Does International investment still make sense?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
fortyofforty
Posts: 1984
Joined: Wed Mar 31, 2010 12:33 pm

Re: Does International investment still make sense?

Post by fortyofforty » Wed Feb 12, 2020 9:02 pm

Many decades ago, when I was just starting out and feeling my way through the complicated world of investing, I had my money in actively-managed global equity funds. I figured that, if I was giving a manager the freedom to select her best ideas, why restrict those ideas to one country. If a manager could find bigger bargains or better opportunities inside the United States, outside the United States, or a combination of the two, who was I to say otherwise? After all, that's why I was paying her.

Well, in a way, nothing has changed, except I am no longer convinced it is possible for an active manager to consistently beat "the market", especially net of fees. Sure, my affinity for global equities has been a performance drag recently. It is for that reason I no longer feel as sure of my belief that it is the better course. But I am sticking with it. I do not proselytize for global diversification, though. Every investor must make his or her own choices, and nothing is "right" or "wrong" that is knowable in advance.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Out of self-quarantine.

JBTX
Posts: 5979
Joined: Wed Jul 26, 2017 12:46 pm

Re: Does International investment still make sense?

Post by JBTX » Wed Feb 12, 2020 9:07 pm

rockstar wrote:
Wed Feb 12, 2020 12:17 pm
muffins14 wrote:
Wed Feb 12, 2020 12:06 pm
I almost feel bad for adding to this thread, since the “is international dumb” topics never generate any new insight, but I’ll ask a question anyway.

People seem to think the US > developed intl because demographic headwinds abroad will slow their growth

People also think that US companies derive plenty of revenue from abroad, so they are tapped into intl markets anyway.

Is that not also a reason to invest in intl-based companies? Clearly a company could be based in the EU and sell $100B of goods to the “demographically advantaged” US. Or furthermore, an EU-domiciled company could have the vast majority of its employees living and working in the US, and earning revenue globally, too.
And you’re beholden to where ever the USD moves. I’d expect some compensation for taking on currency risk. But historically I’m not seeing it for the last 20 years.

I’m trying to find a compelling reason to stay invested in developed foreign equities. I’m struggling. I want a good rational reason.

If the US goes into a recession and equities fall, why wouldn’t the same happen in Europe? How can valuations flip flop this time?
It seems like the logical conclusion of your thought process is you should invest when economies and markets are strong and at highs and avoid investing when economies and markets are at comparative lows. I'm guessing I don't have to explain the fallacy of that conclusion.

Also, taking into account your entire personal financial situation, international provides somewhat of a long term hedge. If the US market is strong, the US economy is likely good, the dollar is strong, you are more likely to be employed and making a good living. Your international portion of your portfolio is less, but who cares, because at least half of your portfolio is good, along with your job and everything else.

Now let's say the US economy enters a protracted period of underperformance (and this is the crux of the issue, given where we are, many people think such a scenario is impossible, even though it has happened before). The economy stinks, the markets are down, the dollar is likely down. But international may be doing much better, both in terms of the stock valuations but also the currency impact.

Yes in the short term if US tanks everywhere will probably tank. But not necessarily and not long term. Japan mid 80s was about half the market cap. After it tanked the US held up pretty well.

Your argument is the US is special, and will always be special, and you want to put all of your eggs in that basket. You could turn out to be right. Chances are most of us here will be better off if that is true. We should hope that is true. But just like we buy life and other types of insurance, it is good to hedge your bets.

columbia
Posts: 2563
Joined: Tue Aug 27, 2013 5:30 am

Re: Does International investment still make sense?

Post by columbia » Wed Feb 12, 2020 9:33 pm

JBTX wrote:
Wed Feb 12, 2020 9:07 pm
rockstar wrote:
Wed Feb 12, 2020 12:17 pm
muffins14 wrote:
Wed Feb 12, 2020 12:06 pm
I almost feel bad for adding to this thread, since the “is international dumb” topics never generate any new insight, but I’ll ask a question anyway.

People seem to think the US > developed intl because demographic headwinds abroad will slow their growth

People also think that US companies derive plenty of revenue from abroad, so they are tapped into intl markets anyway.

Is that not also a reason to invest in intl-based companies? Clearly a company could be based in the EU and sell $100B of goods to the “demographically advantaged” US. Or furthermore, an EU-domiciled company could have the vast majority of its employees living and working in the US, and earning revenue globally, too.
And you’re beholden to where ever the USD moves. I’d expect some compensation for taking on currency risk. But historically I’m not seeing it for the last 20 years.

I’m trying to find a compelling reason to stay invested in developed foreign equities. I’m struggling. I want a good rational reason.

If the US goes into a recession and equities fall, why wouldn’t the same happen in Europe? How can valuations flip flop this time?
It seems like the logical conclusion of your thought process is you should invest when economies and markets are strong and at highs and avoid investing when economies and markets are at comparative lows. I'm guessing I don't have to explain the fallacy of that conclusion.

Also, taking into account your entire personal financial situation, international provides somewhat of a long term hedge. If the US market is strong, the US economy is likely good, the dollar is strong, you are more likely to be employed and making a good living. Your international portion of your portfolio is less, but who cares, because at least half of your portfolio is good, along with your job and everything else.

Now let's say the US economy enters a protracted period of underperformance (and this is the crux of the issue, given where we are, many people think such a scenario is impossible, even though it has happened before). The economy stinks, the markets are down, the dollar is likely down. But international may be doing much better, both in terms of the stock valuations but also the currency impact.

Yes in the short term if US tanks everywhere will probably tank. But not necessarily and not long term. Japan mid 80s was about half the market cap. After it tanked the US held up pretty well.

Your argument is the US is special, and will always be special, and you want to put all of your eggs in that basket. You could turn out to be right. Chances are most of us here will be better off if that is true. We should hope that is true. But just like we buy life and other types of insurance, it is good to hedge your bets.
Flesh that out: which countries, economies and currencies have a chance of achieving what you’ve laid out and for such an extended period of time, that it has a tangible and lasting negative effect on US only investors and why do they have that chance? Pointing to six years in the 70s or 2000s doesn’t meet that threshold, mind you.

If it really comes down to an insurance policy, well, you can buy those for a significantly smaller capital investment and/or own a small stake in a 3x leveraged bear market ETF.
If you leave your head in the sand for too long, you might get run over by a Jeep.

marcwd
Posts: 242
Joined: Tue Feb 20, 2007 10:15 am
Location: Massachusetts

Re: Does International investment still make sense?

Post by marcwd » Wed Feb 12, 2020 9:52 pm

Trader Joe wrote:
Wed Feb 12, 2020 1:55 pm

No, international investing for an American living in the United States never made sense.

For myself, I only invest in either VFIAX or VTSAX and I am very, very happy with my results. Simple and easy.
Never made sense? Just a few years ago you posted that you held and liked the Vanguard Emerging Markets fund. If this isn’t simply recency bias, it would be helpful to understand your change in thinking.

bck63
Posts: 987
Joined: Fri Sep 28, 2018 4:59 pm

Re: Does International investment still make sense?

Post by bck63 » Wed Feb 12, 2020 9:53 pm

lostdog wrote:
Tue Feb 11, 2020 10:42 am
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
What if ex-US starts to out perform and continue in this new decade? Will you keep your head in the sand?
At what point in the last four years did you change your mind about ex-US?

JBTX
Posts: 5979
Joined: Wed Jul 26, 2017 12:46 pm

Re: Does International investment still make sense?

Post by JBTX » Wed Feb 12, 2020 9:58 pm

columbia wrote:
Wed Feb 12, 2020 9:33 pm
JBTX wrote:
Wed Feb 12, 2020 9:07 pm
rockstar wrote:
Wed Feb 12, 2020 12:17 pm
muffins14 wrote:
Wed Feb 12, 2020 12:06 pm
I almost feel bad for adding to this thread, since the “is international dumb” topics never generate any new insight, but I’ll ask a question anyway.

