The International Cap Weight (and Beyond!) Discussion Thread

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
Nathan Drake
Posts: 1146
Joined: Mon Apr 11, 2011 12:28 am

The International Cap Weight (and Beyond!) Discussion Thread

Post by Nathan Drake »

US stocks get plenty of love on this forum. Jack Bogle has been a long proponent of not needing international. Buffet uses the S&P 500 as a common benchmark and will invest his wealth in this fund for his wife (despite owning plenty of international as part of Berkshire). While these industry mavens have done much for the average investor throughout their lives, I don't blindly follow all of their advice. And often, their own beliefs are in conflict with bigger picture investment themes. And that's perfectly fine. We all have our own biases.

I am going to make the argument that if you live in the US, and are investing 100% in US stocks, that you are taking a big risk that is completely unnecessary. A risk that is easily diversified away by investing in cheap index funds. And even if you believe that the US will perpetually see superior returns over the coming decades, a 20% allocation will likely be a good starting point to mitigate significant risk that you are wrong.

But this thread isn't about those that just want to wet their toes into international investing. It's for those that are truly "owning the haystack" at near market weights! 40-60% Depending on where you think the appropriate global cap of exUS should be. For those even more daring, we invest even more than 60% in international.

I would argue that it would be a better decision to be 100% exUS than 100% US on the basis of currency diversification, sector diversification, political/country diversification, and demographic diversification. Yet, the former strategy is absolutely unheard of yet the latter is pretty common.

Things to like about International Equities:

  • Valuations are close to half that of the US
  • ExUS as a percentage of total market cap is at a historical low
  • The majority of the US outperformance over the past 30 years has been due to changes in valuation rather than fundamentals
  • Emerging Markets have superior demographics and some growth aspects of their stocks for cheaper valuations
  • Despite a very poor decade coming out of the GFC, the Eurozone's debt situation slowly improves
  • US has gone from 1/3 of market cap to nearly 2/3 in three decades. Either US goes even higher from these all time highs, it mean reverts, or it stays flat...take your pick on which one you think is most likely to occur. In two of the scenarios, international does just fine.
  • A period of high US inflation, dollar debasement, and a transition away from the reserve currency status will be a tailwind for international stocks to go higher for multiple reasons; commodities, tangible products and services, and more "value" oriented companies that don't have astronomical expectations of future cashflows
Interesting Charts:

Image

Image

Image

I personally have a slight tilt (60%) towards international/emerging markets, with 40% in the US. I may even consider going as high as 2/3s to 3/4s, or it will naturally rise to these levels if we see strong exUS outperformance in the future. Despite the relatively lesser returns over the past decade, this has proven to provide a roughly 10% annualized return and I have been able to stay the course just fine. And even of my US equities, I'm invested in roughly half of those towards Small Cap Value. The equity valuations of US TSM are somewhat alarming to me and I'd personally rather not be so highly exposed when I see better values elsewhere. I liked US equities a decade ago, but I'm not so enthusiastic about starting valuations from where we are at today.

Of course, I could be wrong. US stocks could mimic Japan in the 80s and continue to rapidly increase to obscene levels of global market caps on the backs of speculative megacorp tech stocks that will have no global competition and end up ruling over everyone else with their superior platforms. I find this argument to be highly unlikely if history is our guide, but even so - I will benefit from the amount I have allocated to US TSM.

Nobody knows nothing, but I do know that history tends to rhyme.
okwriter
Posts: 109
Joined: Mon Apr 12, 2021 2:00 pm

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by okwriter »

Another chart to add to your list:

Image

If you'd been all-US, it looks like you'd have missed out on quite a bit; that spike in the 80s stands out.

Source.
User avatar
JoMoney
Posts: 11511
Joined: Tue Jul 23, 2013 5:31 am

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by JoMoney »

How in the world could this be the "official" thread when there's thousands of others, including several currently active threads.
My prediction is this one will run it's course and be locked before before reaching the 13+ pages of this still active one, that you're currently the last poster in.
viewtopic.php?f=10&t=171942
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Topic Author
Nathan Drake
Posts: 1146
Joined: Mon Apr 11, 2011 12:28 am

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by Nathan Drake »

JoMoney wrote: Mon Jun 07, 2021 11:12 pm How in the world could this be the "official" thread when there's thousands of others, including several currently active threads.
My prediction is this one will run it's course and be locked before before reaching the 13+ pages of this still active one, that you're currently the last poster in.
viewtopic.php?f=10&t=171942
I don’t believe there’s a thread specifically for those that choose to own exUS at market weights or tilted. Many here naturally have a large tilt towards US.

And of course most exUS threads have a negative theme to them, such as the one you have linked. I’m sure some posters even avoid those topics simply because it’s extremely negative to those that decide to have more diversification. This is intended to be a bit more positively focused on the benefits of such a strategy, but dissenting views are welcome.
User avatar
JoMoney
Posts: 11511
Joined: Tue Jul 23, 2013 5:31 am

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by JoMoney »

International is (relatively) cheap when looking at the fundamentals (if you ignore the lack of/negative growth in the fundamentals.)
It does seem like they're "due" for a (relative) win eventually.
If other countries weren't debasing their currency as much, they could look better than the dollar.
The 'standard deviation' of broad international is about that of a "mid-cap" U.S. fund, it is riskier, but not especially so in terms of standard deviation.
... just have to get past the higher costs, foreign tax withholding, and lower eligibility for 'qualified dividends'.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Topic Author
Nathan Drake
Posts: 1146
Joined: Mon Apr 11, 2011 12:28 am

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by Nathan Drake »

Lack of growth is a lagging indicator

With supply shocks coming out of COVID, it wouldn’t surprise me to see an uptick in growth for the more industrial and value oriented industries that are more present in exUS

