Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

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TomatoTomahto
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by TomatoTomahto »

vineviz wrote: Tue Jun 30, 2020 8:09 pm The only true mystery is which FAANG stock becomes toothless first.
Haha. I see what you did there :sharebeer
I get the FI part but not the RE part of FIRE.
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pokebowl
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by pokebowl »

McGilicutty wrote: Tue Jun 30, 2020 11:14 am Has International ever outperformed U.S. to the massive extent that U.S. has outperformed International over the last 10 years?
Yes.
asif408
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by asif408 »

LongTermEtfHolder wrote: Wed Jul 01, 2020 10:36 am
asif408 wrote: Wed Jul 01, 2020 9:52 am Railroads were the largest sector in the late 1800s early 1900s. You can find many anecdotes through newspaper articles and behavior that indicate many thought "what could threaten railroads?" until the automobile and airplane came along.
Notice that these are all cases of dominant technology replaced by new, superior technology.

However, now we have companies whose business is coming up with these new, superior technologies.

For example, Alphabet became dominant in many futuristic technologies like self-driving. If self-driving is the next big value, Alphabet will capture much of that value.

It's the equivalent of the dominant railroad company seamlessly attaining dominance in automobiles and airplanes too.

I'm not suggesting this dominance will never break, but it's entirely possible it will not break over the next say 3-4 decades. As you pointed out, such has already happened, for example with Japan in the last century. For my investment horizon, if the US is going to outperform for the next 3-4 decades, then I should invest heavily in the US.
How do you have such confidence that some Chinese, Japanese, or European company won't come up with better self-driving technology and greatest market share? In the cell phone world, Nokia blackberries were all the rage a decade or two ago, and Apple is now. I'm not as confident as you are that the sources of these new technology winners will stay domestic.

The example I gave of Japan is the exception to the rule; the overwhelming number of examples you will find do not put the odds in your favor. But I agree with you it is possible. It's just a bet I wouldn't be willing to take, especially with my life savings. But if you're comfortable with that go for it.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by whereskyle »

asif408 wrote: Wed Jul 01, 2020 11:47 am
LongTermEtfHolder wrote: Wed Jul 01, 2020 10:36 am
asif408 wrote: Wed Jul 01, 2020 9:52 am Railroads were the largest sector in the late 1800s early 1900s. You can find many anecdotes through newspaper articles and behavior that indicate many thought "what could threaten railroads?" until the automobile and airplane came along.
Notice that these are all cases of dominant technology replaced by new, superior technology.

However, now we have companies whose business is coming up with these new, superior technologies.

For example, Alphabet became dominant in many futuristic technologies like self-driving. If self-driving is the next big value, Alphabet will capture much of that value.

It's the equivalent of the dominant railroad company seamlessly attaining dominance in automobiles and airplanes too.

I'm not suggesting this dominance will never break, but it's entirely possible it will not break over the next say 3-4 decades. As you pointed out, such has already happened, for example with Japan in the last century. For my investment horizon, if the US is going to outperform for the next 3-4 decades, then I should invest heavily in the US.
How do you have such confidence that some Chinese, Japanese, or European company won't come up with better self-driving technology and greatest market share? In the cell phone world, Nokia blackberries were all the rage a decade or two ago, and Apple is now. I'm not as confident as you are that the sources of these new technology winners will stay domestic.

The example I gave of Japan is the exception to the rule; the overwhelming number of examples you will find do not put the odds in your favor. But I agree with you it is possible. It's just a bet I wouldn't be willing to take, especially with my life savings. But if you're comfortable with that go for it.
Honestly, with all the Tesla headaches, I expect Toyota or Honda to beat them in electric cars and I expect Tesla's stock price to plummet.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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midareff
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by midareff »

willthrill81 wrote: Tue Jun 30, 2020 6:51 pm
vineviz wrote: Tue Jun 30, 2020 6:33 pm
LongTermEtfHolder wrote: Tue Jun 30, 2020 6:20 pm These companies - like Amazon, Google, and Facebook - only seem to gain more power and wealth with time. Which group of stocks could possibly outperform them?
I can’t tell if you’re being naive, sarcastic, or if you’re just trolling us.

Was there supposed to be an eye-wink emoticon?
While I lean toward the 'U.S. only is probably good enough' argument, I have to agree with you here.

Almost two years ago, I started a thread about a Research Affiliates piece that detailed how all of the top 10 largest companies by market cap-weight in the year 2000 subsequently very badly underperformed the S&P 500 in the next 18 years.
Whether they outperformed the S&P or under performed it we still have the S&P Index. Interestingly enough between 42% and 44% of the sales of the S&P 500 are internationally. AFAIC, that firmly ties the S&P 500 to the wealth, health and prosperity of the rest of the world without having to be concerned about international corporate law, politics, exchange rates and any and all other external influences. The SD&P500 and VTSAX are good enough for me. I worked here, I retired here, I live here, I eat here and I invest here... good enough for me..
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by willthrill81 »

midareff wrote: Wed Jul 01, 2020 11:53 am
willthrill81 wrote: Tue Jun 30, 2020 6:51 pm
vineviz wrote: Tue Jun 30, 2020 6:33 pm
LongTermEtfHolder wrote: Tue Jun 30, 2020 6:20 pm These companies - like Amazon, Google, and Facebook - only seem to gain more power and wealth with time. Which group of stocks could possibly outperform them?
I can’t tell if you’re being naive, sarcastic, or if you’re just trolling us.

Was there supposed to be an eye-wink emoticon?
While I lean toward the 'U.S. only is probably good enough' argument, I have to agree with you here.

Almost two years ago, I started a thread about a Research Affiliates piece that detailed how all of the top 10 largest companies by market cap-weight in the year 2000 subsequently very badly underperformed the S&P 500 in the next 18 years.
Whether they outperformed the S&P or under performed it we still have the S&P Index. Interestingly enough between 42% and 44% of the sales of the S&P 500 are internationally. AFAIC, that firmly ties the S&P 500 to the wealth, health and prosperity of the rest of the world without having to be concerned about international corporate law, politics, exchange rates and any and all other external influences. The SD&P500 and VTSAX are good enough for me. I worked here, I retired here, I live here, I eat here and I invest here... good enough.
My point was that just because the current high flyers appear to be indomitable does not mean that their forward performance will continue as it has for the last decade. U.S. large-cap growth will continue to outperform until it doesn't. Ex-U.S. will continue to underperform until it doesn't. But that doesn't automatically make a LCG growth tilt bad nor a tilt toward ex-U.S. good. We just don't know. Anyone who says otherwise (not saying you) is a liar or deluded.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by Northern Flicker »

I also believe that US equities will outperform. That's why I limit non-US equities to 25% of equities. But it is not zero because the market couldn't care less what I believe, and I am at least as concerned with managing risk as I am with maximizing return.
Risk is not a guarantor of return.
Wayson
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by Wayson »

02nz wrote: Wed Jul 01, 2020 11:05 am
Wayson wrote: Wed Jul 01, 2020 10:57 am I made the choice a few months ago - after 7+ years of holding VXUS and watching as it went nowhere - to divest from it and go 100% US. I had been maintaining 20% of equities as an allocation to international, but the continued underperformance convinced me that over a reasonable timeframe it didn't make sense to keep holding it. I have every confidence that in the extreme long term, international may indeed revert to performance that approximates or exceeds US-only. However, as Keynes said, "this long run is a misleading guide to current affairs. In the long run we are all dead." I cannot afford to wait, 20, 30, 40 years for an investment to cease stagnating. I require a reasonable rate of return annually in order to meet my target retirement numbers.

