice when the market is down 5 or 10% or 15%. That's normal. Down 20 or 30% doesn't really bother me either, I look at it as a buying opportunity. Down 40 or 50+%, I start to be concerned and wonder what the heck is going on.
Spoiler alert: I've already looked at this and it depends on the start and end dates. If start on the March 1996 inception of many of the funds, they all lose to the US.

If you start at the end of the emerging markets bear market in late 1998, you'll find that Singapore, Hong Kong, Mexico, and even Australia and Canada beat the US market in returns.

If your starting date is March 2000, Australia, Mexico, Singapore, and Australia all beat the US market.

If you start in late 2002, when there are more funds, you'll find that Brazil, Australia, and Hong Kong all beat the US stock market. Brazil beat it by 4% CAGR annually, even with two bear markets of 60%+ and 70%+ respectively since 2002.

What lessons can you learn from that? To me, there are 2:

1) Risk of long-term underperformance cannot be measured by sharpe ratios or maximum drawdowns. If you had a portfolio of diversified US, International developed, and EM stocks for the last 20 years, you did better if you were accumulating stocks and not selling with only US stocks: https://www.portfoliovisualizer.com/bac ... tion3_2=34. However, if you were withdrawing from a diversified portfolio of equal parts US, developed ex-US, and emerging, you ended up with more money with the diversified portfolio, even with a lower Sharpe ratio and higher maximum drawdown: https://www.portfoliovisualizer.com/bac ... tion3_2=34.

This seems to fly in the face of those older investors who say they don't need to be as diversified as younger investors. In fact, that portfolio left a retiree in decumulation with about the same amount of money at the end of the 20 year period as a 60/40 US only stock bond portfolio. So for a 65 year old in 2000, holding an equal parts all equity portfolio left them with about the same amount of money as a 60/40 US stock bond portfolio. A 100% US stock portfolio starting with $1 million dollars in 2000 left an investor with about $200,000 less than if they would have either diversified into bonds or heavily into international equity. Just for fun, you could even throw in an equal parts US stocks, international developed, emerging, US REIT, and US SCV and have done even better: https://www.portfoliovisualizer.com/bac ... tion5_3=20

So what was the most risky portfolio over the last 20 years for a retiree?

2) Starting and ending points matter, and the outperformers almost universally started at low valuations, had the poorest previous performance 5-10 year performance (which goes hand in hand with the low valuations), and ended at higher valuations. It's ironic that given this fact a majority of the recent posts here show investors young and old ready to abandon diversification, since all these diversifiers (e.g., international developed, emerging market, REITs, small-cap value, etc.) have underperformed over the last several years, and in some cases, last decade. If history is any guide, most if not all of these assets will outperform US stocks in the coming decade or two, yet sentiment and fund flows seem to suggest performance chasers will never go away.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:46 pm, edited 3 times in total.
andrige
Posts: 44
Joined: Thu May 07, 2020 3:45 pm

Re: Investing in International Stocks

Post by andrige »

grayfox wrote: Sun May 31, 2020 7:11 am That's what I was saying earlier. When you buy the haystack, most of the stocks are losers. But the small number of winners make up for all the losers and you come out ahead.

This is like betting on every horse in a race. You are guaranteed to have a winning ticket.

But it doesn't work at the race track. Say there are 8 horses in the race and you put $2 on each horse to win. That costs you $16 dollars. I think the favorite wins something like 2/3 of the time. But a favorite pays maybe $3, on average. 2/3s of the time you pay $16 and get back only $3. Net loss. Even when a long shot occasionally wins and pays $20, it happens so infrequently that you can't come out ahead. The problem is that horse betting is rigged against you because the race track and state take 15-20% of the pot before it is even distributed. The average $2 bet has an expected value of only $1.70. See Chart of Track Takeouts Based on Wager Type

The paper referenced above used CRSP data which is the U.S. stock market. The question is, does the same principle hold for all 60 international stocks markets? Do the few winners make up for all the losers, and you come out ahead, similar to the U.S. stock market? Or are some of the international markets more like a race track where the winners don't pay off big enough to make up for all the losers. :?:
I have this same concern. It's also very odd that we are seeing such poor growth in Emerging markets when they are having such rapid GDP growth. Where is all this growth being lost?
statefan03
Posts: 64
Joined: Wed Mar 25, 2020 12:31 pm
Location: NC

Re: Investing in International Stocks

Post by statefan03 »

andrige wrote: Mon Jun 01, 2020 3:49 pm
grayfox wrote: Sun May 31, 2020 7:11 am That's what I was saying earlier. When you buy the haystack, most of the stocks are losers. But the small number of winners make up for all the losers and you come out ahead.

This is like betting on every horse in a race. You are guaranteed to have a winning ticket.

But it doesn't work at the race track. Say there are 8 horses in the race and you put $2 on each horse to win. That costs you $16 dollars. I think the favorite wins something like 2/3 of the time. But a favorite pays maybe $3, on average. 2/3s of the time you pay $16 and get back only $3. Net loss. Even when a long shot occasionally wins and pays $20, it happens so infrequently that you can't come out ahead. The problem is that horse betting is rigged against you because the race track and state take 15-20% of the pot before it is even distributed. The average $2 bet has an expected value of only $1.70. See Chart of Track Takeouts Based on Wager Type

The paper referenced above used CRSP data which is the U.S. stock market. The question is, does the same principle hold for all 60 international stocks markets? Do the few winners make up for all the losers, and you come out ahead, similar to the U.S. stock market? Or are some of the international markets more like a race track where the winners don't pay off big enough to make up for all the losers. :?:
I have this same concern. It's also very odd that we are seeing such poor growth in Emerging markets when they are having such rapid GDP growth. Where is all this growth being lost?
This is the crazy thing about indexing, you are guaranteed to shoot par. Sure, guys occasionally shoot birdie for a while, maybe even a rare eagle on a risky shot. But that risky shot next time turns into a triple bogey. Nobody has been able to consistently shoot below par.
User avatar
happyisland
Posts: 610
Joined: Thu Oct 03, 2013 1:36 pm

Re: Investing in International Stocks

Post by happyisland »

asif408 wrote: Mon Jun 01, 2020 12:29 pm
grayfox wrote: Mon Jun 01, 2020 8:18 am I'll use portfoliovisualizer.com to make the calculations. The holding period will be May-1996 to Dec-2019. I'm leaving out the current 2020 bear market so it doesn't end on a temporary downturn making things look worse than they are.

