What is your allocation to U.S. and International?

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J G Bankerton
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Re: What is your allocation to U.S. and International?

Post by J G Bankerton » Thu Jan 10, 2019 6:24 pm

fortyofforty wrote:
Thu Jan 10, 2019 12:45 pm

The OP clearly states "U.S. and International stocks and bonds."
Not in the title. No one reads the posts as is evident by no one mentioning bonds.

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fortyofforty
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Re: What is your allocation to U.S. and International?

Post by fortyofforty » Thu Jan 10, 2019 6:29 pm

J G Bankerton wrote:
Thu Jan 10, 2019 6:24 pm
fortyofforty wrote:
Thu Jan 10, 2019 12:45 pm

The OP clearly states "U.S. and International stocks and bonds."
Not in the title. No one reads the posts as is evident by no one mentioning bonds.
No one mentions bonds because no one can justify his or her position with logical consistency. It's a lot easier and more pleasing to discuss haystacks and rear view mirrors and risk and diversification when discussing personal equity positions, and considerably less so about bonds.

As for the title, it mentions neither stocks nor bonds.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

J G Bankerton
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Re: What is your allocation to U.S. and International?

Post by J G Bankerton » Thu Jan 10, 2019 6:37 pm

fortyofforty wrote:
Thu Jan 10, 2019 6:29 pm

As for the title, it mentions neither stocks nor bonds.
Most, like I, assume stocks as foreign bonds are not in the three fund portfolio.

How many hold ANY foreign bonds?

MnD
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Re: What is your allocation to U.S. and International?

Post by MnD » Thu Jan 10, 2019 7:37 pm

J G Bankerton wrote:
Thu Jan 10, 2019 6:37 pm
fortyofforty wrote:
Thu Jan 10, 2019 6:29 pm

As for the title, it mentions neither stocks nor bonds.
Most, like I, assume stocks as foreign bonds are not in the three fund portfolio.

How many hold ANY foreign bonds?
My only two fixed income positions are 75% TSP G fund (a compelling deal of 11-year treasury yield with zero duration) and 25% Dodge and Cox Global Bond Fund. If I did not have access to the G fund I would likely be 100% D&C Global Bond Fund.

IMO indexing does not translate well to bond funds. One can make very good cases to weigh largest positions in the largest and most profitable companies around the world and a not so compelling case to base largest bond positions on being biggest debtors (Japan, US Treasury, GE, Illinois ect). Low-cost broad equity index funds are out-performers relative to the competition whereas low-cost bond index funds are typically 3-star mid-packers.

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fortyofforty
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Re: What is your allocation to U.S. and International?

Post by fortyofforty » Thu Jan 10, 2019 8:04 pm

MnD wrote:
Thu Jan 10, 2019 7:37 pm
J G Bankerton wrote:
Thu Jan 10, 2019 6:37 pm
fortyofforty wrote:
Thu Jan 10, 2019 6:29 pm

As for the title, it mentions neither stocks nor bonds.
Most, like I, assume stocks as foreign bonds are not in the three fund portfolio.

How many hold ANY foreign bonds?
My only two fixed income positions are 75% TSP G fund (a compelling deal of 11-year treasury yield with zero duration) and 25% Dodge and Cox Global Bond Fund. If I did not have access to the G fund I would likely be 100% D&C Global Bond Fund.

IMO indexing does not translate well to bond funds. One can make very good cases to weigh largest positions in the largest and most profitable companies around the world and a not so compelling case to base largest bond positions on being biggest debtors (Japan, US Treasury, GE, Illinois ect). Low-cost broad equity index funds are out-performers relative to the competition whereas low-cost bond index funds are typically 3-star mid-packers.
That same argument has been made about emerging market equity index funds, international equity index funds, small cap equity index funds, sector equity index funds.... I'm not sure it has validity in any situation, though, even bonds, as long as the appropriate duration and quality are selected.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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spdoublebass
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Re: What is your allocation to U.S. and International?

Post by spdoublebass » Fri Jan 11, 2019 1:50 am

fortyofforty wrote:
Thu Jan 10, 2019 5:21 pm

I agree with you about what appears to be the argument. However, it's illogical.

