Know when to hold them and when to fold them......

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willthrill81
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Re: Know when to hold them and when to fold them......

Post by willthrill81 » Wed Oct 02, 2019 4:17 pm

simas wrote:
Wed Oct 02, 2019 4:13 pm
midareff wrote:
Tue Oct 01, 2019 4:53 pm

Have you changed or rethought your international exposure lately and what did you do if anything?
I have significantly increased it based on review of IPS and portfolio. Specifically I was very uncomfortable how much my 'reptile brain' was starting to release dopamine whenever S&P500 would hit next high, easy 100k, easy 300k, 500K in 1/2 year - since I know that what came up would also come down.
Kind of like back in 1996, the year of Greenspan's 'irrational exuberance' speech?

Except that stocks never again fell to the levels set back in 1996.

Stocks are not airplanes.
“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

alex_686
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Re: Know when to hold them and when to fold them......

Post by alex_686 » Wed Oct 02, 2019 4:22 pm

midareff wrote:
Tue Oct 01, 2019 4:53 pm
You sit, you watch, you rebalance into and into and into as it systematically under performs over a long term. All the while Bogle's no more than 20% if you must and Buffet's none keep going through your head.ng?
I will point out that Buffet is a active trader, and to win at active trading you need a superior skill in your particular domain. I would say that Buffet's particular domain is reading US annual reports, except that he has been loading up on Korean and Israeli companies over the past 10 years.

I will also point out that international stocks over the past 30 years have tracked their American counterparts and this relationship is tightening. 30 years ago individual stocks regressed along regional, sector, and then global factors. Now they regress along global, sector, then regional factors.

The best explanation of the difference in US verse International performance is not country factors. If you notice international indexes have different sector weights than US indexes.

So, what is your opinion of over-weighting sectors in your portfolio? Because that is what you are really asking.

simas
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Re: Know when to hold them and when to fold them......

Post by simas » Wed Oct 02, 2019 6:44 pm

willthrill81 wrote:
Wed Oct 02, 2019 4:17 pm

Kind of like back in 1996, the year of Greenspan's 'irrational exuberance' speech?

Except that stocks never again fell to the levels set back in 1996.

Stocks are not airplanes.
I missed 1996 (started investing few years later) so I can speak to it. what was important to me (as financial portfolio grows) is overall decrease is volatility , as I grew older I become more interested in not losing money vs making as much at possible at highest risk available. As my ability to take risk increased, my desire for it actually went down - I no long need that level of return..

Besides , as immigrant, I see more of the world vs people who never left North American continent. The world and its grows is far more than US and even US + Europe.. As such I do hold emerging market and would be happy to maintain that allocation

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JoMoney
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Re: Know when to hold them and when to fold them......

Post by JoMoney » Wed Oct 02, 2019 7:05 pm

willthrill81 wrote:
Wed Oct 02, 2019 4:17 pm
simas wrote:
Wed Oct 02, 2019 4:13 pm
midareff wrote:
Tue Oct 01, 2019 4:53 pm

Have you changed or rethought your international exposure lately and what did you do if anything?
I have significantly increased it based on review of IPS and portfolio. Specifically I was very uncomfortable how much my 'reptile brain' was starting to release dopamine whenever S&P500 would hit next high, easy 100k, easy 300k, 500K in 1/2 year - since I know that what came up would also come down.
Kind of like back in 1996, the year of Greenspan's 'irrational exuberance' speech?

Except that stocks never again fell to the levels set back in 1996.

Stocks are not airplanes.
Height Freight impacts investors too, spooking them into getting more cautious under assumptions that "what went up will go down". If there is anything to the behaviorists studies, most people actually fear losses more than they desire gains.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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willthrill81
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Re: Know when to hold them and when to fold them......

Post by willthrill81 » Wed Oct 02, 2019 7:31 pm

JoMoney wrote:
Wed Oct 02, 2019 7:05 pm
willthrill81 wrote:
Wed Oct 02, 2019 4:17 pm
simas wrote:
Wed Oct 02, 2019 4:13 pm
midareff wrote:
Tue Oct 01, 2019 4:53 pm

Have you changed or rethought your international exposure lately and what did you do if anything?
I have significantly increased it based on review of IPS and portfolio. Specifically I was very uncomfortable how much my 'reptile brain' was starting to release dopamine whenever S&P500 would hit next high, easy 100k, easy 300k, 500K in 1/2 year - since I know that what came up would also come down.
Kind of like back in 1996, the year of Greenspan's 'irrational exuberance' speech?

Except that stocks never again fell to the levels set back in 1996.

Stocks are not airplanes.
Height Freight impacts investors too, spooking them into getting more cautious under assumptions that "what went up will go down". If there is anything to the behaviorists studies, most people actually fear losses more than they desire gains.
Yes, loss aversion is very real and potentially has some rational underpinnings. But this view that 'stocks must go down' simply has no logical foundation. It largely seems to stem from a fundamental understanding of what stocks are.
“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

shess
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Re: Know when to hold them and when to fold them......

Post by shess » Wed Oct 02, 2019 7:32 pm

midareff wrote:
Tue Oct 01, 2019 4:53 pm
Have you changed or rethought your international exposure lately and what did you do if anything?
Here's the thing - I didn't invest in US and INTL because I thought they both were going to give me great returns, I did it because I figured ONE OF THEM would give good returns, and the other one would hopefully not do too badly. Unfortunately, I didn't know which one it would be.

The fact of the matter is that the US is currently the dominant economy, and even though many argue it's slipping, the US is still clearly the dominant economy. This means that the US attracts talent, that US companies have cheaper and easier access to money, and US companies freeride off of government pressure around the world. This will last until ... it ends. Which will happen in the future. It might happen soon, it might happen after I'm dead, it might happen after my grandchildren are dead. By the time it becomes obvious, the value proposition will have likely already flipped.

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Taylor Larimore
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How Much International? A Suggestion.

Post by Taylor Larimore » Wed Oct 02, 2019 8:23 pm

Bogleheads:

Several years ago I wrote a post about international investing for U.S. investors. I feel the same today. This is the link:

How much international stock? A suggestion.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "I say you don't need to have non-U.S., but if you do, limit it to 20%."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Know when to hold them and when to fold them......

Post by pascalwager » Wed Oct 02, 2019 10:16 pm

Mountain Doc wrote:
Wed Oct 02, 2019 1:22 pm
midareff wrote:
Wed Oct 02, 2019 12:23 pm
Mountain Doc wrote:
Wed Oct 02, 2019 10:51 am
midareff wrote:
Tue Oct 01, 2019 4:53 pm
Let's suppose, just suppose... your 40% or equities is near $400K and you look at M* (Morningstar) and see the last 5 years performance of Total International is 3.16% averaged as of yesterday, and Total US is 10.42%

Have you changed or rethought your international exposure lately and what did you do if anything?

(edited for brevity)
If the numbers were reversed, would you consider "folding" your position in US stocks?

Because at some point the 5-year numbers will be reversed. When that occurs, many US-only investors will rationalize a new position in international stocks for "diversification" or some other reason that sounds much more sophisticated than performance chasing. In reality, it will just be classic performance chasing that causes investors to buy-high / sell-low.
I'm simply going to quote rascott as a reply... and I don't have another 50 to find out.

"There has been zero actual evidence that intl investing has been helpful for the last 50 years. Maybe the next 50 will be different?

Personally, I believe the intl and US markets will continue to grow even more correlated. This trend started 30+ years ago.... and is not abating, but growing stronger. 2008 showed us that when the US economy gets ill.... all the rest get even more ill.