To assess risk, I'll look at Max Drawdown because drawdown during big bear markets is mostly what I care about. I don't care about daily, weekly, monthly or annual volatility. So for me annual standard deviation is not that important. I barely notice when the market is down 5 or 10% or 15%. That's normal. Down 20 or 30% doesn't really bother me either, I look at it as a buying opportunity. Down 40 or 50+%, I start to be concerned and wonder what the heck is going on.
Spoiler alert: I've already looked at this and it depends on the start and end dates. If start on the March 1996 inception of many of the funds, they all lose to the US.

If you start at the end of the emerging markets bear market in late 1998, you'll find that Singapore, Hong Kong, Mexico, and even Australia and Canada beat the US market in returns.

If your starting date is March 2000, Australia, Mexico, Singapore, and Australia all beat the US market.

If you start in late 2002, when there are more funds, you'll find that Brazil, Australia, and Hong Kong all beat the US stock market. Brazil beat it by 4% CAGR annually, even with two bear markets of 60%+ and 70%+ respectively since 2002.

What lessons can you learn from that? To me, there are 2:

1) Risk of long-term underperformance cannot be measured by sharpe ratios or maximum drawdowns. If you had a portfolio of diversified US, International developed, and EM stocks for the last 20 years, you did better if you were accumulating stocks and not selling with only US stocks: https://www.portfoliovisualizer.com/bac ... tion3_2=34. However, if you were withdrawing from a diversified portfolio of equal parts US, developed ex-US, and emerging, you ended up with more money with the diversified portfolio, even with a lower Sharpe ratio and higher maximum drawdown: https://www.portfoliovisualizer.com/bac ... tion3_2=34.

This seems to fly in the face of those older investors who say they don't need to be as diversified as younger investors. In fact, that portfolio left a retiree in decumulation with about the same amount of money at the end of the 20 year period as a 60/40 US only stock bond portfolio. So for a 65 year old in 2000, holding an equal parts all equity portfolio left them with about the same amount of money as a 60/40 US stock bond portfolio. A 100% US stock portfolio starting with $1 million dollars in 2000 left an investor with about $200,000 less than if they would have either diversified into bonds or heavily into international equity. Just for fun, you could even throw in an equal parts US stocks, international developed, emerging, US REIT, and US SCV and have done even better: https://www.portfoliovisualizer.com/bac ... tion5_3=20

So what was the most risky portfolio over the last 20 years for a retiree?

2) Starting and ending points matter, and the outperformers almost universally started at low valuations, had the poorest previous performance 5-10 year performance (which goes hand in hand with the low valuations), and ended at higher valuations. It's ironic that given this fact a majority of the recent posts here show investors young and old ready to abandon diversification, since all these diversifiers (e.g., international developed, emerging market, REITs, small-cap value, etc.) have underperformed over the last several years, and in some cases, last decade. If history is any guide, most if not all of these assets will outperform US stocks in the coming decade or two, yet sentiment and fund flows seem to suggest performance chasers will never go away.
Great post, with a lot of helpful info and context. Thanks!
andrige
Posts: 44
Joined: Thu May 07, 2020 3:45 pm

Re: Investing in International Stocks

Post by andrige »

statefan03 wrote: Mon Jun 01, 2020 4:10 pm
andrige wrote: Mon Jun 01, 2020 3:49 pm
grayfox wrote: Sun May 31, 2020 7:11 am That's what I was saying earlier. When you buy the haystack, most of the stocks are losers. But the small number of winners make up for all the losers and you come out ahead.

This is like betting on every horse in a race. You are guaranteed to have a winning ticket.

But it doesn't work at the race track. Say there are 8 horses in the race and you put $2 on each horse to win. That costs you $16 dollars. I think the favorite wins something like 2/3 of the time. But a favorite pays maybe $3, on average. 2/3s of the time you pay $16 and get back only $3. Net loss. Even when a long shot occasionally wins and pays $20, it happens so infrequently that you can't come out ahead. The problem is that horse betting is rigged against you because the race track and state take 15-20% of the pot before it is even distributed. The average $2 bet has an expected value of only $1.70. See Chart of Track Takeouts Based on Wager Type

The paper referenced above used CRSP data which is the U.S. stock market. The question is, does the same principle hold for all 60 international stocks markets? Do the few winners make up for all the losers, and you come out ahead, similar to the U.S. stock market? Or are some of the international markets more like a race track where the winners don't pay off big enough to make up for all the losers. :?:
I have this same concern. It's also very odd that we are seeing such poor growth in Emerging markets when they are having such rapid GDP growth. Where is all this growth being lost?
This is the crazy thing about indexing, you are guaranteed to shoot par. Sure, guys occasionally shoot birdie for a while, maybe even a rare eagle on a risky shot. But that risky shot next time turns into a triple bogey. Nobody has been able to consistently shoot below par.
You shoot average return - cost. While the paper cost of the two funds may be the same, it doesn't necessarily include the full picture. If you are systematically losing money in one fund (due to artificial manipulation of the currency, insider trading, government corruption, etc.), you may continuously lose by holding that fund.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:46 pm, edited 1 time in total.
andrige
Posts: 44
Joined: Thu May 07, 2020 3:45 pm

Re: Investing in International Stocks

Post by andrige »

grayfox wrote: Mon Jun 01, 2020 8:31 pm
statefan03 wrote: Mon Jun 01, 2020 4:10 pm
This is the crazy thing about indexing, you are guaranteed to shoot par. Sure, guys occasionally shoot birdie for a while, maybe even a rare eagle on a risky shot. But that risky shot next time turns into a triple bogey. Nobody has been able to consistently shoot below par.
The question is what is shooting par at the 60 major stocks markets around the world? It's not the same in every country's stock market.