Holding international blindly in the expectation that, after a decade of near-zero movement, it will suddenly surge in performance and compensate holders for that missed decade.... that was a leap of faith that I wasn't willing to continue making. I understand the 'buy the haystack' perspective, but after a certain point it seems like diversification for diversification's sake. Others may disagree, but ultimately we must all act as we feel best. :beer
So in 2009, the same you would have looked back at a lost decade for U.S. stocks (negative nominal returns, actually much worse than international stocks did over the past decade - positive returns even after inflation), and said the same thing and thrown in the towel on U.S. stocks?
No, because the underlying reasons for the stagnation of US asset values were clear. Two massive crashes in a 8-9 year span, both with prolonged multi-year recoveries. Contrast with today, when at the low (20 March) VTI's valuation was roughly back to where it had been in Dec 2016. Meanwhile if we look at VGTSX from January of 2000 (!!!) until today, VGTSX has only returned 14.70% (not counting dividends, as I can't find an online calculator that will compute total return for it.) That's comedically low for a 20 year period. If we cherry pick the low as your example does above by using 2009, and measure from June 30 2000 until 20 March 2020, it returned -11.49% without including dividends.

Ultimately as a rational investor with a limited timeframe, I have to determine whether I am able to wait decades for my investments to - hopefully - perform well, and whether the opportunity cost of doing so outweighs the potential gains from divesting of those investments. To again quote Keynes, "The market can stay irrational longer than you can stay solvent."
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by adam1712 »

LongTermEtfHolder wrote: Wed Jul 01, 2020 10:42 am
muffins14 wrote: Wed Jul 01, 2020 10:32 am It seems odd to me to proclaim that US tech will forever be dominant at the same time as the best talent may be seeking work elsewhere for several reasons
I work in technology, and can tell you the vast majority of tech workers on the planet are hoping to move to the US.

The pay and benefits that US jobs offer is much better, often massively better, than anywhere else. It's not rare to see a pay gap of x4 or more.

You mentioned healthcare, so consider that a tech worker will have a great plan from their employer (if they work for FAANG) which will easily beat most public plans anywhere else.
That's a pretty good argument right there that labor costs for ex-US tech companies might soon make them a better investment in the future. If this current tech boom is similar to the dot.com boom around 2000, a lot of the profits might have already been made in the tech companies and then the future profits and benefits will be to peripheral companies and people in the US and around the globe. Or this time could be different but history says otherwise. I'd be very careful thinking that the best approach is betting your job, your retirement accounts, and your home location should assume the last best performer will continue forever.

I'm 33% ex-US for my stocks. And I'm willing to admit I'm often in no hurry to rebalance to international since I don't think it's as important as making sure my stock/bond ratio is close to my desired AA. I don't think there's that much harm in deciding 40% is too much for you. I just would highly recommend not making a sudden change to 0%.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by asif408 »

willthrill81 wrote: Wed Jul 01, 2020 11:57 am My point was that just because the current high flyers appear to be indomitable does not mean that their forward performance will continue as it has for the last decade. U.S. large-cap growth will continue to outperform until it doesn't. Ex-U.S. will continue to underperform until it doesn't. But that doesn't automatically make a LCG growth tilt bad nor a tilt toward ex-U.S. good. We just don't know. Anyone who says otherwise (not saying you) is a liar or deluded.
What we do know is that making a bet completely one way or another (all US or all ex-US) increases the dispersion of potential outcomes, and owning some of all mitigates the dispersion of returns, which would mitigate the potential of a poor outcome (of course, that by definition also mitigates the potential for a much higher than average return, which is what US only investors got the past decade). As far as I can tell no one here is advocating 100% ex-US or anything even remotely approaching that, but a growing majority here are advocating or moving towards 100% US. Seems to me the riskier portfolio over the long term is an all US over all ex-US, simply because the US is one country and the international fund consists of 40-50 different countries.

Times change, but it seems like many here think the way things are now is the way they will always be. To me, investing is a lot like sports in that no individual or team stays at the top forever, no matter how good they are looking back. The US stock market has just been through a performance streak that is analogous to the UCLA men's basketball team of the 1960s and 1970s (10 championship over 12 seasons; the US stock market has beaten international stocks 9 of the last 12 years). It didn't make UCLA basketball the dynasty of the future, and I'm skeptical 9 out of the last 12 years of outperformance by US stocks makes it a sure bet as a winner for the future.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by vineviz »

Wayson wrote: Wed Jul 01, 2020 12:52 pm No, because the underlying reasons for the stagnation of US asset values were clear.
These reasons only seem clear in hindsight, of course, and it was never ordained to work out as well for the US stocks as it did. Remember, US stocks underperformed ex-US stocks by 100bps (1.0%) per year for 47 years (from 1961 to 2007). Yes, the comeback of US stocks over the past decade has been remarkable but precisely because it is NOT the typical outcome.
Wayson wrote: Wed Jul 01, 2020 12:52 pm Ultimately as a rational investor with a limited timeframe, I have to determine whether I am able to wait decades for my investments to - hopefully - perform well, and whether the opportunity cost of doing so outweighs the potential gains from divesting of those investments. To again quote Keynes, "The market can stay irrational longer than you can stay solvent."
A so-called "rational investor with a limited timeframe" has only one rational course of action in the absence of perfect information about the future: diversification. US stocks have had 15-year long periods of negative real returns, for a cumulative loss of purchasing power of -10%. The worst 15-year period for a globally diversified portfolio is +7%.

The peddling of US-only portfolios as the "safer" choice is the performance-chasing equivalent of snake oil. You don't have to buy it.
"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: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by Shael_AT »

There is something to be said about investments from now to 2050 and 2100.

We have demographic trends in many places which indicate massive labor and consumer spending predictions in key areas. Rising populations with surging 0-8, 8-13, 13-18, 18-25 demographics are going to be tomorrows innovation centers, work centers and consumer centers. The question is, are those countries either liberalized economies or aiming to tangible, real market liberalization from now until then?

