Theory: NOW is the Best Time for Total World Stock

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InvestorSteve
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Re: Theory: NOW is the Best Time for Total World Stock

Post by InvestorSteve » Sat Apr 06, 2019 6:21 pm

Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?

Drovor
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Re: Theory: NOW is the Best Time for Total World Stock

Post by Drovor » Sat Apr 06, 2019 6:38 pm

InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I switched over at the beginning of the year for stock allocation. In my 403b I do not have it available so I am sticking with Vanguard 500.

InvestorSteve
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Re: Theory: NOW is the Best Time for Total World Stock

Post by InvestorSteve » Sat Apr 06, 2019 6:50 pm

Drovor wrote:
Sat Apr 06, 2019 6:38 pm
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I switched over at the beginning of the year for stock allocation. In my 403b I do not have it available so I am sticking with Vanguard 500.
Do you have it in a taxable account? I wanted to know if it qualified for the foreign tax credit and how does it compare to VTSAX in terms of tax efficiency? If I wanted to tax loss harvest, what funds could I purchase to replicate VTWAX at Vanguard?

Drovor
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Re: Theory: NOW is the Best Time for Total World Stock

Post by Drovor » Sun Apr 07, 2019 10:19 am

InvestorSteve wrote:
Sat Apr 06, 2019 6:50 pm
Drovor wrote:
Sat Apr 06, 2019 6:38 pm
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I switched over at the beginning of the year for stock allocation. In my 403b I do not have it available so I am sticking with Vanguard 500.
Do you have it in a taxable account? I wanted to know if it qualified for the foreign tax credit and how does it compare to VTSAX in terms of tax efficiency? If I wanted to tax loss harvest, what funds could I purchase to replicate VTWAX at Vanguard?
I dont have a taxable account so not sure. I would think VTSAX (TSM) and VTIAX (TISM) could be used to tax loss harvest.

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JoMoney
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Re: Theory: NOW is the Best Time for Total World Stock

Post by JoMoney » Sun Apr 07, 2019 10:34 am

InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I've "thought about it", hard not to with constant hum on here of those advocating for it... but I'm sticking with good ol' S&P500 index fund.
Best wishes to those who believe that international exposure will bring them some "diversification benefit" and even to those that believe it will outperform. :beer
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

lostdog
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Re: Theory: NOW is the Best Time for Total World Stock

Post by lostdog » Sun Apr 07, 2019 10:39 am

Drovor wrote:
Sun Apr 07, 2019 10:19 am
InvestorSteve wrote:
Sat Apr 06, 2019 6:50 pm
Drovor wrote:
Sat Apr 06, 2019 6:38 pm
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I switched over at the beginning of the year for stock allocation. In my 403b I do not have it available so I am sticking with Vanguard 500.
Do you have it in a taxable account? I wanted to know if it qualified for the foreign tax credit and how does it compare to VTSAX in terms of tax efficiency? If I wanted to tax loss harvest, what funds could I purchase to replicate VTWAX at Vanguard?
I dont have a taxable account so not sure. I would think VTSAX (TSM) and VTIAX (TISM) could be used to tax loss harvest.
You can use VTSAX and VTIAX in taxable account for TLH purposes. Just set them to world market cap allocation and let them float. The two funds will float just like VTWAX will. When you add money to the taxable account, just allocate the money to the current world market cap.

Use VTWAX in your IRA's.

With this method you can TLH in taxable and stick with world market cap allocation across your Vanguard accounts. If you have a 401k, you'll have to work with what you have in the 401k.

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bogledogle87
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Re: Theory: NOW is the Best Time for Total World Stock

Post by bogledogle87 » Mon Apr 08, 2019 10:12 am

InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
After much deliberation, I took the global cap plunge and have made the switch for my and my wife's ROTH IRA's. With my 401k, I need to estimate the market cap with multiple funds and re-balance to current weights about once a year. In taxable, I am migrating from VTI to VT over the next year so I can harvest long-term capital gains over two tax years.