Intl returns seem nothing more than a currency play to me these days.... when the dollar is weak, they look good.... when the dollar is strong, they are terrible."
A decade ago, the quote would have been "there has been zero actual evidence that US investing has been helpful for the last 40 years."

Image
Looking at this graph, I can easily see why my advisor lump-summed me into a 51/49 portfolio and a 47/53 portfolio in 1995. Int'l was outperforming then. A few years later, things changed and they were offering to reduce our int'l as we desired, or even increase to 40/60. I didn't ask, but I assume they had complaints. But I'm still 50/50 and don't plan to change.

I have zero belief that int'l will ever produce higher returns, especially Europe, but I don't want to sell low and buy high and then miss an int'l resurgence. I simply discount my beliefs. So I remain invested in total int'l, developed markets, emerging markets, int'l large value, and int'l small company.

If I were starting out now, instead of deep into retirement, I think I would still go 50/50. It just seems like a good balance to me.

deikel
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Re: Know when to hold them and when to fold them......

Post by deikel » Thu Oct 03, 2019 7:00 am

midareff wrote:
Wed Oct 02, 2019 4:02 pm


Combined, you have gained roughly 7 % over the last 5 years which is (almost) exactly what you should get from the stock market on average...on an inflation rate of less then 2% no less. That's a difference of 7% per year in returns That 7% annual difference makes an end difference of greater than $160K.
No, I meant you have an asset allocation of 60/40 US to INT. US growth outpaced the INT by a lot, sure, but combined (and thanks to your chosen asset allocation) you are still at ca 7% growth a year in the last 5 years (in your example anyway)....so, that is close to the 4% SWR rule of thumb given 2 % inflation or close to the 8% average over many many years...not bad.

But we are getting back to: you choose an asset allocation not to maximize the return, you choose it to minimize risk and get to a solid average in order to achieve a goal....its all about downside protection and not upside opportunity.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

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Re: Know when to hold them and when to fold them......

Post by midareff » Thu Oct 03, 2019 7:59 am

alex_686 wrote:
Wed Oct 02, 2019 4:22 pm
midareff wrote:
Tue Oct 01, 2019 4:53 pm
You sit, you watch, you rebalance into and into and into as it systematically under performs over a long term. All the while Bogle's no more than 20% if you must and Buffet's none keep going through your head.ng?
I will point out that Buffet is a active trader, and to win at active trading you need a superior skill in your particular domain. I would say that Buffet's particular domain is reading US annual reports, except that he has been loading up on Korean and Israeli companies over the past 10 years.

I will also point out that international stocks over the past 30 years have tracked their American counterparts and this relationship is tightening. 30 years ago individual stocks regressed along regional, sector, and then global factors. Now they regress along global, sector, then regional factors.

The best explanation of the difference in US verse International performance is not country factors. If you notice international indexes have different sector weights than US indexes.

So, what is your opinion of over-weighting sectors in your portfolio? Because that is what you are really asking.
Well... I don't agree that's what I'm asking or referenced at all. Since you were kind enough to point out (regardless of my agreement with it) "I will also point out that international stocks over the past 30 years have tracked their American counterparts and this relationship is tightening." If you chose to tighten up those bumps in the road and take the long term performance as even, it's still not even since one throws more dividends and less long term capital gains generating a higher tax burden. So even if equal (in your scenario) they aren't.

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Re: Know when to hold them and when to fold them......

Post by midareff » Thu Oct 03, 2019 8:03 am

deikel wrote:
Thu Oct 03, 2019 7:00 am
midareff wrote:
Wed Oct 02, 2019 4:02 pm


Combined, you have gained roughly 7 % over the last 5 years which is (almost) exactly what you should get from the stock market on average...on an inflation rate of less then 2% no less. That's a difference of 7% per year in returns That 7% annual difference makes an end difference of greater than $160K.
No, I meant you have an asset allocation of 60/40 US to INT. US growth outpaced the INT by a lot, sure, but combined (and thanks to your chosen asset allocation) you are still at ca 7% growth a year in the last 5 years (in your example anyway)....so, that is close to the 4% SWR rule of thumb given 2 % inflation or close to the 8% average over many many years...not bad.

But we are getting back to: you choose an asset allocation not to maximize the return, you choose it to minimize risk and get to a solid average in order to achieve a goal....its all about downside protection and not upside opportunity.
I think you are confusing the 50% of portfolio that is equities with the entire portfolio, which is currently about 48% equities, 48% fixed income and 4% cash. If equities are then split roughly 60/40 to US and International your end difference cost over the last 5 years was > $160K, and over the last 10 much larger.

alex_686
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Re: Know when to hold them and when to fold them......

Post by alex_686 » Thu Oct 03, 2019 8:56 am

midareff wrote:
Thu Oct 03, 2019 7:59 am
Well... I don't agree that's what I'm asking or referenced at all. Since you were kind enough to point out (regardless of my agreement with it) "I will also point out that international stocks over the past 30 years have tracked their American counterparts and this relationship is tightening." If you chose to tighten up those bumps in the road and take the long term performance as even, it's still not even since one throws more dividends and less long term capital gains generating a higher tax burden. So even if equal (in your scenario) they aren't.
I know that is not the premise you are putting forward, but the domestic v. international is probably a false - or at least fading - premise at this time.

As a analogy, I will point to the difference in performance between NYSE and NASDAQ stocks. They preformed differently. This can be traced back to the 90s when NASDAQ had lower listing requirements allowing small money losing tech companies to list. Since then the listing requirements have harmonized. Should you base you AA on a factor that has been dead for 20 years?

To extend, I will point out that your counterargument about taxes is a valid argument for growth v. value stocks. If you believe that argument shouldn't you be investing in actual growth companies rather than US companies which only tend to be growth companies? That is, investing in the strong single you actually want (growth) rather than a weaker proxy signal (US)?

To restate, I do think you are using the wrong parameters when thinking about this issue.

TN_Boy
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Re: Know when to hold them and when to fold them......

Post by TN_Boy » Thu Oct 03, 2019 9:11 am

midareff wrote:
Tue Oct 01, 2019 4:53 pm
A discussion among many on the concept of developing your plan and holding it regardless of how future results come in. Let's use Total International as an example for this discussion. You read books, ... Bernstein, Ferri, Bogle, Swedroe and so forth. You read threads on this forum which would lead you to develop the concept you want to hold 40% of your equities as international. You read stay the course hundreds if not thousands of times.

You sit, you watch, you rebalance into and into and into as it systematically under performs over a long term. All the while Bogle's no more than 20% if you must and Buffet's none keep going through your head.

Let's suppose, just suppose... your 40% or equities is near $400K and you look at M* (Morningstar) and see the last 5 years performance of Total International is 3.16% averaged as of yesterday, and Total US is 10.42%. Your commitment to staying the course has cost you more than $150K in capital gains not to mention the additional tax burden of taxable dividend distributions.

Let's further suppose you got old..... >70 .... and your holding period is never going to be another 30 or 40 years...... and you have traveled Europe and seen changes since you traveled there 4 years ago.

Like Jack and Warren I believe in the capitalistic model we presently have.

Have you changed or rethought your international exposure lately and what did you do if anything?
I haven't changed anything. I have a hefty allocation to intl stocks, both small and large. This has cost me money over the last few years. Even so, our fairly conservative portfolio has returned enough to meet our goals.

But I'm not changing anything. I prefer a more diversified portfolio. I am not comfortable putting all my equity* eggs in the US basket, despite the size of the US economy, and its generally good business environment.

I do agree with the premise that a US based investor does not absolutely "need" international exposure, though I believe almost all non-US investors should diversify beyond their own country if possible.

*All my bond money is US bonds.