Take China, great demographics, great production, but there is no appetite for a true liberal, accountable and transparent capital and equities market. That's by design, not on purpose. Allowing a competitive corporate or investment class with the party was never a plan, modernisation and leveraging technology, economic partnerships and expanding sphere of influence to maintain integrity of the state however, always was.

Clear as day, it's literally published by the CCP.

However, you then have both Emerging countries and economies who have the favorable demographic forecasts, and Developed countries with a focus on maintaining demographic structures and augmenting loss of prime age workforce participants with technology, automation, service sector, financial services, with strong institutions, regulations and cultural advantages.

EM:

Mexico, Nigeria, Brasil, India, Iran, Vietnam, Thailand, Ethiopia, South Africa, Malay, Indonesia, Philippines, Turkey --- >>> surging 0-8, 8-13, 13-18, 18-25 demographics with trending GDP, trending market access and trending economic and political liberalisation. Varying degree's of maturity with no forecast being certain, as some of these countries are... suspect... ;) High Risk, potentially very High Reward.

DM:

Japan, South Korea, Taiwan, Canada, New Zealand, Australia, Ireland / parts of the Europe which are central/western Franco-German countries or northern europe, UK --- >>> Diminishing demographics but strong financial services, consumer services, technology, research & development, biomedicine, biotechnology, computer / cloud / ai / robotic adopters (thanks to US companies and IP, lax sharing), along with established institutions, liberal economies and all the things which leads you to assume a level of integrity when investing there. Medium Risk, Medium Reward

All of this changes with a world event, a skirmish, a dirty bomb, a cyber attack, a political or cultural uprising, a drought, a massive earth quake, or a war. We're living in a world where America Hegemony exists to facilitate favorable trade and economic and social integrations as a lesson learned from WW2 and as a result of competing power structures hostile to the capital, elected and investment class during the Cold War.

It's very difficult to assess if that will remain like it is now in the future.

That is precisely why we don't look to the past as a gauge for performance in the future. My personal allocation is:

VTSAX, 70%
VTIAX, 30%

Captures 99% international diversification goals among DM and EM, while diversifying local market Mega/large/mid/small/micro caps to my satisfaction. In 2030's, we might be talking about the sudden collapse and fragmentation of China and the rise of a new African technology mega-hub in Nigeria metro regions, and speculating on massive ultra-fast rail systems connecting all of west-africa to realize the vision of a unified trading bloc.

In the 2050's, we might be gambling on whether or not the Texas Equities Market will outperform the North-East Corridor Market, but complaining that the Chicago common trading platform is down so its impossible to trade through a neutral middle man between your state/mega region and hostile regions engaged in active conflict.

:sharebeer -- The world changes. We do the best we can. Although one day, someone or something can take away, or invalidate, all of your money, savings, investments and property, but... the one thing YOU will always have if you are above ground is your health, intelligence, knowledge, skills, values and principles that hold you. Invest in those things and become good at them, exceptional even. The money will come, one way or another.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by steve321 »

I came across this interesting article on EU stocks.
https://www.aqr.com/Insights/Research/M ... -Me-Its-EU
Complicated stuff though. My mentor Ray Dalio is very strong in macroeconomic thinking (as in everything else); I tend to go for individual stocks analysis.
But concerning the EU it has potential but politics will play a very determining role according to that article. Let's see how it plays out.
Don't know about the UK. I read a Financial Times article saying that the pound sterling is becoming a third world currency - perhaps the UK might become a third world country then. :(
Concerning Emerging Markets I'm pretty bullish myself.
So here are my thoughts on various geographical areas outside US, take it or leave it.
PS
I don't know enough about Japan to express an opinion on the stock market over there - I love Japanese food though! :happy :beer
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Shael_AT
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by Shael_AT »

steve321 wrote: Wed Jul 01, 2020 2:45 pm I came across this interesting article on EU stocks.
https://www.aqr.com/Insights/Research/M ... -Me-Its-EU
Complicated stuff though. My mentor Ray Dalio is very strong in macroeconomic thinking (as in everything else); I tend to go for individual stocks analysis.
But concerning the EU it has potential but politics will play a very determining role according to that article. Let's see how it plays out.
Don't know about the UK. I read a Financial Times article saying that the pound sterling is becoming a third world currency - perhaps the UK might become a third world country then. :(
Concerning Emerging Markets I'm pretty bullish myself.
So here are my thoughts on various geographical areas outside US, take it or leave it.
PS
I don't know enough about Japan to express an opinion on the stock market over there - I love Japanese food though! :happy :beer
Great link, thank you

There was a time where I did VTSAX 70/ VTIAX 15 / VEMAX 15 to over-weight EM's

But, I didn't like the expense ratio and am very adverse to complicating my personal portfolio. For those who are bullish on EM like yourselves, its definitely an option tho :)
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by steve321 »

Shael_AT wrote: Wed Jul 01, 2020 2:51 pm
steve321 wrote: Wed Jul 01, 2020 2:45 pm I came across this interesting article on EU stocks.
https://www.aqr.com/Insights/Research/M ... -Me-Its-EU
Complicated stuff though. My mentor Ray Dalio is very strong in macroeconomic thinking (as in everything else); I tend to go for individual stocks analysis.
But concerning the EU it has potential but politics will play a very determining role according to that article. Let's see how it plays out.
Don't know about the UK. I read a Financial Times article saying that the pound sterling is becoming a third world currency - perhaps the UK might become a third world country then. :(
Concerning Emerging Markets I'm pretty bullish myself.
So here are my thoughts on various geographical areas outside US, take it or leave it.
PS
I don't know enough about Japan to express an opinion on the stock market over there - I love Japanese food though! :happy :beer
Great link, thank you

There was a time where I did VTSAX 70/ VTIAX 15 / VEMAX 15 to over-weight EM's

But, I didn't like the expense ratio and am very adverse to complicating my personal portfolio. For those who are bullish on EM like yourselves, its definitely an option tho :)
Great, glad you liked it. I'm in the UK I use EMIM over here but VEMAX looks good and is cheaper, like funds in the US generally seem to be. Cheers.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde
cheezit
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by cheezit »

Wayson wrote: Wed Jul 01, 2020 12:52 pm Meanwhile if we look at VGTSX from January of 2000 (!!!) until today, VGTSX has only returned 14.70% (not counting dividends, as I can't find an online calculator that will compute total return for it.)
PV to the rescue! The total return over that period, including dividends, was +83%. Over the same period, US equities had a total return of +227%, and the real winner was long US Treasurys with a stellar +378% total return.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by willthrill81 »

asif408 wrote: Wed Jul 01, 2020 1:46 pm
willthrill81 wrote: Wed Jul 01, 2020 11:57 am My point was that just because the current high flyers appear to be indomitable does not mean that their forward performance will continue as it has for the last decade. U.S. large-cap growth will continue to outperform until it doesn't. Ex-U.S. will continue to underperform until it doesn't. But that doesn't automatically make a LCG growth tilt bad nor a tilt toward ex-U.S. good. We just don't know. Anyone who says otherwise (not saying you) is a liar or deluded.
What we do know is that making a bet completely one way or another (all US or all ex-US) increases the dispersion of potential outcomes, and owning some of all mitigates the dispersion of returns, which would mitigate the potential of a poor outcome (of course, that by definition also mitigates the potential for a much higher than average return, which is what US only investors got the past decade).
If your goal is truly to decrease the dispersion of potential, then fixed income is far more likely to be effective than are global equities. The correlation between U.S. and international has been far too great to see significant added benefit there, especially with the central banks' roles having changed greatly in the last ~40 years.