Costs really aren’t a huge concern as they once were. You can get a cheap international fund for a few basis points. Don’t let expenses or taxes wag the dog just because US might be ever so slightly cheaper on those fronts
Topic Author
Nathan Drake
Posts: 1146
Joined: Mon Apr 11, 2011 12:28 am

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by Nathan Drake »

Stock markets outside the U.S. could beat inflation even at 1970s levels, says Citigroup

https://www.marketwatch.com/story/stock ... 1623092763
fennewaldaj
Posts: 1087
Joined: Sun Oct 22, 2017 11:30 pm

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by fennewaldaj »

I am a bit above cap weight as I go with a 50/50 split. I have contemplated going past that to like 60/40 or even further.
todaysBob
Posts: 90
Joined: Mon Mar 02, 2020 6:39 pm

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by todaysBob »

I have been 50:50 US/Intl with half of the intl in Emerging Markets for a year now. I went with this thinking developing countries have more room to grow, should have higher GDP growth and thus higher stock prices. I have since learned that is not the case as all the expected growth is already "priced in". Market knows much more than I ever can.

Performance so far has been good but I do get nervous holding this much International specially because of lack of structure in emerging markets. India for instance has just 50 stocks in its most broad index(Nifty), most of the businesses are not participating in public markets. If we can't get access to the corners of these countries that are growing, does it still make sense to keep buying them?

To summarize my biggest worry is current crop of index funds not being able to properly capture the growth in the developing countries. They are probably fine for Europe and Japan but then these developed countries don't look as promising as the developing ones.
Ocean77
Posts: 403
Joined: Wed Oct 23, 2019 3:20 pm

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by Ocean77 »

Great thread, thanks for starting it!! The OP basically speaks my mind. I'm roughly market weight, in fact slightly more international than US. The way I look at it, the US has a bit over 4% of the world population and our economy makes up 15% share of global GDP. That alone is no small feat. Yet even more remarkably, it makes up about half of the world equity valuation. And those who are putting all or most of their assets into US stocks are basically betting that this outsize share will grow to get even bigger in the future.

I think it will hard as it is for the US to even maintain this weight. If 10 or 20 years from now, the US manages to keep half of the world equity valuation, then by definition, the US stock market performance over those decades would be identical to the performance of international markets. However those who invest primarily in the US are betting that the US share will grow even bigger, perhaps to 60 or 70% of the world stock market? With all the rest of the world, Europe, Japan and the dynamic developing countries of Asia all combined shrinking to 30% to 40%? I would not say such a scenario is entirely impossible. But I would say that the opposite trend is at least as likely. By having a market weight asset allocation, one would essentially be neutral in this respect, and profit either way it goes. Betting all your money on the US simply does not make sense to me.

Anyway, this is how I think about it. I'm looking forward to other BH members who are roughly at market weight to share their thoughts!

And for those BH members here who are 80...100% invested in the US: We know that we are not going to change your mind, which is fine, so you don't need to feel need to chime in here!
HerbertSqueeze
Posts: 6
Joined: Wed Apr 14, 2021 5:45 am

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by HerbertSqueeze »

Yeah, as a European investor it really has never occurred to me why you would want to concentrate your portfolio on one country, especially after it has already enjoyed a significant performance. I just don't get it. It is not much different to me as concentrating your portfolio on a sector because it has done well so far. And sure, after the fact there are always plenty of rationalizations to be found for the outperformance, but if these rationalizations were so sound, they would be easily actionable going forward.

The only part I might understand is that the cap of US is so big and the US equities are currently so much intertwined with the global market, that it just does not matter and that costs and simplicity might win out for Americans. There might just be no special need for US investors to go beyond their own borders. Other than that it just seems like performance chasing to me. There is always going to be one country (or sector etc) that outperforms in any given period. The US just happens to be the one in our timeline at the moment, but that does not tell me anything going forward.

That's why I just hold a total market cap weighted bag of index funds, and accept that my portfolio will always lose out to some more concentrated or tilted portfolio.
whereskyle
Posts: 1712
Joined: Wed Jan 29, 2020 10:29 am

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by whereskyle »

Nathan Drake wrote: Mon Jun 07, 2021 10:35 pm US stocks get plenty of love on this forum. Jack Bogle has been a long proponent of not needing international. Buffet uses the S&P 500 as a common benchmark and will invest his wealth in this fund for his wife (despite owning plenty of international as part of Berkshire). While these industry mavens have done much for the average investor throughout their lives, I don't blindly follow all of their advice. And often, their own beliefs are in conflict with bigger picture investment themes. And that's perfectly fine. We all have our own biases.

I am going to make the argument that if you live in the US, and are investing 100% in US stocks, that you are taking a big risk that is completely unnecessary. A risk that is easily diversified away by investing in cheap index funds. And even if you believe that the US will perpetually see superior returns over the coming decades, a 20% allocation will likely be a good starting point to mitigate significant risk that you are wrong.

But this thread isn't about those that just want to wet their toes into international investing. It's for those that are truly "owning the haystack" at near market weights! 40-60% Depending on where you think the appropriate global cap of exUS should be. For those even more daring, we invest even more than 60% in international.

I would argue that it would be a better decision to be 100% exUS than 100% US on the basis of currency diversification, sector diversification, political/country diversification, and demographic diversification. Yet, the former strategy is absolutely unheard of yet the latter is pretty common.