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Re: Know when to hold them and when to fold them......

Post by 3funder » Thu Oct 03, 2019 10:14 am

Every dog has its day. I have no plans to fold anything in the foreseeable future.

deikel
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Re: Know when to hold them and when to fold them......

Post by deikel » Thu Oct 03, 2019 11:13 am

midareff wrote:
Thu Oct 03, 2019 8:03 am
deikel wrote:
Thu Oct 03, 2019 7:00 am
midareff wrote:
Wed Oct 02, 2019 4:02 pm


Combined, you have gained roughly 7 % over the last 5 years which is (almost) exactly what you should get from the stock market on average...on an inflation rate of less then 2% no less. That's a difference of 7% per year in returns That 7% annual difference makes an end difference of greater than $160K.
No, I meant you have an asset allocation of 60/40 US to INT. US growth outpaced the INT by a lot, sure, but combined (and thanks to your chosen asset allocation) you are still at ca 7% growth a year in the last 5 years (in your example anyway)....so, that is close to the 4% SWR rule of thumb given 2 % inflation or close to the 8% average over many many years...not bad.

But we are getting back to: you choose an asset allocation not to maximize the return, you choose it to minimize risk and get to a solid average in order to achieve a goal....its all about downside protection and not upside opportunity.
I think you are confusing the 50% of portfolio that is equities with the entire portfolio, which is currently about 48% equities, 48% fixed income and 4% cash. If equities are then split roughly 60/40 to US and International your end difference cost over the last 5 years was > $160K, and over the last 10 much larger.
No I don't, because in your model you never mentioned the bond allocation and hence I asked for it in an earlier post.

Yes, your INT allocation is trailing behind and has 'cost you money' vs US stocks and vs expected average return of stocks.

The point I am making is that your combined equities of US and INT are actually not that far off from the 'to be expected' average stock return (based on your numbers, I did not double check) (thanks to the US portion which compensates for the trailing INT). So your moan of losses is correct only in hindsight and only compared to now known better investment options/choices. That's why I called it FOMO.

But that of course is irrelevant for future actions since you don't know what the future brings and is in fact a great showcase for why an asset allocation works.

And yes, if you also held bonds and at roughly 50/50, your overall portfolio returns must have been even further away from the average of the 'to be expected over the long term stock return' - are you also bemoaning that and wished you had that invested in the last 10 years in US stocks ? - probably, but its wishful thinking, you had no possible way of knowing the bull would rage for 10 years....

Stock return expectations have just skewed in the last 10 years - these were not normal times for US stocks at all, they were well above average.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

deikel
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Re: Know when to hold them and when to fold them......

Post by deikel » Thu Oct 03, 2019 11:37 am

midareff wrote:
Wed Oct 02, 2019 4:02 pm
....of course, you could also cash everything in and call it a win (plan also worked !), divide the money by the years remaining and be done with it.

Is that really your suggestion?
[/quote]

I forgot to answer this one

Yes, serious suggestion. In your example case, you indicated the person to be over 70 and hence only having another 10-15 years to go (statistically speaking of course)

Meaning you are close to the end and if you have already won the game (TBD), then actually pulling out of the stock portion and use everything in say CDs seems like a real solution to me.

It boils down to (and is actually independent of your age) the fact that if you only need x amount of money per year to live on (ignore inflation for a second, on a short time scale that works even better) you can simply multiply your remaining years with that number and done.

Or the other way round, the reason a stock portfolio has to be quite large at the beginning of a draw period is that the volatility has to be taken into account (the reason why the first 10 years of draw period are the most important) and you don't want to dip too low early on - otherwise you could do a lot smaller portfolio or see above, just draw from cash (ignoring inflation).

Or yet another way to look at it (getting more conservative), the function of stocks in a conservative portfolio is NOT to generate money out of thin air and enjoy unexpected rallies, its function is to compensate for inflation for the rest of the portfolio that sits in cash/bonds/CDs and provides the money to live off from (the portion you have actually saved during your lifetime).
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

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Re: Know when to hold them and when to fold them......

Post by TN_Boy » Thu Oct 03, 2019 3:01 pm

deikel wrote:
Thu Oct 03, 2019 11:37 am
midareff wrote:
Wed Oct 02, 2019 4:02 pm
....of course, you could also cash everything in and call it a win (plan also worked !), divide the money by the years remaining and be done with it.

Is that really your suggestion?

I forgot to answer this one

Yes, serious suggestion. In your example case, you indicated the person to be over 70 and hence only having another 10-15 years to go (statistically speaking of course)

Meaning you are close to the end and if you have already won the game (TBD), then actually pulling out of the stock portion and use everything in say CDs seems like a real solution to me.

It boils down to (and is actually independent of your age) the fact that if you only need x amount of money per year to live on (ignore inflation for a second, on a short time scale that works even better) you can simply multiply your remaining years with that number and done.

Or the other way round, the reason a stock portfolio has to be quite large at the beginning of a draw period is that the volatility has to be taken into account (the reason why the first 10 years of draw period are the most important) and you don't want to dip too low early on - otherwise you could do a lot smaller portfolio or see above, just draw from cash (ignoring inflation).

Or yet another way to look at it (getting more conservative), the function of stocks in a conservative portfolio is NOT to generate money out of thin air and enjoy unexpected rallies, its function is to compensate for inflation for the rest of the portfolio that sits in cash/bonds/CDs and provides the money to live off from (the portion you have actually saved during your lifetime).
I don't think all CDs is the low risk solution. Quality fixed income with 10 to 20 percent equity is probably safer. I'd use TIPs before CDs if I went all fixed income, which I think is almost always a bad idea.

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Re: Know when to hold them and when to fold them......

Post by deikel » Thu Oct 03, 2019 4:08 pm

TN_Boy wrote:
Thu Oct 03, 2019 3:01 pm
I'd use TIPs before CDs if I went all fixed income, which I think is almost always a bad idea.
Not arguing about TIPS or CDs or MM or cash, that is kind of all the same for my purposes.

But all fixed income is not bad at all, simple example:

You have 10 years to go and 500k in the bank and you need 50k a year (10% SWR). Its a stupid example, but it gets the point across. You just leave it in cash and you have 10x50k (minus inflation).

You leave it in some fixed income and you have 10x50k and probably inflation adjusted (true for the last 10 yrs)

You stick it in equities and you can not draw 50k a year anymore, because you need to consider the chance that the market crashes and the value drops so low that the one year of market correction where you pull 50k will not be recovered in your life time and you run out - that is the volatility that forces you to a lower SWR (or higher start value of the portfolio).

You can check with Bengen what a historically SWR would be in this scenario, but its not 10%....

Hence the folks that buy a SPIA towards the end of the retirement and get a solid paycheck instead of unknown returns
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Re: Know when to hold them and when to fold them......

Post by midareff » Thu Oct 03, 2019 4:11 pm

alex_686 wrote:
Thu Oct 03, 2019 8:56 am
midareff wrote:
Thu Oct 03, 2019 7:59 am
Well... I don't agree that's what I'm asking or referenced at all. Since you were kind enough to point out (regardless of my agreement with it) "I will also point out that international stocks over the past 30 years have tracked their American counterparts and this relationship is tightening." If you chose to tighten up those bumps in the road and take the long term performance as even, it's still not even since one throws more dividends and less long term capital gains generating a higher tax burden. So even if equal (in your scenario) they aren't.
I know that is not the premise you are putting forward, but the domestic v. international is probably a false - or at least fading - premise at this time.