While it's theoretically true that a global allocation should have a smaller dispersion of outcomes without sacrificing returns, that's not actually been true since 1986 (all available data in PV). The Sharpe ratio for a portfolio with only U.S. stock was much higher than one with 50/50 exposure to global stock, and the maximum drawdown of the latter was slightly greater as well.

Was that a statistical fluke? Maybe.

Is an investor foolish to think that maybe it wasn't a fluke? I certainly don't think so.

Further, the question I find to be much more interesting and relevant is whether ex-U.S. stock is the best means for U.S. investors to diversify their otherwise U.S. stock-heavy portfolios without historically reducing their returns in the process. Based on the data I've seen, the answer to that is robustly no.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by Schlabba »

willthrill81 wrote: Wed Jul 01, 2020 3:49 pm
asif408 wrote: Wed Jul 01, 2020 1:46 pm
willthrill81 wrote: Wed Jul 01, 2020 11:57 am My point was that just because the current high flyers appear to be indomitable does not mean that their forward performance will continue as it has for the last decade. U.S. large-cap growth will continue to outperform until it doesn't. Ex-U.S. will continue to underperform until it doesn't. But that doesn't automatically make a LCG growth tilt bad nor a tilt toward ex-U.S. good. We just don't know. Anyone who says otherwise (not saying you) is a liar or deluded.
What we do know is that making a bet completely one way or another (all US or all ex-US) increases the dispersion of potential outcomes, and owning some of all mitigates the dispersion of returns, which would mitigate the potential of a poor outcome (of course, that by definition also mitigates the potential for a much higher than average return, which is what US only investors got the past decade).
If your goal is truly to decrease the dispersion of potential, then fixed income is far more likely to be effective than are global equities. The correlation between U.S. and international has been far too great to see significant added benefit there, especially with the central banks' roles having changed greatly in the last ~40 years.

While it's theoretically true that a global allocation should have a smaller dispersion of outcomes without sacrificing returns, that's not actually been true since 1986 (all available data in PV). The Sharpe ratio for a portfolio with only U.S. stock was much higher than one with 50/50 exposure to global stock, and the maximum drawdown of the latter was slightly greater as well.

Was that a statistical fluke? Maybe.

Is an investor foolish to think that maybe it wasn't a fluke? I certainly don't think so.

Further, the question I find to be much more interesting and relevant is whether ex-U.S. stock is the best means for U.S. investors to diversify their otherwise U.S. stock-heavy portfolios without historically reducing their returns in the process. Based on the data I've seen, the answer to that is robustly no.
Let me fix that for you:
The answer to that has been robustly no.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by vineviz »

willthrill81 wrote: Wed Jul 01, 2020 3:49 pm
Further, the question I find to be much more interesting and relevant is whether ex-U.S. stock is the best means for U.S. investors to diversify their otherwise U.S. stock-heavy portfolios without historically reducing their returns in the process. Based on the data I've seen, the answer to that is robustly no.
A choice doesn’t have to be the BEST option in order to be a GOOD option.

Would you rather have a car with seatbelts or one with brakes?

Just like the false choice implied by frame by the question as ex-US stocks or be bonds, the choice between brakes and seatbelts is a false one since having both is trivially easy to do.
"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: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by vineviz »

Schlabba wrote: Wed Jul 01, 2020 3:54 pm
Let me fix that for you:
The answer to that has been robustly no.
And even that answer only appears true with an excessive focus on recent returns.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by willthrill81 »

vineviz wrote: Wed Jul 01, 2020 3:57 pm
willthrill81 wrote: Wed Jul 01, 2020 3:49 pm
Further, the question I find to be much more interesting and relevant is whether ex-U.S. stock is the best means for U.S. investors to diversify their otherwise U.S. stock-heavy portfolios without historically reducing their returns in the process. Based on the data I've seen, the answer to that is robustly no.
A choice doesn’t have to be the BEST option in order to be a GOOD option.

Would you rather have a car with seatbelts or one with brakes?

Just like the false choice implied by frame by the question as ex-US stocks or be bonds, the choice between brakes and seatbelts is a false one since having both is trivially easy to do.
I get your point, and I've never tried to dissuade a U.S. investor from owning ex-U.S. stock. I completely understand the logic.

But on the other hand, SCV appears to me to have been a far better diversifying asset in portfolios otherwise dominated by U.S. TSM than has ex-U.S. stock, for instance. For instance, while ex-U.S. outperformed U.S. TSM somewhat from 2000-2009, SCV blew both of them out of the water.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by klaus14 »

willthrill81 wrote: Wed Jul 01, 2020 4:07 pm
vineviz wrote: Wed Jul 01, 2020 3:57 pm
willthrill81 wrote: Wed Jul 01, 2020 3:49 pm
Further, the question I find to be much more interesting and relevant is whether ex-U.S. stock is the best means for U.S. investors to diversify their otherwise U.S. stock-heavy portfolios without historically reducing their returns in the process. Based on the data I've seen, the answer to that is robustly no.
A choice doesn’t have to be the BEST option in order to be a GOOD option.

Would you rather have a car with seatbelts or one with brakes?

Just like the false choice implied by frame by the question as ex-US stocks or be bonds, the choice between brakes and seatbelts is a false one since having both is trivially easy to do.
I get your point, and I've never tried to dissuade a U.S. investor from owning ex-U.S. stock. I completely understand the logic.

But on the other hand, SCV appears to me to have been a far better diversifying asset in portfolios otherwise dominated by U.S. TSM than has ex-U.S. stock, for instance. For instance, while ex-U.S. outperformed U.S. TSM somewhat from 2000-2009, SCV blew both of them out of the water.
why not both? you can even do exUS SCV cheaply nowadays.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by 02nz »

Wayson wrote: Wed Jul 01, 2020 12:52 pm
02nz wrote: Wed Jul 01, 2020 11:05 am
Wayson wrote: Wed Jul 01, 2020 10:57 am I made the choice a few months ago - after 7+ years of holding VXUS and watching as it went nowhere - to divest from it and go 100% US. I had been maintaining 20% of equities as an allocation to international, but the continued underperformance convinced me that over a reasonable timeframe it didn't make sense to keep holding it. I have every confidence that in the extreme long term, international may indeed revert to performance that approximates or exceeds US-only. However, as Keynes said, "this long run is a misleading guide to current affairs. In the long run we are all dead." I cannot afford to wait, 20, 30, 40 years for an investment to cease stagnating. I require a reasonable rate of return annually in order to meet my target retirement numbers.

