International stocks are undervalued!

[z3r0c00l]

NIkkei 225 has returned 20% since November, not bad at all. (Mostly during November itself, a 15% month.)

[asif408]

There's someone regular here who is 10/90. I forget the username.

Could be me.

[Triple digit golfer]

There's someone regular here who is 10/90. I forget the username.

Could be me.

And there is the star of the show!

It was on the tip of my tongue. I knew your username started with "A" but couldn't remember. Thanks for chiming in!

[Anon9001]

If anyone is going to tilt this please remember that Momentum can continue for quite a long time. That's why it's not obvious to spot bubbles when they are going on. Only in hind-sight. I would recommend a 50% VT 25% AVUV 25% AVDV position for someone who wants exposure to Value factor.

[UpsetRaptor]

I find it odd timing this thread was bumped when US has outperformed ex-US by about 7% since your OP, at the time of this post. The first page and a half, going back through it, reads in the "This didn't age well" category, at least thus far.

So I backtested and US has returned 60% since OP's post while ex-US has returned 53%, so ... you're technically right, but amounts to a few days of +/- market noise. I can't see how you can look at that kind of minor relative variation and conclude that this 'didn't age well'. As long as we're doing comparisons: emerging markets are tied with the US since OP's post and small value is up by around 80% - do these less-than-one-year variations matter? I mean, if the overarching argument is that one could/should invest in what is undervalued, it seems to have paid off on a lot of fronts since the OP's post.

OP was clearly indicating they believed ex-US was undervalued compared specifically to US. And 7% performance disparity over 9 months is a lot.

[Noobvestor]

OP was clearly indicating they believed ex-US was undervalued compared specifically to US. And 7% performance disparity over 9 months is a lot.

7% over a period with 60% returns is just over a 10% difference in returns, so I'd say 'a lot' is a bit loaded, subjective and relative.

I find it odd timing this thread was bumped when US has outperformed ex-US by about 7% since your OP, at the time of this post. The first page and a half, going back through it, reads in the "This didn't age well" category, at least thus far.

So I backtested and US has returned 60% since OP's post while ex-US has returned 53%, so ... you're technically right, but amounts to a few days of +/- market noise. I can't see how you can look at that kind of minor relative variation and conclude that this 'didn't age well'. As long as we're doing comparisons: emerging markets are tied with the US since OP's post and small value is up by around 80% - do these less-than-one-year variations matter? I mean, if the overarching argument is that one could/should invest in what is undervalued, it seems to have paid off on a lot of fronts since the OP's post.

How has it paid off if investing in the "overvalued" equities would have given you the same or higher return? Seems to me a better assessment is investing in the overvalued asset didn't hurt and investing in the undervalued assets could have yielded a worse return.

I'm confused apparently on multiple fronts. First, I am comparing a number of relatively undervalued segments (developed, emerging and small value) to overvalued US equities. Not all of them beat US, but none lost dramatically, and one won dramatically. So if one took OP's proposition to invest in value-priced stocks and extrapolated it, well, small value has led since they posted. Second, it also seems pretty arbitrary to call out a 7% gap out of a 60%+/- gain at a random point less than a year after a post to pick apart OP's thesis. 7%+/- is literally a few days' worth of market volatility. In short: I think it's a little too soon to call, but over the last three months international developed and emerging have both beaten US ... let's check back in a few years.

[junior]

I find it odd timing this thread was bumped when US has outperformed ex-US by about 7% since your OP, at the time of this post. The first page and a half, going back through it, reads in the "This didn't age well" category, at least thus far.

So I backtested and US has returned 60% since OP's post while ex-US has returned 53%, so ... you're technically right, but amounts to a few days of +/- market noise. I can't see how you can look at that kind of minor relative variation and conclude that this 'didn't age well'. As long as we're doing comparisons: emerging markets are tied with the US since OP's post and small value is up by around 80% - do these less-than-one-year variations matter? I mean, if the overarching argument is that one could/should invest in what is undervalued, it seems to have paid off on a lot of fronts since the OP's post.