The ER's for VTWAX/VT are not worth debating anymore in my opinion - they are plenty low enough. Even looking at what they were 5 years ago, i'm amazing out how fast they have come down and expect them to continue to do so in the future.

I am thrilled to be free of the "correct / optimal" US/International allocation debate. It's exhausting, and every argument ends up being period-dependent.

I was on the 100% US kool-aid for a while, but understand a lot can happen in my 30-50 year horizon. I really started to see the flaw in the "Buy the haystack, but only if it's a US haystack" argument. Toyota, Nestle, and Samsung are just as worthy as US companies. Betting 100% on a single country is not a whole lot different than betting on Technology or Healthcare because their history and fundamentals may promise out-performance.

Total World Stock is the the ultimate implementation of passive equity indexing by eliminating all biases and emotional factors.

"VTWAX and go do something else"
VTWAX and go do something else

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bogledogle87
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Re: Theory: NOW is the Best Time for Total World Stock

Post by bogledogle87 » Mon Apr 08, 2019 10:21 am

JoMoney wrote:
Sun Apr 07, 2019 10:34 am
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I've "thought about it", hard not to with constant hum on here of those advocating for it... but I'm sticking with good ol' S&P500 index fund.
Best wishes to those who believe that international exposure will bring them some "diversification benefit" and even to those that believe it will outperform. :beer
For me, owning this fund is not about attempting to outperform the S&P 500, its about admitting I know absolutely nothing about the future. If I believed I did, I might try stock picking, or load up on Technology / Healthcare / Small Value.

I don't know who the best performing companies or countries are going to be for the next 30-50 years, but I know I will own them.

Just as a datapoint, I wanted to point out this tweet below. "Over the last 70 years, the US has outperformed ex-US by 1% annualized. How much of that outperformance has come since 2009? All of it."

https://twitter.com/MebFaber/status/1090662885573853184
VTWAX and go do something else

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bogledogle87
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Re: Theory: NOW is the Best Time for Total World Stock

Post by bogledogle87 » Mon Apr 08, 2019 10:30 am

lostdog wrote:
Sun Apr 07, 2019 10:39 am
Drovor wrote:
Sun Apr 07, 2019 10:19 am
InvestorSteve wrote:
Sat Apr 06, 2019 6:50 pm
Drovor wrote:
Sat Apr 06, 2019 6:38 pm
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I switched over at the beginning of the year for stock allocation. In my 403b I do not have it available so I am sticking with Vanguard 500.
Do you have it in a taxable account? I wanted to know if it qualified for the foreign tax credit and how does it compare to VTSAX in terms of tax efficiency? If I wanted to tax loss harvest, what funds could I purchase to replicate VTWAX at Vanguard?
I dont have a taxable account so not sure. I would think VTSAX (TSM) and VTIAX (TISM) could be used to tax loss harvest.
You can use VTSAX and VTIAX in taxable account for TLH purposes. Just set them to world market cap allocation and let them float. The two funds will float just like VTWAX will. When you add money to the taxable account, just allocate the money to the current world market cap.

Use VTWAX in your IRA's.

With this method you can TLH in taxable and stick with world market cap allocation across your Vanguard accounts. If you have a 401k, you'll have to work with what you have in the 401k.

Dividend Tax Efficiency can be found here - 85% Qualified for 2018
https://advisors.vanguard.com/VGApp/iip ... yeartodate

Foreign Tax Credit Info - about 4.9% of dividend income
https://advisors.vanguard.com/VGApp/iip ... ldFund2018
VTWAX and go do something else

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vineviz
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Re: Theory: NOW is the Best Time for Total World Stock

Post by vineviz » Mon Apr 08, 2019 10:40 am

JoMoney wrote:
Sun Apr 07, 2019 10:34 am
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I've "thought about it", hard not to with constant hum on here of those advocating for it... but I'm sticking with good ol' S&P500 index fund.
Best wishes to those who believe that international exposure will bring them some "diversification benefit" and even to those that believe it will outperform. :beer
Two investors retired in December, 1965 with $100,000. Each invested in a 60/40 portfolio and withdrew $350 from the portfolio monthly starting in January, 1966 adjusting the amount for inflation.