Things to like about International Equities:

  • Valuations are close to half that of the US
  • ExUS as a percentage of total market cap is at a historical low
  • The majority of the US outperformance over the past 30 years has been due to changes in valuation rather than fundamentals
  • Emerging Markets have superior demographics and some growth aspects of their stocks for cheaper valuations
  • Despite a very poor decade coming out of the GFC, the Eurozone's debt situation slowly improves
  • US has gone from 1/3 of market cap to nearly 2/3 in three decades. Either US goes even higher from these all time highs, it mean reverts, or it stays flat...take your pick on which one you think is most likely to occur. In two of the scenarios, international does just fine.
  • A period of high US inflation, dollar debasement, and a transition away from the reserve currency status will be a tailwind for international stocks to go higher for multiple reasons; commodities, tangible products and services, and more "value" oriented companies that don't have astronomical expectations of future cashflows
Interesting Charts:

Image

Image

Image

I personally have a slight tilt (60%) towards international/emerging markets, with 40% in the US. I may even consider going as high as 2/3s to 3/4s, or it will naturally rise to these levels if we see strong exUS outperformance in the future. Despite the relatively lesser returns over the past decade, this has proven to provide a roughly 10% annualized return and I have been able to stay the course just fine. And even of my US equities, I'm invested in roughly half of those towards Small Cap Value. The equity valuations of US TSM are somewhat alarming to me and I'd personally rather not be so highly exposed when I see better values elsewhere. I liked US equities a decade ago, but I'm not so enthusiastic about starting valuations from where we are at today.

Of course, I could be wrong. US stocks could mimic Japan in the 80s and continue to rapidly increase to obscene levels of global market caps on the backs of speculative megacorp tech stocks that will have no global competition and end up ruling over everyone else with their superior platforms. I find this argument to be highly unlikely if history is our guide, but even so - I will benefit from the amount I have allocated to US TSM.

Nobody knows nothing, but I do know that history tends to rhyme.
Please provide evidentiary support for your claim that the majority of US outperformance over the past 30 years has been due primarily to changes in valuation and not simple fundamental outperformance of US corporations. Since at least 2009, US outperformance has been primarily caused by superior earnings growth, not changes in the price/earnings ratio:

https://www.morningstar.com/articles/10 ... ost-decade

Both US and foreign stocks have seen p/e expansion at almost exactly the same rate since 2009. But US stocks have grown earnings at a far superior rate over that same period:

https://im.morningstar.com/content/CMSImages/13011.jpg

Do you have any similarly persuasive evidence (or any evidence at all) that the 30 most recent years of US outperformance is due primarily to speculation and not simple outperformance of US corporations?

If you don't have any such evidence, I kindly suggest that you remove the assertion from your post for the benefit of the forum.
"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
User avatar
LadyGeek
Site Admin
Posts: 72856
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by LadyGeek »

FYI - I fixed the capitalization in the thread title's spelling.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Somethingwitty92912
Posts: 145
Joined: Mon Sep 14, 2020 9:43 pm

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by Somethingwitty92912 »

Hard no. There’s a lot of misnomers in this post. First we invest in companies not countries. There are reasons (many of which are political.) which cannot be discussed here, as such, preventing honest discussion makes this topic sort of a hard stop.

I’ll give one broad example. The states don’t employ slave labor. Then there’s all the different laws to be considered which change country by country.

Then there’s the past does not predict the future idea which nullifies most of the graphs being presented. Technical analysis has long since proved unreliable.

What buffet, or any major fund manager does is interesting in formation, but means little to I would guess 80-95% of this forum beyond a curio.

I believe the premise of this post is incorrect. I believe this needs to be reviewed and reposted.
Da5id
Posts: 3005
Joined: Fri Feb 26, 2016 8:20 am

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by Da5id »

I agree with you overall (I'm 60% US/40% international in stocks), but I have a few nits to pick:


1) The efficient frontier graph is really rather bogus. In other threads people have shown it zoomed out for proper perspective. Yes there is (or was in 2008) an effect, both terms of improved performance and decreased volatility. But that effect is (was in 2008) really really small. Enough so that I'd say that the graph is misleading. And to the extent it makes an argument, it is clearly against market weight of international (30% was optimal).

2) Arguments for overweighting international are pretty weak. The history of attempting to tactically allocate based on P/E and such have resulted in Vanguard and others closing funds that try and do that. I'm highly dubious that individuals should be doing it either. Yes, multiples may be out of whack, and yes the cause may be speculative. But no saying that the disparity won't persist or change in ways that make that information not very useful for trying to guess at better allocations prospectively.

3) Given that LadyGeek modified the title, I gather it is OK. But were I a new reader I'd interpret "The Official" to mean somehow sanctioned/endorsed by the powers that be (aka site owner, moderators, or such).

I personally find the "rolling returns" one most persuasive. I find looking at it and reading the "100% US now and forever" threads somewhat amusing.
User avatar
LadyGeek
Site Admin
Posts: 72856
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by LadyGeek »

Da5id wrote: Tue Jun 08, 2021 7:34 am 3) Given that LadyGeek modified the title, I gather it is OK. But were I a new reader I'd interpret "The Official" to mean somehow sanctioned/endorsed by the powers that be (aka site owner, moderators, or such).
Good point. I was just fixing the spelling to remove the ALL CAPS formatting. Due to the sensitivity of the ongoing "US vs. International" discussions, I removed "Official Bogleheads" from the title. (We will "officially" lock the thread if it gets to that point.)