How has it paid off if investing in the "overvalued" equities would have given you the same or higher return? Seems to me a better assessment is investing in the overvalued asset didn't hurt and investing in the undervalued assets could have yielded a worse return.

How has U.S. being ahead paid off unless you sold your U.S. stock? It's all make-pretend money until you trade it in for real money. The U.S. investor who has not sold their stock isn't any wealthier, they are make-pretend wealthier. It can go away at any moment.

[Triple digit golfer]

I find it odd timing this thread was bumped when US has outperformed ex-US by about 7% since your OP, at the time of this post. The first page and a half, going back through it, reads in the "This didn't age well" category, at least thus far.

So I backtested and US has returned 60% since OP's post while ex-US has returned 53%, so ... you're technically right, but amounts to a few days of +/- market noise. I can't see how you can look at that kind of minor relative variation and conclude that this 'didn't age well'. As long as we're doing comparisons: emerging markets are tied with the US since OP's post and small value is up by around 80% - do these less-than-one-year variations matter? I mean, if the overarching argument is that one could/should invest in what is undervalued, it seems to have paid off on a lot of fronts since the OP's post.

How has it paid off if investing in the "overvalued" equities would have given you the same or higher return? Seems to me a better assessment is investing in the overvalued asset didn't hurt and investing in the undervalued assets could have yielded a worse return.

How has U.S. being ahead paid off unless you sold your U.S. stock? It's all make-pretend money until you trade it in for real money. The U.S. investor who has not sold their stock isn't any wealthier, they are make-pretend wealthier. It can go away at any moment.

You are absolutely wrong. The investor is wealthier. If you have an investment that's increased in value and you're concerned it can go away at any moment, then sell it and realize your gains.

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Do you not think holding an investment that has increased in value means anything? If so, why do you invest?

[asif408]

You are absolutely wrong. The investor is wealthier. If you have an investment that's increased in value and you're concerned it can go away at any moment, then sell it and realize your gains.

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Do you not think holding an investment that has increased in value means anything? If so, why do you invest?

True, but that's the past. Now in the present US stocks are worth $200 and international are worth $150, so I'm betting the $150 shares beat the $200 shares going forward. At the very least I'm getting more shares for my money with international stocks.

Of course it could be wishful thinking on my part and I could be wrong. That's why I do have 10-15% in US stocks. For all I know this could be Japan 1980, when stocks were overvalued and went to absurdly valued for a decade.

Betting on US stocks this past decade was like better on Tiger Woods or the field in major championships from the 1999 PGA to the 2002 US Open. For golfers out there, Tiger won 7 of those 11, which is amazing. But certainly wasn't likely something that would be sustainable.

[Triple digit golfer]

You are absolutely wrong. The investor is wealthier. If you have an investment that's increased in value and you're concerned it can go away at any moment, then sell it and realize your gains.

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Do you not think holding an investment that has increased in value means anything? If so, why do you invest?

True, but that's the past. Now in the present US stocks are worth $200 and international are worth $150, so I'm betting the $150 shares beat the $200 shares going forward. At the very least I'm getting more shares for my money with international stocks.

Of course it could be wishful thinking on my part and I could be wrong. That's why I do have 10-15% in US stocks. For all I know this could be Japan 1980, when stocks were overvalued and went to absurdly valued for a decade.

Betting on US stocks this past decade was like better on Tiger Woods or the field in major championships from the 1999 PGA to the 2002 US Open. For golfers out there, Tiger won 7 of those 11, which is amazing. But certainly wasn't likely something that would be sustainable.

Absolutely agree. My point is that Investor A has $200 and Investor B has $150. I'm not saying what they should hold moving forward. I'm saying that an investment increasing in value absolutely means something.

[junior]

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Suppose these examples represent 2 stocks bought for $100, stock A is worth $200 today and stock B is worth $150 today.

If stock A is worth $5 in 18 years when I sell it and stock B is worth $280 when I sell it then today's celebration of stock A hitting $200 did me no good except that I had fun updating net worth spreadsheets today.

That's why I say you aren't wealthier until you sell the stock.

