It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

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Whakamole
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Whakamole » Tue Aug 14, 2018 8:35 pm

tibbitts wrote:
Tue Aug 14, 2018 8:27 pm
Well, I would say that now, but when I'd gone through a good chunk of my adult life with savings accounts in the 5-6% range and equities pumping out double-digit annual returns year after year, it seemed unreasonable to base retirement on less than 5% nominal. And now, saving more money doesn't seem like a practical alternative after more than a decade of stagnating or declining real salaries.
So question: if I use the S&P Dividends Reinvested Price Calculator and enter the month/year I graduated college, and a date 15 years later to the month, my nominal return would have been 4.2% (yes, that's dividends reinvested, adjusted for inflation.)

Should I have stopped investing in the US stock market?

WanderingDoc
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by WanderingDoc » Tue Aug 14, 2018 9:37 pm

columbia wrote:
Tue Aug 14, 2018 7:30 pm
WanderingDoc wrote:
Tue Aug 14, 2018 6:31 pm
HuckFinn wrote:
Tue Aug 14, 2018 1:15 am
With a keen knowledge of the concept of "Stay the Course" and "Don't Buy High and Sell Low" and most importantly "Don't Try to Time the Market" I cannot simply put my head in the sand and pretend that the last ten years or more have been anything other then a disappointment for those of us with International exposure and for Vanguard who increased their clients exposure to International equities on their Target and Life strategy funds up to 40% over 3 years ago.

It's easy to stomach performance variables when they are described as "Growth of $10,000 over time" but what does this performance look like when applied to a larger number.... to real portfolio's for comfortable retirees or high net worth individuals?

Using Vanguard's Growth of $10,000 data for Total Stock Market (VTSMX) and Total International Market (VGTSX) I came up with a disheartening example using a larger portfolio below.
* I had to use Investor share class because Total International did not have an Admiral share class for ten years.

Example 1 -
10 years ago Investor A has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equities are solely invested in the Total US Stock Market Fund (VTSMX)
At the end of 10 years his equity position (if left untouched) grows to...
$3,578,284

Example 2 -
10 years ago Investor B has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equity is apportioned as 60% Total US Stock Market Fund = $780,000 (VTSMX) and 40% Total International Market $520,000 (VGTSX)

After ten years Total US Stock Market (VTSMX) grows to $2,146,970
After ten years Total International Market (VGTSX) grows to $720,552
Total equity after 10 years combining his US and INTL holdings = $2,867,522

Using actual ten year performance data Investor A, who chose not to invest Internationally ten years ago would be a whopping $710,762.00 ahead of the investor who went the 60/40 route.

I'll repeat... $710,762.00 ahead because he chose to invest simply in the US and not add an International Fund.

Ok, I know... for some this is the exact reason we might be tempted to re-balance and dump more into International. I get that! People said that 5 years ago, they said it three years ago.... and I think they will be saying it again ten years from now. I know it's foolish to chase performance in the rear view mirror but I also have to take an honest assessment and evaluate if the path I am on is the wisest course.

For the record I have slowly weened my personal Int'l exposure from about 35% to 14% over the years and am not adding to it.

PS... I do intend on reading this 10 years ago if it's still to be found.
The U.S. stock market is overvalued. By almost every objective metric. "We" were lucky the last 10 years. U.S. will not be on top forever. Law of averages. China and others are outworking, out-innovating, and out-procreating us. By 2040, America will be a mere shadow of its former self. No party will last forever.
This is where knowing the age of posters can be helpful. It doesn’t sound like you will be, but I’ll probably be dead by 2040...
You never know ;)
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

WanderingDoc
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by WanderingDoc » Tue Aug 14, 2018 9:40 pm

bligh wrote:
Tue Aug 14, 2018 7:52 pm
columbia wrote:
Tue Aug 14, 2018 7:30 pm
WanderingDoc wrote:
Tue Aug 14, 2018 6:31 pm
HuckFinn wrote:
Tue Aug 14, 2018 1:15 am
With a keen knowledge of the concept of "Stay the Course" and "Don't Buy High and Sell Low" and most importantly "Don't Try to Time the Market" I cannot simply put my head in the sand and pretend that the last ten years or more have been anything other then a disappointment for those of us with International exposure and for Vanguard who increased their clients exposure to International equities on their Target and Life strategy funds up to 40% over 3 years ago.

It's easy to stomach performance variables when they are described as "Growth of $10,000 over time" but what does this performance look like when applied to a larger number.... to real portfolio's for comfortable retirees or high net worth individuals?

Using Vanguard's Growth of $10,000 data for Total Stock Market (VTSMX) and Total International Market (VGTSX) I came up with a disheartening example using a larger portfolio below.
* I had to use Investor share class because Total International did not have an Admiral share class for ten years.

Example 1 -
10 years ago Investor A has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equities are solely invested in the Total US Stock Market Fund (VTSMX)
At the end of 10 years his equity position (if left untouched) grows to...
$3,578,284

Example 2 -
10 years ago Investor B has a $2,000,000 balanced portfolio - 65% stock, 35% bond.
His $1,300,000 in equity is apportioned as 60% Total US Stock Market Fund = $780,000 (VTSMX) and 40% Total International Market $520,000 (VGTSX)

After ten years Total US Stock Market (VTSMX) grows to $2,146,970
After ten years Total International Market (VGTSX) grows to $720,552
Total equity after 10 years combining his US and INTL holdings = $2,867,522

Using actual ten year performance data Investor A, who chose not to invest Internationally ten years ago would be a whopping $710,762.00 ahead of the investor who went the 60/40 route.

I'll repeat... $710,762.00 ahead because he chose to invest simply in the US and not add an International Fund.

Ok, I know... for some this is the exact reason we might be tempted to re-balance and dump more into International. I get that! People said that 5 years ago, they said it three years ago.... and I think they will be saying it again ten years from now. I know it's foolish to chase performance in the rear view mirror but I also have to take an honest assessment and evaluate if the path I am on is the wisest course.

For the record I have slowly weened my personal Int'l exposure from about 35% to 14% over the years and am not adding to it.

PS... I do intend on reading this 10 years ago if it's still to be found.
The U.S. stock market is overvalued. By almost every objective metric. "We" were lucky the last 10 years. U.S. will not be on top forever. Law of averages. China and others are outworking, out-innovating, and out-procreating us. By 2040, America will be a mere shadow of its former self. No party will last forever.
This is where knowing the age of posters can be helpful. It doesn’t sound like you will be, but I’ll probably be dead by 2040...
Not if the Chinese come up with a way to keep you young and healthy for longer! :D

Seriously though, I wouldn't bet against the US. Yes, every party comes to an end, but parties can go on much longer than you can imagine. Even if the US lasts half as long as the Roman empire, it would sill have a good 200 years ahead of it. Too many people have too gloomy an outlook for this country and I think they are wrong. There is a difference between underweighting the US and market weighting it. When you go 50/50 US/exUS you are market weighting the US. If you are going 80/20 you are overweighting it and if you are going 30/70 you are underweighting it. I think underweighting the US is making the same mistake as overweighting it.
I would agree. I am currently ~55% U.S. / 45% Intl and am fine with a floating 50-60% U.S. allocation. I am however, nervous about having most of my assets and cash in the U.S. Something about that seems irresponsible.
Don't wait to buy real estate. Buy real estate, and wait. | Rent where you live, buy where others pay your mortgage for you.