People seem to think the US > developed intl because demographic headwinds abroad will slow their growth

People also think that US companies derive plenty of revenue from abroad, so they are tapped into intl markets anyway.

Is that not also a reason to invest in intl-based companies? Clearly a company could be based in the EU and sell $100B of goods to the “demographically advantaged” US. Or furthermore, an EU-domiciled company could have the vast majority of its employees living and working in the US, and earning revenue globally, too.
And you’re beholden to where ever the USD moves. I’d expect some compensation for taking on currency risk. But historically I’m not seeing it for the last 20 years.

I’m trying to find a compelling reason to stay invested in developed foreign equities. I’m struggling. I want a good rational reason.

If the US goes into a recession and equities fall, why wouldn’t the same happen in Europe? How can valuations flip flop this time?
It seems like the logical conclusion of your thought process is you should invest when economies and markets are strong and at highs and avoid investing when economies and markets are at comparative lows. I'm guessing I don't have to explain the fallacy of that conclusion.

Also, taking into account your entire personal financial situation, international provides somewhat of a long term hedge. If the US market is strong, the US economy is likely good, the dollar is strong, you are more likely to be employed and making a good living. Your international portion of your portfolio is less, but who cares, because at least half of your portfolio is good, along with your job and everything else.

Now let's say the US economy enters a protracted period of underperformance (and this is the crux of the issue, given where we are, many people think such a scenario is impossible, even though it has happened before). The economy stinks, the markets are down, the dollar is likely down. But international may be doing much better, both in terms of the stock valuations but also the currency impact.

Yes in the short term if US tanks everywhere will probably tank. But not necessarily and not long term. Japan mid 80s was about half the market cap. After it tanked the US held up pretty well.

Your argument is the US is special, and will always be special, and you want to put all of your eggs in that basket. You could turn out to be right. Chances are most of us here will be better off if that is true. We should hope that is true. But just like we buy life and other types of insurance, it is good to hedge your bets.
Flesh that out: which countries, economies and currencies have a chance of achieving what you’ve laid out and for such an extended period of time, that it has a tangible and lasting negative effect on US only investors and why do they have that chance? Pointing to six years in the 70s or 2000s doesn’t meet that threshold, mind you.

If it really comes down to an insurance policy, well, you can buy those for a significantly smaller capital investment and/or own a small stake in a 3x leveraged bear market ETF.


Thus you are banking that a protracted period of US underperformance can never happen, because it never really has. I hope you are right given I live here.

Going long stocks then shorting them at the same time seems counter-productive.

My point is that even if the US modestly outperforms international long term, the diversification (both market and overall financial well being) and hedging impacts of international are worth it.

It is 1979-1982. The stock market has return 0% real for the last 13-15 years. Inflation is double digits. Unemployment is high. Interest rates are skyrocketing. Misery Index!! High gas prices. Recent lines at gas stations. US Planned obsolescence and management fighting unions vs Japanese revolutionizing manufacturing / quality and labor relations. President not that long ago resigned in disgrace. We just basically lost a war. We are staying home from the Olympics and worried about getting pounded by Russian nukes while our citizens are held hostage in Iran.

Who in their right mind would invest in that stock market?

columbia
Posts: 2563
Joined: Tue Aug 27, 2013 5:30 am

Re: Does International investment still make sense?

Post by columbia » Wed Feb 12, 2020 10:03 pm

JBTX wrote:
Wed Feb 12, 2020 9:58 pm
columbia wrote:
Wed Feb 12, 2020 9:33 pm
JBTX wrote:
Wed Feb 12, 2020 9:07 pm
rockstar wrote:
Wed Feb 12, 2020 12:17 pm
muffins14 wrote:
Wed Feb 12, 2020 12:06 pm
I almost feel bad for adding to this thread, since the “is international dumb” topics never generate any new insight, but I’ll ask a question anyway.

People seem to think the US > developed intl because demographic headwinds abroad will slow their growth

People also think that US companies derive plenty of revenue from abroad, so they are tapped into intl markets anyway.

Is that not also a reason to invest in intl-based companies? Clearly a company could be based in the EU and sell $100B of goods to the “demographically advantaged” US. Or furthermore, an EU-domiciled company could have the vast majority of its employees living and working in the US, and earning revenue globally, too.
And you’re beholden to where ever the USD moves. I’d expect some compensation for taking on currency risk. But historically I’m not seeing it for the last 20 years.

I’m trying to find a compelling reason to stay invested in developed foreign equities. I’m struggling. I want a good rational reason.

If the US goes into a recession and equities fall, why wouldn’t the same happen in Europe? How can valuations flip flop this time?
It seems like the logical conclusion of your thought process is you should invest when economies and markets are strong and at highs and avoid investing when economies and markets are at comparative lows. I'm guessing I don't have to explain the fallacy of that conclusion.

Also, taking into account your entire personal financial situation, international provides somewhat of a long term hedge. If the US market is strong, the US economy is likely good, the dollar is strong, you are more likely to be employed and making a good living. Your international portion of your portfolio is less, but who cares, because at least half of your portfolio is good, along with your job and everything else.

Now let's say the US economy enters a protracted period of underperformance (and this is the crux of the issue, given where we are, many people think such a scenario is impossible, even though it has happened before). The economy stinks, the markets are down, the dollar is likely down. But international may be doing much better, both in terms of the stock valuations but also the currency impact.

Yes in the short term if US tanks everywhere will probably tank. But not necessarily and not long term. Japan mid 80s was about half the market cap. After it tanked the US held up pretty well.

Your argument is the US is special, and will always be special, and you want to put all of your eggs in that basket. You could turn out to be right. Chances are most of us here will be better off if that is true. We should hope that is true. But just like we buy life and other types of insurance, it is good to hedge your bets.
Flesh that out: which countries, economies and currencies have a chance of achieving what you’ve laid out and for such an extended period of time, that it has a tangible and lasting negative effect on US only investors and why do they have that chance? Pointing to six years in the 70s or 2000s doesn’t meet that threshold, mind you.

If it really comes down to an insurance policy, well, you can buy those for a significantly smaller capital investment and/or own a small stake in a 3x leveraged bear market ETF.


Thus you are banking that a protracted period of US underperformance can never happen, because it never really has. I hope you are right given I live here.

Going long stocks then shorting them at the same time seems counter-productive.

My point is that even if the US modestly outperforms international long term, the diversification (both market and overall financial well being) and hedging impacts of international are worth it.

It is 1979-1982. The stock market has return 0% real for the last 13-15 years. Inflation is double digits. Unemployment is high. Interest rates are skyrocketing. Misery Index!! High gas prices. Recent lines at gas stations. US Planned obsolescence and management fighting unions vs Japanese revolutionizing manufacturing / quality and labor relations. President not that long ago resigned in disgrace. We just basically lost a war. We are staying home from the Olympics and worried about getting pounded by Russian nukes while our citizens are held hostage in Iran.

Who in their right mind would invest in that stock market?
I’m banking on the US economy and markets providing reasonably sufficient returns; I don’t care about the future returns of other markets - in relation to the US - because I don’t invest there.

I find the idea that US returns will do so poorly that they can only be saved by an equal share of ex-US markets to be preposterous.
If you leave your head in the sand for too long, you might get run over by a Jeep.

JBTX
Posts: 5979
Joined: Wed Jul 26, 2017 12:46 pm

Re: Does International investment still make sense?

Post by JBTX » Wed Feb 12, 2020 10:10 pm

columbia wrote:
Wed Feb 12, 2020 10:03 pm
JBTX wrote:
Wed Feb 12, 2020 9:58 pm
columbia wrote:
Wed Feb 12, 2020 9:33 pm
JBTX wrote:
Wed Feb 12, 2020 9:07 pm
rockstar wrote:
Wed Feb 12, 2020 12:17 pm


And you’re beholden to where ever the USD moves. I’d expect some compensation for taking on currency risk. But historically I’m not seeing it for the last 20 years.