The same argument is made about those who, rightly, declared ten years ago that there was no need for international equities. Domestic equities have outperformed for the past decade or more. In terms of "need", can anyone claim there is truly a "need" for international equities that have acted as a performance drag? Can we predict what will happen in the future regarding the bond market any better than we can predicting what will happen in the equity market? Did we?

In a way, it seems as if those claiming the need for a well-constructed portfolio to contain both domestic and international equities, but no need at all for including international bonds, want to eat their cake and have it, too. Logical consistency would demand a mixture of domestic and international equities and bonds, just as Vanguard is doing in its LifeStrategy line. There is, of course, no need for logical consistency in portfolio construction, only what makes each investor comfortable and able to follow the course as set.
I feel the same way and buy into the work of Bill Sharpe and the Global Portfolio.

I think another issue for BH's is the low yield compared to other funds.
BNDX currently has a SEC yield (30 day) of 1% International Bond
BNDW is at 1.93% Total World Bond
BND is at 3.25% TBM
VCSH 3.63% Short Term Corporate
VMMXX 2.44% (7-day yield) Prime MM
I'm trying to think, but nothing happens

fennewaldaj
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Re: What is your allocation to U.S. and International?

Post by fennewaldaj » Fri Jan 11, 2019 2:20 am

MnD wrote:
Thu Jan 10, 2019 7:37 pm
Low-cost broad equity index funds are out-performers relative to the competition whereas low-cost bond index funds are typically 3-star mid-packers.
Part of that is that active bond funds have a significant tilt towards corporate credit (and away from treasuries) on average a lot of them also hold small high yield stakes and/or some emerging market bonds.

fennewaldaj
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Re: What is your allocation to U.S. and International?

Post by fennewaldaj » Fri Jan 11, 2019 2:28 am

brad.clarkston wrote:
Thu Jan 10, 2019 4:19 pm


Now if could at least find a decent Ex-US Small Cap fund that wasn't a large/med in drag and wasn't horribly managed with a bad ER.
Whats wrong with Vanguard's FTSE all world ex US small cap. Its got a nice mix of mid and small caps and covers the whole ex US space. The ER is low and its actually cheaper than the stated value due to securities lending.

s8r
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Re: What is your allocation to U.S. and International?

Post by s8r » Fri Jan 11, 2019 5:39 am

JimmyJammy wrote:
Wed Jan 09, 2019 6:37 pm
I think the general Total International Fund is too diverse. I think one will probably get better results by following individual regions or countries, reading The Economist, and slicing and dicing.
I invest according to the world market cap, but a fund that includes countries selectively would certainly be interesting. For example like this:

USA
Canada
UK
Germany
Switzerland
Netherlands
Sweden
Finland
Norway
Denmark
Australia
Korea

BoggledHead2
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Re: What is your allocation to U.S. and International?

Post by BoggledHead2 » Fri Jan 11, 2019 10:08 am

fortyofforty wrote:
Thu Jan 10, 2019 4:53 am
BoggledHead2 wrote:
Wed Jan 09, 2019 8:30 pm
I believe I saw an article regarding the fact that, due to the markets outperforming each other for different stretches, the 50/50 allocation actually had higher returns over 100% US

I also don’t feel like banking on 1 country for everything, I’ll just leave it at that
Do you also diversify globally in the bond realm (if you invest in bonds)?
I do not have bonds

1. I'm young enough to have a 20+ year horizon. 100% equity + emergency fund
2. I don't think i will ever own bonds, as the thought of my "safe" portion still potentially losing value terrifies me. I'm fine with equity volatility, it pays off in the long run - I'm not fine with my safety net declining. I only "invest" what I know I won't need for 5+ years.

I'll likely be in high yield savings/CD ladders when it's time to start reducing my equity exposure.

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fortyofforty
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Re: What is your allocation to U.S. and International?