Holding international blindly in the expectation that, after a decade of near-zero movement, it will suddenly surge in performance and compensate holders for that missed decade.... that was a leap of faith that I wasn't willing to continue making. I understand the 'buy the haystack' perspective, but after a certain point it seems like diversification for diversification's sake. Others may disagree, but ultimately we must all act as we feel best. :beer
So in 2009, the same you would have looked back at a lost decade for U.S. stocks (negative nominal returns, actually much worse than international stocks did over the past decade - positive returns even after inflation), and said the same thing and thrown in the towel on U.S. stocks?
No, because the underlying reasons for the stagnation of US asset values were clear. Two massive crashes in a 8-9 year span, both with prolonged multi-year recoveries. ...
Ah, everything seems so clear in hindsight, doesn't it?
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by willthrill81 »

klaus14 wrote: Wed Jul 01, 2020 4:15 pm
willthrill81 wrote: Wed Jul 01, 2020 4:07 pm
vineviz wrote: Wed Jul 01, 2020 3:57 pm
willthrill81 wrote: Wed Jul 01, 2020 3:49 pm
Further, the question I find to be much more interesting and relevant is whether ex-U.S. stock is the best means for U.S. investors to diversify their otherwise U.S. stock-heavy portfolios without historically reducing their returns in the process. Based on the data I've seen, the answer to that is robustly no.
A choice doesn’t have to be the BEST option in order to be a GOOD option.

Would you rather have a car with seatbelts or one with brakes?

Just like the false choice implied by frame by the question as ex-US stocks or be bonds, the choice between brakes and seatbelts is a false one since having both is trivially easy to do.
I get your point, and I've never tried to dissuade a U.S. investor from owning ex-U.S. stock. I completely understand the logic.

But on the other hand, SCV appears to me to have been a far better diversifying asset in portfolios otherwise dominated by U.S. TSM than has ex-U.S. stock, for instance. For instance, while ex-U.S. outperformed U.S. TSM somewhat from 2000-2009, SCV blew both of them out of the water.
why not both? you can even do exUS SCV cheaply nowadays.
You certainly can. Ex-U.S. SCV funds are now available, and that asset class has far outperformed developed ex-U.S. over the last decade.

Regarding having U.S. TSM, U.S. SCV, developed ex-U.S., and ex-U.S. SCV, the data I've seen suggest that, due to its size on the global landscape, U.S. investors can logically have a significant tilt to the U.S. because they are experiencing U.S. inflation, not France's, Japan's, or Brazil's. Disconnecting one's investments from one's inflation can be risky. It can certainly help in some situations, especially in the event of hyperinflation, as noted above. But if the U.S. experienced hyperinflation for any meaningful period of time, I have no doubt that there would be a global financial collapse, and I mean that literally. There would be no hiding in ex-U.S. stocks.

Again, I'm not opposed to ex-U.S. at all. But the 'global market cap' folks often take a very antagonistic stance toward the 'U.S. tilting' or 'U.S. only is probably good enough' folks that I do not personally find to be very persuasive. There are good arguments on both sides, and acknowledging that this is the case is something that very few seem willing to do for some reason. I suppose it's rooted in the human tendency to want black and white answers to everything.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by klaus14 »

willthrill81 wrote: Wed Jul 01, 2020 4:27 pm
klaus14 wrote: Wed Jul 01, 2020 4:15 pm
willthrill81 wrote: Wed Jul 01, 2020 4:07 pm
vineviz wrote: Wed Jul 01, 2020 3:57 pm
willthrill81 wrote: Wed Jul 01, 2020 3:49 pm
Further, the question I find to be much more interesting and relevant is whether ex-U.S. stock is the best means for U.S. investors to diversify their otherwise U.S. stock-heavy portfolios without historically reducing their returns in the process. Based on the data I've seen, the answer to that is robustly no.
A choice doesn’t have to be the BEST option in order to be a GOOD option.

Would you rather have a car with seatbelts or one with brakes?

Just like the false choice implied by frame by the question as ex-US stocks or be bonds, the choice between brakes and seatbelts is a false one since having both is trivially easy to do.
I get your point, and I've never tried to dissuade a U.S. investor from owning ex-U.S. stock. I completely understand the logic.

But on the other hand, SCV appears to me to have been a far better diversifying asset in portfolios otherwise dominated by U.S. TSM than has ex-U.S. stock, for instance. For instance, while ex-U.S. outperformed U.S. TSM somewhat from 2000-2009, SCV blew both of them out of the water.
why not both? you can even do exUS SCV cheaply nowadays.
You certainly can. Ex-U.S. SCV funds are now available, and that asset class has far outperformed developed ex-U.S. over the last decade.

Regarding having U.S. TSM, U.S. SCV, developed ex-U.S., and ex-U.S. SCV, the data I've seen suggest that, due to its size on the global landscape, U.S. investors can logically have a significant tilt to the U.S. because they are experiencing U.S. inflation, not France's, Japan's, or Brazil's. Disconnecting one's investments from one's inflation can be risky. It can certainly help in some situations, especially in the event of hyperinflation, as noted above. But if the U.S. experienced hyperinflation for any meaningful period of time, I have no doubt that there would be a global financial collapse, and I mean that literally. There would be no hiding in ex-U.S. stocks.

Again, I'm not opposed to ex-U.S. at all. But the 'global market cap' folks often take a very antagonistic stance toward the 'U.S. tilting' or 'U.S. only is probably good enough' folks that I do not personally find to be very persuasive. There are good arguments on both sides, and acknowledging that this is the case is something that very few seem willing to do for some reason. I suppose it's rooted in the human tendency to want black and white answers to everything.
One can have his US tilt with bonds. I don't hold exUS developed bonds.
(I do hold EM bonds as part of my risk alloc)
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by LongTermEtfHolder »

adam1712 wrote: Wed Jul 01, 2020 1:29 pm That's a pretty good argument right there that labor costs for ex-US tech companies might soon make them a better investment in the future.
That would make sense if "cheap labor" was important in tech as it is in, say, manufacturing. However, R&D in cutting edge fields is unlike manufacturing.

Take self-driving as a futuristic technology. Typically of tech, it's a winner-takes-all race. Whichever company developers that first will reap huge rewards.

You can't undercut that winner by producing the same thing for a lower price, because the winner will have a legal monopoly over the technology they developed thanks to IP laws.