I’m trying to find a compelling reason to stay invested in developed foreign equities. I’m struggling. I want a good rational reason.

If the US goes into a recession and equities fall, why wouldn’t the same happen in Europe? How can valuations flip flop this time?
It seems like the logical conclusion of your thought process is you should invest when economies and markets are strong and at highs and avoid investing when economies and markets are at comparative lows. I'm guessing I don't have to explain the fallacy of that conclusion.

Also, taking into account your entire personal financial situation, international provides somewhat of a long term hedge. If the US market is strong, the US economy is likely good, the dollar is strong, you are more likely to be employed and making a good living. Your international portion of your portfolio is less, but who cares, because at least half of your portfolio is good, along with your job and everything else.

Now let's say the US economy enters a protracted period of underperformance (and this is the crux of the issue, given where we are, many people think such a scenario is impossible, even though it has happened before). The economy stinks, the markets are down, the dollar is likely down. But international may be doing much better, both in terms of the stock valuations but also the currency impact.

Yes in the short term if US tanks everywhere will probably tank. But not necessarily and not long term. Japan mid 80s was about half the market cap. After it tanked the US held up pretty well.

Your argument is the US is special, and will always be special, and you want to put all of your eggs in that basket. You could turn out to be right. Chances are most of us here will be better off if that is true. We should hope that is true. But just like we buy life and other types of insurance, it is good to hedge your bets.
Flesh that out: which countries, economies and currencies have a chance of achieving what you’ve laid out and for such an extended period of time, that it has a tangible and lasting negative effect on US only investors and why do they have that chance? Pointing to six years in the 70s or 2000s doesn’t meet that threshold, mind you.

If it really comes down to an insurance policy, well, you can buy those for a significantly smaller capital investment and/or own a small stake in a 3x leveraged bear market ETF.


Thus you are banking that a protracted period of US underperformance can never happen, because it never really has. I hope you are right given I live here.

Going long stocks then shorting them at the same time seems counter-productive.

My point is that even if the US modestly outperforms international long term, the diversification (both market and overall financial well being) and hedging impacts of international are worth it.

It is 1979-1982. The stock market has return 0% real for the last 13-15 years. Inflation is double digits. Unemployment is high. Interest rates are skyrocketing. Misery Index!! High gas prices. Recent lines at gas stations. US Planned obsolescence and management fighting unions vs Japanese revolutionizing manufacturing / quality and labor relations. President not that long ago resigned in disgrace. We just basically lost a war. We are staying home from the Olympics and worried about getting pounded by Russian nukes while our citizens are held hostage in Iran.

Who in their right mind would invest in that stock market?
I’m banking on the US economy and markets providing reasonably sufficient returns; I don’t care about the future returns of other markets - in relation to the US - because I don’t invest there.
That's a unique argument. I'll give you that.
I find the idea that US returns will do so poorly that they can only be saved by an equal share of ex-US markets to be preposterous.
That's not exactly what I said. But I am glad you can foresee the future. I hope it works out for you.

stocknoob4111
Posts: 1249
Joined: Sun Jan 07, 2018 12:52 pm

Re: Does International investment still make sense?

Post by stocknoob4111 » Wed Feb 12, 2020 10:12 pm

pascalwager wrote:
Tue Feb 11, 2020 9:58 pm
Vanguard said sometime during the decade.
At the moment I don't care if it lags the S&P 500, my expectations that International will out perform have been thrown out the window a long time ago. If it just performs and the real returns stay in positive territory that would be great. Right now, for the past 24 months, the real CAGR for VTIAX is -1.73% when the S&P 500 11.6%. I have a 6 digit position in this fund and could've been up tens of thousands instead of losing money and at the same time going through all the volatility for zero gains.

I watch the Bogle videos again and feel I should've listened to his justifications, ultimately I chose to disagree with his advice and follow Fidelity, Schwab and Vanguard Corp itself with the "valuations" argument. As I said earlier perhaps valuations don't really tell you anything.

visualguy
Posts: 1795
Joined: Thu Jan 30, 2014 1:32 am

Re: Does International investment still make sense?

Post by visualguy » Wed Feb 12, 2020 11:03 pm

KyleAAA wrote:
Wed Feb 12, 2020 8:39 pm
I don't understand your question. Why would other nations have needed to catch up for the US not to be an outlier? US economic growth is rather slow, which is expected for a mature economy. Much innovation happens here, sure, but not an inordinate amount relative to the size of its economy. There are three major factors that made US economic performance an outlier in the 20th century.

1.) Avoided having any major wars fought on US soil. The impact of this cannot be overstated.
2.) Inclusive economic institutions, and increasing inclusiveness for most of the 20th century.
3.) A strong and growing middle class.

None of those 3 advantages apply anymore. Institutions have become increasingly less inclusive, the middle class is shrinking (granted the upper middle class has grown, but that isn't the same thing), and there have been no major wars in any of the countries most likely to overtake us, making that factor a push.
Again, which countries are "likely to overtake us" as you say?

I thought we were talking about the US stock market index performance being an outlier, which it has been, including this century. Not sure what you mean by "inclusive economic institutions", and why you think the size of the US middle class vs upper middle class or other classes is somehow a critical factor in US stock market index performance - US companies operate and sell globally. No wars on US soil is true, but significant wars on foreign soil, and actually less of any of that now.

You need to look at the capital markets and their regulation, the shareholder-centric corporate culture, the tremendous innovation, the ability to attract so much top talent from around the world, the great universities, etc.

Topic Author
rockstar
Posts: 197
Joined: Mon Feb 03, 2020 6:51 pm

Re: Does International investment still make sense?

Post by rockstar » Wed Feb 12, 2020 11:11 pm

stocknoob4111 wrote:
Wed Feb 12, 2020 10:12 pm
pascalwager wrote:
Tue Feb 11, 2020 9:58 pm
Vanguard said sometime during the decade.
At the moment I don't care if it lags the S&P 500, my expectations that International will out perform have been thrown out the window a long time ago. If it just performs and the real returns stay in positive territory that would be great. Right now, for the past 24 months, the real CAGR for VTIAX is -1.73% when the S&P 500 11.6%. I have a 6 digit position in this fund and could've been up tens of thousands instead of losing money and at the same time going through all the volatility for zero gains.

I watch the Bogle videos again and feel I should've listened to his justifications, ultimately I chose to disagree with his advice and follow Fidelity, Schwab and Vanguard Corp itself with the "valuations" argument. As I said earlier perhaps valuations don't really tell you anything.
I'm in IEFA. Pretty much the same result with 3ish dividends per year. So I made a return slightly better than buying a treasury two years ago on the short end. A ten year treasury would have given me a better result. Buying a treasury would have been a better choice for me and far less risky. I think I'm going to wait for the summer distribution and then decide what to do next. I most likely will cut my position in half.

Northern Flicker
Posts: 5402
Joined: Fri Apr 10, 2015 12:29 am

Re: Does International investment still make sense?

Post by Northern Flicker » Wed Feb 12, 2020 11:47 pm

willthrill81 wrote:
Wed Feb 12, 2020 4:59 pm
Northern Flicker wrote:
Wed Feb 12, 2020 4:44 pm
Lee_WSP wrote: If you can achieve the same CAGR with a lower SD, then adding international is a worthwhile addition.
I believe the benefit of int’l equity diversification is to diversify long-term risks and once-in-a-lifetime types of tail risk events.
Funny enough, when I've thrown the possibility of a small (e.g. ~10%) allocation to gold for that very purpose, most here shoot it down like a low-flying duck on opening day.
Gold has no revenue stream. It is a static/stagnant investment. Gold mining stocks may function in the desired manner however.
Risk provides no guarantee of return.