Post by fortyofforty » Fri Jan 11, 2019 11:11 am

BoggledHead2 wrote:
Fri Jan 11, 2019 10:08 am
fortyofforty wrote:
Thu Jan 10, 2019 4:53 am
BoggledHead2 wrote:
Wed Jan 09, 2019 8:30 pm
I believe I saw an article regarding the fact that, due to the markets outperforming each other for different stretches, the 50/50 allocation actually had higher returns over 100% US

I also don’t feel like banking on 1 country for everything, I’ll just leave it at that
Do you also diversify globally in the bond realm (if you invest in bonds)?
I do not have bonds

1. I'm young enough to have a 20+ year horizon. 100% equity + emergency fund
2. I don't think i will ever own bonds, as the thought of my "safe" portion still potentially losing value terrifies me. I'm fine with equity volatility, it pays off in the long run - I'm not fine with my safety net declining. I only "invest" what I know I won't need for 5+ years.

I'll likely be in high yield savings/CD ladders when it's time to start reducing my equity exposure.
Of course that does mean you''ll be banking on one country with your "safety net". Again, not that it's "wrong", just that it's reality and a choice.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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steve roy
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Re: What is your allocation to U.S. and International?

Post by steve roy » Fri Jan 11, 2019 11:29 am

Currently our allocation is 27% stocks, 73% bonds.

17.5% of the stock allocation is international. Two months ago, it was 10% higher but we sold a large slug Vanguard's FTSE small cap international ETF because Tax Loss Harvesting. Haven't gotten back in. Since we're at the beginning of retirement, since domestic stock have high valuations and are a wee bit, ahm, choppy, we're sticking to various fixed instruments (CDs, Money Market, bonds).

Ten years from now, we plan to be at a 40% stock, 60% bond allocation, but we'll see. We're not in a position where we have to be in the game, so we're mostly out.

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Re: What is your allocation to U.S. and International?

Post by Hector » Fri Jan 11, 2019 1:16 pm

fennewaldaj wrote:
Fri Jan 11, 2019 2:20 am
MnD wrote:
Thu Jan 10, 2019 7:37 pm
Low-cost broad equity index funds are out-performers relative to the competition whereas low-cost bond index funds are typically 3-star mid-packers.
Part of that is that active bond funds have a significant tilt towards corporate credit (and away from treasuries) on average a lot of them also hold small high yield stakes and/or some emerging market bonds.
IMO, most people invest in bonds for safety reasons. In theory, us treasury bonds are the safest. I don't think comparing investing in us equities to foreign equities is the same as comparing investing in us bonds to foreign bonds. I also think when it comes to us bonds, investing in treasury bonds is not the same as investing in MBS or corporate or other type bonds.

BoggledHead2
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Re: What is your allocation to U.S. and International?

Post by BoggledHead2 » Fri Jan 11, 2019 1:42 pm

fortyofforty wrote:
Fri Jan 11, 2019 11:11 am
BoggledHead2 wrote:
Fri Jan 11, 2019 10:08 am
fortyofforty wrote:
Thu Jan 10, 2019 4:53 am
BoggledHead2 wrote:
Wed Jan 09, 2019 8:30 pm
I believe I saw an article regarding the fact that, due to the markets outperforming each other for different stretches, the 50/50 allocation actually had higher returns over 100% US

I also don’t feel like banking on 1 country for everything, I’ll just leave it at that
Do you also diversify globally in the bond realm (if you invest in bonds)?
I do not have bonds

1. I'm young enough to have a 20+ year horizon. 100% equity + emergency fund
2. I don't think i will ever own bonds, as the thought of my "safe" portion still potentially losing value terrifies me. I'm fine with equity volatility, it pays off in the long run - I'm not fine with my safety net declining. I only "invest" what I know I won't need for 5+ years.

I'll likely be in high yield savings/CD ladders when it's time to start reducing my equity exposure.
Of course that does mean you''ll be banking on one country with your "safety net". Again, not that it's "wrong", just that it's reality and a choice.
if an FDIC insured CD is risky, this world has bigger problems than what my asset allocation is. I don't delve that deep into anxiety, fortunately.

PhilosophyAndrew
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Re: What is your allocation to U.S. and International?