(That's why the US is so interested in establishing IP protections via the agreement with China.)
If this current tech boom is similar to the dot.com boom around 2000, a lot of the profits might have already been made in the tech companies and then the future profits and benefits will be to peripheral companies and people in the US and around the globe.
I am not certain about many things, including some of my ideas in this thread. I am not certain US tech will continue to outperform for two or even one more decade. However, as a technologist, trust me on this:

Tech is just getting started.

Artificial Intelligence and Machine Learning are just now hitting their stride.

You ain't seen nothing yet.
I'm 33% ex-US for my stocks. And I'm willing to admit I'm often in no hurry to rebalance to international since I don't think it's as important as making sure my stock/bond ratio is close to my desired AA. I don't think there's that much harm in deciding 40% is too much for you. I just would highly recommend not making a sudden change to 0%.
Hilariously, I seem to be the only one in this thread who actually followed Vanguard advice to the letter and held 40% ex-US. Maybe that's why I'm pissed off: 40% of my portfolio is not even beating inflation!
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by willthrill81 »

LongTermEtfHolder wrote: Wed Jul 01, 2020 4:39 pmYou can't undercut that winner by producing the same thing for a lower price, because the winner will have a legal monopoly over the technology they developed thanks to IP laws.
Patent laws don't usually offer as much protection as that. The process of quickly creating one's own 'unique' invention to undercut the product pioneer is so common that it's called the fast follower strategy. In the realm of services, fast followers win the game more often than do the pioneers. There are reams of academic literature on this topic.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by abuss368 »

LongTermEtfHolder wrote: Tue Jun 30, 2020 11:28 am
02nz wrote: Tue Jun 30, 2020 11:22 am Now to your broader question:
Thanks, that graph is very illustrative. I'd like to point out though that VTIAX hasn't merely "underperformed the US" - it performed poorly, period. In absolute terms, it was just a poorly yielding investment for the past 10 years. Is that normal? Would you recommend to keep buying it right now?
Recent bias? Sure after waiting 30 years.

The “older” investors on here? Bring a ton of education and collective wisdom. Listen to it as you will be a much better investor.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by stan1 »

willthrill81 wrote: Wed Jul 01, 2020 4:27 pm But the 'global market cap' folks often take a very antagonistic stance toward the 'U.S. tilting' or 'U.S. only is probably good enough' folks that I do not personally find to be very persuasive. There are good arguments on both sides, and acknowledging that this is the case is something that very few seem willing to do for some reason. I suppose it's rooted in the human tendency to want black and white answers to everything.
And then the 2/3 domestic 1/3 international folks (or 75/25) who see both arguments are accused of being indecisive for not picking a side. :oops:
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by abuss368 »

At the end of the day no one knows and guess what? It does not matter.

The most important part is not US or International. It is not REIT, Small, Gold, Junk Bonds and so forth!

No it is none of that.

It is spending less than you make. Saving and investing. Keep costs low. Build cash. Pay down / off debt. Invest you must. Pick only funds you can stick with.

The rest?

Dancing on the head of a pin!

I don’t know and I don’t care!
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by typical.investor »

LongTermEtfHolder wrote: Wed Jul 01, 2020 4:39 pmHilariously, I seem to be the only one in this thread who actually followed Vanguard advice to the letter and held 40% ex-US. Maybe that's why I'm pissed off: 40% of my portfolio is not even beating inflation!
At 45% International equities, I share your concern.

That said, I am staying the course.

Of course US companies are just better :wink: , but they are priced for that. The last couple years in particular have seen prices deviate from the fundamentals.

All international has to do is underperform by less than expected (by current pricing) or for the US to not outperform as much as expected. It's not that international has to outperform the US.

In any case, Goldman Sachs says they've done the math and project a 5% hit to US GDP because many Americans won't take the simple step of wearing a mask to prevent COVID transmission. Their case is the mask wearing would negate the need for renewed lockdowns.

In terms of inflation, I think having cheaper assets that don't have much of their price determined by future earnings is a safety net. Equities with a large future earnings component baked into their price will have that discounted if inflation rises.

And then there is the question of how long the USD can stay so strong. The pandemic certainly was a flight to safety which raised it, however long term a strong USD hurts exports and invites imports affecting US economic competitiveness.

For me the bottom line is this, $1 invested today is expected to have the same returns whether you put it in US or foreign stocks. It's the same story with value and growth stocks. For a time, one will do better than the other. And one has been doing better than the other.

What I see is growth and US stocks doing better because they are getting more expensive. Perhaps profitability will rise over time to justify their valuations, or perhaps prices will remain flat or drop.

Personally I am leery of future predictions made for hot asset classes as they seem too rosy.

Those who are US only now made a nice call, but starting to build a portfolio on only the most expensive assets because they have done well isn't something that I'd do.

I feel your pain but don't really need a big number in my account at the moment. I am ok with having holdings that have a lower P/E too. I see no reason to change that plan.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by willthrill81 »

typical.investor wrote: Wed Jul 01, 2020 5:36 pm Those who are US only now made a nice call, but starting to build a portfolio on only the most expensive assets because they have done well isn't something that I'd do.
Your logic is sound.

But just to be a friendly 'devil's advocate', there's a reason that yesterday's bread is priced 50% off. :wink:
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by typical.investor »

willthrill81 wrote: Wed Jul 01, 2020 5:50 pm
typical.investor wrote: Wed Jul 01, 2020 5:36 pm Those who are US only now made a nice call, but starting to build a portfolio on only the most expensive assets because they have done well isn't something that I'd do.
Your logic is sound.

But just to be a friendly 'devil's advocate', there's a reason that yesterday's bread is priced 50% off. :wink:
I don't see the bread reference as relevant.

A stock that has been discounted (for whatever economic, regulatory, or other reason) by 30% has the same expected returns as one that hasn't. $1 into either is expected to have the same return.

$1 into yesterday's bread is expected to return more nutritional and caloric value than $1 into today's bread. Of course the trade off is that it won't stay fresh as long and if you are very sensitive to freshness may not be as appealing.

Your comment is rather suggesting both types of bread have the same expected returns but yesterday's bread is less pleasing, and as such isn't true.

Anyway, I think you are a timer (nothing wrong with that) who goes in the market when things are going well and gets out when they don't. Valuations have little meaning to you, I suspect, and I wouldn't expect you to want to try to understand the mechanisms.

Kind of a harsh reaction from me for your playful comment. So :sharebeer
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by abuss368 »

Jack Bogle has often said that perhaps there is a reason international is so cheap.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by typical.investor »

abuss368 wrote: Wed Jul 01, 2020 6:16 pm Jack Bogle has often said that perhaps there is a reason international is so cheap.
Of course there is.

There are reasons why value is cheap too.

Did Bogle suggest we stick to growth stocks?
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by willthrill81 »

typical.investor wrote: Wed Jul 01, 2020 6:15 pm
willthrill81 wrote: Wed Jul 01, 2020 5:50 pm
typical.investor wrote: Wed Jul 01, 2020 5:36 pm Those who are US only now made a nice call, but starting to build a portfolio on only the most expensive assets because they have done well isn't something that I'd do.
Your logic is sound.