Image

Joe invested in portfolio 1, which was 60% S&P 500 and 40% intermediate US treasury bonds. Joe figured that the US had always been exceptional and there was no reason to suspect that of changing any time soon.

Bob invested in portfolio 2, which was 48% S&P 500, 12% international mutual funds (the category average of funds in Morningstar), and and 40% intermediate US treasury bonds. Bob figured that putting 20% of his equities in non-US companies might be a a good way to diversify.

Joe was bankrupt in 1993 and died broke. He did, however, enjoy the smug satisfaction of using air quotes to describe Bob's portfolio as "diversified".
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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bogledogle87
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Re: Theory: NOW is the Best Time for Total World Stock

Post by bogledogle87 » Mon Apr 08, 2019 10:53 am

vineviz wrote:
Mon Apr 08, 2019 10:40 am
JoMoney wrote:
Sun Apr 07, 2019 10:34 am
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I've "thought about it", hard not to with constant hum on here of those advocating for it... but I'm sticking with good ol' S&P500 index fund.
Best wishes to those who believe that international exposure will bring them some "diversification benefit" and even to those that believe it will outperform. :beer
Two investors retired in December, 1965 with $100,000. Each invested in a 60/40 portfolio and withdrew $350 from the portfolio monthly starting in January, 1966 adjusting the amount for inflation.

Image

Joe invested in portfolio 1, which was 60% S&P 500 and 40% intermediate US treasury bonds. Joe figured that the US had always been exceptional and there was no reason to suspect that of changing any time soon.

Bob invested in portfolio 2, which was 48% S&P 500, 12% international mutual funds (the category average of funds in Morningstar), and and 40% intermediate US treasury bonds. Bob figured that putting 20% of his equities in non-US companies might be a a good way to diversify.

Joe was bankrupt in 1993 and died broke. He did, however, enjoy the smug satisfaction of using air quotes to describe Bob's portfolio as "diversified".
How did you model this? Portfolio Visualizer Backtest for Asset class only goes back to 1972. I would love to see some data further back
VTWAX and go do something else

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vineviz
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Re: Theory: NOW is the Best Time for Total World Stock

Post by vineviz » Mon Apr 08, 2019 11:23 am

bogledogle87 wrote:
Mon Apr 08, 2019 10:53 am
How did you model this? Portfolio Visualizer Backtest for Asset class only goes back to 1972. I would love to see some data further back
PortfolioVisualizer allows you to import your own data series, with daily values back to 1970 (I think) and month values to 1930, so that's what I did.

In this case I extracted the data from Morningstar by calling up a return chart that included their "World Large Stock" category and finding the data series in the scripts called by the page, then cleaned it and imported it into PV. The details are probably off-topic for this post, and they seem to change from time to time. The URLs for these data series used to be stable, but those stable URLs no longer seem to work for me.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

UpperNwGuy
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Re: Theory: NOW is the Best Time for Total World Stock

Post by UpperNwGuy » Mon Apr 08, 2019 1:40 pm

vineviz wrote:
Mon Apr 08, 2019 10:40 am
JoMoney wrote:
Sun Apr 07, 2019 10:34 am
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
I've "thought about it", hard not to with constant hum on here of those advocating for it... but I'm sticking with good ol' S&P500 index fund.
Best wishes to those who believe that international exposure will bring them some "diversification benefit" and even to those that believe it will outperform. :beer
Two investors retired in December, 1965 with $100,000. Each invested in a 60/40 portfolio and withdrew $350 from the portfolio monthly starting in January, 1966 adjusting the amount for inflation.

Image

Joe invested in portfolio 1, which was 60% S&P 500 and 40% intermediate US treasury bonds. Joe figured that the US had always been exceptional and there was no reason to suspect that of changing any time soon.