For the U.S. stock market, shooting par has been 10% return per year.
For Japan, shooting par has been 1% return per year.
The argument is that the US could become Japan. However, I think you are onto something with avoiding systemic risk of certain countries.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:46 pm, edited 1 time in total.
statefan03
Posts: 64
Joined: Wed Mar 25, 2020 12:31 pm
Location: NC

Re: Investing in International Stocks

Post by statefan03 »

grayfox wrote: Tue Jun 02, 2020 7:12 am John Bogle said that total return had two parts: 1) Investment Return and 2) Speculative Return. Investment Return is dividends and earnings growth. Speculative Return is change in P/E, i.e. change in valuation.

I thought I would look to see how much of TR for the various countries was due to change in P/E. Barclays provides Historic CAPE Ratio by country. So I looked at the values of CAPE back in May-1996 and Dec-2019, how much they changed (CAPE Ratio), and what TR would be if they had not changed (CAPE-Adjusted TR).

Code: Select all

                   5/96-12/2019
Country         Fund    TR      CAPE    CAPE    CAPE            CAPE-Adj
                                05/96   12/19   Ratio           TR
U.S.            VFISX   2.2
U.S.            SPY     7.6     27.49   31.00   1.13            6.7   <- 3rd highest CAPE-adjusted TR
Switzerland     EWL     5.5     29.03   29.52   1.02            5.4
Canada          EWC     5.7     28.21   22.67   0.80            7.1   <- 2nd highest CAPE-adjusted TR
Sweden          EWD     6.3     27.27   22.77   0.83            7.6   <- highest CAPE-adjusted TR
Mexico          EWW     6.3             19.48
Australia       EWA     5.6     20.27   22.09   1.09            5.1
France          EWQ     4.9             24.77
Spain           EWP     4.9     18.88   16.44   0.87            5.7
Netherlands     EWN     4.1     21.90   30.53   1.39            2.9

Code: Select all

VG EM           VEIEX   4.0
Germany         EWG     4.0     24.96   20.15   0.81            4.9
Belgium         EWK     3.9
Hong Kong       EWH     3.6     21.82   17.38   0.80            4.6
UK              EWU     3.3     20.63   18.34   0.89            3.7
Austria         EWO     3.5
VG TISM         VGTSX   3.1
Italy           EWI     2.6     24.23   22.22   0.92            2.9
Singapore       EWS     2.0     28.67   16.13   0.56            3.6
Malaysia        EWM     1.4
Japan           EWJ     1.2     49.75   21.69   0.44            2.8
A few countries saw valuations expand (Ratio > 1) . Most countries saw valuations contract. (Ratio < 1)

Valuation Expanded
1 Netherlands had the biggest expansion in CAPE, from 22 to 31, 1.39x. TR adjusts down from 4.1x down to 2.9x.
2 U.S. CAPE expanded from 27 to 31, 1.13x. TR adjusts from 7.6x down to 6.7x.
3 Australia CAPE had a small expansion, 1.09x. TR adjusts down to 5.1x.

Switzerland CAPE was about unchanged.

Valuations Contracted
1 Japan CAPE had the biggest contraction, from 50 to 22, 0.44x. TR adjusts from 1.2x up to 2.8x. Still shows a poor TR even if CAPE had not contracted.
2 Singapore CAPE had second biggest contraction, by 0.56x. TR adjusts to 3.6x. Still mediocre.
Sweden CAPE contracted by 0.83x. TR adjusts up to 7.6x. After adjusting for change in valuation, Sweden had to the highest TR.
Canada CAPE contracted by 0.80x, TR adjusts up to 7.1x. Second highest.
The rest had valuation contract by .80x to .92x, which lowered their TR.

Summary: The U.S. had a small amount of valuation expansion over the period which boosted its TR by 1.13x.
Many of the other countries saw their valuations contract by, which lowered their TR by .90x or .80x.
Japan saw valutions contract by a whopping 0.44x. Yet even after adjusting for that, Japan's TR was still poor.

:arrow: Conclusion: For most countries, change in valuations made only a modest difference in TR. In other words, over the 24 year period, speculative return didn't add or take away a whole lot.
Sweden, Canada, U.S., Switzerland still had the best TR.
Japan is still terrible. Most other countries are still mediocre.

Very interesting analysis. I took a quick summary view of the Fidelity funds of Emerging Markets, Developed Markets, and US TSM to compare:

Code: Select all

Fund	                                                P/E	P/BV	EPS Growth Rate (3 yr)
FPADX - International Emerging Markets only	        11.77	1.34	11.79
FSPSX - International Developed Markets only	        13.88	1.26	12.24
FSKAX -  US Total Stock Market	                        17.33	2.46	18.29	
It looks like Emerging Markets could be a good place to be, at least in terms of relative valuation.
Huskiez
Posts: 21
Joined: Sat Aug 22, 2015 11:58 am

Re: Investing in International Stocks

Post by Huskiez »

Does anyone else get tired of watching International get destroyed by US on a daily basis and wonder if investing in International is worth it?

I think this is the first time in years I have seen International beat US in back to back days, but that's probably recall bias.
User avatar
vineviz
Posts: 9052
Joined: Tue May 15, 2018 1:55 pm

Re: Investing in International Stocks

Post by vineviz »

Huskiez wrote: Tue Jun 02, 2020 1:42 pm I think this is the first time in years I have seen International beat US in back to back days, but that's probably recall bias.
It's happened 29 times in the past year, by my count.