But just to be a friendly 'devil's advocate', there's a reason that yesterday's bread is priced 50% off. :wink:
I don't see the bread reference as relevant.

A stock that has been discounted (for whatever economic, regulatory, or other reason) by 30% has the same expected returns as one that hasn't. $1 into either is expected to have the same return.

$1 into yesterday's bread is expected to return more nutritional and caloric value than $1 into today's bread. Of course the trade off is that it won't stay fresh as long and if you are very sensitive to freshness may not be as appealing.

Your comment is rather suggesting both types of bread have the same expected returns but yesterday's bread is less pleasing, and as such isn't true.

Anyway, I think you are a timer (nothing wrong with that) who goes in the market when things are going well and gets out when they don't. Valuations have little meaning to you, I suspect, and I wouldn't expect you to want to try to understand the mechanisms.

Kind of a harsh reaction from me for your playful comment. So :sharebeer
There are multiple ways to interpret the analogy. Some take the 'calories are what matter' approach and buy the discounted bread. Others want the freshest bread they can get and buy today's loaves. In general, the market places less value on yesterday's bread, which is why it's discounted. It's good enough for some, but it's not even viewed by most of them as being equivalent.

There must be a reason, probably many, why ex-U.S. has grossly underperformed U.S. for the sum total of the last 30+ years. Maybe those reasons will no longer exist going forward. Maybe they will.

Just friendly food for thought. :beer
Last edited by willthrill81 on Wed Jul 01, 2020 6:20 pm, edited 1 time in total.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by abuss368 »

typical.investor wrote: Wed Jul 01, 2020 6:18 pm
abuss368 wrote: Wed Jul 01, 2020 6:16 pm Jack Bogle has often said that perhaps there is a reason international is so cheap.
Of course there is.

There are reasons why value is cheap too.

Did Bogle suggest we stick to growth stocks?
Value and growth discussed in his books. Consider buying as you will learn much!
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by abuss368 »

It appears more and more that international really has become interlinked with US. Years ago felt like better diversification. Perhaps the result of a global economy.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by McGilicutty »

abuss368 wrote: Wed Jul 01, 2020 5:16 pm Pick only funds you can stick with.
That's the whole point of this thread. People are having trouble sticking with International due to its recent history. People had trouble sticking with US during the first decade of this century.

It's easy to stick with a fund or asset class if it performs well but very hard to stick with it if it performs poorly over a long period of time. I know that I couldn't have stuck with International for 10 years of hardly any gains (especially given how well US has performed).

I'm not sure what I'll do if US has a few poor years. I doubt I'll go full ex-US because there are some countries I don't want to be associated with, but I'll probably performance chase some other asset class.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by abuss368 »

McGilicutty wrote: Wed Jul 01, 2020 6:30 pm
abuss368 wrote: Wed Jul 01, 2020 5:16 pm Pick only funds you can stick with.
That's the whole point of this thread. People are having trouble sticking with International due to its recent history. People had trouble sticking with US during the first decade of this century.

It's easy to stick with a fund or asset class if it performs well but very hard to stick with it if it performs poorly over a long period of time. I know that I couldn't have stuck with International for 10 years of hardly any gains (especially given how well US has performed).

I'm not sure what I'll do if US has a few poor years. I doubt I'll go full ex-US because there are some countries I don't want to be associated with, but I'll probably performance chase some other asset class.
Do you invest in international?
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by 02nz »

abuss368 wrote: Wed Jul 01, 2020 6:21 pm It appears more and more that international really has become interlinked with US. Years ago felt like better diversification. Perhaps the result of a global economy.
There's truth in that, but things can change and are changing. If you had told me a year ago we'd see the number of daily flights between New York and London drop from 30+ to 2, or Americans not being permitted to enter most European countries (among many others), I would've laughed in disbelief. But that's what happened. The consequences of the pandemic (and other developments that aren't allowed to be discussed on this forum) will take quite some time to fully manifest themselves. But it's certainly not out of the realm of possibility that we'll see a partial reversal of the kind of globalization and interconnectedness that have made U.S. and int'l stocks more closely correlated. Obviously no one knows if we'll see a greater diversification benefit from ex-US in the next 10 years than we did in the past 10, but I definitely wouldn't rule it out thinking globalization is inexorable or irreversible.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by McGilicutty »

abuss368 wrote: Wed Jul 01, 2020 6:33 pm
McGilicutty wrote: Wed Jul 01, 2020 6:30 pm
abuss368 wrote: Wed Jul 01, 2020 5:16 pm Pick only funds you can stick with.
That's the whole point of this thread. People are having trouble sticking with International due to its recent history. People had trouble sticking with US during the first decade of this century.

It's easy to stick with a fund or asset class if it performs well but very hard to stick with it if it performs poorly over a long period of time. I know that I couldn't have stuck with International for 10 years of hardly any gains (especially given how well US has performed).

I'm not sure what I'll do if US has a few poor years. I doubt I'll go full ex-US because there are some countries I don't want to be associated with, but I'll probably performance chase some other asset class.
Do you invest in international?
No, but I learned some things about International that I didn't know by asking questions in this thread. Maybe I'll invest in some International markets in the future, but I don't have any plans to do that as of now.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by abuss368 »

02nz wrote: Wed Jul 01, 2020 6:38 pm
abuss368 wrote: Wed Jul 01, 2020 6:21 pm It appears more and more that international really has become interlinked with US. Years ago felt like better diversification. Perhaps the result of a global economy.
There's truth in that, but things can change and are changing. If you had told me a year ago we'd see the number of daily flights between New York and London drop from 30+ to 2, or Americans not being permitted to enter most European countries (among many others), I would've laughed in disbelief. But that's what happened. The consequences of the pandemic (and other developments that aren't allowed to be discussed on this forum) will take quite some time to fully manifest themselves. But it's certainly not out of the realm of possibility that we'll see a partial reversal of the kind of globalization and interconnectedness that have made U.S. and int'l stocks more closely correlated. Obviously no one knows if we'll see a greater diversification benefit from ex-US in the next 10 years than we did in the past 10, but I definitely wouldn't rule it out thinking globalization is inexorable or irreversible.
Or if international economies now outperform!
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by abuss368 »

McGilicutty wrote: Wed Jul 01, 2020 6:40 pm
abuss368 wrote: Wed Jul 01, 2020 6:33 pm
McGilicutty wrote: Wed Jul 01, 2020 6:30 pm
abuss368 wrote: Wed Jul 01, 2020 5:16 pm Pick only funds you can stick with.
That's the whole point of this thread. People are having trouble sticking with International due to its recent history. People had trouble sticking with US during the first decade of this century.