We do have a few threads with "official" in their title, but it's nothing as sensitive as this topic.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
JoMoney
Posts: 11511
Joined: Tue Jul 23, 2013 5:31 am

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by JoMoney »

Nathan Drake wrote: Mon Jun 07, 2021 11:54 pm...
Costs really aren’t a huge concern as they once were. You can get a cheap international fund for a few basis points. Don’t let expenses or taxes wag the dog just because US might be ever so slightly cheaper on those fronts
To characterize how much, here's a chart of the MSCI All Country World Index Excluding USA , showing the 'Net Return' index (after foreign tax withholding), the 'Gross Return' (no foreign tax withholding), and an index fund tracking the index (iShares ACWX ETF)

Image

Over this period, the 'Gross Return' index without foreign tax withholding was about .15% higher than the 'Net Return' index on an annualized basis.
The 'Gross Return' was about .21% higher annualized then the fund attempting to track the index.

Over the same period, the S&P 500 index was about .05% higher annualized then the iShares S&P 500 ETF after its expenses
LINK

If an individual held these in a retirement account, it looks like "international" costs about .16% a year more.
If they held in a taxable account, the US holder could get back some of the foreign tax withholding as a tax credit on their US taxes, but there would also be higher US taxes to pay with the larger distributions and less of those being "qualified dividends".
Last edited by JoMoney on Tue Jun 08, 2021 8:23 am, edited 1 time in total.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
UpperNwGuy
Posts: 5380
Joined: Sun Oct 08, 2017 7:16 pm

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by UpperNwGuy »

Da5id wrote: Tue Jun 08, 2021 7:34 am I personally find the "rolling returns" one most persuasive. I find looking at it and reading the "100% US now and forever" threads somewhat amusing.
I find the rolling returns chart to be less persuasive because my mind automatically ignores the late 1980s as an aberration that isn't likely to be repeated.
Da5id
Posts: 3005
Joined: Fri Feb 26, 2016 8:20 am

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by Da5id »

UpperNwGuy wrote: Tue Jun 08, 2021 8:23 am
Da5id wrote: Tue Jun 08, 2021 7:34 am I personally find the "rolling returns" one most persuasive. I find looking at it and reading the "100% US now and forever" threads somewhat amusing.
I find the rolling returns chart to be less persuasive because my mind automatically ignores the late 1980s as an aberration that isn't likely to be repeated.
I suppose if one excludes historical events that are inconvenient to one's beliefs as aberrations that indeed helps to support ones conclusions. That "aberration" could happen to the US some day too. I prefer to diversify away such risks myself. But perhaps indeed it is the case that the US will outperform into the indefinite future, asymptotically approaching 100% of global market cap (seems dubious to me). If so it is the majority of my holdings so I'll be OK with that.
ckangas
Posts: 54
Joined: Fri May 21, 2021 8:08 pm

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by ckangas »

Da5id wrote: Tue Jun 08, 2021 7:34 am I agree with you overall (I'm 60% US/40% international in stocks), but I have a few nits to pick:


1) The efficient frontier graph is really rather bogus. In other threads people have shown it zoomed out for proper perspective. Yes there is (or was in 2008) an effect, both terms of improved performance and decreased volatility. But that effect is (was in 2008) really really small. Enough so that I'd say that the graph is misleading. And to the extent it makes an argument, it is clearly against market weight of international (30% was optimal).

2) Arguments for overweighting international are pretty weak. The history of attempting to tactically allocate based on P/E and such have resulted in Vanguard and others closing funds that try and do that. I'm highly dubious that individuals should be doing it either. Yes, multiples may be out of whack, and yes the cause may be speculative. But no saying that the disparity won't persist or change in ways that make that information not very useful for trying to guess at better allocations prospectively.

3) Given that LadyGeek modified the title, I gather it is OK. But were I a new reader I'd interpret "The Official" to mean somehow sanctioned/endorsed by the powers that be (aka site owner, moderators, or such).

I personally find the "rolling returns" one most persuasive. I find looking at it and reading the "100% US now and forever" threads somewhat amusing.
On #1 the image is clearly labeled with return rates; if one looks at it for more than a few seconds it shouldn't be misleading. I don't think anyone expects that you combine two correlated assets around 9% returns and suddenly get 15% returns. And while 20 basis points (or a few more for 60/40) isn't huge in a given year, and is simply noise if someone is trying to predict US vs developed performance in the future, I think many would consider that a very big deal if it was in fees.

For #2 for the extent we do expect mean reversion of valuations, this has historically often happened over 10-30 years. Mean reversion is certainly not guaranteed in these situations, and current US valuations do get tricky concerning IT is at a higher %, lower expected interest rates, a rising CAPE over time, etc. And for every article such as the Morningstar one that is linked here, you can find a counter argument from Schiller or a well respected economist arguing the reverse. So I'm not advocating for anyone to try to time it, or even that we have a firm grasp of what valuations are / if we do or do not have efficient market prices. But it seems as if there was mean reversion, it would be over the course of decades with an expectation to lose money over the next few years as the current trend continues. If a fund is losing money over the next 5 years, it's not going to be open when the trend reverses. I don't draw much from whether funds succeed or fail from a category.

Concerning #3, I agree that it's not particularly official.
UpperNwGuy
Posts: 5380
Joined: Sun Oct 08, 2017 7:16 pm

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by UpperNwGuy »

Da5id wrote: Tue Jun 08, 2021 8:28 am
UpperNwGuy wrote: Tue Jun 08, 2021 8:23 am
Da5id wrote: Tue Jun 08, 2021 7:34 am I personally find the "rolling returns" one most persuasive. I find looking at it and reading the "100% US now and forever" threads somewhat amusing.
I find the rolling returns chart to be less persuasive because my mind automatically ignores the late 1980s as an aberration that isn't likely to be repeated.
I suppose if one excludes historical events that are inconvenient to one's beliefs as aberrations that indeed helps to support ones conclusions. That "aberration" could happen to the US some day too. I prefer to diversify away such risks myself. But perhaps indeed it is the case that the US will outperform into the indefinite future, asymptotically approaching 100% of global market cap (seems dubious to me). If so it is the majority of my holdings so I'll be OK with that.
I also consider the 31 years from 1914 to 1945 to be one giant and long aberration — and that doesn't help support a pro-US conclusion, so don't be attributing motives to me, please. I also don't believe "that the US will outperform into the indefinite future, asymptotically approaching 100% of global market cap" so I don't know how that comment applies to what I wrote.
Topic Author
Nathan Drake
Posts: 1146
Joined: Mon Apr 11, 2011 12:28 am