Post by PhilosophyAndrew » Fri Jan 11, 2019 2:07 pm

For equities, I’m 50% US and 50% International, with the aim of at least loosely matching global market capitalization. Portfolio is 80% equities/20% bonds.

I don’t invest in international bonds.

Andy.

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fortyofforty
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Re: What is your allocation to U.S. and International?

Post by fortyofforty » Fri Jan 11, 2019 2:39 pm

BoggledHead2 wrote:
Fri Jan 11, 2019 1:42 pm
fortyofforty wrote:
Fri Jan 11, 2019 11:11 am
BoggledHead2 wrote:
Fri Jan 11, 2019 10:08 am
fortyofforty wrote:
Thu Jan 10, 2019 4:53 am
BoggledHead2 wrote:
Wed Jan 09, 2019 8:30 pm
I believe I saw an article regarding the fact that, due to the markets outperforming each other for different stretches, the 50/50 allocation actually had higher returns over 100% US

I also don’t feel like banking on 1 country for everything, I’ll just leave it at that
Do you also diversify globally in the bond realm (if you invest in bonds)?
I do not have bonds

1. I'm young enough to have a 20+ year horizon. 100% equity + emergency fund
2. I don't think i will ever own bonds, as the thought of my "safe" portion still potentially losing value terrifies me. I'm fine with equity volatility, it pays off in the long run - I'm not fine with my safety net declining. I only "invest" what I know I won't need for 5+ years.

I'll likely be in high yield savings/CD ladders when it's time to start reducing my equity exposure.
Of course that does mean you''ll be banking on one country with your "safety net". Again, not that it's "wrong", just that it's reality and a choice.
if an FDIC insured CD is risky, this world has bigger problems than what my asset allocation is. I don't delve that deep into anxiety, fortunately.
And if domestic equities are more risky than foreign equities, we all have deep problems that won't be solved by any form of asset allocation. I stay out of crazytown, personally. Of course, it's the very same argument used by the "domestic stocks are enough" crowd, and hard to refute.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

fennewaldaj
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Re: What is your allocation to U.S. and International?

Post by fennewaldaj » Fri Jan 11, 2019 11:44 pm

fortyofforty wrote:
Fri Jan 11, 2019 2:39 pm

And if domestic equities are more risky than foreign equities, we all have deep problems that won't be solved by any form of asset allocation. I stay out of crazytown, personally. Of course, it's the very same argument used by the "domestic stocks are enough" crowd, and hard to refute.
Is that necessarily true? While International equity do have some other risk on top of normal equity risk, its not entirely crazy that the earnings growth of foreign firms could be more safe than that of the US. And it is then possible for that to outweigh the other risk that you take on with international equity. That is not a place we are in now or in the near future but in 20 years who knows. This would not have to be a disaster scenario. Japanese equities were certainly more risky for Japanese investors in 1989 than foreign equities. While they have had sluggish gdp growth since then it has not been anywhere close to a disaster. In addition international equities protect against high domestic inflation while inflation in other countries is lower.

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fortyofforty
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Re: What is your allocation to U.S. and International?

Post by fortyofforty » Sat Jan 12, 2019 7:29 am

fennewaldaj wrote:
Fri Jan 11, 2019 11:44 pm
fortyofforty wrote:
Fri Jan 11, 2019 2:39 pm

And if domestic equities are more risky than foreign equities, we all have deep problems that won't be solved by any form of asset allocation. I stay out of crazytown, personally. Of course, it's the very same argument used by the "domestic stocks are enough" crowd, and hard to refute.
Is that necessarily true? While International equity do have some other risk on top of normal equity risk, its not entirely crazy that the earnings growth of foreign firms could be more safe than that of the US. And it is then possible for that to outweigh the other risk that you take on with international equity. That is not a place we are in now or in the near future but in 20 years who knows. This would not have to be a disaster scenario. Japanese equities were certainly more risky for Japanese investors in 1989 than foreign equities. While they have had sluggish gdp growth since then it has not been anywhere close to a disaster. In addition international equities protect against high domestic inflation while inflation in other countries is lower.
There are many who'd say that some foreign governments are far more fiscally prudent than that of the United States. Not getting into politics, here. It's the same argument made to justify placing equity money overseas, at least into developed markets. It would, at least, be an argument for spreading "safe" money around in stable, developed markets, including government debt instruments, not putting all eggs into one country's basket (even if, historically, it's been stable).