User avatar
willthrill81
Posts: 17385
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Does International investment still make sense?

Post by willthrill81 » Thu Feb 13, 2020 12:12 am

Northern Flicker wrote:
Wed Feb 12, 2020 11:47 pm
willthrill81 wrote:
Wed Feb 12, 2020 4:59 pm
Northern Flicker wrote:
Wed Feb 12, 2020 4:44 pm
Lee_WSP wrote: If you can achieve the same CAGR with a lower SD, then adding international is a worthwhile addition.
I believe the benefit of int’l equity diversification is to diversify long-term risks and once-in-a-lifetime types of tail risk events.
Funny enough, when I've thrown the possibility of a small (e.g. ~10%) allocation to gold for that very purpose, most here shoot it down like a low-flying duck on opening day.
Gold has no revenue stream. It is a static/stagnant investment.
I'll go a step beyond that and say that gold is never an investment; it's a speculation that shares commonalities with insurance (though it is obviously not insurance).

But for the same reason that we insure our home, an investor might choose to hold a small allocation to gold as what David Stein refers to as 'insurance against the unknown'.

For many investors, the comparatively short track record of free-floating gold and lack of income stream are enough to convince them to avoid gold entirely, which is perfectly fine. Other investors observe that a small allocation to gold would have smoothed out returns without harming them, especially during rough patches for traditional portfolios, over much of the last 50 years for investors in multiple nations, not just those in the U.S.

And for the record, only about 2% of our net worth is in precious metals, so I can hardly be called a gold-bug.

Back on the topic of the thread, I certainly agree that ex-U.S. stock might help to diversify against, to borrow your words, "long-term risks and once-in-a-lifetime types of tail risk events." But I think that a small allocation to gold might fit that bill for investors with those concerns as well.
“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

KyleAAA
Posts: 8127
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Does International investment still make sense?

Post by KyleAAA » Thu Feb 13, 2020 2:04 am

visualguy wrote:
Wed Feb 12, 2020 11:03 pm
KyleAAA wrote:
Wed Feb 12, 2020 8:39 pm
I don't understand your question. Why would other nations have needed to catch up for the US not to be an outlier? US economic growth is rather slow, which is expected for a mature economy. Much innovation happens here, sure, but not an inordinate amount relative to the size of its economy. There are three major factors that made US economic performance an outlier in the 20th century.

1.) Avoided having any major wars fought on US soil. The impact of this cannot be overstated.
2.) Inclusive economic institutions, and increasing inclusiveness for most of the 20th century.
3.) A strong and growing middle class.

None of those 3 advantages apply anymore. Institutions have become increasingly less inclusive, the middle class is shrinking (granted the upper middle class has grown, but that isn't the same thing), and there have been no major wars in any of the countries most likely to overtake us, making that factor a push.
Again, which countries are "likely to overtake us" as you say?

I thought we were talking about the US stock market index performance being an outlier, which it has been, including this century. Not sure what you mean by "inclusive economic institutions", and why you think the size of the US middle class vs upper middle class or other classes is somehow a critical factor in US stock market index performance - US companies operate and sell globally. No wars on US soil is true, but significant wars on foreign soil, and actually less of any of that now.

You need to look at the capital markets and their regulation, the shareholder-centric corporate culture, the tremendous innovation, the ability to attract so much top talent from around the world, the great universities, etc.
None of those things drove US economic performance in the 20th century and aren't significant competitive advantages now. I do not say those things are critical indicators of stock market performance. I did not mention the stock market at all.

But I haven't seen data to suggest US stock market performance has been an outlier this century as you claim.

User avatar
fortyofforty
Posts: 1984
Joined: Wed Mar 31, 2010 12:33 pm

Re: Does International investment still make sense?

Post by fortyofforty » Thu Feb 13, 2020 7:13 am

rockstar wrote:
Wed Feb 12, 2020 11:11 pm
stocknoob4111 wrote:
Wed Feb 12, 2020 10:12 pm
pascalwager wrote:
Tue Feb 11, 2020 9:58 pm
Vanguard said sometime during the decade.
At the moment I don't care if it lags the S&P 500, my expectations that International will out perform have been thrown out the window a long time ago. If it just performs and the real returns stay in positive territory that would be great. Right now, for the past 24 months, the real CAGR for VTIAX is -1.73% when the S&P 500 11.6%. I have a 6 digit position in this fund and could've been up tens of thousands instead of losing money and at the same time going through all the volatility for zero gains.

I watch the Bogle videos again and feel I should've listened to his justifications, ultimately I chose to disagree with his advice and follow Fidelity, Schwab and Vanguard Corp itself with the "valuations" argument. As I said earlier perhaps valuations don't really tell you anything.
I'm in IEFA. Pretty much the same result with 3ish dividends per year. So I made a return slightly better than buying a treasury two years ago on the short end. A ten year treasury would have given me a better result. Buying a treasury would have been a better choice for me and far less risky. I think I'm going to wait for the summer distribution and then decide what to do next. I most likely will cut my position in half.
This is where the rubber meets the road. It's all well and good being right in principle, but when real money is at stake, being right in principle but wrong in results still stings. Opportunity cost is still a cost, when it's so easy to compare returns over the recent past. As the future is unknowable, we are all just making our best guesses based on information currently available. Dogmatic attacks are counterproductive, on all sides.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Out of self-quarantine.

lostdog
Posts: 2503
Joined: Thu Feb 04, 2016 2:15 pm

Re: Does International investment still make sense?

Post by lostdog » Thu Feb 13, 2020 10:34 am

hisdudeness wrote:
Wed Feb 12, 2020 7:40 pm
willthrill81 wrote:
Wed Feb 12, 2020 3:53 pm
DB2 wrote:
Wed Feb 12, 2020 3:47 pm
willthrill81 wrote:
Wed Feb 12, 2020 3:16 pm
cjking wrote:
Wed Feb 12, 2020 2:12 pm
Someone linked to a Mebane Faber tweet up-thread. I think it's worth quoting.




https://mobile.twitter.com/mebfaber/sta ... 84?lang=en
That sounds like cherry picking on Faber's part.

In the 2009 Credit Suisse yearbook, they reported that from 1900-2008 (all their available data), the real return on ex-U.S. stock was 4.8%, while the U.S. had real returns of 6.0%.
Agreed, hard to disregard the last 11 years.
Yes, the last 11 years matter, but my point was that Meb's statement implied that U.S. and ex-U.S. equities were on long-term par back in 2009. That was certainly not the case.
When I first read that Faber quote, I thought it sounded wrong. I wonder what the incentive is for him and others (Vanguard "experts") to promote ex US investing. Might be a good subject for a different thread.
I highly doubt it. What kind of incentives do you think they will get from this? :oops:
Global Market Cap Equity || Taxable: VTSAX+VTIAX || Retirement: VTWAX

lostdog
Posts: 2503
Joined: Thu Feb 04, 2016 2:15 pm

Re: Does International investment still make sense?

Post by lostdog » Thu Feb 13, 2020 10:36 am

columbia wrote:
Wed Feb 12, 2020 7:59 pm
hisdudeness wrote:
Wed Feb 12, 2020 7:40 pm
willthrill81 wrote:
Wed Feb 12, 2020 3:53 pm
DB2 wrote:
Wed Feb 12, 2020 3:47 pm
willthrill81 wrote:
Wed Feb 12, 2020 3:16 pm


That sounds like cherry picking on Faber's part.