[SantaClaraSurfer]

My wife's 401(k) will hit Required Minimum Distributions in 2050.

Her entire 401(k) is in a company-sponsored Vanguard TDF that has a current AA of 35.5% Int'l equities and 3% Int'l Bond.

Taking the 29 year time frame and what we've seen from a variety of international businesses in our careers, we are comfortable with that.

[Triple digit golfer]

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Suppose these examples represent 2 stocks bought for $100, stock A is worth $200 today and stock B is worth $150 today.

If stock A is worth $5 in 18 years when I sell it and stock B is worth $280 when I sell it then today's celebration of stock A hitting $200 did me no good except that I had fun updating net worth spreadsheets today.

That's why I say you aren't wealthier until you sell the stock.

Except you aren't required to hold Stock A today. You are free to sell and place the proceeds in Stock B.

I don't know why somebody wouldn't prefer an investment that has performed well for them.

[abuss368]

My crystal ball is saying international stocks may have a day in the sun in the future.

Tony

[MarkBarb]

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Suppose these examples represent 2 stocks bought for $100, stock A is worth $200 today and stock B is worth $150 today.

If stock A is worth $5 in 18 years when I sell it and stock B is worth $280 when I sell it then today's celebration of stock A hitting $200 did me no good except that I had fun updating net worth spreadsheets today.

That's why I say you aren't wealthier until you sell the stock.

This doesn't make sense to me. I've been investing primarily in the US Total Stock Market for decades now. Are you saying that I shouldn't count any of that money as wealth? But if I sell it tomorrow, it does count as wealth? Should I exclude the entire value of my stock holdings or just the appreciation?

[junior]

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Suppose these examples represent 2 stocks bought for $100, stock A is worth $200 today and stock B is worth $150 today.

If stock A is worth $5 in 18 years when I sell it and stock B is worth $280 when I sell it then today's celebration of stock A hitting $200 did me no good except that I had fun updating net worth spreadsheets today.

That's why I say you aren't wealthier until you sell the stock.

This doesn't make sense to me. I've been investing primarily in the US Total Stock Market for decades now. Are you saying that I shouldn't count any of that money as wealth? But if I sell it tomorrow, it does count as wealth? Should I exclude the entire value of my stock holdings or just the appreciation?

I don't intend to sell any of my stock for many years. The value today won't be the value when I sell. People talking about U.S. outperforming but not selling stock are counting their chickens before they hatch.

If you don't sell your U.S. stock today it's value in any real sense is "?????" Your international stock also has a value of "?????". There is no real case that your international stock has under or overperformed unless you sold it. The performance isn't real.

Updating net worth spreedsheets with hypothetical values of stock is fun but pretty much useless.

[Jacotus]

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Suppose these examples represent 2 stocks bought for $100, stock A is worth $200 today and stock B is worth $150 today.

If stock A is worth $5 in 18 years when I sell it and stock B is worth $280 when I sell it then today's celebration of stock A hitting $200 did me no good except that I had fun updating net worth spreadsheets today.

That's why I say you aren't wealthier until you sell the stock.

This doesn't make sense to me. I've been investing primarily in the US Total Stock Market for decades now. Are you saying that I shouldn't count any of that money as wealth? But if I sell it tomorrow, it does count as wealth? Should I exclude the entire value of my stock holdings or just the appreciation?

I don't intend to sell any of my stock for many years. The value today won't be the value when I sell. People talking about U.S. outperforming but not selling stock are counting their chickens before they hatch.

If you don't sell your U.S. stock today it's value in any real sense is "?????" Your international stock also has a value of "?????". There is no real case that your international stock has under or overperformed unless you sold it. The performance isn't real.

Updating net worth spreedsheets with hypothetical values of stock is fun but pretty much useless.

Of course one can define wealth however they like, as it's a matter of semantics and definition. Be aware, though, that major publications like Forbes would disagree with you as they define Musk or Bezos or Gates or whoever as the "wealthiest person alive" which is almost entirely based on stock value.