Bob invested in portfolio 2, which was 48% S&P 500, 12% international mutual funds (the category average of funds in Morningstar), and and 40% intermediate US treasury bonds. Bob figured that putting 20% of his equities in non-US companies might be a a good way to diversify.

Joe was bankrupt in 1993 and died broke. He did, however, enjoy the smug satisfaction of using air quotes to describe Bob's portfolio as "diversified".
Bob was a smart guy, but what if Bob had invested 30% S&P 500, 30% international, and 40% intermediate treasuries? Because that’s what’s being advocated by the VTWAX champions in this thread.

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vineviz
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Re: Theory: NOW is the Best Time for Total World Stock

Post by vineviz » Mon Apr 08, 2019 1:47 pm

UpperNwGuy wrote:
Mon Apr 08, 2019 1:40 pm
vineviz wrote:
Mon Apr 08, 2019 10:40 am
Joe invested in portfolio 1, which was 60% S&P 500 and 40% intermediate US treasury bonds. Joe figured that the US had always been exceptional and there was no reason to suspect that of changing any time soon.

Bob invested in portfolio 2, which was 48% S&P 500, 12% international mutual funds (the category average of funds in Morningstar), and and 40% intermediate US treasury bonds. Bob figured that putting 20% of his equities in non-US companies might be a a good way to diversify.

Joe was bankrupt in 1993 and died broke. He did, however, enjoy the smug satisfaction of using air quotes to describe Bob's portfolio as "diversified".
Bob was a smart guy, but what if Bob had invested 30% S&P 500, 30% international, and 40% intermediate treasuries? Because that’s what’s being advocated by the VTWAX champions in this thread.
I was trying to avoid revealing the complete foolishness of Joe's xenophobic portfolio in my example, but since you asked . . . .

Image
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

anil686
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Re: Theory: NOW is the Best Time for Total World Stock

Post by anil686 » Mon Apr 08, 2019 2:09 pm

bogledogle87 wrote:
Mon Apr 08, 2019 10:30 am
lostdog wrote:
Sun Apr 07, 2019 10:39 am
Drovor wrote:
Sun Apr 07, 2019 10:19 am
InvestorSteve wrote:
Sat Apr 06, 2019 6:50 pm
Drovor wrote:
Sat Apr 06, 2019 6:38 pm


I switched over at the beginning of the year for stock allocation. In my 403b I do not have it available so I am sticking with Vanguard 500.
Do you have it in a taxable account? I wanted to know if it qualified for the foreign tax credit and how does it compare to VTSAX in terms of tax efficiency? If I wanted to tax loss harvest, what funds could I purchase to replicate VTWAX at Vanguard?
I dont have a taxable account so not sure. I would think VTSAX (TSM) and VTIAX (TISM) could be used to tax loss harvest.
You can use VTSAX and VTIAX in taxable account for TLH purposes. Just set them to world market cap allocation and let them float. The two funds will float just like VTWAX will. When you add money to the taxable account, just allocate the money to the current world market cap.

Use VTWAX in your IRA's.

With this method you can TLH in taxable and stick with world market cap allocation across your Vanguard accounts. If you have a 401k, you'll have to work with what you have in the 401k.

Dividend Tax Efficiency can be found here - 85% Qualified for 2018
https://advisors.vanguard.com/VGApp/iip ... yeartodate

Foreign Tax Credit Info - about 4.9% of dividend income
https://advisors.vanguard.com/VGApp/iip ... ldFund2018

I use it in taxable - just started with the admiral share class released. Expect it to be fairly tax efficient - much more than TISM although I will need to keep my VTSAX and VTIAX for now since they have large cap gains. I really think it is a great fund and has simplified my investing dramatically from a mental/emotional perspective. Obviously not true for everybody....

lostdog
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Re: Theory: NOW is the Best Time for Total World Stock

Post by lostdog » Mon Apr 08, 2019 2:17 pm

bogledogle87 wrote:
Mon Apr 08, 2019 10:12 am
InvestorSteve wrote:
Sat Apr 06, 2019 6:21 pm
Curious to see if anyone else has given some more thought towards this topic and is considering going 100% into VTWAX?
After much deliberation, I took the global cap plunge and have made the switch for my and my wife's ROTH IRA's. With my 401k, I need to estimate the market cap with multiple funds and re-balance to current weights about once a year. In taxable, I am migrating from VTI to VT over the next year so I can harvest long-term capital gains over two tax years.