It's easy to stick with a fund or asset class if it performs well but very hard to stick with it if it performs poorly over a long period of time. I know that I couldn't have stuck with International for 10 years of hardly any gains (especially given how well US has performed).

I'm not sure what I'll do if US has a few poor years. I doubt I'll go full ex-US because there are some countries I don't want to be associated with, but I'll probably performance chase some other asset class.
Do you invest in international?
No, but I learned some things about International that I didn't know by asking questions in this thread. Maybe I'll invest in some International markets in the future, but I don't have any plans to do that as of now.
Thanks. That is the problem. No one knows. I did see international dividends dropped a large amount this quarter.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by midareff »

willthrill81 wrote: Wed Jul 01, 2020 11:57 am
midareff wrote: Wed Jul 01, 2020 11:53 am
willthrill81 wrote: Tue Jun 30, 2020 6:51 pm
vineviz wrote: Tue Jun 30, 2020 6:33 pm
LongTermEtfHolder wrote: Tue Jun 30, 2020 6:20 pm These companies - like Amazon, Google, and Facebook - only seem to gain more power and wealth with time. Which group of stocks could possibly outperform them?
I can’t tell if you’re being naive, sarcastic, or if you’re just trolling us.

Was there supposed to be an eye-wink emoticon?
While I lean toward the 'U.S. only is probably good enough' argument, I have to agree with you here.

Almost two years ago, I started a thread about a Research Affiliates piece that detailed how all of the top 10 largest companies by market cap-weight in the year 2000 subsequently very badly underperformed the S&P 500 in the next 18 years.
Whether they outperformed the S&P or under performed it we still have the S&P Index. Interestingly enough between 42% and 44% of the sales of the S&P 500 are internationally. AFAIC, that firmly ties the S&P 500 to the wealth, health and prosperity of the rest of the world without having to be concerned about international corporate law, politics, exchange rates and any and all other external influences. The SD&P500 and VTSAX are good enough for me. I worked here, I retired here, I live here, I eat here and I invest here... good enough.
My point was that just because the current high flyers appear to be indomitable does not mean that their forward performance will continue as it has for the last decade. U.S. large-cap growth will continue to outperform until it doesn't. Ex-U.S. will continue to underperform until it doesn't. But that doesn't automatically make a LCG growth tilt bad nor a tilt toward ex-U.S. good. We just don't know. Anyone who says otherwise (not saying you) is a liar or deluded.
I totally agree Will/... things will continue as they have until they don't. My choosing to invest in the USA and exclude International is my choice for me, others may choose for them as they like.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by willthrill81 »

McGilicutty wrote: Wed Jul 01, 2020 6:30 pm
abuss368 wrote: Wed Jul 01, 2020 5:16 pm Pick only funds you can stick with.
That's the whole point of this thread. People are having trouble sticking with International due to its recent history.
I have no doubt that some are doing just that. But not all.

Many are looking at the last 30+ years and finding it hard to believe in the theoretical justifications for ex-U.S. when the returns have paled in comparison to those of the U.S. Maybe that's short enough to be called 'recent history'.

Ex-U.S. will outperform again at some point. I have zero doubt of that. But will that be true for the sum total of the next 10, 20, or 50 years? I don't know.

Again, I see both sides of this perpetual issue. Blanket statements for either side (e.g. 'people are doing X strictly because of Y') are simply inaccurate.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by 02nz »

McGilicutty wrote: Wed Jul 01, 2020 6:30 pm It's easy to stick with a fund or asset class if it performs well but very hard to stick with it if it performs poorly over a long period of time. I know that I couldn't have stuck with International for 10 years of hardly any gains (especially given how well US has performed).
So you wouldn't have stuck with U.S. stocks in 2009, after a decade of net negative returns? How would that have worked out?
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by McGilicutty »

02nz wrote: Wed Jul 01, 2020 8:06 pm
McGilicutty wrote: Wed Jul 01, 2020 6:30 pm It's easy to stick with a fund or asset class if it performs well but very hard to stick with it if it performs poorly over a long period of time. I know that I couldn't have stuck with International for 10 years of hardly any gains (especially given how well US has performed).
So you wouldn't have stuck with U.S. stocks in 2009, after a decade of net negative returns? How would that have worked out?
No, I doubt if I could tolerate a decade of negative returns. After a few years, I would be performance chasing something else.

But, you've picked the worst period for U.S. stocks in recent history. Most people aren't going to be so unlucky as to put their lifetime earnings into the market all at once at the top. Instead, they will likely put money into the market over time and try different things and hopefully some of them work out.

As for me, I cashed out some nice stock options and RSUs in the 2013-2015 period and put that into the S&P 500. I happened to get lucky with the timing as well as the asset class and it's worked out well. I also have some individual U.S. tech stocks that have done well. As I said in another post, it's better to be lucky than good.
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by 02nz »

McGilicutty wrote: Wed Jul 01, 2020 9:27 pm
02nz wrote: Wed Jul 01, 2020 8:06 pm
McGilicutty wrote: Wed Jul 01, 2020 6:30 pm It's easy to stick with a fund or asset class if it performs well but very hard to stick with it if it performs poorly over a long period of time. I know that I couldn't have stuck with International for 10 years of hardly any gains (especially given how well US has performed).
So you wouldn't have stuck with U.S. stocks in 2009, after a decade of net negative returns? How would that have worked out?
No, I doubt if I could tolerate a decade of negative returns. After a few years, I would be performance chasing something else.

But, you've picked the worst period for U.S. stocks in recent history. Most people aren't going to be so unlucky as to put their lifetime earnings into the market all at once at the top. Instead, they will likely put money into the market over time and try different things and hopefully some of them work out.

As for me, I cashed out some nice stock options and RSUs in the 2013-2015 period and put that into the S&P 500. I happened to get lucky with the timing as well as the asset class and it's worked out well. I also have some individual U.S. tech stocks that have done well. As I said in another post, it's better to be lucky than good.
Perhaps it's time for a little refresher :happy : https://www.bogleheads.org/wiki/Boglehe ... philosophy
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Re: Will ex-US ever revert to good performance? Or is it just a high-risk, low-reward investment?

Post by Northern Flicker »

LongTermETFInvestor wrote: I am not certain about many things, including some of my ideas in this thread. I am not certain US tech will continue to outperform for two or even one more decade. However, as a technologist, trust me on this:

Tech is just getting started.

Artificial Intelligence and Machine Learning are just now hitting their stride.

You ain't seen nothing yet.
Other market participants know about the technologies in question. They may undervalue them so that the stocks are underpriced. They may overvalue them so that you would be overpaying to participate in the rewards of these dazzling outcomes. Or, most likely they may be in aggregate pricing them fairly so that the price you pay for the stocks reflects their risk, and their expected risk-adjusted return matches that of other stocks.
Risk is not a guarantor of return.
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