rudeboy
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by rudeboy » Tue Aug 14, 2018 9:41 pm

If you aren't unhappy with part of your portfolio, you aren't diversified enough.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by asif408 » Tue Aug 14, 2018 9:53 pm

OP,

I'm not seeing you chime in, so I'm assuming nothing is convincing you to stay the course. Will you agree to come back to this post in 5 years, say approximately 2024, and look at the past 22 years of returns (2002-2024) as you are doing now and see how US compares to Int'l, and post your results and how the results dictate your allocation going forward?

tibbitts
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by tibbitts » Tue Aug 14, 2018 10:01 pm

Whakamole wrote:
Tue Aug 14, 2018 8:35 pm
tibbitts wrote:
Tue Aug 14, 2018 8:27 pm
Well, I would say that now, but when I'd gone through a good chunk of my adult life with savings accounts in the 5-6% range and equities pumping out double-digit annual returns year after year, it seemed unreasonable to base retirement on less than 5% nominal. And now, saving more money doesn't seem like a practical alternative after more than a decade of stagnating or declining real salaries.
So question: if I use the S&P Dividends Reinvested Price Calculator and enter the month/year I graduated college, and a date 15 years later to the month, my nominal return would have been 4.2% (yes, that's dividends reinvested, adjusted for inflation.)

Should I have stopped investing in the US stock market?
I don't understand your point. What did alternative investments return during that time? Possibly you should have stopped investing in it at the beginning of that 15-year period and invested in something else. Depending on what happened over the subsequent 15 years, maybe you should have stopped investing in it at the end of the 15-year period. Or in the middle somewhere.

My only point is that everyone is inclined to base decisions to some degree on personal experience, and that's a difficult bias to overcome. So while today I would say nobody should count on 5% returns over time, years ago I would have felt 5% was a very conservative assumption for returns going forward - even though I had studied historical periods of worse returns than I had personally experienced.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Engineer250 » Tue Aug 14, 2018 10:18 pm

I swear if it weren't for threads on this forum I'd have no idea what my investments were even doing. The major news outlets cover DJIA and sometimes S&P, but it's easy even with that to forget past the day-to-day and what it's actually doing this year or last five years or whatever.

I'm a market capper, 50/50 US/International. I'm okay with slightly lower returns in the same way many who hold bonds are okay with lower returns. However, if others want to hold only US, I respect their decisions. Just not the decision I made for myself.
Where the tides of fortune take us, no man can know.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by climber2020 » Tue Aug 14, 2018 10:52 pm

asif408 wrote:
Tue Aug 14, 2018 9:53 pm
OP,

I'm not seeing you chime in, so I'm assuming nothing is convincing you to stay the course. Will you agree to come back to this post in 5 years, say approximately 2024, and look at the past 22 years of returns (2002-2024) as you are doing now and see how US compares to Int'l, and post your results and how the results dictate your allocation going forward?
If he doesn't, I'll be sure to revive it for discussion.

Still waiting to hear back from this person who up and vanished into thin air: viewtopic.php?f=10&t=203792

smectym
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by smectym » Tue Aug 14, 2018 11:14 pm

The idea that “staying the course” is a Boglehead mantra that indisputably applies to international investing is obviously flawed. There is a substantial division of opinion as to the wisdom of a separate allocation to international equities and an even sharper divide re international bonds. Within these contentious debates, there are also valid differences as to the correct allocation as a percentage of portfolio to devote to international.

Therefore, OP’s decision to scale back on international investing is perfectly OK and doesn’t represent any departure from the sacred principle to “Stay the Course”: international investing is still too controversial to be part of the definitive “Course” on which one is obliged to “Stay.”

Smectym

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by AlphaLess » Tue Aug 14, 2018 11:14 pm

steve321 wrote:
Tue Aug 14, 2018 3:59 am
CFM300 wrote:
Tue Aug 14, 2018 2:09 am
HuckFinn wrote:
Tue Aug 14, 2018 1:15 am
$710,762.00 ahead because he chose to invest simply in the US and not add an International Fund.
He should have invested 100% his equity portion in QQQ (Nasdaq 100). Then he would have been more than $2.5 million ahead.
why not put all into Amazon?
Back in the day: AAPL. Then strategically move 100% into AMZN. And then strategically move into whatever stock is going to outperform in the next 4 years.

Picking winners since oh-well ... in hindsight.
"You can get more with a kind word and a gun than with just a kind word." George Washington

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HuckFinn
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by HuckFinn » Wed Aug 15, 2018 12:55 am

asif408 wrote:
Tue Aug 14, 2018 9:53 pm
OP,

I'm not seeing you chime in, so I'm assuming nothing is convincing you to stay the course. Will you agree to come back to this post in 5 years, say approximately 2024, and look at the past 22 years of returns (2002-2024) as you are doing now and see how US compares to Int'l, and post your results and how the results dictate your allocation going forward?
Hi asif408. (from the OP) I've responded a few times on this post but it's a long thread. I am 49 years old by the way and retired ten years ago - (another poster inquired)

Regarding staying the course..(below)

We have a Joint taxable account, 2 rollovers and 2 Roth's - all under the Vanguard banner.

5 years ago we owned 10 different Vanguard Funds - Asset Allocation - 69% Stock and 31% Bond. Foreign percentage of equities was 32%.

Roughly 3 years ago we had reduced our different funds down to 6 (from 10) - Asset allocation - 64% Stock and 36% bond. Foreign percentage of equities was 30%.

By January 1st of this year we had slimmed our entire portfolio down to only 4 Vanguard funds - Asset allocation 65% stock and 35% bond. We reduced our International percentage to 20% of equities. In the last few months we have reduced our foreign percentage to around 15%.

We essentially have a 4 fund portfolio laid out tax efficiently with a 6 basis point expense ratio. Despite the tone and tenor of my post over time we have continually made our portfolio simpler, more tax efficient and more Boglehead like. I won't even tell you what it looked like 12 years ago... We do pretty much stay the course though at times grudgingly.

If I had to guess 15 years ago we may have been at 40% International equities so our slide from 40% to 30% to 20% to 15% has been slow and gradual and not without strain.

As a person who barely squeaked through high school and was kicked out of college I look over our 29 year investing history and our experience simply has been:
International Funds are riskier, more costly and have less return. They are as Un-Boglelike as can be and yet for some reason nobody actually talks about why we ever started throwing Internationals into the mix and why people who question this philosophy are rebuked by so many despite some pretty drastic numbers.

Vanguard suggests this: To get the full diversification benefits, we recommend that you consider investing about 40% of your stock allocation in international stocks. I think this ill suits investors – new and old.

When will we see this: Although there have been short periods where investing in International stocks has been beneficial it has not been proven to reduce risk or provide superior returns over the long term. Therefore we recommend that investors allocate no more than 10% of their stock allocation in International stocks.

If 5 years from now the five year returns are dismal for INTL do we still cling to the 40% suggestion? What if we see another 10 poor years for INT'l is it time yet? That would be 30 years or more of clinging to a bad idea. When is it time to let go of the rope?