In fact, the longest streak ended a year ago tomorrow: VXUS outperformed VTI eight days in a row from 5/22/19 to 6/3/19.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
jhawktx
Posts: 334
Joined: Thu May 19, 2011 8:15 am

Re: Investing in International Stocks

Post by jhawktx »

Huskiez wrote: Tue Jun 02, 2020 1:42 pm Does anyone else get tired of watching International get destroyed by US on a daily basis and wonder if investing in International is worth it?
Since I have a very small percent of my portfolio in International, I don't get tired of it at all. In fact, I hope it continues. Someday the tables will turn but who knows when. The later the better for me.
User avatar
Spinola
Posts: 263
Joined: Fri Nov 16, 2018 1:32 pm

Re: Investing in International Stocks

Post by Spinola »

Buy the haystack. No one knows nothing. Diversify.
The US only jingoistic high-fiving circle crowd are crowing success while businesses are burning and stores are being looted, 40 million are unemployed, 100,000 plus dead, and businesses are furloughing and laying off more workers daily, reducing benefits, suspending employer retirement plan contributions, announcing zero- pay increases, pay reductions, etc.. We are headed into a long recession and the market will hit the wall eventually...
asif408
Posts: 2268
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: Investing in International Stocks

Post by asif408 »

grayfox,

I looked at the funds you mentioned. Let's say you were a retiree with a $1 million dollar portfolio withdrawing 4%/year. Let's compare a 100% S&P portfolio with one where you said hey, I don't know who will have the best performance, but all theses country funds are available, so I'll just put 5% or so in each country ETF, holding that equal weighting of all countries and rebalancing annually. For a retiree that would have put you almost $300,000 ahead of a US only investor since 2000, with nearly all of those countries underperforming individually.

Since 1996 inception: https://www.portfoliovisualizer.com/bac ... ion19_3=40

Since 2000: https://www.portfoliovisualizer.com/bac ... ion19_3=40

So if the starting point is 1996 US wins, no question about it. But in the 1996 starting point case all equities did well, so at the end you had more money than you started with. Change the start date just 2 years ahead and the result is essentially at tie. In the 2000 starting point case, all equities had pretty high valuations, except for some of the emerging markets. In that case, all portfolios lost, but the globally diversified portfolio lost less. That, to me, is more important, protection against a decade of poor performance of one country. It's also a case of looking at individual parts of the portfolio and not looking at the portfolio as a whole.

Now here's the view from an accumulator, say with $100 starting and contributing $500/month to max out their Roth or tIRA every year:

From 1996: https://www.portfoliovisualizer.com/bac ... ion19_3=40

From 2000: https://www.portfoliovisualizer.com/bac ... ion19_3=40

In each case the US won. In the 1996 starting point you were ahead the 1st 6 years with US only, then you lagged for a decade, then you were ahead since approximately 2014. In the 2000 starting point, it was pretty much a tie for 3 years, then you had 10 years of outperformance by the global portfolio followed by US outperformance which started in July 2014, and the biggest chunk of that has come in the last 2 years.

Even holding some of Japan and Malaysia, which were pitiful performers overall but had years where they performed well, didn't hurt the diversified portfolio. But a Japan only or Malaysia only retiree would have ran out of money before 2020. Who's to say the US couldn't have similar performance at some point in the future. An accumulator in Japan or Malaysia over that time, although not doing great, would have at least made some money.

From looking at these, I'm not seeing how US only investing is a slam dunk for either a retiree or an accumulator. Change the starting or ending points by just a few years and you can come to dramatically different conclusions. To me, these charts show me that global diversification protects an investor from a scenario where one country has a decade or two of poor performance, and that appears to be more important for a retiree than an accumulator. So I think as we get older it's even more important for our equity portfolio to be diversified, especially if it is equity heavy.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:47 pm, edited 1 time in total.
asif408
Posts: 2268
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: Investing in International Stocks

Post by asif408 »

grayfox wrote: Wed Jun 03, 2020 9:01 am You're trying too hard.
Possibly, I'll let others decide. I think you're trying too hard to pick individual countries, I've just shown a dumb, I don't know approach doesn't work so bad.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:47 pm, edited 2 times in total.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:47 pm, edited 2 times in total.
Massdriver
Posts: 143
Joined: Tue Jan 02, 2018 12:05 pm

Re: Investing in International Stocks

Post by Massdriver »

Thank you Asif and grayfox. Good stuff
User avatar
Taylor Larimore
Advisory Board
Posts: 30284
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Investing in International Stocks ?

Post by Taylor Larimore »

Grayfox and others:

The link below has a good discussion about investing in international stocks:

viewtopic.php?f=10&t=196956

Best wishes.

Taylor
Jack Bogle's Words of Wisdom: "Holdings of non-U.S. stocks should be limited to no more than 20% of equities."
"Simplicity is the master key to financial success." -- Jack Bogle
User avatar
bluquark
Posts: 1189
Joined: Mon Oct 22, 2018 2:30 pm

Re: Investing in International Stocks

Post by bluquark »

andrige wrote: Mon Jun 01, 2020 3:49 pm It's also very odd that we are seeing such poor growth in Emerging markets when they are having such rapid GDP growth. Where is all this growth being lost?
It's been going to income or private equity of residents of those countries. Sometimes it's going to developed multinationals not listed on EM stock exchanges.

EM by definition means the public stock markets of those countries are immature, which typically implies they only account for a small and not necessarily representative fraction of the local economy. Some of the most exciting growth stories like India are hardly investible at all.
70/30 portfolio | Equity: global market weight | Bonds: 20% long-term munis - 10% LEMB
hohum
Posts: 45
Joined: Thu Jan 03, 2019 2:34 pm

Re: Investing in International Stocks

Post by hohum »

I'm thinking if I combine international with small cap value I can get deeper exposure to the underperformance factor and save on er ...
55% VOO 20% IAU 15% AVDV 10% EDV
Massdriver
Posts: 143
Joined: Tue Jan 02, 2018 12:05 pm

Re: Investing in International Stocks

Post by Massdriver »

The dividend chart that grayfox provided is great, but I would love to find a good source of total international stocks earnings growth in a chart. It would be even more interesting to see small cap int broken out. I have looked before but I always come up short.