As a analogy, I will point to the difference in performance between NYSE and NASDAQ stocks. They preformed differently. This can be traced back to the 90s when NASDAQ had lower listing requirements allowing small money losing tech companies to list. Since then the listing requirements have harmonized. Should you base you AA on a factor that has been dead for 20 years?

To extend, I will point out that your counterargument about taxes is a valid argument for growth v. value stocks. If you believe that argument shouldn't you be investing in actual growth companies rather than US companies which only tend to be growth companies? That is, investing in the strong single you actually want (growth) rather than a weaker proxy signal (US)?

To restate, I do think you are using the wrong parameters when thinking about this issue.
I don't think so Alex..... of course your perception may be different. I no longer (as of 10/1/2019) hold international. Is there a penalty to be paid for that.. I don't know but certainly do know I held it at a great penalty to me for many years. I'll be 72 in December... can anything I do at this point
really matter much? I think not... could I sell off corporates in my IRA and buy IT Treasuries and lose 1/2 or 3/4 of a dividend percentage point? Sure.. but why?

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Re: Know when to hold them and when to fold them......

Post by midareff » Thu Oct 03, 2019 4:23 pm

deikel wrote:
Thu Oct 03, 2019 11:13 am
midareff wrote:
Thu Oct 03, 2019 8:03 am
deikel wrote:
Thu Oct 03, 2019 7:00 am
midareff wrote:
Wed Oct 02, 2019 4:02 pm


Combined, you have gained roughly 7 % over the last 5 years which is (almost) exactly what you should get from the stock market on average...on an inflation rate of less then 2% no less. That's a difference of 7% per year in returns That 7% annual difference makes an end difference of greater than $160K.
No, I meant you have an asset allocation of 60/40 US to INT. US growth outpaced the INT by a lot, sure, but combined (and thanks to your chosen asset allocation) you are still at ca 7% growth a year in the last 5 years (in your example anyway)....so, that is close to the 4% SWR rule of thumb given 2 % inflation or close to the 8% average over many many years...not bad.

But we are getting back to: you choose an asset allocation not to maximize the return, you choose it to minimize risk and get to a solid average in order to achieve a goal....its all about downside protection and not upside opportunity.
I think you are confusing the 50% of portfolio that is equities with the entire portfolio, which is currently about 48% equities, 48% fixed income and 4% cash. If equities are then split roughly 60/40 to US and International your end difference cost over the last 5 years was > $160K, and over the last 10 much larger.
No I don't, because in your model you never mentioned the bond allocation and hence I asked for it in an earlier post.

Yes, your INT allocation is trailing behind and has 'cost you money' vs US stocks and vs expected average return of stocks.

The point I am making is that your combined equities of US and INT are actually not that far off from the 'to be expected' average stock return (based on your numbers, I did not double check) (thanks to the US portion which compensates for the trailing INT). So your moan of losses is correct only in hindsight and only compared to now known better investment options/choices. That's why I called it FOMO.

But that of course is irrelevant for future actions since you don't know what the future brings and is in fact a great showcase for why an asset allocation works.

And yes, if you also held bonds and at roughly 50/50, your overall portfolio returns must have been even further away from the average of the 'to be expected over the long term stock return' - are you also bemoaning that and wished you had that invested in the last 10 years in US stocks ? - probably, but its wishful thinking, you had no possible way of knowing the bull would rage for 10 years....

Stock return expectations have just skewed in the last 10 years - these were not normal times for US stocks at all, they were well above average.
Hmmm... I think we are communicating on different wavelengths. My model never mentioned bond allocation or how it was allocated.... that is all something you assumed for yourself and material for a far different discussion which will not be held here. Frankly, my roughly 48/48/4 portfolio has returned 8.3% on average over the last ten years despite the drag of international. Now lets put the drag of international in terms that a retiree can easily understand..... it's about 4.5 one month cruises in a two room suite on a high end cruise line. Go cheaper or go one room suite and it's many more trips. That's a rough approximation of what it is. Now, you may be a young guy who doesn't find value in that, or you may be someone who does like to travel and doesn't finds that valuable., but you will eventually.

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Re: Know when to hold them and when to fold them......

Post by alex_686 » Thu Oct 03, 2019 4:41 pm

midareff wrote:
Thu Oct 03, 2019 4:11 pm
I don't think so Alex..... of course your perception may be different. ... I don't know but certainly do know I held it at a great penalty to me for many years.
Ah - but it is not a question of perception, but rather cold hard math. There has been very little penalty for holding international, but there has been one for holding value stocks. Value has been underpreforming, and international skews towards value. Depending on the time period chosen, the value factor is between 2 to 4 times more powerful than the international factor in explaining the "penalty" over the past 10 to 30 years. By choosing the wrong parameter you have gotten the wrong answer.

Step back and think about the biggest DM equity Nestle. Nestle acts more like Proctor and Gamble and other consumer staple stocks (either domestic or international). And both of these companies are more sensitive to world GNP movements then other consumer staple stocks. After all, they are both global powerhouses. Neither regress terribly well against their home GNP.

The problem is that internal indexes are dominated by these frumpy value stocks, unlike America which is dominated by the red hot growth FANG stocks.

If you feel strongly about this, then the rational answer is to dump both domestic and international indexes and load up on world growth indexes.

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Re: Know when to hold them and when to fold them......

Post by vineviz » Thu Oct 03, 2019 5:09 pm

rascott wrote:
Wed Oct 02, 2019 9:41 am

There has been zero actual evidence that intl investing has been helpful for the last 50 years. Maybe the next 50 will be different?
Actually there are literally volumes of such evidence, but of course there are two groups of investors for whom actual evidence is unpersuasive: those who can’t understand it and those who choose not to accept it.

Every investor should pick an asset allocation that suits them, but can we not perpetuate the xenophobic misinformation?
"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: Know when to hold them and when to fold them......

Post by junior » Thu Oct 03, 2019 5:25 pm

midareff wrote:
Tue Oct 01, 2019 4:53 pm

Let's suppose, just suppose... your 40% or equities is near $400K and you look at M* (Morningstar) and see the last 5 years performance of Total International is 3.16% averaged as of yesterday, and Total US is 10.42%.
Are you actually in danger of running out of money or are you bored and spending too much time looking at Morningstar?

I take it you have 1 million dollars in equities (40% in international) plus presumably social security and maybe a lot more in bonds, real estate, and other assets.

Assuming you have plenty of money for retirement if you didn't compare your portfolio to a benchmark you wouldn't have buyers remorse when it comes to international investing.

Nobody knows how international is going to perform compared to domestic in the rest of your lifespan. Any dope can get an internet connection and post here. What possible value can come from starting another international vs domestic stock thread?

The answer, I would suggest, is not to make a change to your domestic vs international allocation, but instead, stop looking at benchmarks showing what could have been if you had invested with a different strategy.

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Re: Know when to hold them and when to fold them......

Post by rascott » Thu Oct 03, 2019 5:54 pm

vineviz wrote:
Thu Oct 03, 2019 5:09 pm
rascott wrote:
Wed Oct 02, 2019 9:41 am

There has been zero actual evidence that intl investing has been helpful for the last 50 years. Maybe the next 50 will be different?
Actually there are literally volumes of such evidence, but of course there are two groups of investors for whom actual evidence is unpersuasive: those who can’t understand it and those who choose not to accept it.

Every investor should pick an asset allocation that suits them, but can we not perpetuate the xenophobic misinformation?

I asked this before,... but the data available from 1970-2018 (so 48 years) straight from the backtesting spreadsheet on this site has shown zero benefit from holding intl equities (EAFE). And I state this as someone who still owns them.

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Re: Know when to hold them and when to fold them......