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by steve321 » Wed Aug 15, 2018 3:51 am

AlphaLess wrote:
Tue Aug 14, 2018 11:14 pm
steve321 wrote:
Tue Aug 14, 2018 3:59 am
CFM300 wrote:
Tue Aug 14, 2018 2:09 am
HuckFinn wrote:
Tue Aug 14, 2018 1:15 am
$710,762.00 ahead because he chose to invest simply in the US and not add an International Fund.
He should have invested 100% his equity portion in QQQ (Nasdaq 100). Then he would have been more than $2.5 million ahead.
why not put all into Amazon?
Back in the day: AAPL. Then strategically move 100% into AMZN. And then strategically move into whatever stock is going to outperform in the next 4 years.

Picking winners since oh-well ... in hindsight.
lol :D
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

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Bendee » Wed Aug 15, 2018 6:36 am

HuckFinn wrote:
Wed Aug 15, 2018 12:55 am
As a person who barely squeaked through high school and was kicked out of college I look over our 29 year investing history and our experience simply has been:
International Funds are riskier, more costly and have less return.
The Fidelity ZERO funds have the same ER, 0.00%, for Total Int and US. As posted earlier, 3 of the 4 full decades available for total int vs total us mutual fund comparison show int'l beating US (the 90s with the US tech boom is the only one that didn't).
They are as Un-Boglelike as can be and yet for some reason nobody actually talks about why we ever started throwing Internationals into the mix and why people who question this philosophy are rebuked by so many despite some pretty drastic numbers.
People have mentioned it in this thread, but 2 reasons I have for being Bogle-like: 1) Diversity out of the US market and 2) Diversity out of the US Dollar. While currency trading is a very risky business (especially as there is no expected growth overall), holding onto some of your portfolio in another currency/market is a nice hedge if something happens to the dollar and/or the market, especially for someone like me whose company is entirely US-based and whose salary/savings/retirement would be entirely US based if not for Total Int'l funds.

I imagine similar talks from Enron employees who put their savings into Enron stock saying there is no need to put it into other stocks/funds based on past performance probably happened around late 2000. That's obviously a much smaller basket, but without total Int, I have all my eggs attached to a single currency.
If 5 years from now the five year returns are dismal for INTL do we still cling to the 40% suggestion? What if we see another 10 poor years for INT'l is it time yet? That would be 30 years or more of clinging to a bad idea. When is it time to let go of the rope?
What if the next 5-10 years show Int'l beating US? You would have done market timing in order to performance chase, as many investors (novice and professional) have done over the years. If you look, you would have 40% more money in the past decade investing in VITAX (Vanguard Tech) vs VTSAX. Why don't you just put your money there? Total US has shown to be a loser compared to VITAX.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Valuethinker » Wed Aug 15, 2018 6:48 am

bligh wrote:
Tue Aug 14, 2018 7:52 pm


Seriously though, I wouldn't bet against the US. Yes, every party comes to an end, but parties can go on much longer than you can imagine. Even if the US lasts half as long as the Roman empire, it would sill have a good 200 years ahead of it.
Depends on your dating of the Fall of Rome ;-). Note that the Roman Republic lasted a lot shorter time. The Roman Empire was very different - it was deliberately multicultural (making citizens of prominent members of *all* the subject peoples) and latterly Rome was capital in name only - the real capital was along the Danube and Rhine frontiers. The crisis of the 3rd C AD would make anyone sit up and notic.

The reality is the USA is clearly a late phase part of a European imperial diaspora which began in roughly 1492 and came to an end in the 20th century. The Spanish, Portugese, French and British Empires begat the subject nations. Now the wheels are slowly reversing.

The USA is likely to remain a very important country just to have more rivalry -- from India and China in particular. Nigeria the problems are manifest and so its rise is further away and the situation is foggier - but it's definitely a possibility.

This does not have much to do with the level of the US stock market, though. Capital markets are global. Consider the UK-- 70% of profits of FTSE companies are earned in foreign currencies. We happen to have the HQs of a lot of multinationals.
Too many people have too gloomy an outlook for this country and I think they are wrong. There is a difference between underweighting the US and market weighting it. When you go 50/50 US/exUS you are market weighting the US. If you are going 80/20 you{ are overweighting it and if you are going 30/70 you are underweighting it. I think underweighting the US is making the same mistake as overweighting it.
Generally, yes. One should not underweight the US.

There is a portfolio theory point, though. Your assets as an American are in USD - your home equity, your labour income, your Social Security and other retiree benefits. Thus overweighting foreign markets is something of a diversification.

It's difficult to know how far to take that. Many internationally listed companies are big USD players and / or heavily weighted towards US business (think Glaxo Smithkline in pharma, or BP in oil & gas). So a US investor does not gain much in that sense by international diversification - they gain something, but it's not as large as it might otherwise be.

You do get more exposure to EM - European companies for example are relatively EM tilted in their revenues, compared to US listed cos (that graph has been on a thread here). By owning HSBC for example you get massive exposure to Far Eastern banking, proportionately greater than any US bank.

I think the main issue is a sectoral one. The US stockmarket is heavily healthcare and technology weighted. By contrast, it has a low weighting in natural resources (especially ex energy)-- the world's main mining companies are listed in London, Brazil, Australia, not USA.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by InvestorNewb » Wed Aug 15, 2018 7:15 am

I have about 25% international. I'm just happy that I've never rebalanced into it. I don't plan on buying anymore of it either except with dividend reinvestments.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by lostdog » Wed Aug 15, 2018 7:41 am

So much recency bias in this thread. Some should look in the mirror and ask if they're pure indexers or just have a hard time staying the course because of recency bias.

Some are saying they're not adding to international even though it hits their rebalancing band or they're slowly getting out of it all together at market lows.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by dwickenh » Wed Aug 15, 2018 7:52 am

sambb wrote:
Tue Aug 14, 2018 4:24 am
this thread has reminded me to buy international this week
buy low sell high is nice
+1, Bought some myself this week to re-balance.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Wed Aug 15, 2018 7:58 am

HuckFinn wrote:
Wed Aug 15, 2018 12:55 am
As a person who barely squeaked through high school and was kicked out of college I look over our 29 year investing history and our experience simply has been: International Funds are riskier, more costly and have less return. They are as Un-Boglelike as can be and yet for some reason nobody actually talks about why we ever started throwing Internationals into the mix and why people who question this philosophy are rebuked by so many despite some pretty drastic numbers.

Vanguard suggests this: To get the full diversification benefits, we recommend that you consider investing about 40% of your stock allocation in international stocks. I think this ill suits investors – new and old.
With all due respect, I feel confident in saying the difference here is that Vanguard is relying on evidence and not emotion in forming their recommendation.

Your "experience", that international stocks "are riskier, more costly and have less return" is not supported by looking at the full period of evidence nor by considering their role in a portfolio as a whole. Moreover, I feel comfortable suggesting that your "experience" is being unduly influenced by recent performance. Recency bias is a well-known cognitive bias, one that has been mentioned by several folks in this thread and is surely influencing your thinking.

Take a look at the difference in performance between two portfolios. Portfolio 1 follows Vanguard's advice and is 60% US stocks and 40% international stocks. The benchmark is 100% US stocks. The time period is 1970 to 2017, the whole period for which full-year data is available for the international index (MSCI ex US).

Image

In this one chart you can clearly see the decades (1970-1979, 1980-1989, and 2000-2010) in which international stocks outperformed US stocks and the decades (1990-1999 and 2000-2017) in which US stocks outperformed.