If international had an unexpected earnings growth explosion, we could be looking at massive outperformance given current valuations. We can only dream. It’s hard to see it right now.
User avatar
abuss368
Posts: 23665
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Investing in International Stocks

Post by abuss368 »

Jack Bogle has said "maybe there is a good reason why international stocks are so cheap".
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
abuss368
Posts: 23665
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Investing in International Stocks

Post by abuss368 »

grayfox wrote: Thu May 21, 2020 6:25 am
Whatever happened to the American Stock Exchange (AMEX)?
Investopedia has an excellent explanation of the history of the American Stock Exchange: https://www.investopedia.com/terms/a/amex.asp
John C. Bogle: “Simplicity is the master key to financial success."
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:47 pm, edited 3 times in total.
jibantik
Posts: 485
Joined: Fri Nov 24, 2017 1:05 pm

Re: Investing in International Stocks

Post by jibantik »

Grayfox, you don't know anything the market does not, nor do you know anything better than the market does.

Buy the haystack, anything else is delusion.
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:47 pm, edited 1 time in total.
User avatar
jeffyscott
Posts: 9449
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Investing in International Stocks

Post by jeffyscott »

grayfox wrote: Sat Jun 06, 2020 7:14 amIn fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
What do you mean by indexing working/not working?

It seems to me that your actual hypothesis is that investing in some markets has not worked. Because if you are only intending to say that indexing has not worked, that implies that one could hire a fund manager or pick their own stocks in those countries and reliably do better than one who bought the index.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
nanameg
Posts: 434
Joined: Fri Mar 20, 2020 10:57 am

Re: Investing in International Stocks

Post by nanameg »

grayfox wrote: Sat Jun 06, 2020 7:14 am
jibantik wrote: Sat Jun 06, 2020 6:53 am Grayfox, you don't know anything the market does not, nor do you know anything better than the market does.

Buy the haystack, anything else is delusion.
You are missing the whole point of the thread. When it comes to world stocks, there is no such thing as "the market". There are 60 major markets, all different.

Buying the haystack, i.e. indexing, has been shown to work in the U.S. This was demonstrated, first, by academic research in the 1960s and 1970s when they came up both Efficient Markets Hypothesis. Then indexing was put into practice with actual index funds like Vanguard S&P 500 Index fund, started by Bogle in 1976, and shown to work in practice as well has in theory.

:?: What research has been done in the other 59 markets to show that indexing works there as well as in the U.S. stock market?
U.S. has CRSP data going back to 1926, 95 years. That's the data the researchers used to come up with the EMH.
Some of the international stock markets only started in the 2000s or 2010s. Not enough data to draw any conclusions.

:idea: "Indexing works in the U.S. stock market, so it must work everywhere." I would not make that assumption.

In fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
I appreciate the work you put into analyzing the way international stock markets work. But don’t u think professional analysts in the financial industry have done the same and even more work? Do u think the people at vanguard and fidelity just “assume” international indexes work fine and put them in their offerings without due consideration and analysis?

I’m not being sarcastic... I’m asking honestly. I’m trying to decide about investing in international funds myself.
lostdog
Posts: 3755
Joined: Thu Feb 04, 2016 2:15 pm

Re: Investing in International Stocks

Post by lostdog »

nanameg wrote: Sat Jun 06, 2020 8:03 am
grayfox wrote: Sat Jun 06, 2020 7:14 am
jibantik wrote: Sat Jun 06, 2020 6:53 am Grayfox, you don't know anything the market does not, nor do you know anything better than the market does.

Buy the haystack, anything else is delusion.
You are missing the whole point of the thread. When it comes to world stocks, there is no such thing as "the market". There are 60 major markets, all different.

Buying the haystack, i.e. indexing, has been shown to work in the U.S. This was demonstrated, first, by academic research in the 1960s and 1970s when they came up both Efficient Markets Hypothesis. Then indexing was put into practice with actual index funds like Vanguard S&P 500 Index fund, started by Bogle in 1976, and shown to work in practice as well has in theory.

:?: What research has been done in the other 59 markets to show that indexing works there as well as in the U.S. stock market?
U.S. has CRSP data going back to 1926, 95 years. That's the data the researchers used to come up with the EMH.
Some of the international stock markets only started in the 2000s or 2010s. Not enough data to draw any conclusions.

:idea: "Indexing works in the U.S. stock market, so it must work everywhere." I would not make that assumption.

In fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
I appreciate the work you put into analyzing the way international stock markets work. But don’t u think professional analysts in the financial industry have done the same and even more work? Do u think the people at vanguard and fidelity just “assume” international indexes work fine and put them in their offerings without due consideration and analysis?

I’m not being sarcastic... I’m asking honestly. I’m trying to decide about investing in international funds myself.
+1

I'll take Vanguard's advice over internet armchair experts.
57% VTI 43% VXUS || 33x Expenses
jibantik
Posts: 485
Joined: Fri Nov 24, 2017 1:05 pm

Re: Investing in International Stocks

Post by jibantik »

nanameg wrote: Sat Jun 06, 2020 8:03 am
grayfox wrote: Sat Jun 06, 2020 7:14 am
jibantik wrote: Sat Jun 06, 2020 6:53 am Grayfox, you don't know anything the market does not, nor do you know anything better than the market does.

Buy the haystack, anything else is delusion.
You are missing the whole point of the thread. When it comes to world stocks, there is no such thing as "the market". There are 60 major markets, all different.

Buying the haystack, i.e. indexing, has been shown to work in the U.S. This was demonstrated, first, by academic research in the 1960s and 1970s when they came up both Efficient Markets Hypothesis. Then indexing was put into practice with actual index funds like Vanguard S&P 500 Index fund, started by Bogle in 1976, and shown to work in practice as well has in theory.