Post by wesgreen » Thu Oct 03, 2019 6:20 pm

"Nobody knows how international is going to perform compared to domestic in the rest of your lifespan. Any dope can get an internet connection and post here. What possible value can come from starting another international vs domestic stock thread?"



Nobody knows how REIT is going to perform compared to domestic for the rest of my lifespan either. That's no reason for me to invest in it. All we can do is weigh the evidence available, and consider the arguments of people we respect. The value of international vs. domestic stock threads, for me personally, is in reminding me that Bogle is right on international investing, at least for someone in my situation. Listening to the arguments on both sides over many years finally helped me to ditch int. equity. Thanks for posting, Midareff. I also think it's a good idea to check how your investments are doing, from time to time, benchmark or otherwise.
Last edited by wesgreen on Thu Oct 03, 2019 6:23 pm, edited 1 time in total.

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Re: Know when to hold them and when to fold them......

Post by vineviz » Thu Oct 03, 2019 6:22 pm

rascott wrote:
Thu Oct 03, 2019 5:54 pm
vineviz wrote:
Thu Oct 03, 2019 5:09 pm
rascott wrote:
Wed Oct 02, 2019 9:41 am

There has been zero actual evidence that intl investing has been helpful for the last 50 years. Maybe the next 50 will be different?
Actually there are literally volumes of such evidence, but of course there are two groups of investors for whom actual evidence is unpersuasive: those who can’t understand it and those who choose not to accept it.

Every investor should pick an asset allocation that suits them, but can we not perpetuate the xenophobic misinformation?

I asked this before,... but the data available from 1970-2018 (so 48 years) straight from the backtesting spreadsheet on this site has shown zero benefit from holding intl equities (EAFE). And I state this as someone who still owns them.
I’m not sure what your question is, but it would be untrue to support there has been no benefit: that’s the evidence to which I referred earlier.
"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: Know when to hold them and when to fold them......

Post by TN_Boy » Thu Oct 03, 2019 6:30 pm

deikel wrote:
Thu Oct 03, 2019 4:08 pm
TN_Boy wrote:
Thu Oct 03, 2019 3:01 pm
I'd use TIPs before CDs if I went all fixed income, which I think is almost always a bad idea.
Not arguing about TIPS or CDs or MM or cash, that is kind of all the same for my purposes.

But all fixed income is not bad at all, simple example:

You have 10 years to go and 500k in the bank and you need 50k a year (10% SWR). Its a stupid example, but it gets the point across. You just leave it in cash and you have 10x50k (minus inflation).

You leave it in some fixed income and you have 10x50k and probably inflation adjusted (true for the last 10 yrs)

You stick it in equities and you can not draw 50k a year anymore, because you need to consider the chance that the market crashes and the value drops so low that the one year of market correction where you pull 50k will not be recovered in your life time and you run out - that is the volatility that forces you to a lower SWR (or higher start value of the portfolio).

You can check with Bengen what a historically SWR would be in this scenario, but its not 10%....

Hence the folks that buy a SPIA towards the end of the retirement and get a solid paycheck instead of unknown returns
I don't think all "cash" is the same. TIPs for example should provide better inflation protection. But your example is (intentionally I know) contrived. "You have 10 years to go." Some people like doing things such as building a TIPs ladder to cover the years between early retirement and taking SS. In that situation fixed income and a known time span can work.

But if 70 and I just want to have money for the rest of my life, I can't say "I have 10 years to go" because I probably don't know my expiration date. And when you look at 10+ year timeframes, inflation does matter (you keep brushing it aside, but that's too simple).

For an unknown timespan (2 to 20 years for example) I believe a low percentage of equities makes the portfolio safer. And I think the SWR studies show that 100% fixed income is never optimal.

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Re: Know when to hold them and when to fold them......

Post by DonIce » Thu Oct 03, 2019 6:34 pm

rascott wrote:
Thu Oct 03, 2019 5:54 pm
I asked this before,... but the data available from 1970-2018 (so 48 years) straight from the backtesting spreadsheet on this site has shown zero benefit from holding intl equities (EAFE). And I state this as someone who still owns them.
Over the past ~120 years, the US stock market has outperformed the rest of the world by going from 15% of total world stock market cap, to over 53% of total world stock market cap. That is, the US fraction of the total stock world market has more than tripled to generate the outperformance we saw over the past 120 years.

Image

To demonstrate the same outperformance relative to international over the next century, the US share of the total world stock market would have to climb from 53% to ~85%, and the entire rest of the world would have to fall to just 15%. This doesn't seem likely to me.

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Re: Know when to hold them and when to fold them......

Post by TN_Boy » Thu Oct 03, 2019 6:41 pm

midareff wrote:
Thu Oct 03, 2019 4:23 pm

.....

Much stuff deleted


Frankly, my roughly 48/48/4 portfolio has returned 8.3% on average over the last ten years despite the drag of international. Now lets put the drag of international in terms that a retiree can easily understand..... it's about 4.5 one month cruises in a two room suite on a high end cruise line. Go cheaper or go one room suite and it's many more trips. That's a rough approximation of what it is. Now, you may be a young guy who doesn't find value in that, or you may be someone who does like to travel and doesn't finds that valuable., but you will eventually.
I'm not going to try and convince you that getting rid of international is a bad idea; clearly international hasn't helped recently.

But your comment "Now lets put the drag of international in terms that a retiree can easily understand" is very very much emphasizing outcome versus strategy.

Any investment strategy, even a great one, may turn out, in hindsight, to have been inferior. Getting hung up on the past is not a good plan for the future. My strategy is to get some equity returns if any major portion of the US + international stock universe does well. Tell me which will do best in the future and I'll only invest in it.

If your reasoning tells you international is a bad idea, fine. But focusing on outcomes, you should just have bought google or facebook or apple stock a while back and held it. The heck with that fixed income as well; been a huge drag the last 10 years.

I don't think zero international is a tragic, or even big, mistake for US investors. But I don't think the international under-performance of the last 10 years is the reason to go 100% US.

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Re: Know when to hold them and when to fold them......

Post by elainet7 » Thu Oct 03, 2019 6:58 pm

Buffett has told his wife to invest 90% of their money in the sp500 index fund
Who better to listen to

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Re: Know when to hold them and when to fold them......

Post by vineviz » Thu Oct 03, 2019 7:03 pm

elainet7 wrote:
Thu Oct 03, 2019 6:58 pm
Buffett has told his wife to invest 90% of their money in the sp500 index fund
Who better to listen to
Who better to listen to than Warren Buffett?

Someone with a better grasp of asset allocation than he seems to have.
"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: Know when to hold them and when to fold them......

Post by deikel » Thu Oct 03, 2019 7:04 pm

TN_Boy wrote:
Thu Oct 03, 2019 6:30 pm
deikel wrote:
Thu Oct 03, 2019 4:08 pm
TN_Boy wrote:
Thu Oct 03, 2019 3:01 pm
I'd use TIPs before CDs if I went all fixed income, which I think is almost always a bad idea.
Not arguing about TIPS or CDs or MM or cash, that is kind of all the same for my purposes.

But all fixed income is not bad at all, simple example:

You have 10 years to go and 500k in the bank and you need 50k a year (10% SWR). Its a stupid example, but it gets the point across. You just leave it in cash and you have 10x50k (minus inflation).

You leave it in some fixed income and you have 10x50k and probably inflation adjusted (true for the last 10 yrs)

You stick it in equities and you can not draw 50k a year anymore, because you need to consider the chance that the market crashes and the value drops so low that the one year of market correction where you pull 50k will not be recovered in your life time and you run out - that is the volatility that forces you to a lower SWR (or higher start value of the portfolio).

You can check with Bengen what a historically SWR would be in this scenario, but its not 10%....