In the 2009 Credit Suisse yearbook, they reported that from 1900-2008 (all their available data), the real return on ex-U.S. stock was 4.8%, while the U.S. had real returns of 6.0%.
Agreed, hard to disregard the last 11 years.
Yes, the last 11 years matter, but my point was that Meb's statement implied that U.S. and ex-U.S. equities were on long-term par back in 2009. That was certainly not the case.
When I first read that Faber quote, I thought it sounded wrong. I wonder what the incentive is for him and others (Vanguard "experts") to promote ex US investing. Might be a good subject for a different thread.
To be direct, his incentive is to sell you “smart” funds and has settled on deviating from US large cap blend is the way to convince you that he knows better than myopic, xenophobic, and head in the sand* VTI/VOO investors.


*increasingly common BH tropes
What kind of incentives will Vanguard get? I would like to hear about this conspiracy theory?
Global Market Cap Equity || Taxable: VTSAX+VTIAX || Retirement: VTWAX

lostdog
Posts: 2503
Joined: Thu Feb 04, 2016 2:15 pm

Re: Does International investment still make sense?

Post by lostdog » Thu Feb 13, 2020 10:41 am

bck63 wrote:
Wed Feb 12, 2020 9:53 pm
lostdog wrote:
Tue Feb 11, 2020 10:42 am
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
What if ex-US starts to out perform and continue in this new decade? Will you keep your head in the sand?
At what point in the last four years did you change your mind about ex-US?
When I finally just got it. I came to conclusion I know nothing so I might as well by the haystack.
Global Market Cap Equity || Taxable: VTSAX+VTIAX || Retirement: VTWAX

Lee_WSP
Posts: 2183
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Does International investment still make sense?

Post by Lee_WSP » Thu Feb 13, 2020 10:47 am

Northern Flicker wrote:
Wed Feb 12, 2020 7:57 pm
Lee_WSP wrote:
Wed Feb 12, 2020 5:21 pm
Northern Flicker wrote:
Wed Feb 12, 2020 4:44 pm
https://www.vanguard.com/pdf/ISGGEB.pdf

While I’m sure there will be variability in these results when different time periods are used in the analysis, I don’t think it is an accident that higher non-US allocations were found to minimize variance of longer-term returns in comparison to minimizing (short-term) volatility.

Also interesting in that Vanguard article is the presentation of volatility of equity markets by country/market. The top 3 are Hong Kong, Norway, and Italy— none of which are EM.
Pages 1-3 deal with the issue of whether to even diversify globally. Reading between the lines, Vanguard really isn't pressing all that hard for holding ex-US.

The best argument they came up with is: well, it exposes you to the entire world rather than just your home country. Except, you know, the US has the lowest volatility of each country in this study and has performed just as well or better over the long term. But, if you do want to diversify globally, here's how you do it.
Figure 3 on page 5 is a visual summary of their result, which was that the variance in 10-year returns is minimized at 40% non-US stocks, both with 100% equity or 60/40 equity/bond portfolios. The 10-year variance of this mix was lower than the 10-year variance of US returns. This is a more relevant risk measure for retirement savers than short-term volatility. Vanguard also recommends being at least 20% non-US equities even if you reject the higher level that they recommend.

I'm not advocating for 40% of equities allocated to non-US, but there are enough examples of tail risk materializing (Germany 1920's, Japan 1990's) where int'l equity diversification would have greatly protected investors not to consider some diversification.
Based on simulations, and doesn't distinguish between upside & downside volatility.

Again, there's no compelling reason to invest in foreign stocks for US investors.

There's also no compelling reason not to.

enc0re
Posts: 87
Joined: Mon Sep 19, 2011 9:32 pm

Re: Does International investment still make sense?

Post by enc0re » Thu Feb 13, 2020 11:31 am

I keep about 10% of my equity allocation in International. That's small enough that if Domestic continues to outperform, I'm not losing out by any significant amount. But it's large enough that if International outperforms, I can feel smugly superior to all the 100% Domestic types. :happy

And that's what really matters.

User avatar
hisdudeness
Posts: 86
Joined: Sat Nov 17, 2018 8:26 pm

Re: Does International investment still make sense?

Post by hisdudeness » Thu Feb 13, 2020 11:51 am

lostdog wrote:
Thu Feb 13, 2020 10:34 am
hisdudeness wrote:
Wed Feb 12, 2020 7:40 pm
willthrill81 wrote:
Wed Feb 12, 2020 3:53 pm
DB2 wrote:
Wed Feb 12, 2020 3:47 pm
willthrill81 wrote:
Wed Feb 12, 2020 3:16 pm


That sounds like cherry picking on Faber's part.

In the 2009 Credit Suisse yearbook, they reported that from 1900-2008 (all their available data), the real return on ex-U.S. stock was 4.8%, while the U.S. had real returns of 6.0%.
Agreed, hard to disregard the last 11 years.
Yes, the last 11 years matter, but my point was that Meb's statement implied that U.S. and ex-U.S. equities were on long-term par back in 2009. That was certainly not the case.
When I first read that Faber quote, I thought it sounded wrong. I wonder what the incentive is for him and others (Vanguard "experts") to promote ex US investing. Might be a good subject for a different thread.
I highly doubt it. What kind of incentives do you think they will get from this? :oops:
I honestly don't know what Vanguard's incentives would be. Probably Vanguard's decision makers truly believe what they are suggesting, with near global market weight in their target date funds.
Only time will tell, but I don't have much confidence in the projections of "experts". In fact I think they (Vanguard) are dead wrong and I'm not going to follow that route.
There is too much that is unknowable.

User avatar
hisdudeness
Posts: 86
Joined: Sat Nov 17, 2018 8:26 pm

Re: Does International investment still make sense?

Post by hisdudeness » Thu Feb 13, 2020 12:00 pm

enc0re wrote:
Thu Feb 13, 2020 11:31 am
I keep about 10% of my equity allocation in International. That's small enough that if Domestic continues to outperform, I'm not losing out by any significant amount. But it's large enough that if International outperforms, I can feel smugly superior to all the 100% Domestic types. :happy

And that's what really matters.
+1
That's what I have .004% in VTIAX for, but maybe that's a stretch

whereskyle
Posts: 197
Joined: Wed Jan 29, 2020 10:29 am

Re: Does International investment still make sense?

Post by whereskyle » Thu Feb 13, 2020 12:26 pm

Peculiar_Investor wrote:
Tue Feb 11, 2020 9:49 am
lostdog wrote:
Tue Feb 11, 2020 9:26 am
Buy the haystack! but US only.
That's the problem. The theory of passive investing using broad-based indices translates to the first part, buy the haystack. Why should it stop at any particular country or border or region or sector or ...

Or applying it somewhat in reverse, why not exclude specific companies domiciled in specific states? Particularly ones that have historically underperformed?
The haystack Bogle talked about buying was the U.S. Stock Market. All of his research, ideas, and recommendations are based on the history of the U.S. stock market. Applying his recommendation to the rest of the world requires one to conclude that the rest of the world should be treated the same as the U.S. Bogle never reached that conclusion, even years after Vanguard and other index fund providers attempted to apply his U.S.-based strategy to the world at large. If you can convince me that the rest of the world is a parallel to the U.S. at this point in history, then I will humbly agree with you. For now, I am satisfied that Bogle's theories are based on the history of the U.S. and its stock market, so I trust that his theories will work in that context. I have not seen sufficient evidence for why I should treat the markets of the rest of the world as Bogle treated the U.S. stock market. If someone can bridge that gap for me, I will consider international more seriously.
"I am better off than he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

User avatar
abuss368
Posts: 18821
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Does International investment still make sense?

Post by abuss368 » Thu Feb 13, 2020 1:01 pm

whereskyle wrote:
Thu Feb 13, 2020 12:26 pm
Peculiar_Investor wrote:
Tue Feb 11, 2020 9:49 am
lostdog wrote:
Tue Feb 11, 2020 9:26 am
Buy the haystack! but US only.
That's the problem. The theory of passive investing using broad-based indices translates to the first part, buy the haystack. Why should it stop at any particular country or border or region or sector or ...