:?: What research has been done in the other 59 markets to show that indexing works there as well as in the U.S. stock market?
U.S. has CRSP data going back to 1926, 95 years. That's the data the researchers used to come up with the EMH.
Some of the international stock markets only started in the 2000s or 2010s. Not enough data to draw any conclusions.

:idea: "Indexing works in the U.S. stock market, so it must work everywhere." I would not make that assumption.

In fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
I appreciate the work you put into analyzing the way international stock markets work. But don’t u think professional analysts in the financial industry have done the same and even more work? Do u think the people at vanguard and fidelity just “assume” international indexes work fine and put them in their offerings without due consideration and analysis?

I’m not being sarcastic... I’m asking honestly. I’m trying to decide about investing in international funds myself.
No, those teams of PhDs who spend their entire professional careers working 50 hours a week could not possibly have taken this into account. Us Bogleheads are special, we can have a few chats at the watercooler, have a few international friends, read some newspapers and be able to predict how thousands of global companies are going to perform decades into the future better than everyone else. :oops:

nanameg here's how it is. You have decided to invest some of your portfolio into equities. Here is the universe of equities and their value. If you do not take those values (or overweight certain subsets) you are saying that you know the value better than the market. Do you have any RATIONAL basis for that? If not, then you MUST take the equities at their value, what else can you do.

https://www.youtube.com/watch?v=LwTHLtu ... e=youtu.be
andrige
Posts: 44
Joined: Thu May 07, 2020 3:45 pm

Re: Investing in International Stocks

Post by andrige »

jeffyscott wrote: Sat Jun 06, 2020 7:47 am
grayfox wrote: Sat Jun 06, 2020 7:14 amIn fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
What do you mean by indexing working/not working?

It seems to me that your actual hypothesis is that investing in some markets has not worked. Because if you are only intending to say that indexing has not worked, that implies that one could hire a fund manager or pick their own stocks in those countries and reliably do better than one who bought the index.
There are clearly more inefficiencies with passive investing outside the us. We also see more inefficiency in passively tracking small caps vs large caps.

Please refer to this article: https://www.google.com/amp/s/www.market ... FF297AC1E0

83% of low cost active managers were able to beat the index (over a 10 year period) in Europe compared to less than 20% for us large blend. This also demonstrates why passive investing is more popular in the US than elsewhere in the world.
User avatar
jeffyscott
Posts: 9449
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Investing in International Stocks

Post by jeffyscott »

andrige wrote: Sat Jun 06, 2020 9:11 am
jeffyscott wrote: Sat Jun 06, 2020 7:47 am
grayfox wrote: Sat Jun 06, 2020 7:14 amIn fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
What do you mean by indexing working/not working?

It seems to me that your actual hypothesis is that investing in some markets has not worked. Because if you are only intending to say that indexing has not worked, that implies that one could hire a fund manager or pick their own stocks in those countries and reliably do better than one who bought the index.
There are clearly more inefficiencies with passive investing outside the us. We also see more inefficiency in passively tracking small caps vs large caps.
That may be and I am very far from being an indexing purist, having approximately $0 in cap weighted total market index funds. But it seems to me that grayfox's statements (and data presented) is actually arguing that one should invest in country A, but not in country B, rather than that one should index country A but not index in country B. As I stated, the actual hypothesis being that investing in some markets has not worked (and implying that this will continue to be the case).

It is similar to the difference between suggesting 100% US Total Stock Market and 0% International (international is simply not worth investing in) vs. suggesting, say, 70% US Total Stock Market, 30% Total International (International is worth investing in and indexing works in both US and International markets) vs. 70% US Total Stock Market, 30% low cost managed international fund (International is worth investing in, but indexing doesn't work well in those markets, it only works well in the US market).
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
andrige
Posts: 44
Joined: Thu May 07, 2020 3:45 pm

Re: Investing in International Stocks

Post by andrige »

jeffyscott wrote: Sat Jun 06, 2020 9:37 am
andrige wrote: Sat Jun 06, 2020 9:11 am
jeffyscott wrote: Sat Jun 06, 2020 7:47 am
grayfox wrote: Sat Jun 06, 2020 7:14 amIn fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
What do you mean by indexing working/not working?

It seems to me that your actual hypothesis is that investing in some markets has not worked. Because if you are only intending to say that indexing has not worked, that implies that one could hire a fund manager or pick their own stocks in those countries and reliably do better than one who bought the index.
There are clearly more inefficiencies with passive investing outside the us. We also see more inefficiency in passively tracking small caps vs large caps.
That may be and I am very far from being an indexing purist, having approximately $0 in cap weighted total market index funds. But it seems to me that grayfox's statements (and data presented) is actually arguing that one should invest in country A, but not in country B, rather than that one should index country A but not index in country B. As I stated, the actual hypothesis being that investing in some markets has not worked (and implying that this will continue to be the case).

It is similar to the difference between suggesting 100% US Total Stock Market and 0% International (international is simply not worth investing in) vs. suggesting, say, 70% US Total Stock Market, 30% Total International (International is worth investing in and indexing works in both US and International markets) vs. 70% US Total Stock Market, 30% low cost managed international fund (International is worth investing in, but indexing doesn't work well in those markets, it only works well in the US market).
It would be interesting if somebody compared passive vs active management by country (maybe as a thesis). It would be interesting to see which countries it worked best in.

Also the most popular opinion on the Boglehead forums has been to passively index the world at varying percentages.
nanameg
Posts: 434
Joined: Fri Mar 20, 2020 10:57 am

Re: Investing in International Stocks

Post by nanameg »

jibantik wrote: Sat Jun 06, 2020 8:28 am
nanameg wrote: Sat Jun 06, 2020 8:03 am
grayfox wrote: Sat Jun 06, 2020 7:14 am
jibantik wrote: Sat Jun 06, 2020 6:53 am Grayfox, you don't know anything the market does not, nor do you know anything better than the market does.