Hence the folks that buy a SPIA towards the end of the retirement and get a solid paycheck instead of unknown returns
I don't think all "cash" is the same. TIPs for example should provide better inflation protection. But your example is (intentionally I know) contrived. "You have 10 years to go." Some people like doing things such as building a TIPs ladder to cover the years between early retirement and taking SS. In that situation fixed income and a known time span can work.

But if 70 and I just want to have money for the rest of my life, I can't say "I have 10 years to go" because I probably don't know my expiration date. And when you look at 10+ year timeframes, inflation does matter (you keep brushing it aside, but that's too simple).

For an unknown timespan (2 to 20 years for example) I believe a low percentage of equities makes the portfolio safer. And I think the SWR studies show that 100% fixed income is never optimal.
Not quite, when you check out Bengen (right, wrong, indifferent), then on short time spans and high SWR around 6-8 % (if you want to call it that, Figure 2 in the below link) 100% Treasuries actually performed very well compared to any stocks - the goal being not to run out of money.

http://www.retailinvestor.org/pdf/Bengen1.pdf
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

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Re: Know when to hold them and when to fold them......

Post by TN_Boy » Thu Oct 03, 2019 7:33 pm

deikel wrote:
Thu Oct 03, 2019 7:04 pm
TN_Boy wrote:
Thu Oct 03, 2019 6:30 pm
deikel wrote:
Thu Oct 03, 2019 4:08 pm
TN_Boy wrote:
Thu Oct 03, 2019 3:01 pm
I'd use TIPs before CDs if I went all fixed income, which I think is almost always a bad idea.
Not arguing about TIPS or CDs or MM or cash, that is kind of all the same for my purposes.

But all fixed income is not bad at all, simple example:

You have 10 years to go and 500k in the bank and you need 50k a year (10% SWR). Its a stupid example, but it gets the point across. You just leave it in cash and you have 10x50k (minus inflation).

You leave it in some fixed income and you have 10x50k and probably inflation adjusted (true for the last 10 yrs)

You stick it in equities and you can not draw 50k a year anymore, because you need to consider the chance that the market crashes and the value drops so low that the one year of market correction where you pull 50k will not be recovered in your life time and you run out - that is the volatility that forces you to a lower SWR (or higher start value of the portfolio).

You can check with Bengen what a historically SWR would be in this scenario, but its not 10%....

Hence the folks that buy a SPIA towards the end of the retirement and get a solid paycheck instead of unknown returns
I don't think all "cash" is the same. TIPs for example should provide better inflation protection. But your example is (intentionally I know) contrived. "You have 10 years to go." Some people like doing things such as building a TIPs ladder to cover the years between early retirement and taking SS. In that situation fixed income and a known time span can work.

But if 70 and I just want to have money for the rest of my life, I can't say "I have 10 years to go" because I probably don't know my expiration date. And when you look at 10+ year timeframes, inflation does matter (you keep brushing it aside, but that's too simple).

For an unknown timespan (2 to 20 years for example) I believe a low percentage of equities makes the portfolio safer. And I think the SWR studies show that 100% fixed income is never optimal.
Not quite, when you check out Bengen (right, wrong, indifferent), then on short time spans and high SWR around 6-8 % (if you want to call it that, Figure 2 in the below link) 100% Treasuries actually performed very well compared to any stocks - the goal being not to run out of money.

http://www.retailinvestor.org/pdf/Bengen1.pdf
I think we are talking past each other. As I said, for an unknown time span -- like the one a 70 year retiree faces -- I believe 100% fixed income is a (really) bad choice.

For a fixed shorter time span, sure, buy enough CDs or treasuries and you can predict the nominal dollars which can be withdrawn every year. Or buy TIPs and get predictable real withdrawals. That is not an interesting problem though, at least to me. Or I think to the 70 year old retiree who doesn't know when he or she will die.

This was also in Bengen's paper a little after figure 2:
I think it is appropriate to advise the client to accept a stock allocation as close to 75 percent as possible, and in no cases less than 50 percent. Stock allocations lower than 50 percent are counterproductive, in that they lower the amount of accumulated wealth as well as lowering the minimum portfolio longevity.

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Re: Know when to hold them and when to fold them......

Post by Johnnie » Thu Oct 03, 2019 8:02 pm

shess wrote:
Wed Oct 02, 2019 7:32 pm
Here's the thing - I didn't invest in US and INTL because I thought they both were going to give me great returns, I did it because I figured ONE OF THEM would give good returns, and the other one would hopefully not do too badly. Unfortunately, I didn't know which one it would be...
Hey that's pretty good!

I've been thinking about no longer rebalancing my current internationals but haven't done it yet, and have several months to think about it. My time horizon is about 25 years max.

Another good piece of advice I hear around here is make any allocation changes gradually.

In 1969 you could buy a Deutsche Mark or Swiss Franc for about 25 cents US; a dozen years later it was about a buck and never went back down. I obviously never forgot it.
"I know nothing."

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Re: Know when to hold them and when to fold them......

Post by midareff » Fri Oct 04, 2019 7:08 am

alex_686 wrote:
Thu Oct 03, 2019 4:41 pm
midareff wrote:
Thu Oct 03, 2019 4:11 pm
I don't think so Alex..... of course your perception may be different. ... I don't know but certainly do know I held it at a great penalty to me for many years.
Ah - but it is not a question of perception, but rather cold hard math. There has been very little penalty for holding international, but there has been one for holding value stocks. Value has been underpreforming, and international skews towards value. Depending on the time period chosen, the value factor is between 2 to 4 times more powerful than the international factor in explaining the "penalty" over the past 10 to 30 years. By choosing the wrong parameter you have gotten the wrong answer.

Step back and think about the biggest DM equity Nestle. Nestle acts more like Proctor and Gamble and other consumer staple stocks (either domestic or international). And both of these companies are more sensitive to world GNP movements then other consumer staple stocks. After all, they are both global powerhouses. Neither regress terribly well against their home GNP.

The problem is that internal indexes are dominated by these frumpy value stocks, unlike America which is dominated by the red hot growth FANG stocks.

If you feel strongly about this, then the rational answer is to dump both domestic and international indexes and load up on world growth indexes.
Your rational answers and mine are far apart.
That's simply wrong. Last 5 years Total US 10.36% annually, Total International 3.15% annually. That's better than 7% difference per year.

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Re: Know when to hold them and when to fold them......

Post by TN_Boy » Fri Oct 04, 2019 7:56 am

midareff wrote:
Fri Oct 04, 2019 7:08 am
alex_686 wrote:
Thu Oct 03, 2019 4:41 pm
midareff wrote:
Thu Oct 03, 2019 4:11 pm
I don't think so Alex..... of course your perception may be different. ... I don't know but certainly do know I held it at a great penalty to me for many years.
Ah - but it is not a question of perception, but rather cold hard math. There has been very little penalty for holding international, but there has been one for holding value stocks. Value has been underpreforming, and international skews towards value. Depending on the time period chosen, the value factor is between 2 to 4 times more powerful than the international factor in explaining the "penalty" over the past 10 to 30 years. By choosing the wrong parameter you have gotten the wrong answer.

Step back and think about the biggest DM equity Nestle. Nestle acts more like Proctor and Gamble and other consumer staple stocks (either domestic or international). And both of these companies are more sensitive to world GNP movements then other consumer staple stocks. After all, they are both global powerhouses. Neither regress terribly well against their home GNP.

The problem is that internal indexes are dominated by these frumpy value stocks, unlike America which is dominated by the red hot growth FANG stocks.