Or applying it somewhat in reverse, why not exclude specific companies domiciled in specific states? Particularly ones that have historically underperformed?
The haystack Bogle talked about buying was the U.S. Stock Market. All of his research, ideas, and recommendations are based on the history of the U.S. stock market. Applying his recommendation to the rest of the world requires one to conclude that the rest of the world should be treated the same as the U.S. Bogle never reached that conclusion, even years after Vanguard and other index fund providers attempted to apply his U.S.-based strategy to the world at large. If you can convince me that the rest of the world is a parallel to the U.S. at this point in history, then I will humbly agree with you. For now, I am satisfied that Bogle's theories are based on the history of the U.S. and its stock market, so I trust that his theories will work in that context. I have not seen sufficient evidence for why I should treat the markets of the rest of the world as Bogle treated the U.S. stock market. If someone can bridge that gap for me, I will consider international more seriously.
I would agree with the conclusion that Mr. Bogle referred to the US stock market only. This was not applied to the rest of the world and there are many interviews where Mr. Bogle discusses international investing and specifically his thoughts.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

User avatar
Peculiar_Investor
Posts: 1508
Joined: Thu Oct 20, 2011 12:23 am
Location: Staying home - Calgary, AB
Contact:

Re: Does International investment still make sense?

Post by Peculiar_Investor » Thu Feb 13, 2020 1:31 pm

whereskyle wrote:
Thu Feb 13, 2020 12:26 pm
The haystack Bogle talked about buying was the U.S. Stock Market. All of his research, ideas, and recommendations are based on the history of the U.S. stock market.
I'll have to dig out my copy of his books (and/or Google) because I've always understood the basic thought behind his theory was buy everything so you participate in all companies, good and bad. His "universe" for the theory might have been the U.S. stock market but I don't recall him specifically stated the theory was specific to that "universe".

FWIW, I'm a Canadian investor who discovered Bogle later in my investment career but I've always understood the inherent conflict that The role of home bias in global asset allocation decisions and therefore my lens or point of reference might be significantly different than most here.
Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams

whereskyle
Posts: 197
Joined: Wed Jan 29, 2020 10:29 am

Re: Does International investment still make sense?

Post by whereskyle » Thu Feb 13, 2020 2:00 pm

Peculiar_Investor wrote:
Thu Feb 13, 2020 1:31 pm
whereskyle wrote:
Thu Feb 13, 2020 12:26 pm
The haystack Bogle talked about buying was the U.S. Stock Market. All of his research, ideas, and recommendations are based on the history of the U.S. stock market.
I'll have to dig out my copy of his books (and/or Google) because I've always understood the basic thought behind his theory was buy everything so you participate in all companies, good and bad. His "universe" for the theory might have been the U.S. stock market but I don't recall him specifically stated the theory was specific to that "universe".

FWIW, I'm a Canadian investor who discovered Bogle later in my investment career but I've always understood the inherent conflict that The role of home bias in global asset allocation decisions and therefore my lens or point of reference might be significantly different than most here.
Vanguard's home bias point does give me pause. It suggests that people are not being objective about where the most reliable place to put their money is, and I can admit that there is an emotional security in staying home.

To be honest, some of Bogle's and Buffett's comments on sticking to the U.S. don't seem to be particularly deep. Things like, "U.S. businesses are the most innovative, flexible, and resilient." I don't know if they are just relying on an American ethos or simple mythology to back up those views. In at least some interviews, they are not offering hard data to back up their U.S.-only position. But I do know that Bogle's books are based on the U.S. stock market, and I therefore do not automatically extend their principles internationally.

I agree that theoretically market principles should be the same around the world. It just gives me pause that the man who started the thinking that we discuss here never truly endorsed that view. We all know now that markets do not operate independently of the governments under which they reside or the cultures in which they function. With that, there are so many socio-political questions raised that I think it becomes hard to answer the U.S. v. Int'l question objectively. Looking solely at past performance also does not answer the question. Being in the U.S., I confidently believe that corporations are safe here. Even if CEO pay is a hot-button issue, Americans like to buy things. The opportunity to buy different things is synonymous with the ethos of American freedom. Therefore, I think the market will continue to thrive here. At this point, I'm just psycho-analyzing though aren't I? Is this home bias?
"I am better off than he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

User avatar
UpsetRaptor
Posts: 528
Joined: Tue Jan 19, 2016 5:15 pm

Re: Does International investment still make sense?

Post by UpsetRaptor » Thu Feb 13, 2020 2:28 pm

KyleAAA wrote:
Wed Feb 12, 2020 3:48 pm
rascott wrote:
Tue Feb 11, 2020 12:05 am
Some would discount a century of outperformance as statistical noise. Others don't.
The US was an outlier in the 20th century. Do we expect it to be an outlier in the 21st? That idea strains credibility. I don't see any utility in looking at the world as it was over a century ago. We've had 2 world wars and an influenza pandemic since then.
In addition to the 20th century, it also outperformed in the 19th century (200 years ago it was not even a top 10 economy). It has also outperformed thus far in the 21st century, albeit "only" two decades. Entirely unforeseeable, black swan type of stuff, nothing systemic/fundamental?

KyleAAA
Posts: 8127
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Does International investment still make sense?

Post by KyleAAA » Thu Feb 13, 2020 3:08 pm

UpsetRaptor wrote:
Thu Feb 13, 2020 2:28 pm
KyleAAA wrote:
Wed Feb 12, 2020 3:48 pm
rascott wrote:
Tue Feb 11, 2020 12:05 am
Some would discount a century of outperformance as statistical noise. Others don't.
The US was an outlier in the 20th century. Do we expect it to be an outlier in the 21st? That idea strains credibility. I don't see any utility in looking at the world as it was over a century ago. We've had 2 world wars and an influenza pandemic since then.
In addition to the 20th century, it also outperformed in the 19th century (200 years ago it was not even a top 10 economy). It has also outperformed thus far in the 21st century, albeit "only" two decades. Entirely unforeseeable, black swan type of stuff, nothing systemic/fundamental?
Obviously there were systemic/fundamental drivers in the 20th century and before. That's literally what I said above. Those drivers have not been present since the early 80s.

But you couldn't have predicted that outperformance 100-200 years ago. It only seems obviously in retrospect. Just because there were fundamental drivers doesn't mean it was predictable.
Last edited by KyleAAA on Thu Feb 13, 2020 3:34 pm, edited 1 time in total.

TropikThunder
Posts: 2185
Joined: Sun Apr 03, 2016 5:41 pm

Re: Does International investment still make sense?

Post by TropikThunder » Thu Feb 13, 2020 3:25 pm

whereskyle wrote:
Thu Feb 13, 2020 2:00 pm
Americans like to buy things. The opportunity to buy different things is synonymous with the ethos of American freedom. Therefore, I think the market will continue to thrive here. At this point, I'm just psycho-analyzing though aren't I? Is this home bias?
Fair point but a lot of the things Americans like to buy are made by foreign companies. I think the “S&P 500 makes X% of their revenue abroad” argument is unconvincing. Yes, Ford, Exxon and Apple sell stuff in Europe and Asia but VW, Shell and Samsung sell stuff here too.

User avatar
willthrill81
Posts: 17385
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Does International investment still make sense?

Post by willthrill81 » Thu Feb 13, 2020 3:40 pm

TropikThunder wrote:
Thu Feb 13, 2020 3:25 pm
whereskyle wrote:
Thu Feb 13, 2020 2:00 pm
Americans like to buy things. The opportunity to buy different things is synonymous with the ethos of American freedom. Therefore, I think the market will continue to thrive here. At this point, I'm just psycho-analyzing though aren't I? Is this home bias?
Fair point but a lot of the things Americans like to buy are made by foreign companies. I think the “S&P 500 makes X% of their revenue abroad” argument is unconvincing. Yes, Ford, Exxon and Apple sell stuff in Europe and Asia but VW, Shell and Samsung sell stuff here too.
But the last 30 years has shown that Americans buying products from foreign companies has not resulted in the stock markets of the nations in which those companies operate performing well (and by well, I mean that TBM has significantly outperformed ex-U.S. since 1990). That may not continue going forward, but it's difficult for a lot of people to ignore 30 years of significant underperformance, despite all the theory supporting ex-U.S.
“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

whereskyle
Posts: 197
Joined: Wed Jan 29, 2020 10:29 am

Re: Does International investment still make sense?