Buy the haystack, anything else is delusion.
You are missing the whole point of the thread. When it comes to world stocks, there is no such thing as "the market". There are 60 major markets, all different.

Buying the haystack, i.e. indexing, has been shown to work in the U.S. This was demonstrated, first, by academic research in the 1960s and 1970s when they came up both Efficient Markets Hypothesis. Then indexing was put into practice with actual index funds like Vanguard S&P 500 Index fund, started by Bogle in 1976, and shown to work in practice as well has in theory.

:?: What research has been done in the other 59 markets to show that indexing works there as well as in the U.S. stock market?
U.S. has CRSP data going back to 1926, 95 years. That's the data the researchers used to come up with the EMH.
Some of the international stock markets only started in the 2000s or 2010s. Not enough data to draw any conclusions.

:idea: "Indexing works in the U.S. stock market, so it must work everywhere." I would not make that assumption.

In fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
I appreciate the work you put into analyzing the way international stock markets work. But don’t u think professional analysts in the financial industry have done the same and even more work? Do u think the people at vanguard and fidelity just “assume” international indexes work fine and put them in their offerings without due consideration and analysis?

I’m not being sarcastic... I’m asking honestly. I’m trying to decide about investing in international funds myself.
No, those teams of PhDs who spend their entire professional careers working 50 hours a week could not possibly have taken this into account. Us Bogleheads are special, we can have a few chats at the watercooler, have a few international friends, read some newspapers and be able to predict how thousands of global companies are going to perform decades into the future better than everyone else. :oops:

nanameg here's how it is. You have decided to invest some of your portfolio into equities. Here is the universe of equities and their value. If you do not take those values (or overweight certain subsets) you are saying that you know the value better than the market. Do you have any RATIONAL basis for that? If not, then you MUST take the equities at their value, what else can you do.

https://www.youtube.com/watch?v=LwTHLtu ... e=youtu.be
So much I don’t understand! I’ll check out the utube but what do people mean when they refer to the market as “ knowing “ things...it seems to me that the “market” is comprised of a lot of people and their hopes and incomplete knowledge...how can “ it” know a single thing? I realize that’s an expression ...u don’t know more than the market ...and the market already priced that in ...but what assumptions are being made by referring to “the market “ as knowing anything whatsoever?
User avatar
jeffyscott
Posts: 9449
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Investing in International Stocks

Post by jeffyscott »

nanameg wrote: Sat Jun 06, 2020 10:21 am
jibantik wrote: Sat Jun 06, 2020 8:28 am
nanameg wrote: Sat Jun 06, 2020 8:03 am
grayfox wrote: Sat Jun 06, 2020 7:14 am
jibantik wrote: Sat Jun 06, 2020 6:53 am Grayfox, you don't know anything the market does not, nor do you know anything better than the market does.

Buy the haystack, anything else is delusion.
You are missing the whole point of the thread. When it comes to world stocks, there is no such thing as "the market". There are 60 major markets, all different.

Buying the haystack, i.e. indexing, has been shown to work in the U.S. This was demonstrated, first, by academic research in the 1960s and 1970s when they came up both Efficient Markets Hypothesis. Then indexing was put into practice with actual index funds like Vanguard S&P 500 Index fund, started by Bogle in 1976, and shown to work in practice as well has in theory.

:?: What research has been done in the other 59 markets to show that indexing works there as well as in the U.S. stock market?
U.S. has CRSP data going back to 1926, 95 years. That's the data the researchers used to come up with the EMH.
Some of the international stock markets only started in the 2000s or 2010s. Not enough data to draw any conclusions.

:idea: "Indexing works in the U.S. stock market, so it must work everywhere." I would not make that assumption.

In fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
I appreciate the work you put into analyzing the way international stock markets work. But don’t u think professional analysts in the financial industry have done the same and even more work? Do u think the people at vanguard and fidelity just “assume” international indexes work fine and put them in their offerings without due consideration and analysis?

I’m not being sarcastic... I’m asking honestly. I’m trying to decide about investing in international funds myself.
No, those teams of PhDs who spend their entire professional careers working 50 hours a week could not possibly have taken this into account. Us Bogleheads are special, we can have a few chats at the watercooler, have a few international friends, read some newspapers and be able to predict how thousands of global companies are going to perform decades into the future better than everyone else. :oops:

nanameg here's how it is. You have decided to invest some of your portfolio into equities. Here is the universe of equities and their value. If you do not take those values (or overweight certain subsets) you are saying that you know the value better than the market. Do you have any RATIONAL basis for that? If not, then you MUST take the equities at their value, what else can you do.

https://www.youtube.com/watch?v=LwTHLtu ... e=youtu.be
So much I don’t understand! I’ll check out the utube but what do people mean when they refer to the market as “ knowing “ things...it seems to me that the “market” is comprised of a lot of people and their hopes and incomplete knowledge...how can “ it” know a single thing? I realize that’s an expression ...u don’t know more than the market ...and the market already priced that in ...but what assumptions are being made by referring to “the market “ as knowing anything whatsoever?
See: Efficient Market Hypothesis (EMH)
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
nanameg
Posts: 434
Joined: Fri Mar 20, 2020 10:57 am

Re: Investing in International Stocks

Post by nanameg »

jeffyscott wrote: Sat Jun 06, 2020 11:19 am
nanameg wrote: Sat Jun 06, 2020 10:21 am
jibantik wrote: Sat Jun 06, 2020 8:28 am
nanameg wrote: Sat Jun 06, 2020 8:03 am
grayfox wrote: Sat Jun 06, 2020 7:14 am

You are missing the whole point of the thread. When it comes to world stocks, there is no such thing as "the market". There are 60 major markets, all different.