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by Nathan Drake »

No problem on the title changes. Thanks for allowing a devoted discussion of those that are a bit more heavily invested.
Da5id
Posts: 3005
Joined: Fri Feb 26, 2016 8:20 am

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by Da5id »

ckangas wrote: Tue Jun 08, 2021 8:33 am
Da5id wrote: Tue Jun 08, 2021 7:34 am
1) The efficient frontier graph is really rather bogus. In other threads people have shown it zoomed out for proper perspective. Yes there is (or was in 2008) an effect, both terms of improved performance and decreased volatility. But that effect is (was in 2008) really really small. Enough so that I'd say that the graph is misleading. And to the extent it makes an argument, it is clearly against market weight of international (30% was optimal).
On #1 the image is clearly labeled with return rates; if one looks at it for more than a few seconds it shouldn't be misleading. I don't think anyone expects that you combine two correlated assets around 9% returns and suddenly get 15% returns. And while 20 basis points (or a few more for 60/40) isn't huge in a given year, and is simply noise if someone is trying to predict US vs developed performance in the future, I think many would consider that a very big deal if it was in fees.

Concerning #3, I agree that it's not particularly official.
OK. But the impression the zoomed in graph gives at least to me is "big glaring effect", which I find really rather misleading. And the 20 basis points was from 2008 data. Is there an updated graph - I assume moving the 100% US return point relatively upward a chunk will largely or completely remove the enhanced return. If so, how strong a selling point is this graph?

My guess is that international will have its day, sooner rather than later. But that is really only a guess...
Da5id
Posts: 3005
Joined: Fri Feb 26, 2016 8:20 am

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by Da5id »

UpperNwGuy wrote: Tue Jun 08, 2021 8:37 am
Da5id wrote: Tue Jun 08, 2021 8:28 am
UpperNwGuy wrote: Tue Jun 08, 2021 8:23 am
Da5id wrote: Tue Jun 08, 2021 7:34 am I personally find the "rolling returns" one most persuasive. I find looking at it and reading the "100% US now and forever" threads somewhat amusing.
I find the rolling returns chart to be less persuasive because my mind automatically ignores the late 1980s as an aberration that isn't likely to be repeated.
I suppose if one excludes historical events that are inconvenient to one's beliefs as aberrations that indeed helps to support ones conclusions. That "aberration" could happen to the US some day too. I prefer to diversify away such risks myself. But perhaps indeed it is the case that the US will outperform into the indefinite future, asymptotically approaching 100% of global market cap (seems dubious to me). If so it is the majority of my holdings so I'll be OK with that.
I also consider the 31 years from 1914 to 1945 to be one giant and long aberration — and that doesn't help support a pro-US conclusion, so don't be attributing motives to me, please. I also don't believe "that the US will outperform into the indefinite future, asymptotically approaching 100% of global market cap" so I don't know how that comment applies to what I wrote.
I assumed that by eliding one of the largest peaks of international outperformance you were making the case (or saying the graph makes the case) that the US "advantage" is even better than it looks on the graph, and I drew conclusions from that. Given that you don't believe and weren't meaning to imply that, my bad, sorry about that.
ckangas
Posts: 54
Joined: Fri May 21, 2021 8:08 pm

Re: The Official Bogleheads INTERNATIONAL CAP WEIGHT (AND BEYOND!) Discussion Thread

Post by ckangas »

JoMoney wrote: Tue Jun 08, 2021 8:21 am If an individual held these in a retirement account, it looks like "international" costs about .16% a year more.
If they held in a taxable account, the US holder could get back some of the foreign tax withholding as a tax credit on their US taxes, but there would also be higher US taxes to pay with the larger distributions and less of those being "qualified dividends".
Taxable accounts get complicated; a lot will depend on the specifics of the investor's income brackets and fund specifics. Rebalancing being so painful in taxable also limits some of the diversification benefits.

But yeah, for tax advantaged accounts the extra taxes do add up. This is especially true if you're investing in things like value, dividend funds, or small cap value in countries with high rates. It can eat up over 50 basis points in the more extreme examples of certain country specific factor tilts, so definitely something to at least look into and consider.
UpperNwGuy
Posts: 5380
Joined: Sun Oct 08, 2017 7:16 pm

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by UpperNwGuy »

