Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

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Day9
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Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Day9 »

Last week Vanguard published this article "Beyond the pandemic: What to expect from stocks, bonds" https://investornews.vanguard/beyond-th ... ocks-bonds

Here are some important figures:

Image

To get the numbers in my submission title I simply took the average of the high and low end of their estimate. But please look at the figures and read the article for more details, including projected volatility.

The article also has a figure for bond returns but the image is too large to include in this forum so please click on the link and scroll down to see it.
I'm just a fan of the person I got my user name from
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by willthrill81 »

What is Vanguard's track record with predicting future returns?
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by sycamore »

Be aware of the date shown in the notes from the Vanguard projection:
Forecast corresponds to distribution of 10,000 VCMM simulations for ten-year annualized nominal returns as of March 31, 2020, in U.S. dollars.
That was a couple months ago when the market had bottomed out and just started to recover. So some of the projected increase has already happened :)
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by tmcc »

willthrill81 wrote: Thu Jun 11, 2020 3:02 pm What is Vanguard's track record with predicting future returns?
garbage

they put out the same emerging/international outperform guidance back in 2018 and if you followed it, you got crushed.

if this is 9% from current levels, great..... still down 33% from 2018
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Candor »

I'll take that! Unfortunately, it's all guesswork but it is nice to think about.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by HippoSir »

tmcc wrote: Thu Jun 11, 2020 3:20 pm
willthrill81 wrote: Thu Jun 11, 2020 3:02 pm What is Vanguard's track record with predicting future returns?
garbage

they put out the same emerging/international outperform guidance back in 2018 and if you followed it, you got crushed.

if this is 9% from current levels, great..... still down 33% from 2018
2018 was 2 years ago, they're projecting 10 year returns.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by tmcc »

HippoSir wrote: Thu Jun 11, 2020 3:33 pm
tmcc wrote: Thu Jun 11, 2020 3:20 pm
willthrill81 wrote: Thu Jun 11, 2020 3:02 pm What is Vanguard's track record with predicting future returns?
garbage

they put out the same emerging/international outperform guidance back in 2018 and if you followed it, you got crushed.

if this is 9% from current levels, great..... still down 33% from 2018
2018 was 2 years ago, they're projecting 10 year returns.
thats the point. new money might make 10%. if you listened 2 years ago, you're still -33% after the 10%. fantastic job vanguard
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by MadHungarian »

I wish folks, including Vanguard, would realize that lower valuations doesn't necessarily mean undervalued. And that those oh so tantalizing emerging market returns somehow never seem to make it out of the countries and into the pockets of small foreign investors.
For 25 years now i've been hearing the same story from Vanguard every year.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by MadHungarian »

Notwithstanding that, i still keep a certain % of international, because, well, i could be wrong.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by willthrill81 »

MadHungarian wrote: Thu Jun 11, 2020 4:14 pm I wish folks, including Vanguard, would realize that lower valuations doesn't necessarily mean undervalued. And that those oh so tantalizing emerging market returns somehow never seem to make it out of the countries and into the pockets of small foreign investors.
For 25 years now i've been hearing the same story from Vanguard every year.
EM went up like a rocket from 2000-2007, but since then it's lost significant money for U.S. investors.

I'm not saying that U.S. investors should avoid it, but if you buy it, you'd better be prepared to hold it for very long time.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by bloom2708 »

I notice that many good products sell without advertising.

Is 40% international advertising to get it to sell? Kind of off topic, but these type of numbers would help "sell" international.

I'm still not buying.
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columbia
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by columbia »

Nobody knows.

US could be lower than the mentioned figure and international...even lower.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by patrick013 »

TSM estimate is likely a realizable number but Intl is very hard to predict. One big casino, both profit wise and currency rate wise. A good place for an overseas investment.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Trader Joe »

Day9 wrote: Thu Jun 11, 2020 3:01 pm Last week Vanguard published this article "Beyond the pandemic: What to expect from stocks, bonds" https://investornews.vanguard/beyond-th ... ocks-bonds

Here are some important figures:

Image

To get the numbers in my submission title I simply took the average of the high and low end of their estimate. But please look at the figures and read the article for more details, including projected volatility.

The article also has a figure for bond returns but the image is too large to include in this forum so please click on the link and scroll down to see it.
Do you believe this projection?
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by deltaneutral83 »

I don't come close to seeing this given what inflation is expected to be. The projections would indicate almost historical real returns which I just don't see on TSM. What are real returns from 1926-2005, 6%?
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by willthrill81 »

deltaneutral83 wrote: Thu Jun 11, 2020 5:13 pm I don't come close to seeing this given what inflation is expected to be. The projections would indicate almost historical real returns which I just don't see on TSM. What are real returns from 1926-2005, 6%?
They are nominal predictions, not real.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by hagridshut »

Ignore the Vanguard projections. This is just encouraging people to performance chase.