Buying the haystack, i.e. indexing, has been shown to work in the U.S. This was demonstrated, first, by academic research in the 1960s and 1970s when they came up both Efficient Markets Hypothesis. Then indexing was put into practice with actual index funds like Vanguard S&P 500 Index fund, started by Bogle in 1976, and shown to work in practice as well has in theory.

:?: What research has been done in the other 59 markets to show that indexing works there as well as in the U.S. stock market?
U.S. has CRSP data going back to 1926, 95 years. That's the data the researchers used to come up with the EMH.
Some of the international stock markets only started in the 2000s or 2010s. Not enough data to draw any conclusions.

:idea: "Indexing works in the U.S. stock market, so it must work everywhere." I would not make that assumption.

In fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
I appreciate the work you put into analyzing the way international stock markets work. But don’t u think professional analysts in the financial industry have done the same and even more work? Do u think the people at vanguard and fidelity just “assume” international indexes work fine and put them in their offerings without due consideration and analysis?

I’m not being sarcastic... I’m asking honestly. I’m trying to decide about investing in international funds myself.
No, those teams of PhDs who spend their entire professional careers working 50 hours a week could not possibly have taken this into account. Us Bogleheads are special, we can have a few chats at the watercooler, have a few international friends, read some newspapers and be able to predict how thousands of global companies are going to perform decades into the future better than everyone else. :oops:

nanameg here's how it is. You have decided to invest some of your portfolio into equities. Here is the universe of equities and their value. If you do not take those values (or overweight certain subsets) you are saying that you know the value better than the market. Do you have any RATIONAL basis for that? If not, then you MUST take the equities at their value, what else can you do.

https://www.youtube.com/watch?v=LwTHLtu ... e=youtu.be
So much I don’t understand! I’ll check out the utube but what do people mean when they refer to the market as “ knowing “ things...it seems to me that the “market” is comprised of a lot of people and their hopes and incomplete knowledge...how can “ it” know a single thing? I realize that’s an expression ...u don’t know more than the market ...and the market already priced that in ...but what assumptions are being made by referring to “the market “ as knowing anything whatsoever?
See: Efficient Market Hypothesis (EMH)
Thank you
Topic Author
grayfox
Posts: 5569
Joined: Sat Sep 15, 2007 4:30 am

Re: Investing in International Stocks

Post by grayfox »

nevermind
Last edited by grayfox on Tue Jul 14, 2020 2:47 pm, edited 1 time in total.
columbia
Posts: 3023
Joined: Tue Aug 27, 2013 5:30 am

Re: Investing in International Stocks

Post by columbia »

Among the things know about international investing:

1. It’s not my thing, so I don’t do it.
2. I’m glad that I live in a country, where people can choose their investments.
3. It’s their money and certainly not any of my business, as far as how others choose to allocate their money.
4. Based on years of reading this forum, I don’t know how some here deal with the obvious psychological trauma of others choosing to invest differently than they do. (These displays have really ramped up in the last few years; it’s both bizarre and unsettling.)
petulant
Posts: 1901
Joined: Thu Sep 22, 2016 1:09 pm

Re: Investing in International Stocks

Post by petulant »

andrige wrote: Sat Jun 06, 2020 9:11 am
jeffyscott wrote: Sat Jun 06, 2020 7:47 am
grayfox wrote: Sat Jun 06, 2020 7:14 amIn fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
What do you mean by indexing working/not working?

It seems to me that your actual hypothesis is that investing in some markets has not worked. Because if you are only intending to say that indexing has not worked, that implies that one could hire a fund manager or pick their own stocks in those countries and reliably do better than one who bought the index.
There are clearly more inefficiencies with passive investing outside the us. We also see more inefficiency in passively tracking small caps vs large caps.

Please refer to this article: https://www.google.com/amp/s/www.market ... FF297AC1E0

83% of low cost active managers were able to beat the index (over a 10 year period) in Europe compared to less than 20% for us large blend. This also demonstrates why passive investing is more popular in the US than elsewhere in the world.
100% of active mangers, both low-cost and high-cost, beat their benchmarks for international small cap in that study--that's eye-popping.
User avatar
jeffyscott
Posts: 9449
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Investing in International Stocks

Post by jeffyscott »

grayfox wrote: Sat Jun 06, 2020 5:13 pm
jeffyscott wrote: Sat Jun 06, 2020 7:47 am It seems to me that your actual hypothesis is that investing in some markets has not worked. Because if you are only intending to say that indexing has not worked, that implies that one could hire a fund manager or pick their own stocks in those countries and reliably do better than one who bought the index.
Not necessarily. It could be the case that neither indexing nor active management would have worked. The best course would have been to avoid it completely.
Well yes, that is exactly what I think you are claiming to demonstrate? But saying that neither indexing nor active management would have worked, is saying investing in that market did not work.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
jibantik
Posts: 485
Joined: Fri Nov 24, 2017 1:05 pm

Re: Investing in International Stocks

Post by jibantik »

grayfox wrote: Sat Jun 06, 2020 5:13 pm
jeffyscott wrote: Sat Jun 06, 2020 7:47 am
grayfox wrote: Sat Jun 06, 2020 7:14 amIn fact, looking at the results from some of the country funds, there is evidence that, in some countries, indexing does not work anywhere near as well as it works in the U.S.
What do you mean by indexing working/not working?
I would say that indexing worked for the investor if, over the long term like 20 years, it had risk and return similar to U.S. stock market.
This is a strange definition, no? Why base it off US stock market. Your definition is setup such that US indexing "works"... by definition. That is a bit biased.

To me, if you can get market returns for low cost than indexing is successful. Considering I can get VTWAX for 0.10%, that seems pretty dang successful.

There is no magical way for us all to beat market returns. We all share whatever the market happens to return, however we divy it up amongst oursevles. Some countries markets may perform better than others, and that may change. I have no idea why people think they have a clue that they can predict HOW that is going to change.

You are basically claiming you can predict the chart below into the future.
Image
Post Reply