If you look closely you can see that from 1970 through 2012 the two portfolios had very similar returns (10.01% and 10.17%). You can't tell just by looking, but the diversified portfolio actually had lower volatility than the US-only portfolio (15.06% vs 16.00% stdev) and slightly better risk-adjusted returns (Sharpe Ratio of 0.37 vs 0.36) over that period as well.

Your "experience" is likely being unduly influenced by the results of the most recent five years. That's valid, but the wise response would be to seek out ways to dampen that bias rather than seek out ways to reinforce.

Five years of underperformance can be frustrating, I know, but investing is a marathon not a sprint. The best thing you can do as an investor, IMHO, is to avoid overreacting and making decisions based on frustration.
Last edited by vineviz on Wed Aug 15, 2018 8:00 am, edited 1 time in total.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by tibbitts » Wed Aug 15, 2018 7:59 am

HuckFinn wrote:
Wed Aug 15, 2018 12:55 am
asif408 wrote:
Tue Aug 14, 2018 9:53 pm
OP,

I'm not seeing you chime in, so I'm assuming nothing is convincing you to stay the course. Will you agree to come back to this post in 5 years, say approximately 2024, and look at the past 22 years of returns (2002-2024) as you are doing now and see how US compares to Int'l, and post your results and how the results dictate your allocation going forward?
Hi asif408. (from the OP) I've responded a few times on this post but it's a long thread. I am 49 years old by the way and retired ten years ago - (another poster inquired)

Regarding staying the course..(below)

We have a Joint taxable account, 2 rollovers and 2 Roth's - all under the Vanguard banner.

5 years ago we owned 10 different Vanguard Funds - Asset Allocation - 69% Stock and 31% Bond. Foreign percentage of equities was 32%.

Roughly 3 years ago we had reduced our different funds down to 6 (from 10) - Asset allocation - 64% Stock and 36% bond. Foreign percentage of equities was 30%.

By January 1st of this year we had slimmed our entire portfolio down to only 4 Vanguard funds - Asset allocation 65% stock and 35% bond. We reduced our International percentage to 20% of equities. In the last few months we have reduced our foreign percentage to around 15%.

We essentially have a 4 fund portfolio laid out tax efficiently with a 6 basis point expense ratio. Despite the tone and tenor of my post over time we have continually made our portfolio simpler, more tax efficient and more Boglehead like. I won't even tell you what it looked like 12 years ago... We do pretty much stay the course though at times grudgingly.

If I had to guess 15 years ago we may have been at 40% International equities so our slide from 40% to 30% to 20% to 15% has been slow and gradual and not without strain.

As a person who barely squeaked through high school and was kicked out of college I look over our 29 year investing history and our experience simply has been:
International Funds are riskier, more costly and have less return. They are as Un-Boglelike as can be and yet for some reason nobody actually talks about why we ever started throwing Internationals into the mix and why people who question this philosophy are rebuked by so many despite some pretty drastic numbers.

Vanguard suggests this: To get the full diversification benefits, we recommend that you consider investing about 40% of your stock allocation in international stocks. I think this ill suits investors – new and old.

When will we see this: Although there have been short periods where investing in International stocks has been beneficial it has not been proven to reduce risk or provide superior returns over the long term. Therefore we recommend that investors allocate no more than 10% of their stock allocation in International stocks.

If 5 years from now the five year returns are dismal for INTL do we still cling to the 40% suggestion? What if we see another 10 poor years for INT'l is it time yet? That would be 30 years or more of clinging to a bad idea. When is it time to let go of the rope?
I believe you have read the answer to your question about "why" - international initially gained increased attention after an extended period of international outperformance, and as (possibly in a related development) more efficient international investment vehicles became available to domestic investors. Also increasing academic research appeared suggesting that international investing provided diversification benefits.

Your question about how much history is relevant is interesting, and always difficult to determine - it's the "is it really different this time?" question. I don't have an answer. I don't believe anyone is necessarily claiming that international will produce "superior returns over time", only that it improves diversification, which is undeniable but may turn out to be for better or worse in terms of net results.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by ImmigrantSaver » Wed Aug 15, 2018 8:39 am

vineviz wrote:
Tue Aug 14, 2018 8:12 pm
typical.investor wrote:
Tue Aug 14, 2018 8:09 pm

I, too, am disappointed by Intl returns - especially emerging. My plan, though, was and still is to allocate to a desired exposure and maintain that exposure.
That’s the way to do it. I bought some international small caps myself today.
Just curious. Do you buy those in taxable? I wish I could buy some VSS in the past days but my Roth is full and I heard VSS is not good for taxable so I got vtiax instead.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by KlangFool » Wed Aug 15, 2018 8:46 am

HuckFinn wrote:
Wed Aug 15, 2018 12:55 am

If I had to guess 15 years ago we may have been at 40% International equities so our slide from 40% to 30% to 20% to 15% has been slow and gradual and not without strain.
HuckFinn,

Essentially, you are market timing when the US stock market is having a bull run. You are selling low (International) and buy high (US). So, when the trend reverse aka International is doing well, you will do the same again, selling low (US) and buying (high).

KlangFool

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by jeffyscott » Wed Aug 15, 2018 8:47 am

vineviz wrote:
Wed Aug 15, 2018 7:58 am
If you look closely you can see that from 1970 through 2012 the two portfolios had very similar returns (10.01% and 10.17%). You can't tell just by looking, but the diversified portfolio actually had lower volatility than the US-only portfolio (15.06% vs 16.00% stdev) and slightly better risk-adjusted returns (Sharpe Ratio of 0.37 vs 0.36) over that period as well.

Your "experience" is likely being unduly influenced by the results of the most recent five years. That's valid, but the wise response would be to seek out ways to dampen that bias rather than seek out ways to reinforce.
Yep, at most even with just looking at the past 10 years, it is just a 7 year period of underperformance. Here's the first 3 years out of the past 10:

Image
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
press on, regardless - John C. Bogle

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Wed Aug 15, 2018 9:04 am

ImmigrantSaver wrote:
Wed Aug 15, 2018 8:39 am
vineviz wrote:
Tue Aug 14, 2018 8:12 pm
That’s the way to do it. I bought some international small caps myself today.
Just curious. Do you buy those in taxable? I wish I could buy some VSS in the past days but my Roth is full and I heard VSS is not good for taxable so I got vtiax instead.
The vast majority of my accounts are tax-deferred so tax-efficiency is not something I spend much time worrying about.

VTIAX has been somewhat more tax-efficient than VSS, but over the long-run I expect the small-cap premium would more than make up for the difference.
"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: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by ImmigrantSaver » Wed Aug 15, 2018 9:13 am

vineviz wrote:
Wed Aug 15, 2018 9:04 am
ImmigrantSaver wrote:
Wed Aug 15, 2018 8:39 am
vineviz wrote:
Tue Aug 14, 2018 8:12 pm
That’s the way to do it. I bought some international small caps myself today.
Just curious. Do you buy those in taxable? I wish I could buy some VSS in the past days but my Roth is full and I heard VSS is not good for taxable so I got vtiax instead.
The vast majority of my accounts are tax-deferred so tax-efficiency is not something I spend much time worrying about.