People should set an International Allocation that they feel comfortable with, and stick to it.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by tetractys »

If Vanguard’s educated guess ends up being more or less accurate, it looks like I may be relying somewhat on Total International for my retirement drawdowns. 8-)
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by TropikThunder »

Vanguard: "We predict US will continue to outperform Int'l over the next 10 years."
Bogleheads: "Well, those guys are the experts!"

Vanguard: "We predict Int'l will outperform US over the next 10 years."
Bogleheads: "Nobody knows nothin'!"
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by FIREchief »

It’s nice that VG is sharing such humor to entertain us a bit.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by rockthisworld »

I’m predicting 4.5-5% nominal and an average inflation of 3.5% over the next 40 years (so I used the average inflation instead of today’s standard 2%.

Then again who ever knows. Market could go down 50%, 70%. Or be up by that amount. I just know things are overvalued given the fundamentals. And I just don’t see as strong of a recovery as others may see. Who knows Japan had a massive bubble and the real returns since the height of it all in 1989 they still have negative returns.

I really hope that wouldn’t happen in America. I hope the dollar stays strong.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by absolute zero »

It really is strange that they would generate a forecast in late March and then wait 2+ months before publishing the article. By my math, with S&P500 ~2600 in late March and now at 3000, their real US equity forecast drops from 5% real down to 3.5% real. Pretty big difference.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by willthrill81 »

TropikThunder wrote: Thu Jun 11, 2020 7:35 pm Vanguard: "We predict US will continue to outperform Int'l over the next 10 years."
Bogleheads: "Well, those guys are the experts!"

Vanguard: "We predict Int'l will outperform US over the next 10 years."
Bogleheads: "Nobody knows nothin'!"
Sadly, confirmation bias is strong with most human beings. It's not limited to the perennial U.S. vs. ex-U.S. issue.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Grt2bOutdoors »

A broken clock is right twice a day. Eventually their prediction will be right but for the last 10 years had you been in international you would be way behind. I pay no mind to theirs or anyone else’s predictions - no one’s crystal ball is clear.

If they really wanted to make a prediction it would be that in 2020 the world’s economy would shut down for a period of time. Did they? No.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by rockthisworld »

absolute zero wrote: Thu Jun 11, 2020 8:00 pm It really is strange that they would generate a forecast in late March and then wait 2+ months before publishing the article. By my math, with S&P500 ~2600 in late March and now at 3000, their real US equity forecast drops from 5% real down to 3.5% real. Pretty big difference.
3.5% real would be a blessing given economic outlook from the fed. I do think that we are heading for a tough economic road ahead but 3.5% real would be more reasonable given a longer time horizon. I personally think we move sideways for the next five years. But who knows maybe the earnings recover and wall st doesn’t miss a beat and only Main Street will suffer so who knows what the future will bring. I surely never predicted a global pandemic. But we all knew stocks were overvalued way before Covid. If you look up David Stockman (Reagan’s financial budget director) he will state the same thing.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by midareff »

tmcc wrote: Thu Jun 11, 2020 3:20 pm
willthrill81 wrote: Thu Jun 11, 2020 3:02 pm What is Vanguard's track record with predicting future returns?
garbage

they put out the same emerging/international outperform guidance back in 2018 and if you followed it, you got crushed.

if this is 9% from current levels, great..... still down 33% from 2018
International has basically under performed US by 7% annually for the last ten years (that's 70+%) and roughly 2.5% a year since 1900. Outperforming the US by 3% a year for a decade just doesn't mean much, either as a projection or if it actually happens. International out performance has been touted for years and where has that got you... free lunch of gravel?
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by rockthisworld »

I mean if US is contracting GDP and so are the rest of the world I don’t think they would necessarily outperform US especially because this is a global pandemic driven recession.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by abuss368 »

For me that does nothing. I have read so many predictions about this asset class or that asset class outperforming in the future. I no longer waste my time!
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by abuss368 »

I recall that saying “nobody knows nuttin” with investing. Very true.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by abuss368 »