If you feel strongly about this, then the rational answer is to dump both domestic and international indexes and load up on world growth indexes.
Your rational answers and mine are far apart.
That's simply wrong. Last 5 years Total US 10.36% annually, Total International 3.15% annually. That's better than 7% difference per year.
I think you can get plenty of support here (along with the dissenters) that international is not required for US investors.

But the narrow focus on recent results .... hard to get behind that.

How much more money would you have if your portfolio was 58% stocks rather than 48%? Your asset allocation was, in hindsight, "wrong" to have so much international. But it was also "wrong" to have so many bonds.

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Re: Know when to hold them and when to fold them......

Post by JoMoney » Fri Oct 04, 2019 7:58 am

DonIce wrote:
Thu Oct 03, 2019 6:34 pm
...
Image

To demonstrate the same outperformance relative to international over the next century, the US share of the total world stock market would have to climb from 53% to ~85%, and the entire rest of the world would have to fall to just 15%. This doesn't seem likely to me.
No, not necessarily. Relative market cap and relative return don't necessarily follow each other.
Dividends, share buybacks, and new issues/dillution, can impact the return an investor receives per share without changing the market cap for a company or a market as a whole.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Know when to hold them and when to fold them......

Post by rascott » Fri Oct 04, 2019 8:44 am

vineviz wrote:
Thu Oct 03, 2019 6:22 pm
rascott wrote:
Thu Oct 03, 2019 5:54 pm
vineviz wrote:
Thu Oct 03, 2019 5:09 pm
rascott wrote:
Wed Oct 02, 2019 9:41 am

There has been zero actual evidence that intl investing has been helpful for the last 50 years. Maybe the next 50 will be different?
Actually there are literally volumes of such evidence, but of course there are two groups of investors for whom actual evidence is unpersuasive: those who can’t understand it and those who choose not to accept it.

Every investor should pick an asset allocation that suits them, but can we not perpetuate the xenophobic misinformation?

I asked this before,... but the data available from 1970-2018 (so 48 years) straight from the backtesting spreadsheet on this site has shown zero benefit from holding intl equities (EAFE). And I state this as someone who still owns them.
I’m not sure what your question is, but it would be untrue to support there has been no benefit: that’s the evidence to which I referred earlier.

So what is the actual benefit? As its certainly not been in returns or a reduction in volatility since 1970.

Even if you were only to look at 1970-2010.... ignoring the huge outperformance of this decade.... it still provided nothing. Identical returns and volatility.

The last 30 years (1988-2018) have been quite poor for the globally diversified investor, vs the US only investor.


So I stick by my original point that the last 50 years have provided zero benefit (and many cases a penalty) for investing in intl equities. But we don't know if the next 50 will look like the last 50.

The academic work in recent years has shown that international markets become highly correlated with US markets when the US market is struggling..... and then becomes much less correlated when the US is in a bull market. This is basically the opposite of what an investor should want.

On top of that.... as economies have become more interconnected than ever.... the ability to diversify away from US based risk has been falling since the 80s. This played out exactly with the GFC.... when a US based problem caused international equities to drop MORE than US equities.

Everything I look at indicates that the only benefit one might grasp onto is a falling USD$. The surging dollar is one of the main reasons intl returns have been so poor for the last decade.

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Re: Know when to hold them and when to fold them......

Post by fishandgolf » Fri Oct 04, 2019 9:10 am

For me...... International investing reminds me of that old 7 Up commercial......."never had, never will"

https://www.youtube.com/watch?v=9OHGXiFtQCo

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Re: Know when to hold them and when to fold them......

Post by Cycle » Fri Oct 04, 2019 9:35 am

Vtwax is good enough for me. I own substantial us holdings, and ex-US as well in case people switch to non-facebook / Google / Amazon / Microsoft. Much of the us performance can be attributed to tech.

I work for a more traditional big fortune 500 company where we make a bunch of stuff, and our stock has been a dog 🐕
Never look back unless you are planning to go that way

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Re: Know when to hold them and when to fold them......

Post by Taylor Larimore » Fri Oct 04, 2019 9:41 am

vineviz wrote:
Thu Oct 03, 2019 7:03 pm
elainet7 wrote:
Thu Oct 03, 2019 6:58 pm
Buffett has told his wife to invest 90% of their money in the sp500 index fund
Who better to listen to
Someone with a better grasp of asset allocation than he seems to have.
vineviz:

If you were Mr. Buffett, what would you do differently?

Thank you and best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Deep down, I remain absolutely confident that the vast majority of American families will be well served by owning their equity holding in an all-U.S. stock market index portfolio and holding their bonds in an all U.S. bond market index fund."
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Know when to hold them and when to fold them......

Post by midareff » Fri Oct 04, 2019 10:06 am

TN_Boy wrote:
Fri Oct 04, 2019 7:56 am
midareff wrote:
Fri Oct 04, 2019 7:08 am
alex_686 wrote:
Thu Oct 03, 2019 4:41 pm
midareff wrote:
Thu Oct 03, 2019 4:11 pm
I don't think so Alex..... of course your perception may be different. ... I don't know but certainly do know I held it at a great penalty to me for many years.
Ah - but it is not a question of perception, but rather cold hard math. There has been very little penalty for holding international, but there has been one for holding value stocks. Value has been underpreforming, and international skews towards value. Depending on the time period chosen, the value factor is between 2 to 4 times more powerful than the international factor in explaining the "penalty" over the past 10 to 30 years. By choosing the wrong parameter you have gotten the wrong answer.

Step back and think about the biggest DM equity Nestle. Nestle acts more like Proctor and Gamble and other consumer staple stocks (either domestic or international). And both of these companies are more sensitive to world GNP movements then other consumer staple stocks. After all, they are both global powerhouses. Neither regress terribly well against their home GNP.

The problem is that internal indexes are dominated by these frumpy value stocks, unlike America which is dominated by the red hot growth FANG stocks.

If you feel strongly about this, then the rational answer is to dump both domestic and international indexes and load up on world growth indexes.
Your rational answers and mine are far apart.
That's simply wrong. Last 5 years Total US 10.36% annually, Total International 3.15% annually. That's better than 7% difference per year.
I think you can get plenty of support here (along with the dissenters) that international is not required for US investors.

But the narrow focus on recent results .... hard to get behind that.

How much more money would you have if your portfolio was 58% stocks rather than 48%? Your asset allocation was, in hindsight, "wrong" to have so much international. But it was also "wrong" to have so many bonds.
It's not the narrow focus, its the ease of obtaining the data, it was in front of me. Let's look longer term... Morningstar says since October 1, 2009, Total International has gained 52.95% vs. 234.80% for Total US. Your comment on 58% vs. 48% equities reminds me of that short story about the frog that would not wear his butt out hopping if he had been born with wings. That's the famous "What if" story. The impact of additional US equities would be easy to calculate if I was interested, but I'm comfortable where I am.
Last edited by midareff on Fri Oct 04, 2019 10:14 am, edited 1 time in total.

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midareff
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Re: Know when to hold them and when to fold them......

Post by midareff » Fri Oct 04, 2019 10:11 am

Taylor Larimore wrote:
Fri Oct 04, 2019 9:41 am
vineviz wrote:
Thu Oct 03, 2019 7:03 pm
elainet7 wrote:
Thu Oct 03, 2019 6:58 pm
Buffett has told his wife to invest 90% of their money in the sp500 index fund
Who better to listen to
Someone with a better grasp of asset allocation than he seems to have.

vineviz:

If you were Mr. Buffett, what would you do differently?