VTIAX has been somewhat more tax-efficient than VSS, but over the long-run I expect the small-cap premium would more than make up for the difference.
Got it, thanks. It is very tempting I must say but I am in a fairly high tax bracket and that stops me

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Wed Aug 15, 2018 9:18 am

WanderingDoc wrote:
Tue Aug 14, 2018 9:40 pm

I would agree. I am currently ~55% U.S. / 45% Intl and am fine with a floating 50-60% U.S. allocation. I am however, nervous about having most of my assets and cash in the U.S. Something about that seems irresponsible.
I am the same. (I keep it between 50/50 and 55/45) ... You and I are fortunate to have our assets and cash denominated in the world's reserve currency and living in a country with strong property rights protections, enforced law and order and strong dynamic economy. There aren't many places in the world where your assets would be more secure. We are the lucky ones. Remember, when the markets tank and there is a flight to "safety", it is the Dollar they turn to.. at least for now.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Wed Aug 15, 2018 9:20 am

jeffyscott wrote:
Wed Aug 15, 2018 8:47 am
vineviz wrote:
Wed Aug 15, 2018 7:58 am
If you look closely you can see that from 1970 through 2012 the two portfolios had very similar returns (10.01% and 10.17%). You can't tell just by looking, but the diversified portfolio actually had lower volatility than the US-only portfolio (15.06% vs 16.00% stdev) and slightly better risk-adjusted returns (Sharpe Ratio of 0.37 vs 0.36) over that period as well.

Your "experience" is likely being unduly influenced by the results of the most recent five years. That's valid, but the wise response would be to seek out ways to dampen that bias rather than seek out ways to reinforce.
Yep, at most even with just looking at the past 10 years, it is just a 7 year period of underperformance.
To play devil's advocate a bit, international has been generally underperforming the U.S. since 1989. Yes, there have been a few years where international outperformed the U.S., but they have been the exception over the last ~30 years. From 1989 until now, the U.S. has outperformed by nearly 6% annually. Even short term treasuries outperformed international stocks over that same period by .1% and with a relatively no volatility. About the only 'major' asset class that international stocks outperformed over that period was gold (4.4% vs. 3.58%).

It's hard to persuade skeptical people that an asset class with that kind of performance over the last 30 years is now/still a good investment.
“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: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by kosomoto » Wed Aug 15, 2018 9:33 am

vineviz wrote:
Wed Aug 15, 2018 7:58 am
HuckFinn wrote:
Wed Aug 15, 2018 12:55 am
As a person who barely squeaked through high school and was kicked out of college I look over our 29 year investing history and our experience simply has been: International Funds are riskier, more costly and have less return. They are as Un-Boglelike as can be and yet for some reason nobody actually talks about why we ever started throwing Internationals into the mix and why people who question this philosophy are rebuked by so many despite some pretty drastic numbers.

Vanguard suggests this: To get the full diversification benefits, we recommend that you consider investing about 40% of your stock allocation in international stocks. I think this ill suits investors – new and old.
With all due respect, I feel confident in saying the difference here is that Vanguard is relying on evidence and not emotion in forming their recommendation.

Your "experience", that international stocks "are riskier, more costly and have less return" is not supported by looking at the full period of evidence nor by considering their role in a portfolio as a whole. Moreover, I feel comfortable suggesting that your "experience" is being unduly influenced by recent performance. Recency bias is a well-known cognitive bias, one that has been mentioned by several folks in this thread and is surely influencing your thinking.

Take a look at the difference in performance between two portfolios. Portfolio 1 follows Vanguard's advice and is 60% US stocks and 40% international stocks. The benchmark is 100% US stocks. The time period is 1970 to 2017, the whole period for which full-year data is available for the international index (MSCI ex US).

Image

In this one chart you can clearly see the decades (1970-1979, 1980-1989, and 2000-2010) in which international stocks outperformed US stocks and the decades (1990-1999 and 2000-2017) in which US stocks outperformed.

If you look closely you can see that from 1970 through 2012 the two portfolios had very similar returns (10.01% and 10.17%). You can't tell just by looking, but the diversified portfolio actually had lower volatility than the US-only portfolio (15.06% vs 16.00% stdev) and slightly better risk-adjusted returns (Sharpe Ratio of 0.37 vs 0.36) over that period as well.

Your "experience" is likely being unduly influenced by the results of the most recent five years. That's valid, but the wise response would be to seek out ways to dampen that bias rather than seek out ways to reinforce.

Five years of underperformance can be frustrating, I know, but investing is a marathon not a sprint. The best thing you can do as an investor, IMHO, is to avoid overreacting and making decisions based on frustration.
What international index fund could you buy in 1970?

Hint: None.

That data from 1970 is not useful as nobody actually obtained those index returns.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Wed Aug 15, 2018 9:34 am

Valuethinker wrote:
Wed Aug 15, 2018 6:48 am

Depends on your dating of the Fall of Rome ;-). Note that the Roman Republic lasted a lot shorter time. The Roman Empire was very different - it was deliberately multicultural (making citizens of prominent members of *all* the subject peoples) and latterly Rome was capital in name only - the real capital was along the Danube and Rhine frontiers. The crisis of the 3rd C AD would make anyone sit up and notic.
Haha.. Indeed. I generally think of Rome's civilization as lasting from somewhere around 600BC to somewhere around 400AD. I mis-spoke when I said "Roman Empire", I meant it to mean, the Roman Civilization.. I am not sure how Historians view it, but I consider the shift from Republic to Empire as just an evolution of the system of government. It was still the same civilization. Even during the Empire phase, I believe they still held local elections. Also, I tend to think of Byzantium as somewhat of a continuation of the Roman civilization. Similar to how you describe the US as continuation of the European period of dominance (which I also agree with).
The USA is likely to remain a very important country just to have more rivalry -- from India and China in particular. Nigeria the problems are manifest and so its rise is further away and the situation is foggier - but it's definitely a possibility.
India and China are pretty much the only countries that have a shot rivaling the US in the next 20-50 years. The social and economic problems in China and India are still quite formidable as well (restive provinces, territorial disputes, corruption, lack of trust in government, demographic problems, and many others). The US is quite a bit better off by comparison. While not as vast, it's workforce is more highly skilled, more productive and more innovative. But yes, it is certainly possible that either of those two countries (most likely China) will become an equal to the US in the next couple of decades.
I think the main issue is a sectoral one. The US stockmarket is heavily healthcare and technology weighted. By contrast, it has a low weighting in natural resources (especially ex energy)-- the world's main mining companies are listed in London, Brazil, Australia, not USA.
That is a very good point I hadn't even thought of - The fact that different sectors and industries dominate in different countries.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by pennylane » Wed Aug 15, 2018 9:38 am

thanks for reminding me to buy more :sharebeer

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Wed Aug 15, 2018 9:41 am

kosomoto wrote:
Wed Aug 15, 2018 9:33 am
That data from 1970 is not useful as nobody actually obtained those index returns.
FWIW, recency bias is not the only cognitive error that investors are prone to make.
"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: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Wed Aug 15, 2018 9:44 am

bligh wrote:
Wed Aug 15, 2018 9:34 am
....restive provinces, territorial disputes, corruption, lack of trust in government, demographic problems, and many others....
All of those things were true about the United States at the dawn of the 20th century and they didn't prevent our stock markets from dominating the world's other markets.
"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: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Wed Aug 15, 2018 9:46 am

vineviz wrote:
Wed Aug 15, 2018 9:41 am
kosomoto wrote:
Wed Aug 15, 2018 9:33 am
That data from 1970 is not useful as nobody actually obtained those index returns.
FWIW, recency bias is not the only cognitive error that investors are prone to make.
I'm not sure if you can blame 30 years of U.S. outperformance on mere recency bias. That could easily be an investor's entire accumulation period. But of course, we don't know whether the next 30 will even resemble that.
“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: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Elysium » Wed Aug 15, 2018 9:47 am

OP said:
5 years ago we owned 10 different Vanguard Funds - Asset Allocation - 69% Stock and 31% Bond. Foreign percentage of equities was 32%.