So why doesn’t Vanguard increase the international stock allocation in the life strategy and target funds to 50% US and 50% International since it will outperform?
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by rockthisworld »

abuss368 wrote: Fri Jun 12, 2020 5:35 pm So why doesn’t Vanguard increase the international stock allocation in the life strategy and target funds to 50% US and 50% International since it will outperform?
Because they don’t put their money where there mouth is. I use Vanguard and love them and they have great low cost and quality customer service! But until I see an investment change in some capacity I can’t put enough stock into the idea international would outperform domestic.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by bt365 »

Compounding is indeed powerful, but patience and time are finite.
Many tell themselves their patience will be rewarded in the long term.
Problem is, many lose patience long before the long term.
Last edited by bt365 on Fri Jun 12, 2020 5:46 pm, edited 1 time in total.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by abuss368 »

rockthisworld wrote: Fri Jun 12, 2020 5:41 pm
abuss368 wrote: Fri Jun 12, 2020 5:35 pm So why doesn’t Vanguard increase the international stock allocation in the life strategy and target funds to 50% US and 50% International since it will outperform?
Because they don’t put their money where there mouth is. I use Vanguard and love them and they have great low cost and quality customer service! But until I see an investment change in some capacity I can’t put enough stock into the idea international would outperform domestic.
Exactly. For me that is any asset class. This is why I honestly don’t even read predictions any longer.

Only one prediction has ever come true for me consistently. That is every time I hear about a stock market prediction, I predict that if I read it, the result is only a waste of time. That somehow always works!
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by lostdog »

TropikThunder wrote: Thu Jun 11, 2020 7:35 pm Vanguard: "We predict US will continue to outperform Int'l over the next 10 years."
Bogleheads: "Well, those guys are the experts!"

Vanguard: "We predict Int'l will outperform US over the next 10 years."
Bogleheads: "Nobody knows nothin'!"
:D

This is so true. You see it happening in this thread.
Last edited by lostdog on Fri Jun 12, 2020 5:48 pm, edited 1 time in total.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by abuss368 »

bt365 wrote: Fri Jun 12, 2020 5:45 pm Many tell themselves their patience will be rewarded in the long term.
Problem is, many lose patience long before the long term.
Compounding is indeed powerful, but patience and time are finite.
Very true and this is why I have learned over my investing lifetime that the best portfolio is not what someone else tells you or recommends (even on an Internet forum). Certainly not. The best portfolio is the one you can stick with in all markets.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by abuss368 »

Best part is absolutely none of this matters if you don’t get the big things right.

Invest you must, pick one or a few index funds, keep costs low, keep taxes down, build cash, pay down / off debt, invest and work hard in your career, and live below your means.

The rest such as picking the perfect fund is dancing on the head of a pin.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by lostdog »

abuss368 wrote: Fri Jun 12, 2020 5:47 pm
bt365 wrote: Fri Jun 12, 2020 5:45 pm Many tell themselves their patience will be rewarded in the long term.
Problem is, many lose patience long before the long term.
Compounding is indeed powerful, but patience and time are finite.
Very true and this is why I have learned over my investing lifetime that the best portfolio is not what someone else tells you or recommends (even on an Internet forum). Certainly not. The best portfolio is the one you can stick with in all markets.
Until you give up on it and use the "simplicity" or "Jack said so" excuses instead of what it's really called, performance chasing.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by abuss368 »

lostdog wrote: Fri Jun 12, 2020 5:50 pm
abuss368 wrote: Fri Jun 12, 2020 5:47 pm
bt365 wrote: Fri Jun 12, 2020 5:45 pm Many tell themselves their patience will be rewarded in the long term.
Problem is, many lose patience long before the long term.
Compounding is indeed powerful, but patience and time are finite.
Very true and this is why I have learned over my investing lifetime that the best portfolio is not what someone else tells you or recommends (even on an Internet forum). Certainly not. The best portfolio is the one you can stick with in all markets.
Until you give up on it and use the "simplicity" or "Jack said so" excuses instead of what it's really called, performance chasing.
No not at all which I believe I have mention to you many times. Please read it again.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by 92irish »

I am going to go out a limb and predict the 10 year return on a Treasury Note. My guess .7%. Pretty sad.

No matter what Vanguard predicts or what the actual returns turn out to be, I don't think there is much alternative to investing in equities long term. All we can do is hope for the best with equity returns and accept what the market gives us.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Forester »

tmcc wrote: Thu Jun 11, 2020 3:20 pm
willthrill81 wrote: Thu Jun 11, 2020 3:02 pm What is Vanguard's track record with predicting future returns?
garbage

they put out the same emerging/international outperform guidance back in 2018 and if you followed it, you got crushed.

if this is 9% from current levels, great..... still down 33% from 2018
Is it 2028 yet? :wink:
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Rosencrantz1 »

I sure don't want to be labeled a 'performance chaser' and switch equities into international based on Vanguard's projections. Curious...have Vanguard's projections been accurate over the years?