Thank you and best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Deep down, I remain absolutely confident that the vast majority of American families will be well served by owning their equity holding in an all-U.S. stock market index portfolio and holding their bonds in an all U.S. bond market index fund."
It's always a bit funny when someone decides the fellow who is probably the greatest investor of our lifetime doesn't have a grasp on asset allocation, not to mention the fellow who probably did more for the individual investor than anyone on the planet and he too knows nothing about asset allocation.

If I don't get to see you at the next South Florida meet up, all the best to you and family for the Holidays and New Year Taylor.

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Re: Know when to hold them and when to fold them......

Post by dm200 » Fri Oct 04, 2019 10:16 am


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Re: Know when to hold them and when to fold them......

Post by willthrill81 » Fri Oct 04, 2019 10:16 am

midareff wrote:
Fri Oct 04, 2019 10:11 am
Taylor Larimore wrote:
Fri Oct 04, 2019 9:41 am
vineviz wrote:
Thu Oct 03, 2019 7:03 pm
elainet7 wrote:
Thu Oct 03, 2019 6:58 pm
Buffett has told his wife to invest 90% of their money in the sp500 index fund
Who better to listen to
Someone with a better grasp of asset allocation than he seems to have.

vineviz:

If you were Mr. Buffett, what would you do differently?

Thank you and best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Deep down, I remain absolutely confident that the vast majority of American families will be well served by owning their equity holding in an all-U.S. stock market index portfolio and holding their bonds in an all U.S. bond market index fund."
It's always a bit funny when someone decides the fellow who is probably the greatest investor of our lifetime doesn't have a grasp on asset allocation, not to mention the fellow who probably did more for the individual investor than anyone on the planet and he too knows nothing about asset allocation.
I do find that interesting as well. There have been so many explanations for both Bogle's and Buffett's disdain for ex-U.S. stock, ranging from 'they were from a different era' to 'their views on this are/were purely irrational' to 'they are/were just plain home-country biased'. It's intriguing to see see such things attributed to these men.
“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: Know when to hold them and when to fold them......

Post by bogledogle87 » Fri Oct 04, 2019 10:17 am

pokebowl wrote:
Wed Oct 02, 2019 9:28 am
Still holding global weighting here with no plans to change, should the cap weightings change due to international under performance, my portfolio will automatically drift accordingly and visa versa. If the all in U.S. crowd is correct, over half of my portfolio will over perform, if we experience a multi-decade period of international out performance again, my international side will excel. Overall I will get the middle of whatever the difference is between the global markets and still hit my target. :beer

If indexing was supposed to always guarantee you on the top performing asset class, we all would be retired long ago on our own private islands. :wink:
This +1000.

It fascinates me that most investors are in favor of passive equity indexing in the form of the S&P 500 or the Total US Market, but so strongly oppose passively indexing the equities of the entire World.

For the 100% US investors, It seems hypocritical to sing the praises of the market cap approach, but then turn right around and limit that very approach to a single country while pointing to recent out-performance. With that logic, you might as well consider market cap weighting specific sectors like US Technology and avoid US Energy at all costs. I can understand some hesitation with currency, political, and regulation risk, but it's important to know that these factors are generally priced in to markets already. Diversification across currencies and valuations can be a very powerful for investors as well, especially if they have behaved differently in recent years.

For those with 30-50% already allocated to international, I might argue for at least considering taking the plunge into Total World instead of the fixed allocation/rebalance strategy. You have already accepted the market cap approach for the most part, along with the currency and political risks. What made you decide your specific % to international was optimal for you? What made you decide to reblancing international as if it were a different asset class rather than just carrying the market weight?

For any investor that is already sold on market cap weighting equities and acknowledges the benefits of international diversification, VTWAX is the natural starting point and reasonable ending point, with any other tilt in allocation requiring additional justification.
Last edited by bogledogle87 on Fri Oct 04, 2019 10:28 am, edited 1 time in total.
VTWAX and chill

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Re: Know when to hold them and when to fold them......

Post by willthrill81 » Fri Oct 04, 2019 10:23 am

bogledogle87 wrote:
Fri Oct 04, 2019 10:17 am
It fascinates me that most investors are in favor of passive equity indexing in the form of the S&P 500 or the Total US Market, but so strongly oppose passively indexing the entire World.
Much of it comes down to whether one views the 'haystack' as being all of the world's publicly traded equities or not.

Exceptionally few investors hold global bonds at market weight, yet there is very little derision for such behavior.
“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: Know when to hold them and when to fold them......

Post by TN_Boy » Fri Oct 04, 2019 10:36 am

midareff wrote:
Fri Oct 04, 2019 10:06 am

It's not the narrow focus, its the ease of obtaining the data, it was in front of me. Let's look longer term... Morningstar says since October 1, 2009, Total International has gained 52.95% vs. 234.80% for Total US. Your comment on 58% vs. 48% equities reminds me of that short story about the frog that would not wear his butt out hopping if he had been born with wings. That's the famous "What if" story. The impact of additional US equities would be easy to calculate if I was interested, but I'm comfortable where I am.
Doesn't matter if the data is easy or hard to obtain. You are saying, "International has done poorly over the last 10 years, thus I am getting out of the asset class." Which looks an awful lot like performance chasing. It seems a lot like buying high and selling low!

If you'd said I reread Bogle's thoughts on international, pondered the evidence and re-evaluated the need for international, that would make sound it a little better. But you keep emphasizing in the original post and this one the performance difference. If you have multiple asset classes, some of them will do poorly at times, maybe a long time.

Do you really believe the rest of the world will continue to lag the US so much? As someone else pointed out, much of the performance differential is due to the strong dollar. Of course, one risk of international investing is exchange rate fluctuations. But if the dollar weakened, all of a sudden international stocks would look a lot prettier.

As I said before, I think zero international is a defensible position for a US investor.

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Re: Know when to hold them and when to fold them......

Post by Alaric » Fri Oct 04, 2019 11:21 am

willthrill81 wrote:
Fri Oct 04, 2019 10:16 am
midareff wrote:
Fri Oct 04, 2019 10:11 am
Taylor Larimore wrote:
Fri Oct 04, 2019 9:41 am
vineviz wrote:
Thu Oct 03, 2019 7:03 pm
elainet7 wrote:
Thu Oct 03, 2019 6:58 pm
Buffett has told his wife to invest 90% of their money in the sp500 index fund
Who better to listen to
Someone with a better grasp of asset allocation than he seems to have.

vineviz:

If you were Mr. Buffett, what would you do differently?

Thank you and best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Deep down, I remain absolutely confident that the vast majority of American families will be well served by owning their equity holding in an all-U.S. stock market index portfolio and holding their bonds in an all U.S. bond market index fund."
It's always a bit funny when someone decides the fellow who is probably the greatest investor of our lifetime doesn't have a grasp on asset allocation, not to mention the fellow who probably did more for the individual investor than anyone on the planet and he too knows nothing about asset allocation.
I do find that interesting as well. There have been so many explanations for both Bogle's and Buffett's disdain for ex-U.S. stock, ranging from 'they were from a different era' to 'their views on this are/were purely irrational' to 'they are/were just plain home-country biased'. It's intriguing to see see such things attributed to these men.
Yes. And a similar rationale can be and has been used to justify any and every departure from Buffett's and Bogle's advice even on a site inspired by Bogle's advice. Bogle may have stumbled upon a good point about low-expense index funds, but he was an old Luddite fuddy duddy who was frightened and confused by cryptocurrencies, so everyone should go against his no-Bitcoin advice. Etc.

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Re: Know when to hold them and when to fold them......

Post by bertilak » Fri Oct 04, 2019 11:24 am

"Know when to hold them and when to fold them" Is a gambling maxim.

As such I think it applies more to speculation than investing.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

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