The ER's for VTWAX/VT are not worth debating anymore in my opinion - they are plenty low enough. Even looking at what they were 5 years ago, i'm amazing out how fast they have come down and expect them to continue to do so in the future.

I am thrilled to be free of the "correct / optimal" US/International allocation debate. It's exhausting, and every argument ends up being period-dependent.

I was on the 100% US kool-aid for a while, but understand a lot can happen in my 30-50 year horizon. I really started to see the flaw in the "Buy the haystack, but only if it's a US haystack" argument. Toyota, Nestle, and Samsung are just as worthy as US companies. Betting 100% on a single country is not a whole lot different than betting on Technology or Healthcare because their history and fundamentals may promise out-performance.

Total World Stock is the the ultimate implementation of passive equity indexing by eliminating all biases and emotional factors.

"VTWAX and go do something else"
I bought the U.S. only kool-aid early on also. Now world market cap is completely logical to me. it really is the ultimate boglehead allocation. I am seeing through the U.S. only arguments which don't hold much weight. It's mainly old school ideology hidden behind those arguments.

I did the same with our 401k. I just estimate and re balance once a year. If you have a ton of money in the 401k, it will just float with world market cap.
Last edited by lostdog on Mon Apr 08, 2019 2:54 pm, edited 1 time in total.

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bogledogle87
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Re: Theory: NOW is the Best Time for Total World Stock

Post by bogledogle87 » Mon Apr 08, 2019 2:33 pm

vineviz wrote:
Mon Apr 08, 2019 1:47 pm
UpperNwGuy wrote:
Mon Apr 08, 2019 1:40 pm
vineviz wrote:
Mon Apr 08, 2019 10:40 am
Joe invested in portfolio 1, which was 60% S&P 500 and 40% intermediate US treasury bonds. Joe figured that the US had always been exceptional and there was no reason to suspect that of changing any time soon.

Bob invested in portfolio 2, which was 48% S&P 500, 12% international mutual funds (the category average of funds in Morningstar), and and 40% intermediate US treasury bonds. Bob figured that putting 20% of his equities in non-US companies might be a a good way to diversify.

Joe was bankrupt in 1993 and died broke. He did, however, enjoy the smug satisfaction of using air quotes to describe Bob's portfolio as "diversified".
Bob was a smart guy, but what if Bob had invested 30% S&P 500, 30% international, and 40% intermediate treasuries? Because that’s what’s being advocated by the VTWAX champions in this thread.
I was trying to avoid revealing the complete foolishness of Joe's xenophobic portfolio in my example, but since you asked . . . .

Image
Just noting that if we are truly talking about the Total World (or VTWAX) approach, there is no re-balancing of the equities, which defaults to annual on PV. You would need to know the relative US / Int'l market caps on the initial date and allow the portfolio to float accordingly. This may be difficult to backtest, especially if re-balancing with a bond component, and especially if introducing any periodic contributions. This particular graph may be closer to a periodically rebalanced 30 US/30 Int'l/40 Bond portfolio than a 60 Total World/ 40 Bond, which show quite different results.
VTWAX and go do something else

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unclescrooge
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Re: Theory: NOW is the Best Time for Total World Stock

Post by unclescrooge » Mon Apr 08, 2019 2:49 pm

vineviz wrote:
Mon Apr 08, 2019 1:47 pm

I was trying to avoid revealing the complete foolishness of Joe's xenophobic portfolio in my example, but since you asked . . . .
Haha. Thanks injecting some humor in these repetitive threads!