Da5id wrote: Tue Jun 08, 2021 8:43 am
UpperNwGuy wrote: Tue Jun 08, 2021 8:37 am
Da5id wrote: Tue Jun 08, 2021 8:28 am
UpperNwGuy wrote: Tue Jun 08, 2021 8:23 am
Da5id wrote: Tue Jun 08, 2021 7:34 am I personally find the "rolling returns" one most persuasive. I find looking at it and reading the "100% US now and forever" threads somewhat amusing.
I find the rolling returns chart to be less persuasive because my mind automatically ignores the late 1980s as an aberration that isn't likely to be repeated.
I suppose if one excludes historical events that are inconvenient to one's beliefs as aberrations that indeed helps to support ones conclusions. That "aberration" could happen to the US some day too. I prefer to diversify away such risks myself. But perhaps indeed it is the case that the US will outperform into the indefinite future, asymptotically approaching 100% of global market cap (seems dubious to me). If so it is the majority of my holdings so I'll be OK with that.
I also consider the 31 years from 1914 to 1945 to be one giant and long aberration — and that doesn't help support a pro-US conclusion, so don't be attributing motives to me, please. I also don't believe "that the US will outperform into the indefinite future, asymptotically approaching 100% of global market cap" so I don't know how that comment applies to what I wrote.
I assumed that by eliding one of the largest peaks of international outperformance you were making the case (or saying the graph makes the case) that the US "advantage" is even better than it looks on the graph, and I drew conclusions from that. Given that you don't believe and weren't meaning to imply that, my bad, sorry about that.
Just to be clear, here is the sentence from my Investment Policy Statement that describes my personal approach: "I believe that US stocks will outperform ex-US stocks more often than not, but ex-US will have periods in which it outperforms US, therefore I invest in both but with a US tilt."
Da5id
Posts: 3005
Joined: Fri Feb 26, 2016 8:20 am

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by Da5id »

UpperNwGuy wrote: Tue Jun 08, 2021 8:55 am Just to be clear, here is the sentence from my Investment Policy Statement that describes my personal approach: "I believe that US stocks will outperform ex-US stocks more often than not, but ex-US will have periods in which it outperforms US, therefore I invest in both but with a US tilt."
Fair enough. If the US stocks outperform more often than not (e.g. net outperform over the long haul), why wouldn't they approach 100% of global market cap over the long haul? Won't the US return advantage plus exponential growth drive things there (perhaps rather unevenly given that international will sometimes outperform)?
jay22
Posts: 952
Joined: Thu Aug 23, 2012 8:56 am
Location: Sacramento, CA

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by jay22 »

I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
Da5id
Posts: 3005
Joined: Fri Feb 26, 2016 8:20 am

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by Da5id »

jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
I wonder if the frequency of "I've bailed on underperforming asset X which I previously (presumably for good reasons) believed should be part of my allocation" posts/threads is a leading indicator for X turning around. Whether X is international, SCV, or whatnot. I'd not act on that speculation, but I do wonder.
User avatar
vitaflo
Posts: 1601
Joined: Sat Sep 03, 2011 3:02 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by vitaflo »

Nathan Drake wrote: Mon Jun 07, 2021 10:35 pm Despite the relatively lesser returns over the past decade, this has proven to provide a roughly 10% annualized return and I have been able to stay the course just fine.
I've been cap weight on US/Int for about a decade, and my annualized return over that time is 9.3%. So when people say Int kills returns, that certainly hasn't been my experience. Certainly I'd have higher returns with US only for the past decade, but I'm more than hitting my goals, so I'm just fine.

That said, you said "nobody knows nothing" but also posted a lot about things you think will happen. This is why I'm cap weight. I don't need to think about whether Int is undervalued vs US, whether US has a high tech weight to it, etc. I don't need to predict the future by over-weighting one way or another based on...something. I take what the market gives me and so far I've been pretty happy with it.
jay22
Posts: 952
Joined: Thu Aug 23, 2012 8:56 am
Location: Sacramento, CA

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by jay22 »

Da5id wrote: Tue Jun 08, 2021 9:29 am
jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
I wonder if the frequency of "I've bailed on underperforming asset X which I previously (presumably for good reasons) believed should be part of my allocation" posts/threads is a leading indicator for X turning around. Whether X is international, SCV, or whatnot. I'd not act on that speculation, but I do wonder.
Maybe it is. I am not saying international cannot outperform - it might. But I don't think the outperformance would be significant compared to US.

I personally I am trying to concentrate my portfolio only with the positions that I can stick with for at least 5-10 years and don't have to tweak/think about much. International equities isn't one of them.
User avatar
goonie
Posts: 432
Joined: Fri May 31, 2013 7:33 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by goonie »

jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
Why didn't you come to this conclusion 10 years ago?
jay22
Posts: 952
Joined: Thu Aug 23, 2012 8:56 am
Location: Sacramento, CA

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by jay22 »

goonie wrote: Tue Jun 08, 2021 9:47 am
jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
Why didn't you come to this conclusion 10 years ago?
I wasn't as educated on investing as I am today 10 years ago. I have no problem admitting that it wasn't the right move (for me).
Somethingwitty92912
Posts: 145
Joined: Mon Sep 14, 2020 9:43 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by Somethingwitty92912 »

jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
This is the winning comment right here IMHO.
Triple digit golfer
Posts: 7696
Joined: Mon May 18, 2009 5:57 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by Triple digit golfer »

We hold 60/40 U.S./international, recently increased from 70/30. My logic for increasing international is that I simply had no reason to underweight it all those years and that most of the target retirement funds hold around 40% international. For me, it seems to be the path of least regret and the portfolio that I am most likely to stick with over a long period of time.

I was not upset to change from 30% to 40% because I was buying the underperforming asset. Note that this isn't the reason I made the move, rather, something that made me feel okay with making a move.

My logic with advocating global market cap weight or very close to it is simply that I know nothing, so I cannot substantiate deviating from it.

I don't try to pick winning sectors, so I buy them all.
I don't try to pick winning styles, so I hold them all.
I don't try to pick winning sizes, so I hold them all.
I don't try to pick winning geographic areas, so I hold them all.