Roughly 3 years ago we had reduced our different funds down to 6 (from 10) - Asset allocation - 64% Stock and 36% bond. Foreign percentage of equities was 30%.

By January 1st of this year we had slimmed our entire portfolio down to only 4 Vanguard funds - Asset allocation 65% stock and 35% bond. We reduced our International percentage to 20% of equities. In the last few months we have reduced our foreign percentage to around 15%.

If I had to guess 15 years ago we may have been at 40% International equities so our slide from 40% to 30% to 20% to 15% has been slow and gradual and not without strain.
You have been market timing out of lower performing INTL assets into higher performing US assets. If you were to market time, better would have been to have done it all once going from 40% to 15% in one shot. But the fact you could not do it means you have no idea how any of these assets will perform. But not to worry, because none of the experts also know.

Additional fact is that you probably were market timing into INTL before this 15 year period increasing your allocation to 40% while US was underperforming. All in all you may have sold lower performing equities and purchased higer performing equities, only to see them perform lower after you chased performance.

The best thing to do was to simply keep your AA and re-balance periodically.

This should be classic post to remind everyone exactly what not to do. There could be reasons why someone may not want to invest in INTL or follow the 20% Bogle rule, but chasing past performance isn't one of them.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by tadamsmar » Wed Aug 15, 2018 9:55 am

HuckFinn,

You need to quit diversifying.

If you diversify, there is anyways something performing badly.

Put is all in a savings account and ignore inflation so that you will be able to believe that everything is going up.
Last edited by tadamsmar on Wed Aug 15, 2018 10:03 am, edited 1 time in total.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by jeffyscott » Wed Aug 15, 2018 9:56 am

bligh wrote:
Wed Aug 15, 2018 9:34 am
Valuethinker wrote:
Wed Aug 15, 2018 6:48 am

Depends on your dating of the Fall of Rome ;-). Note that the Roman Republic lasted a lot shorter time. The Roman Empire was very different - it was deliberately multicultural (making citizens of prominent members of *all* the subject peoples) and latterly Rome was capital in name only - the real capital was along the Danube and Rhine frontiers. The crisis of the 3rd C AD would make anyone sit up and notic.
Haha.. Indeed. I generally think of Rome's civilization as lasting from somewhere around 600BC to somewhere around 400AD. I mis-spoke when I said "Roman Empire", I meant it to mean, the Roman Civilization.. I am not sure how Historians view it, but I consider the shift from Republic to Empire as just an evolution of the system of government. It was still the same civilization. Even during the Empire phase, I believe they still held local elections. Also, I tend to think of Byzantium as somewhat of a continuation of the Roman civilization. Similar to how you describe the US as continuation of the European period of dominance (which I also agree with).
Some would say it also continued in the west as what we call the "Holy Roman Empire" (which I think called itself just the Roman Empire?) and the Catholic church.
I consider the shift from Republic to Empire as just an evolution of the system of government
Yes, I don't think the people living at the time thought "oh, now we are the Roman Empire, no longer a republic", the Roman Senate continued on, it just let the "emperor" run things. One might also see the gradual transition to more and more power being concentrated in the US President as somewhat of a parallel evolution.
press on, regardless - John C. Bogle

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Wed Aug 15, 2018 10:05 am

willthrill81 wrote:
Wed Aug 15, 2018 9:46 am
vineviz wrote:
Wed Aug 15, 2018 9:41 am
kosomoto wrote:
Wed Aug 15, 2018 9:33 am
That data from 1970 is not useful as nobody actually obtained those index returns.
FWIW, recency bias is not the only cognitive error that investors are prone to make.
I'm not sure if you can blame 30 years of U.S. outperformance on mere recency bias. That could easily be an investor's entire accumulation period. But of course, we don't know whether the next 30 will even resemble that.
I’m not blaming the performance differential on bias.

The bias is the act of putting more weight on recent evidence while discounting more powerful evidence that is less recent.

Also, its not quite accurate to say there has been 30 years of outperformance. For all but the last five years the two asset classes had similar performance, with a fairly balanced ratio of annual winners.

Don’t forget that for the entire decade of the 2000s the S&P 500 had a negative CAGR while international stocks had a positive return.
"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: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by tadamsmar » Wed Aug 15, 2018 10:12 am

Valuethinker wrote:
Wed Aug 15, 2018 6:48 am

Depends on your dating of the Fall of Rome ;-). Note that the Roman Republic lasted a lot shorter time. The Roman Empire was very different - it was deliberately multicultural (making citizens of prominent members of *all* the subject peoples) and latterly Rome was capital in name only - the real capital was along the Danube and Rhine frontiers. The crisis of the 3rd C AD would make anyone sit up and notice.
But, if you were a citizen of Rome in 200 AD, would you have thought that you were living in a republic? Augustus declared the republic to be restored shortly after he took power as emperor.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Wed Aug 15, 2018 10:25 am

vineviz wrote:
Wed Aug 15, 2018 10:05 am
willthrill81 wrote:
Wed Aug 15, 2018 9:46 am
vineviz wrote:
Wed Aug 15, 2018 9:41 am
kosomoto wrote:
Wed Aug 15, 2018 9:33 am
That data from 1970 is not useful as nobody actually obtained those index returns.
FWIW, recency bias is not the only cognitive error that investors are prone to make.
I'm not sure if you can blame 30 years of U.S. outperformance on mere recency bias. That could easily be an investor's entire accumulation period. But of course, we don't know whether the next 30 will even resemble that.
I’m not blaming the performance differential on bias.

The bias is the act of putting more weight on recent evidence while discounting more powerful evidence that is less recent.

Also, its not quite accurate to say there has been 30 years of outperformance. For all but the last five years the two asset classes had similar performance, with a fairly balanced ratio of annual winners.

Don’t forget that for the entire decade of the 2000s the S&P 500 had a negative CAGR while international stocks had a positive return.
Over the last 30 years, international has absolutely been a drag on returns. Yes, there have been relatively brief periods where it did better than U.S., but the sum total has been abysmal.
willthrill81 wrote:
Wed Aug 15, 2018 9:20 am
To play devil's advocate a bit, international has been generally underperforming the U.S. since 1989. Yes, there have been a few years where international outperformed the U.S., but they have been the exception over the last ~30 years. From 1989 until now, the U.S. has outperformed by nearly 6% annually. Even short term treasuries outperformed international stocks over that same period by .1% and with a relatively no volatility. About the only 'major' asset class that international stocks outperformed over that period was gold (4.4% vs. 3.58%).