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vineviz
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Re: Theory: NOW is the Best Time for Total World Stock

Post by vineviz » Mon Apr 08, 2019 6:08 pm

bogledogle87 wrote:
Mon Apr 08, 2019 2:33 pm
This particular graph may be closer to a periodically rebalanced 30 US/30 Int'l/40 Bond portfolio than a 60 Total World/ 40 Bond, which show quite different results.
This graph does, indeed, show a monthly rebalanced portfolio but leaving the US/ex-US allocations unrebalanced wouldn't make any appreciable difference in the result in this particular case: Joe still dies penniless and Bob ends up with $232,000 instead of $272,000.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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JoMoney
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Re: Theory: NOW is the Best Time for Total World Stock

Post by JoMoney » Tue Apr 09, 2019 12:06 am

vineviz wrote:
Mon Apr 08, 2019 11:23 am
bogledogle87 wrote:
Mon Apr 08, 2019 10:53 am
How did you model this? Portfolio Visualizer Backtest for Asset class only goes back to 1972. I would love to see some data further back
PortfolioVisualizer allows you to import your own data series, with daily values back to 1970 (I think) and month values to 1930, so that's what I did.

In this case I extracted the data from Morningstar by calling up a return chart that included their "World Large Stock" category and finding the data series in the scripts called by the page, then cleaned it and imported it into PV. The details are probably off-topic for this post, and they seem to change from time to time. The URLs for these data series used to be stable, but those stable URLs no longer seem to work for me.
Here's a link to the MStar Chart for "World Large Stock":
Link
Direct links to the raw data used to build the chart (that are easier to parse up for re-use) don't work anymore. siamond explained to me that it appears Morningstar recently implemented a check that requires the HTTP "Referrer" to the raw data come from quotes.morningstar.com as the referring page...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

selters
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Re: Theory: NOW is the Best Time for Total World Stock

Post by selters » Tue Apr 09, 2019 2:54 am

visualguy wrote:
Thu Feb 14, 2019 12:33 pm
bogledogle87 wrote:
Thu Feb 14, 2019 12:23 pm
sunnywindy wrote:
Thu Feb 14, 2019 11:42 am
I think the theory is sound (use global market cap - I am 55/45 US/Intl), but I'm not sure "now" is the perfect time. However, I'm not sure "now" is not the perfect time, either. I just set my asset allocation and let it do its thing.
My logic of "now" is that the US market cap as a percentage of world is the highest it's ever been. If US were to grow to 60% by the end of the year, of course that future "now" would be better and my literal claim of 2/14/2019 is invalid. I really wanted to convey the overall sentiment that right now may be better than ever we've ever seen, given the current valuations. If an investor is coming from 100% or heavily overweighted to US, they should be pretty confident they are selling high on US and buying low on International to some degree by moving to Total World.
The problem is that ex-US isn't cheap either. Valuations are lower than US (which is nothing new), but they are still much higher than their historical average.
Are they? I don't know what the historical average is. Valuations may be higher than their historical averages, but on an absolute basis, developed ex US stocks don't look that expensive. The MSCI World ex US Index has a trailing PE of 14.9, a 12 month forward PE of 13.3 and a PB of 1.61. That may still be too high if long term future earnings prospects are bad, but if markets are reasonably efficient, then a 14.9 PE doesn't bode too bad for the future.

Europe had a 30 PE in 2000, which partly explains why price returns have been flat since then.

RNJ
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Re: Theory: NOW is the Best Time for Total World Stock

Post by RNJ » Tue Apr 09, 2019 8:56 am

There is a line of thinking suggesting that the true passive investor begins with the "global market portfolio" of marketable securities (essentially, stocks and bonds). A rough estimation of this would be something like 1/2 Total World Stock, 1/4 US bonds, 1/4 ex-US bonds (the percentages are off from the "true" GMP, but not by much. See this, for example: https://www.marketwatch.com/story/this- ... 2018-01-04

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bogledogle87
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Re: Theory: NOW is the Best Time for Total World Stock

Post by bogledogle87 » Fri Apr 12, 2019 6:09 am

Is it fair to say that if you are 100% US that you do not expect the US to fall much below 55% global cap in your lifetime, but rather are expecting it to gain considerably more?