Post by whereskyle » Thu Feb 13, 2020 3:42 pm

TropikThunder wrote:
Thu Feb 13, 2020 3:25 pm
whereskyle wrote:
Thu Feb 13, 2020 2:00 pm
Americans like to buy things. The opportunity to buy different things is synonymous with the ethos of American freedom. Therefore, I think the market will continue to thrive here. At this point, I'm just psycho-analyzing though aren't I? Is this home bias?
Fair point but a lot of the things Americans like to buy are made by foreign companies. I think the “S&P 500 makes X% of their revenue abroad” argument is unconvincing. Yes, Ford, Exxon and Apple sell stuff in Europe and Asia but VW, Shell and Samsung sell stuff here too.
Absolutely true, which shows that my psychoanalysis of americans is not a good reason for home bias.

Can anyone explain why I should trust the U.S. stock market to operate according to Bogle's principles over any other stock market?
"I am better off than he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

User avatar
UpsetRaptor
Posts: 528
Joined: Tue Jan 19, 2016 5:15 pm

Re: Does International investment still make sense?

Post by UpsetRaptor » Thu Feb 13, 2020 4:02 pm

KyleAAA wrote:
Thu Feb 13, 2020 3:08 pm
UpsetRaptor wrote:
Thu Feb 13, 2020 2:28 pm
KyleAAA wrote:
Wed Feb 12, 2020 3:48 pm
rascott wrote:
Tue Feb 11, 2020 12:05 am
Some would discount a century of outperformance as statistical noise. Others don't.
The US was an outlier in the 20th century. Do we expect it to be an outlier in the 21st? That idea strains credibility. I don't see any utility in looking at the world as it was over a century ago. We've had 2 world wars and an influenza pandemic since then.
In addition to the 20th century, it also outperformed in the 19th century (200 years ago it was not even a top 10 economy). It has also outperformed thus far in the 21st century, albeit "only" two decades. Entirely unforeseeable, black swan type of stuff, nothing systemic/fundamental?
Obviously there were systemic/fundamental drivers in the 20th century and before. That's literally what I said above. Those drivers have not been present since the early 80s.

But you couldn't have predicted that outperformance 100-200 years ago. It only seems obviously in retrospect. Just because there were fundamental drivers doesn't mean it was predictable.
I would classify things like world wars as black swan events, that's not what I was implying by systemic/fundamental reasons for US outperformance. Regardless of semantic quibbles, let's say you're correct and the "fundamental" reasons for centuries of historical US outperformance ceased to exist in the early 1980s. Why has the US continued to outperform for almost 4 decades since?

bck63
Posts: 987
Joined: Fri Sep 28, 2018 4:59 pm

Re: Does International investment still make sense?

Post by bck63 » Thu Feb 13, 2020 4:10 pm

lostdog wrote:
Thu Feb 13, 2020 10:41 am
bck63 wrote:
Wed Feb 12, 2020 9:53 pm
lostdog wrote:
Tue Feb 11, 2020 10:42 am
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
What if ex-US starts to out perform and continue in this new decade? Will you keep your head in the sand?
At what point in the last four years did you change your mind about ex-US?
When I finally just got it. I came to conclusion I know nothing so I might as well by the haystack.
:thumbsup

Northern Flicker
Posts: 5402
Joined: Fri Apr 10, 2015 12:29 am

Re: Does International investment still make sense?

Post by Northern Flicker » Thu Feb 13, 2020 4:47 pm

rockstar wrote: I'm in IEFA. Pretty much the same result with 3ish dividends per year. So I made a return slightly better than buying a treasury two years ago on the short end. A ten year treasury would have given me a better result. Buying a treasury would have been a better choice for me and far less risky. I think I'm going to wait for the summer distribution and then decide what to do next. I most likely will cut my position in half.
What does the distribution have to do with it? When a stock mutual fund distributes dividends, it is just distributing stock dividends that have already accrued, and are already contributing to the NAV (share price) of the investment you hold. The NAV is lowered upon distribution, commensurate with the amount of the distribution.

If you hold $10,000 in a mutual fund at market close on the day a dividend distribution is processed, and the fund distributes $100 of dividends, then after the distribution is processed, you hold $9,900 in mutual fund shares and $100 in cash, which you could reinvest in the fund. In that case, you would again hold $10,000 in the fund, but it would be more shares at a lower price per share. Either way, if in a taxable account, you will get a 1099 that includes the distribution for tax reporting purposes.

Two years is not an appropriate time horizon for evaluating the performance of a stock investment. If that is your evaluation period, and you are ready to pull the plug because you were not able to project the general level of return of a stock investment over two years, that is your choice, but that is a different issue from whether int’l equities are a good long-term diversifier for US investors.

Lastly, you should evaluate total return and not focus on dividend yield. You probably won’t be happy to learn that a 10-year treasury handily beat IEFA over the last 2 years due to its appreciation from falling interest rates. Here is a total return comparison of VSIGX (intermediate treasuries fund) with IEFA. The treasury fund had a total return of about 11.3% vs about 7.3% for IEFA:

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D
Risk provides no guarantee of return.

patrick
Posts: 1732
Joined: Fri Sep 04, 2009 3:39 am
Location: Mega-City One

Re: Does International investment still make sense?

Post by patrick » Thu Feb 13, 2020 6:54 pm

rascott wrote:
Tue Feb 11, 2020 12:05 am
Some would discount a century of outperformance as statistical noise. Others don't.
Indeed. Some people discount the huge outperformance of Australian stocks since 1900 and keep investing in the historically under-performing US stocks.

jibantik
Posts: 291
Joined: Fri Nov 24, 2017 1:05 pm

Re: Does International investment still make sense?

Post by jibantik » Thu Feb 13, 2020 7:24 pm

abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
It should fall on deaf ears. Investing based on past performance is one of the worst things you can do.

TropikThunder
Posts: 2185
Joined: Sun Apr 03, 2016 5:41 pm

Re: Does International investment still make sense?

Post by TropikThunder » Thu Feb 13, 2020 7:31 pm

jibantik wrote:
Thu Feb 13, 2020 7:24 pm
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
It should fall on deaf ears. Investing based on past performance is one of the worst things you can do.
But Jack said so!

visualguy
Posts: 1795
Joined: Thu Jan 30, 2014 1:32 am

Re: Does International investment still make sense?

Post by visualguy » Thu Feb 13, 2020 7:53 pm

jibantik wrote:
Thu Feb 13, 2020 7:24 pm
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
It should fall on deaf ears. Investing based on past performance is one of the worst things you can do.
The Boglehead strategy is based on the fact that it worked in the past. Without this past performance we wouldn't be investing in it, and this forum wouldn't exist.

User avatar
abuss368
Posts: 18821
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Does International investment still make sense?

Post by abuss368 » Thu Feb 13, 2020 7:58 pm

jibantik wrote:
Thu Feb 13, 2020 7:24 pm
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
It should fall on deaf ears. Investing based on past performance is one of the worst things you can do.
So when does the additional return arrive? Jack Bogle noted a few years ago (which means the gap is even wider now) since 1994 the cumulative return of international is approximately 280% while US is over 700%! Can't imagine what that would be today.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

visualguy
Posts: 1795
Joined: Thu Jan 30, 2014 1:32 am

Re: Does International investment still make sense?