We're at the start of a new decade (and we know what happened last decade) - is international giving the US a 'sound thrashing' so far this year? That'd be a start to give Vanguard's projection some credibility.

I'll just stick with what's worked these past 30+ years. I'm liking this 'stay the course' business.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Tamalak »

That's hella optimistic. I don't "believe" it but it is reassuring :sharebeer

Maybe my 50% international will finally be worth a damn.. I can dream!
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by jibantik »

tmcc wrote: Thu Jun 11, 2020 3:20 pm
willthrill81 wrote: Thu Jun 11, 2020 3:02 pm What is Vanguard's track record with predicting future returns?
garbage

they put out the same emerging/international outperform guidance back in 2018 and if you followed it, you got crushed.

if this is 9% from current levels, great..... still down 33% from 2018
All those people in equities with a 1.5 investment horizon must be absolutely devastated.

Now the question is going to be, will all the US-only performance chasers continue chasing performance and move to international when it outperforms or will they stick to their US-only portfolio because Warren Buffet said to buy S&P500. Maybe Warren Buffet will say to buy international and their head will explode.

This great, my portfolio will be skyrocketing and I will get to enjoy the show :sharebeer
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by wesgreen »

I enjoy seeing them embarrass themselves, because their bad advice cost me a lot of money. Twenty years later, I'm back to striktly sticking with John Bogle. But the more I see them move away from his principles, the more I worry about having my savings there.
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by dh »

I have grown weary of predictions and projections. When I look back at Callan's table, I see the past.. nothing outperforms over the long-term, nothing under performs over the long term.
https://www.callan.com/periodic-table/

So, rather than project (i.e., guess) I keep my equity at 50% US; 50% International. :sharebeer
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by lostdog »

wesgreen wrote: Fri Jun 12, 2020 8:58 pm I enjoy seeing them embarrass themselves, because their bad advice cost me a lot of money. Twenty years later, I'm back to striktly sticking with John Bogle. But the more I see them move away from his principles, the more I worry about having my savings there.
If you're U.S. only and you have your funds at Vanguard, what do you think they will do with it? Force you into international? :oops:
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Steve Reading »

rockthisworld wrote: Fri Jun 12, 2020 5:41 pm
abuss368 wrote: Fri Jun 12, 2020 5:35 pm So why doesn’t Vanguard increase the international stock allocation in the life strategy and target funds to 50% US and 50% International since it will outperform?
Because they don’t put their money where there mouth is.
The reason is most likely that US investors have such overwhelming home country bias that if Vanguard upped the Ex-US allocation to 50%+ in their TDFs, based on their own internal research, investors would be extremely upset and disgruntled, calling it market-timing, etc.

Their Managed Allocation Fund, does overweigh International right now. How's that for putting their money where their mouth is?
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by 1789 »

The problem with so called experts including Vanguard is that they make predictions for a decade, and when they come out wrong they never show up and say “sorry folks, we screwed this up” .
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)
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mrspock
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by mrspock »

Day9 wrote: Thu Jun 11, 2020 3:01 pm Last week Vanguard published this article "Beyond the pandemic: What to expect from stocks, bonds" https://investornews.vanguard/beyond-th ... ocks-bonds

Here are some important figures:

Image

To get the numbers in my submission title I simply took the average of the high and low end of their estimate. But please look at the figures and read the article for more details, including projected volatility.

The article also has a figure for bond returns but the image is too large to include in this forum so please click on the link and scroll down to see it.
So if I'm reading this right, stay far (far) away from US Value & International. Duly noted Vanguard. Keep up the good work on your projections!
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Schlabba
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Re: Vanguard projects 10 year returns: TSM 6.5% Int'l 9.5%

Post by Schlabba »

Day9 wrote: Thu Jun 11, 2020 3:01 pm Last week Vanguard published this article "Beyond the pandemic: What to expect from stocks, bonds" https://investornews.vanguard/beyond-th ... ocks-bonds

Here are some important figures:

Image

To get the numbers in my submission title I simply took the average of the high and low end of their estimate. But please look at the figures and read the article for more details, including projected volatility.

The article also has a figure for bond returns but the image is too large to include in this forum so please click on the link and scroll down to see it.
What I read in this image is just very good returns. I am 50% international so I am looking at an 8% return forecast! :sharebeer
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