I feel that global equity cap weight should be the starting point. Vanguard has stated the same. Deviations should occur with good reasons. I have no good reasons to deviate and no tilt that I feel confident enough in to hold over the long term.
User avatar
goonie
Posts: 432
Joined: Fri May 31, 2013 7:33 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by goonie »

jay22 wrote: Tue Jun 08, 2021 9:51 am
goonie wrote: Tue Jun 08, 2021 9:47 am
jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
Why didn't you come to this conclusion 10 years ago?
I wasn't as educated on investing as I am today 10 years ago. I have no problem admitting that it wasn't the right move (for me).
Why didn't you come to this conclusion 5 years ago?
jay22
Posts: 952
Joined: Thu Aug 23, 2012 8:56 am
Location: Sacramento, CA

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by jay22 »

goonie wrote: Tue Jun 08, 2021 9:59 am
jay22 wrote: Tue Jun 08, 2021 9:51 am
goonie wrote: Tue Jun 08, 2021 9:47 am
jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
Why didn't you come to this conclusion 10 years ago?
I wasn't as educated on investing as I am today 10 years ago. I have no problem admitting that it wasn't the right move (for me).
Why didn't you come to this conclusion 5 years ago?
What are you trying to prove here? That I am performance chasing? You can call it whatever you want if that satisfies you.
Somethingwitty92912
Posts: 145
Joined: Mon Sep 14, 2020 9:43 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by Somethingwitty92912 »

goonie wrote: Tue Jun 08, 2021 9:59 am
jay22 wrote: Tue Jun 08, 2021 9:51 am
goonie wrote: Tue Jun 08, 2021 9:47 am
jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
Why didn't you come to this conclusion 10 years ago?
I wasn't as educated on investing as I am today 10 years ago. I have no problem admitting that it wasn't the right move (for me).
Why didn't you come to this conclusion 5 years ago?
Your not really reading the persons comments. He learned between now an then how intertwined the vast majority of the largest companies are internationally. There fore, he is already diversified enough for his portfolio. Adding ex-us just adds complexity, and fees. In other words it’s just a net drag.
User avatar
goonie
Posts: 432
Joined: Fri May 31, 2013 7:33 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by goonie »

Triple digit golfer wrote: Tue Jun 08, 2021 9:56 am
My logic with advocating global market cap weight or very close to it is simply that I know nothing, so I cannot substantiate deviating from it.

I don't try to pick winning sectors, so I buy them all.
I don't try to pick winning styles, so I hold them all.
I don't try to pick winning sizes, so I hold them all.
I don't try to pick winning geographic areas, so I hold them all.

I feel that global equity cap weight should be the starting point. Vanguard has stated the same. Deviations should occur with good reasons. I have no good reasons to deviate and no tilt that I feel confident enough in to hold over the long term.
+1

I'm 43 and have no idea how the next 30-50 years of stock investing is going to go. That's why I invest in stocks at global capitalization weight.

Set it, forget it, and let the world be the world.
Robot Monster
Posts: 2456
Joined: Sun May 05, 2019 11:23 am
Location: New York

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by Robot Monster »

Somethingwitty92912 wrote: Tue Jun 08, 2021 9:55 am
jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
This is the winning comment right here IMHO.
Yes, it mirrors Bogle's thoughts:

“The three largest countries in the international index [EAFE] are Great Britain, Japan and France, and to bet those countries will do better than the U.S. in the long run is a bad bet.” link

So he's not a fan of the international index. I would like to now note that Vanguard International Growth Fund's top three countries are: United States, China, and the Netherlands. And the forth is Germany. link

In all fairness, the top three countries has changed in the international index since the Bogle quote. It's now: Japan, China, Great Britain.
"I think we may see a return to full employment next year." -- Janet Yellen, March 23rd 2021
ckangas
Posts: 54
Joined: Fri May 21, 2021 8:08 pm

Re: The Official Bogleheads International Cap Weight (and Beyond!) Discussion Thread

Post by ckangas »

Da5id wrote: Tue Jun 08, 2021 8:41 am
ckangas wrote: Tue Jun 08, 2021 8:33 am
Da5id wrote: Tue Jun 08, 2021 7:34 am
1) The efficient frontier graph is really rather bogus. In other threads people have shown it zoomed out for proper perspective. Yes there is (or was in 2008) an effect, both terms of improved performance and decreased volatility. But that effect is (was in 2008) really really small. Enough so that I'd say that the graph is misleading. And to the extent it makes an argument, it is clearly against market weight of international (30% was optimal).
On #1 the image is clearly labeled with return rates; if one looks at it for more than a few seconds it shouldn't be misleading. I don't think anyone expects that you combine two correlated assets around 9% returns and suddenly get 15% returns. And while 20 basis points (or a few more for 60/40) isn't huge in a given year, and is simply noise if someone is trying to predict US vs developed performance in the future, I think many would consider that a very big deal if it was in fees.

Concerning #3, I agree that it's not particularly official.
OK. But the impression the zoomed in graph gives at least to me is "big glaring effect", which I find really rather misleading. And the 20 basis points was from 2008 data. Is there an updated graph - I assume moving the 100% US return point relatively upward a chunk will largely or completely remove the enhanced return. If so, how strong a selling point is this graph?

My guess is that international will have its day, sooner rather than later. But that is really only a guess...
I'd say it's a selling point for at least a small amount of international stocks (20%+). And a selling point for not worrying too much about the exact ratio of US to international if you expect both to roughly have the same returns over the long haul.