It's hard to persuade skeptical people that an asset class with that kind of performance over the last 30 years is now/still a good investment.
“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: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Elysium » Wed Aug 15, 2018 10:30 am

If at all someone were to reduce the allocation to one specific asset like INTL, then the right time to do so will be during a period of strength relative to other assets, and not during decline. I would wait until INTL starts outperforming US again and reduce after cumulative returns have surpassed before getting *convinced* INTL is not needed.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by bligh » Wed Aug 15, 2018 10:33 am

vineviz wrote:
Wed Aug 15, 2018 9:44 am
bligh wrote:
Wed Aug 15, 2018 9:34 am
....restive provinces, territorial disputes, corruption, lack of trust in government, demographic problems, and many others....
All of those things were true about the United States at the dawn of the 20th century and they didn't prevent our stock markets from dominating the world's other markets.
I disagree on two points. The US did not have a demographic problem at all. In fact the US was thriving demographically. If you look at the immigration statistics there was a massive spike in immigration during the late 1800s and early 1900s. During that period, the workforce was constantly being injected with fresh labor intent on making a new life for themselves here. (As a percentage of the population we had higher immigration back then, than we do even today)

China and India have the opposite problem right now. They have been experiencing a brain drain where a size able chunk of their most educated and ambitious are leaving... for the US. Yes this flow has slowed, but it hasn't reversed. Neither country (yet) attracts people from around the world to its shores the way the US did then (and still does). Nor is it as welcoming.

The second point you are missing... By the late 1800s the US wasn't just competing with the dominant empire of the time (the British) on making things faster and cheaper. It had actually grabbed the lead in pushing the edge of technology forward on its own. In fact, just as Britain is credited with bringing about the Industrial Age.. It would not be unfair to say that the US can be credited with bringing about the Modern age. It was innovating like no other country on Earth at the time, and I would argue, it still is. I have yet to see a comparable innovation lead appear in China or India.

It takes a lot of hard work and a lot of luck to build a super power (other wise every one would be doing it!).. China and India will face the same hurdles the US faced. Eventually, though it is inevitable that either the US will kill its own Golden Goose (possibly throwing the world into a new dark age - kind of what happened with Rome), or another country will grab the lead, cross those hurdles, and take us into the "Post" Modern age (Kind of like what happened with Spain followed by Britain followed by the US). It is obvious which one we'd all prefer. :)

Just to repeat though, these are my opinions and the future is of course unknown, which is why I am for market weighting the US, not overweighting or underweighting it.
Last edited by bligh on Wed Aug 15, 2018 10:39 am, edited 3 times in total.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by appleshampooid » Wed Aug 15, 2018 10:38 am

rudeboy wrote:
Tue Aug 14, 2018 9:41 pm
If you aren't unhappy with part of your portfolio, you aren't diversified enough.
This is a great quote. Thank you. Going to use it for my sig. :sharebeer
"If you aren't unhappy with part of your portfolio, you aren't diversified enough." -rudeboy

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by drzzzzz » Wed Aug 15, 2018 10:50 am

Everyone's risk tolerance is different and while I invest in international, it also seems to me that international markets often have greater daily swings when compared to US markets which is frustrating and at times anxiety provoking - I assume it is because they are less liquid, more opaque, have fewer controls, more hot money chasing the markets and then returning to the US, currency issues, or something else going on. It seems like when the US gets a cold, foreign markets get pneumonia; and conversely foreign markets selling off seem for their own reasons seem to be a contagion to the US and to forecast a fall in US markets although usually to a smaller degree.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Valuethinker » Wed Aug 15, 2018 11:24 am

tadamsmar wrote:
Wed Aug 15, 2018 10:12 am
Valuethinker wrote:
Wed Aug 15, 2018 6:48 am

Depends on your dating of the Fall of Rome ;-). Note that the Roman Republic lasted a lot shorter time. The Roman Empire was very different - it was deliberately multicultural (making citizens of prominent members of *all* the subject peoples) and latterly Rome was capital in name only - the real capital was along the Danube and Rhine frontiers. The crisis of the 3rd C AD would make anyone sit up and notice.
But, if you were a citizen of Rome in 200 AD, would you have thought that you were living in a republic? Augustus declared the republic to be restored shortly after he took power as emperor.
That was a conceit that died with Augustus, I think?

They called the ruler "Emperor" and he was appointed by his predecessor or by the Army. In the Eastern Roman Empire, he was elevated as a God (in some provinces, at any rate).

People were still proud of having come from patrician/ Senatorial origins, but no one doubted where the power was.

Rome is just not a useful measurestick for longevity of civilizations. City state became Republic became Empire. Trappings of the previous arrangements were kept around but they were trappings. And things happen much faster now.

Taking "European civilization" in the round as a framework of culture, language, people, political and economic norms we can talk about the explosion of same onto the world post c. 1492. As having huge and permanent demographic impacts (perhaps 90% of the population of the New World died of disease in the subsequent century or in the subsequent genocidal wars and occupations; to be replaced with people of European (and slaves of African) origin). Modern capitalism emerged in that period and spread across the face of the world. European languages became dominant. "culture" came to mean European culture (Beethoven, Shakespeare etc.).

One can see the change of leadership going on. The US is not going anywhere as a preeminent military, political and economic power. But China and India have the populations and the economic momentum to rival it (assuming nothing derails them). Beyond them is the question of whether Africa can capitalize on its demographic advantages and overcome all its other issues - the balance of the world's population is moving towards Africa.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by vineviz » Wed Aug 15, 2018 12:16 pm

willthrill81 wrote:
Wed Aug 15, 2018 10:25 am
Over the last 30 years, international has absolutely been a drag on returns. Yes, there have been relatively brief periods where it did better than U.S., but the sum total has been abysmal.
First let me say that 30 years is a somewhat arbitrary time period and coincidently (or not) begins precisely at the end of a 20 year period in which international stocks DRAMATICALLY outperformed US stocks. So choosing a period of 30 years seems engineered to line up a comparison of international stocks that looks especially unfavorable compared to (say) a period of 20 years or 40 years. In fact this PARTICULAR 30 year period happens to be the least favorable 30 year period you could choose for such a comparison.

Even so, out of the past 30 full years (1988 through 2017), the MSCI World ex US index has outperformed the S&P 500 in 13 years. That's just barely less than half the time, which is hardly a rout in favor of US stocks.

And perhaps it is a semantic quibble but I wouldn't call six straight years of international outperformance (2002 to 2007) a "brief period": it's longer than any winning streak that US stocks have enjoyed.
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by tadamsmar » Wed Aug 15, 2018 12:18 pm

Valuethinker wrote:
Wed Aug 15, 2018 11:24 am
tadamsmar wrote:
Wed Aug 15, 2018 10:12 am
Valuethinker wrote:
Wed Aug 15, 2018 6:48 am

Depends on your dating of the Fall of Rome ;-). Note that the Roman Republic lasted a lot shorter time. The Roman Empire was very different - it was deliberately multicultural (making citizens of prominent members of *all* the subject peoples) and latterly Rome was capital in name only - the real capital was along the Danube and Rhine frontiers. The crisis of the 3rd C AD would make anyone sit up and notice.
But, if you were a citizen of Rome in 200 AD, would you have thought that you were living in a republic? Augustus declared the republic to be restored shortly after he took power as emperor.
That was a conceit that died with Augustus, I think?
Saying that openly on the streets of Rome after Augustus death might have gotten you arrested. Not sure what the typical Roman citizen thought about the matter.