I've often argued that, if people wonder whether an S&P 500 index fund is good enough to capture equity performance without being too risky because of concentration, I say if the 500 largest U.S. corporations all go belly-up, the country has far more serious problems than your portfolio construction.

The point is that the very same justification for investing globally applies to stocks, bonds, and cash.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

GAAP
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Re: What is your allocation to U.S. and International?

Post by GAAP » Sat Jan 12, 2019 11:57 am

fortyofforty wrote:
Thu Jan 10, 2019 6:29 pm

No one mentions bonds because no one can justify his or her position with logical consistency. It's a lot easier and more pleasing to discuss haystacks and rear view mirrors and risk and diversification when discussing personal equity positions, and considerably less so about bonds.

As for the title, it mentions neither stocks nor bonds.
Nobody?
GAAP wrote:
Sat Nov 24, 2018 5:15 pm
Approximately 50/50 per asset class, given that I use VT (total world ETF) for equity, and a 50/50 mix of BND/BNDX for bonds. If I were starting today, I would use BNDW (total world bond) instead. My Equity to Fixed Income ratio is 70/30.

With the interconnected financial world that we have today, I just assume that the overall monetary resources will ebb and flow into those four basic asset classes. By choosing the broadest possible definitions, I don't have to worry about which tide is up at the moment. That in turn leaves the single decision of how much equity risk premium to accept/require.

As I've said elsewhere, I'm lazy...
“Adapt what is useful, reject what is useless, and add what is specifically your own.” ― Bruce Lee

J G Bankerton
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Re: What is your allocation to U.S. and International?

Post by J G Bankerton » Sat Jan 12, 2019 1:10 pm

We must not forget the currency risks of unhedged funds. Why would I buy bonds from a country whos currency is not the de facto world currency. Gold and oil are priced in US dollars. Being the world currency gives US an advantage in both bonds, stocks and real world personal buying power.
I'm holding at 10% foreign stocks and zero bonds of any kind.

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fortyofforty
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Re: What is your allocation to U.S. and International?

Post by fortyofforty » Sat Jan 12, 2019 2:41 pm

GAAP wrote:
Sat Jan 12, 2019 11:57 am
fortyofforty wrote:
Thu Jan 10, 2019 6:29 pm

No one mentions bonds because no one can justify his or her position with logical consistency. It's a lot easier and more pleasing to discuss haystacks and rear view mirrors and risk and diversification when discussing personal equity positions, and considerably less so about bonds.

As for the title, it mentions neither stocks nor bonds.
Nobody?
GAAP wrote:
Sat Nov 24, 2018 5:15 pm
Approximately 50/50 per asset class, given that I use VT (total world ETF) for equity, and a 50/50 mix of BND/BNDX for bonds. If I were starting today, I would use BNDW (total world bond) instead. My Equity to Fixed Income ratio is 70/30.

With the interconnected financial world that we have today, I just assume that the overall monetary resources will ebb and flow into those four basic asset classes. By choosing the broadest possible definitions, I don't have to worry about which tide is up at the moment. That in turn leaves the single decision of how much equity risk premium to accept/require.

As I've said elsewhere, I'm lazy...
No one who excludes international bonds, as what I wrote makes perfectly clear to those who read it.
fortyofforty wrote:
Thu Jan 10, 2019 5:21 pm
In a way, it seems as if those claiming the need for a well-constructed portfolio to contain both domestic and international equities, but no need at all for including international bonds, want to eat their cake and have it, too. Logical consistency would demand a mixture of domestic and international equities and bonds, just as Vanguard is doing in its LifeStrategy line. There is, of course, no need for logical consistency in portfolio construction, only what makes each investor comfortable and able to follow the course as set.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | There are many roads to doublin'. | Original Vanguard Diehard

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