Post by visualguy » Thu Feb 13, 2020 8:00 pm

patrick wrote:
Thu Feb 13, 2020 6:54 pm
rascott wrote:
Tue Feb 11, 2020 12:05 am
Some would discount a century of outperformance as statistical noise. Others don't.
Indeed. Some people discount the huge outperformance of Australian stocks since 1900 and keep investing in the historically under-performing US stocks.
False equivalence again. Australia is a tiny market when compared the the US. Also, it's the only country that out-performed the US over that period, and it did so by something like half a percent. Sorry, ex-US indexing truly hasn't been a good approach in the long run. If the US didn't exist, and all I could get is what ex-US delivered, I would be all in real-estate, and stay out of the stock market. Too little return for the volatility in ex-US - below my threshold for a reasonable investment.

jibantik
Posts: 291
Joined: Fri Nov 24, 2017 1:05 pm

Re: Does International investment still make sense?

Post by jibantik » Thu Feb 13, 2020 8:12 pm

abuss368 wrote:
Thu Feb 13, 2020 7:58 pm
jibantik wrote:
Thu Feb 13, 2020 7:24 pm
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
It should fall on deaf ears. Investing based on past performance is one of the worst things you can do.
So when does the additional return arrive? Jack Bogle noted a few years ago (which means the gap is even wider now) since 1994 the cumulative return of international is approximately 280% while US is over 700%! Can't imagine what that would be today.
No idea, which is why I invest in the total market. I don't performance chase, I am not trying to beat the market because it's a fools errand. If you are trying to outperform the market based on past performance, then I have some snake oil to sell you.

Here is a good set of quotes about past performance.

One of my personal favorites: Bill Schultheis, adviser and author of The Coffeehouse Investor:
Using past performance numbers as a method for choosing mutual funds is such a lousy idea that mutual fund companies are required by law to tell you it is a lousy idea.

Rosencrantz1
Posts: 321
Joined: Tue Sep 10, 2019 12:28 pm

Re: Does International investment still make sense?

Post by Rosencrantz1 » Thu Feb 13, 2020 8:14 pm

jibantik wrote:
Thu Feb 13, 2020 7:24 pm
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
It should fall on deaf ears. Investing based on past performance is one of the worst things you can do.
I sure hope that's not entirely true... I have high six figures sitting in VOO/VTI because of the historical performance of the US stock market. :beer

patrick
Posts: 1732
Joined: Fri Sep 04, 2009 3:39 am
Location: Mega-City One

Re: Does International investment still make sense?

Post by patrick » Thu Feb 13, 2020 8:55 pm

visualguy wrote:
Thu Feb 13, 2020 8:00 pm
patrick wrote:
Thu Feb 13, 2020 6:54 pm
rascott wrote:
Tue Feb 11, 2020 12:05 am
Some would discount a century of outperformance as statistical noise. Others don't.
Indeed. Some people discount the huge outperformance of Australian stocks since 1900 and keep investing in the historically under-performing US stocks.
False equivalence again. Australia is a tiny market when compared the the US. Also, it's the only country that out-performed the US over that period, and it did so by something like half a percent. Sorry, ex-US indexing truly hasn't been a good approach in the long run. If the US didn't exist, and all I could get is what ex-US delivered, I would be all in real-estate, and stay out of the stock market. Too little return for the volatility in ex-US - below my threshold for a reasonable investment.
Australia isn't the only country that outperformed the US since 1900. South Africa did even better. I suppose you'll dismiss that as another tiny market, but how large does a market have to be for its historical performance to count? Note that back in 1900 the UK had a larger market than the US, as did Japan briefly around 1990.

columbia
Posts: 2563
Joined: Tue Aug 27, 2013 5:30 am

Re: Does International investment still make sense?

Post by columbia » Thu Feb 13, 2020 9:35 pm

jibantik wrote:
Thu Feb 13, 2020 7:24 pm
abuss368 wrote:
Tue Feb 11, 2020 10:25 am
rockstar wrote:
Tue Feb 11, 2020 10:08 am
It’s a lot of risk for lower returns than domestic. That’s what I’m seeing. I haven’t sold my position yet. But I’m struggling with a rational reason to hold it.
That is exactly a point I have often raised which appears to fall on deaf ears. I have zero, none, nada, interest in investing in something that is acknowledged to be much riskier for the same expected return as U.S.

For the additional risk, I expect additional expected return! That never seems to happen.
It should fall on deaf ears. Investing based on past performance is one of the worst things you can do.
Theoretically, that stance would imply that a 50/50 split between stocks and bonds (if we’re discussing core assets): we don’t know, so split the difference.

Either way, What is your asset allocation and how did you arrive at that decision?
If you leave your head in the sand for too long, you might get run over by a Jeep.

CoastalWinds
Posts: 1063
Joined: Sat Apr 06, 2019 8:28 pm

Re: Does International investment still make sense?

Post by CoastalWinds » Thu Feb 13, 2020 10:00 pm

Yes- the answer is 57.

User avatar
abuss368
Posts: 18821
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Does International investment still make sense?

Post by abuss368 » Thu Feb 13, 2020 10:17 pm

In reviewing the YTD fund performance between Total Stock and Total International Stock on Vanguard's website, there appears to be an almost 5% difference:

Total Stock - 4.68%
Total International Stock - (0.23%)
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

as9
Posts: 87
Joined: Mon Jan 27, 2020 9:26 am

Re: Does International investment still make sense?

Post by as9 » Thu Feb 13, 2020 10:22 pm

abuss368 wrote:
Thu Feb 13, 2020 10:17 pm
In reviewing the YTD fund performance between Total Stock and Total International Stock on Vanguard's website, there appears to be an almost 5% difference:

Total Stock - 4.68%
Total International Stock - (0.23%)
YTD is 44 days so how significant is that?

User avatar
abuss368
Posts: 18821
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Does International investment still make sense?

Post by abuss368 » Thu Feb 13, 2020 10:24 pm

as9 wrote:
Thu Feb 13, 2020 10:22 pm
abuss368 wrote:
Thu Feb 13, 2020 10:17 pm
In reviewing the YTD fund performance between Total Stock and Total International Stock on Vanguard's website, there appears to be an almost 5% difference:

Total Stock - 4.68%
Total International Stock - (0.23%)
YTD is 44 days so how significant is that?
No significant but rather I was reviewing the YTD, 1 Year, 3 Year, 5 Year, and 10 Year. There is a large difference between the two.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

columbia
Posts: 2563
Joined: Tue Aug 27, 2013 5:30 am

Re: Does International investment still make sense?

Post by columbia » Thu Feb 13, 2020 10:27 pm

as9 wrote:
Thu Feb 13, 2020 10:22 pm
abuss368 wrote:
Thu Feb 13, 2020 10:17 pm
In reviewing the YTD fund performance between Total Stock and Total International Stock on Vanguard's website, there appears to be an almost 5% difference:

Total Stock - 4.68%
Total International Stock - (0.23%)
YTD is 44 days so how significant is that?
Not at all. For those banking on it, I hope those expected returns finally kick in.
If you leave your head in the sand for too long, you might get run over by a Jeep.

User avatar
abuss368
Posts: 18821
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Does International investment still make sense?

Post by abuss368 » Thu Feb 13, 2020 10:30 pm

columbia wrote:
Thu Feb 13, 2020 10:27 pm
as9 wrote:
Thu Feb 13, 2020 10:22 pm
abuss368 wrote:
Thu Feb 13, 2020 10:17 pm
In reviewing the YTD fund performance between Total Stock and Total International Stock on Vanguard's website, there appears to be an almost 5% difference:

Total Stock - 4.68%
Total International Stock - (0.23%)
YTD is 44 days so how significant is that?
Not at all. For those banking on it, I hope those expected returns finally kick in.
Columbia -

Have you ever invested internationally or specifically with Vanguard Total International Stock Index?
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

Locked