The Roman Senate outlasted the Empire. It's last recorded act was 603 AD.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by patrick013 » Wed Aug 15, 2018 1:08 pm

Bendee wrote:
Wed Aug 15, 2018 6:36 am
What if the next 5-10 years show Int'l beating US?
I wouldn't have any faith in it if it doesn't. I need the money too much.
age in bonds, buy-and-hold, 10 year business cycle

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by WanderingDoc » Wed Aug 15, 2018 1:32 pm

willthrill81 wrote:
Wed Aug 15, 2018 9:20 am
jeffyscott wrote:
Wed Aug 15, 2018 8:47 am
vineviz wrote:
Wed Aug 15, 2018 7:58 am
If you look closely you can see that from 1970 through 2012 the two portfolios had very similar returns (10.01% and 10.17%). You can't tell just by looking, but the diversified portfolio actually had lower volatility than the US-only portfolio (15.06% vs 16.00% stdev) and slightly better risk-adjusted returns (Sharpe Ratio of 0.37 vs 0.36) over that period as well.

Your "experience" is likely being unduly influenced by the results of the most recent five years. That's valid, but the wise response would be to seek out ways to dampen that bias rather than seek out ways to reinforce.
Yep, at most even with just looking at the past 10 years, it is just a 7 year period of underperformance.
To play devil's advocate a bit, international has been generally underperforming the U.S. since 1989. Yes, there have been a few years where international outperformed the U.S., but they have been the exception over the last ~30 years. From 1989 until now, the U.S. has outperformed by nearly 6% annually. Even short term treasuries outperformed international stocks over that same period by .1% and with a relatively no volatility. About the only 'major' asset class that international stocks outperformed over that period was gold (4.4% vs. 3.58%).

It's hard to persuade skeptical people that an asset class with that kind of performance over the last 30 years is now/still a good investment.
I guess Vangaurd is easily persuaded then :P
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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by Jags4186 » Wed Aug 15, 2018 1:50 pm

Valuethinker wrote:
Wed Aug 15, 2018 11:24 am
That was a conceit that died with Augustus, I think?

They called the ruler "Emperor" and he was appointed by his predecessor or by the Army. In the Eastern Roman Empire, he was elevated as a God (in some provinces, at any rate).

People were still proud of having come from patrician/ Senatorial origins, but no one doubted where the power was.

Rome is just not a useful measurestick for longevity of civilizations. City state became Republic became Empire. Trappings of the previous arrangements were kept around but they were trappings. And things happen much faster now.
The Roman Empire was de jure a Republic until 284 when the Dominate was established. The Principate, Augustus up until Carus was a republic. The Romans didn't have a word for emperor, they used Caesar, Augustus, or both. It wasn't until Carus divided the empire between his sons did the facade of the Republic was completely wiped away and Diocletian unambiguously made it an empire. The english word emperor derives from the latin term imperator which was originally a titled used by generals. Generals had imperium (legal military power) and therefore were imperator. Roman emperors all took this title as they were nominally the most senior military official.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by hornet96 » Wed Aug 15, 2018 2:26 pm

Wow, this thread has exploded in barely 24 hours!
vineviz wrote:
Wed Aug 15, 2018 12:16 pm

First let me say that 30 years is a somewhat arbitrary time period.....

I haven't read every post, but agree with you and others that have pointed out the arbitrary nature of selecting any time period to look at over or under performance of Investment A vs. Investment B. The point that many seemed to missing (in the first couple of pages I got through at least!) is that the very act of looking at time periods on a calendar year basis is itself arbitrary - there is nothing magical about January 1st and December 31st, and in fact, most portfolio cash flows happen on the other 363 days of each year that will have a time-weighted effect on portfolio returns. Performance data from 1/1/07 - 12/31/07 is just as arbitrary as performance data from 3/27/07 - 4/26/08 or whatever. The calendar year (or any 12 month period) is simply a human convention that fools many people into believing they are looking at a meaningful data set and making an informed decision - which couldn't be further from the truth.

One annual performance period ended yesterday (12 months ending 8/14/18), and another one ends today (12 months ending 8/15/18). Interestingly, another one ends tomorrow as well (12 months ending 8/16/18), and all the other days of the year.....

If we really want to be pedantic in illustrating the data mining bias associated with the selection of performance periods, the selection of annual periods is also arbitrary. Why not bi-annual? Or semi-annual? Or octo-annual periods? Or rolling tri-monthly periods? Hopefully the point is clear by now.

There have been studies illustrating the effect of "rolling" returns (starting with each day of the year) and some that illustrate the impact of missing the best or worse 10 trading days of a time period, etc., that further help illustrate this point. I don't have time to find them right now but will try to do so later.
vineviz wrote:
Wed Aug 15, 2018 12:16 pm
And perhaps it is a semantic quibble but I wouldn't call six straight years of international outperformance (2002 to 2007) a "brief period": it's longer than any winning streak that US stocks have enjoyed.
In fact, it was even better than that when just looking at the two most common Bogglehead funds - Total US Stock and Total International. The (arbitrary) 10 year period of 12/31/02 - 12/31/12 showed an outperformance by Total International to the tune of +34% cumulative.

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Re: It's not enough to mumble "Stay the Course"... INT'L Investing has been a disaster!

Post by willthrill81 » Wed Aug 15, 2018 3:30 pm

vineviz wrote:
Wed Aug 15, 2018 12:16 pm
willthrill81 wrote:
Wed Aug 15, 2018 10:25 am
Over the last 30 years, international has absolutely been a drag on returns. Yes, there have been relatively brief periods where it did better than U.S., but the sum total has been abysmal.
First let me say that 30 years is a somewhat arbitrary time period and coincidently (or not) begins precisely at the end of a 20 year period in which international stocks DRAMATICALLY outperformed US stocks. So choosing a period of 30 years seems engineered to line up a comparison of international stocks that looks especially unfavorable compared to (say) a period of 20 years or 40 years. In fact this PARTICULAR 30 year period happens to be the least favorable 30 year period you could choose for such a comparison.

Even so, out of the past 30 full years (1988 through 2017), the MSCI World ex US index has outperformed the S&P 500 in 13 years. That's just barely less than half the time, which is hardly a rout in favor of US stocks.

And perhaps it is a semantic quibble but I wouldn't call six straight years of international outperformance (2002 to 2007) a "brief period": it's longer than any winning streak that US stocks have enjoyed.
As pointed out by hornet96, the argument as to arbitrary time periods for backtesting can be applied to any time period. My point was and is that 30 years is a long time to underperform in total. Certainly there have been periods during that time when international outperformed. Virtually every asset class has outperformed U.S. stocks at some point; that means nothing.

Over the last 30 years, gold, for instance, would have been a far better diversifier than international stocks. A 70/30 portfolio of U.S./International would have had a CAGR of 7.58%, compared to 7.70% for 70/30 U.S./gold. But the latter had a far smaller maximum drawdown (less than half that of the former) a better worst year, and a substantially higher Sharpe ratio.

Believe it or not, I'm not saying that I'm opposed to international equities. But what I am saying is that this notion that with a wave of our hand we can convince intelligent people that 30 years of dramatic underperformance (in total) doesn't change anything is flawed. This was, I believe, the OP's point. If we want to tell others that they need to have a permanent stake in international equities, then we had better have an extremely persuasive argument for doing so. Simply saying things like "stay the course" just doesn't cut it.
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