I'm not sure we are immune to another 1989 over the next 30-50 years. I'm also somewhat confused by this data. It seems Total International should have outperformed from 1970 to 2018 based on the way the data is presented. Am I missing something?

1900-2017 via Credit Suisse ~120 years
Image

1970-2018 via Vanguard ~48 years
Image
VTWAX and go do something else

sabtastic
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Re: Theory: NOW is the Best Time for Total World Stock

Post by sabtastic » Fri Apr 12, 2019 8:22 am

You can confirm with portfolio visualizer - international was flat from 87 to 94, and from 94 to 2004, whereas from 86 to 2000 the US is a nice, steady upward slope with a few gut wrenching drops along the way.

Why we are extrapolating the future based off of 40 year old data I do not understand. There is no reason to assume any of this will happen again. The essential reason for diversification is the future is unknown.

IMO the #1 reason NOT to diversify internationally was the cost. Imagine how much a world index fund would cost from 1960-1980.

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bogledogle87
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Re: Theory: NOW is the Best Time for Total World Stock

Post by bogledogle87 » Fri Apr 12, 2019 8:31 am

sabtastic wrote:
Fri Apr 12, 2019 8:22 am
Why we are extrapolating the future based off of 40 year old data I do not understand. There is no reason to assume any of this will happen again.

IMO the #1 reason NOT to diversify internationally was the cost. Imagine how much a world index fund would cost from 1960-1980.
These are my top 2 reasons for choosing VTWAX. There is no reason to think anyone knows what will happen. Ownership is no longer cost prohibitive.
VTWAX and go do something else

ryman554
Posts: 1172
Joined: Sun Jan 12, 2014 9:44 pm

Re: Theory: NOW is the Best Time for Total World Stock

Post by ryman554 » Fri Apr 12, 2019 8:42 am

imyeti2 wrote:
Thu Feb 14, 2019 11:16 am
From 1980s to now, lot of US companies have become global. Also reverse is true. By owning stock in large US companies, you are already being exposed to global markets.
From the 1900s to today, a lot of companies based in California become nationwide, so the folks in NYC are being exposed to the national market. And vice versa.

By that logic, I could just continue to invest in NYC only equities and do just fine.

If that sounds absurd, how is it any different to the statement quoted?

Nathan Drake
Posts: 401
Joined: Mon Apr 11, 2011 12:28 am

Re: Theory: NOW is the Best Time for Total World Stock

Post by Nathan Drake » Sun Apr 14, 2019 6:12 pm

HomerJ wrote:
Fri Feb 15, 2019 8:31 pm
lostdog wrote:
Fri Feb 15, 2019 2:55 pm
hohum wrote:
Fri Feb 15, 2019 2:12 pm
I'll help the pro-international people out.

1. diversification means own more stocks and 10000 is more than 4000. Doesn't matter if correlation goes to 1.0, you are still more diversified in a very meaningful way. Doesn't matter if you only own two asset classes (stocks and bonds). Doesn't matter if 100 megacaps are 40% of your total equity position -- you are better diversified with 10000 stocks.
[OT comments removed by admin LadyGeek]
4. Remember by owning the global market cap you already own things like gold, real estate, small cap, value, low-beta, alternative asset classes in the exactly correct proportion (as determined by the marginal global know-nothing doofus investor).
And here it is...

Old school thinking on it's way out. Young investors seeing stuff like this will know better. The world is getting smaller and it's no longer the U.S. vs the rest of the world. The 1980's are long gone...

Vanguard will get to the point where international will no longer be a separate asset class.
The world is getting smaller and everything is connected. There's less reason to go international, because there's MORE correlation these days. And everyone is selling everywhere.
Keep telling yourself that

Correlation isn’t necessarily what’s important, but the magnitude and dispersion of returns.

The past ten years, both US and International have been correlated, yet US has outperformed dramatically.

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