I think a longer historical record and a long chain of decade by decade performance reviews are probably more useful if someone is trying to predict future returns. Which is probably somewhere between difficult and a fool's errand anyways : )
Last edited by ckangas on Tue Jun 08, 2021 10:31 am, edited 2 times in total.
User avatar
goonie
Posts: 432
Joined: Fri May 31, 2013 7:33 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by goonie »

jay22 wrote: Tue Jun 08, 2021 10:01 am
goonie wrote: Tue Jun 08, 2021 9:59 am
jay22 wrote: Tue Jun 08, 2021 9:51 am
goonie wrote: Tue Jun 08, 2021 9:47 am
jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
Why didn't you come to this conclusion 10 years ago?
I wasn't as educated on investing as I am today 10 years ago. I have no problem admitting that it wasn't the right move (for me).
Why didn't you come to this conclusion 5 years ago?
What are you trying to prove here? That I am performance chasing? You can call it whatever you want if that satisfies you.
Yeah, I'm trying to highlight the performance chasing. But it's probably not necessary. I doubt some newbie is going to follow suit based on "I cannot see ex-US performing significantly better".
jay22
Posts: 952
Joined: Thu Aug 23, 2012 8:56 am
Location: Sacramento, CA

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by jay22 »

I love it when every case of tweaking your portfolio in any shape or form is labeled as performance chasing here.

Yawn!
User avatar
goonie
Posts: 432
Joined: Fri May 31, 2013 7:33 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by goonie »

jay22 wrote: Tue Jun 08, 2021 10:18 am I love it when every case of tweaking your portfolio in any shape or form is labeled as performance chasing here.

Yawn!
I wouldn't call changing 25-30% of your portfolio "tweaking".
jay22
Posts: 952
Joined: Thu Aug 23, 2012 8:56 am
Location: Sacramento, CA

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by jay22 »

goonie wrote: Tue Jun 08, 2021 10:20 am
jay22 wrote: Tue Jun 08, 2021 10:18 am I love it when every case of tweaking your portfolio in any shape or form is labeled as performance chasing here.

Yawn!
I wouldn't call changing 25-30% of your portfolio "tweaking".
Good thing I am not you. You are free to choose whatever you want to call it.
Da5id
Posts: 3005
Joined: Fri Feb 26, 2016 8:20 am

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by Da5id »

jay22 wrote: Tue Jun 08, 2021 10:24 am
goonie wrote: Tue Jun 08, 2021 10:20 am
jay22 wrote: Tue Jun 08, 2021 10:18 am I love it when every case of tweaking your portfolio in any shape or form is labeled as performance chasing here.

Yawn!
I wouldn't call changing 25-30% of your portfolio "tweaking".
Good thing I am not you. You are free to choose whatever you want to call it.
Whether something is performance chasing is generally a question of motivation. Only you know what you were motivated by and the weight the significant recent US outperformance played in your decision process.

But really, 30% is a "tweak"? Tweak in common usage is a minor adjustment. For me 5% is a tweak, 30% is a sizeable shift. If 30% is but a tweak, I'd hesitate to wonder what a real adjustment would consist of.
UpperNwGuy
Posts: 5380
Joined: Sun Oct 08, 2017 7:16 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by UpperNwGuy »

goonie wrote: Tue Jun 08, 2021 10:12 am Yeah, I'm trying to highlight the performance chasing.
Why do you feel it necessary to do that?
ckangas
Posts: 54
Joined: Fri May 21, 2021 8:08 pm

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by ckangas »

Robot Monster wrote: Tue Jun 08, 2021 10:09 am
Somethingwitty92912 wrote: Tue Jun 08, 2021 9:55 am
jay22 wrote: Tue Jun 08, 2021 9:15 am I was invested in international stocks till last year (25-30% of my portfolio) but sold out and plan to only hold only US equities going forward.

Given how closely connected US companies are to the global markets, I cannot see ex-US performing significantly better than VTI. Looks like this is another W for Bogle.
This is the winning comment right here IMHO.
Yes, it mirrors Bogle's thoughts:

“The three largest countries in the international index [EAFE] are Great Britain, Japan and France, and to bet those countries will do better than the U.S. in the long run is a bad bet.” link

So he's not a fan of the international index. I would like to now note that Vanguard International Growth Fund's top three countries are: United States, China, and the Netherlands. And the forth is Germany. link

In all fairness, the top three countries has changed in the international index since the Bogle quote. It's now: Japan, China, Great Britain.
If you are searching for economic growth, China and India are projected to grow much faster than the US over the coming decades.
Returns aren't really correlated with growth, however. So it's a moot point.
Da5id
Posts: 3005
Joined: Fri Feb 26, 2016 8:20 am

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by Da5id »

Robot Monster wrote: Tue Jun 08, 2021 10:09 am Yes, it mirrors Bogle's thoughts:

“The three largest countries in the international index [EAFE] are Great Britain, Japan and France, and to bet those countries will do better than the U.S. in the long run is a bad bet.” link
To invest internationally isn't necessarily to "bet that those countries will do better than the US in the long run". It is perhaps instead to believe that the (presumably widely known) advantages the US may have are correctly reflected in the market prices of its stocks.
jay22
Posts: 952
Joined: Thu Aug 23, 2012 8:56 am
Location: Sacramento, CA

Re: The International Cap Weight (and Beyond!) Discussion Thread

Post by jay22 »

Da5id wrote: Tue Jun 08, 2021 10:30 am
jay22 wrote: Tue Jun 08, 2021 10:24 am
goonie wrote: Tue Jun 08, 2021 10:20 am
jay22 wrote: Tue Jun 08, 2021 10:18 am I love it when every case of tweaking your portfolio in any shape or form is labeled as performance chasing here.

Yawn!
I wouldn't call changing 25-30% of your portfolio "tweaking".
Good thing I am not you. You are free to choose whatever you want to call it.
Whether something is performance chasing is generally a question of motivation. Only you know what you were motivated by and the weight the significant recent US outperformance played in your decision process.

But really, 30% is a "tweak"? Tweak in common usage is a minor adjustment. For me 5% is a tweak, 30% is a sizeable shift. If 30% is but a tweak, I'd hesitate to wonder what a real adjustment would consist of.
If I said "changing your portfolio", would it make you feel better?
Post Reply