[birdog]

If you don't sell your U.S. stock today it's value in any real sense is "?????" Your international stock also has a value of "?????". There is no real case that your international stock has under or overperformed unless you sold it. The performance isn't real.

I understand your position. However, the performance IS real. If not, then it’s fake performance?

[Triple digit golfer]

Which investor would you rather be? Either one can sell and realize gains.

A. Buy shares for $100 and they are now worth $200.
B. Buy shares for $100 and they are now worth $150.

Suppose these examples represent 2 stocks bought for $100, stock A is worth $200 today and stock B is worth $150 today.

If stock A is worth $5 in 18 years when I sell it and stock B is worth $280 when I sell it then today's celebration of stock A hitting $200 did me no good except that I had fun updating net worth spreadsheets today.

That's why I say you aren't wealthier until you sell the stock.

This doesn't make sense to me. I've been investing primarily in the US Total Stock Market for decades now. Are you saying that I shouldn't count any of that money as wealth? But if I sell it tomorrow, it does count as wealth? Should I exclude the entire value of my stock holdings or just the appreciation?

I don't intend to sell any of my stock for many years. The value today won't be the value when I sell. People talking about U.S. outperforming but not selling stock are counting their chickens before they hatch.

If you don't sell your U.S. stock today it's value in any real sense is "?????" Your international stock also has a value of "?????". There is no real case that your international stock has under or overperformed unless you sold it. The performance isn't real.

Updating net worth spreedsheets with hypothetical values of stock is fun but pretty much useless.

It doesn't matter if you intend to sell or not. They have a known value today that you can realize if you choose. The performance gives them their values.

Do you rebalance? If so, you're realizing gains, selling high, and buying low.

[dmcmahon]

OP was clearly indicating they believed ex-US was undervalued compared specifically to US.

I said the same thing 2 years ago. And 3 years ago. And 4 years ago. It’s actually true! But recognizing that fact and $4 gets me a cup of coffee at Starbucks!

[Ari]

I don't intend to sell any of my stock for many years. The value today won't be the value when I sell. People talking about U.S. outperforming but not selling stock are counting their chickens before they hatch.

If you don't sell your U.S. stock today it's value in any real sense is "?????" Your international stock also has a value of "?????". There is no real case that your international stock has under or overperformed unless you sold it. The performance isn't real.

Updating net worth spreedsheets with hypothetical values of stock is fun but pretty much useless.

If you sell your stocks, you get dollars (if you’re American), but until you buy something with those dollars you haven’t got a clue what they’re worth. They’re just pretend value. Between the day you sell your stocks and the day you buy your groceries, the value of a dollar can change. Until you actually buy something with those dollars, their value is just hypothetical.

[junior]

I don't intend to sell any of my stock for many years. The value today won't be the value when I sell. People talking about U.S. outperforming but not selling stock are counting their chickens before they hatch.

If you don't sell your U.S. stock today it's value in any real sense is "?????" Your international stock also has a value of "?????". There is no real case that your international stock has under or overperformed unless you sold it. The performance isn't real.

Updating net worth spreedsheets with hypothetical values of stock is fun but pretty much useless.

If you sell your stocks, you get dollars (if you’re American), but until you buy something with those dollars you haven’t got a clue what they’re worth. They’re just pretend value. Between the day you sell your stocks and the day you buy your groceries, the value of a dollar can change. Until you actually buy something with those dollars, their value is just hypothetical.

Sure, but dollars are not known to drop 50% in value in a single year.

[KingTut]

I try to keep an 80/20 allocation between US and International on the equity side. For the last 2 years, all my new contributions have gone exclusively on the International side since it has been lagging US for so long. This will be the first month that I won't need to add new money to international because it is at 20.2%. My thesis has been that International has better long term return potential because of cheaper valuation for a while... I guess I have to be right eventually. 20% is a low international allocation and I know Vanguard suggests 40%. I may eventually increase, but I think I'm sticking with my original Investment plan for a few more years. I have a home country basis and I only plan to ever have expenses in dollars. As I wait and see, I'm assuming the more diversified international stocks will become, the cheaper the fees will be, and the higher % of world market capitalization non-US orgs will become.