US vs Int stock allocation
- Goldilocks
- Posts: 92
- Joined: Fri Sep 04, 2020 3:04 pm
- Location: Tempe, AZ
US vs Int stock allocation
I'm searching for optimal advice on what the stock allocation of US vs International should be within the equity portion of a 3 fund portfolio. We're holding the Vanguard Total US Stock Market Index Funds (VTSAX/VTI) and International (VTIAX/VXUS) in IRAs plus similar funds in a 401k.
Our Bogleheads 3 fund portfolio posts 80%US/20%Int. Portfolio Visualizer's pre-loaded Bogleheads portfolio loads 70%US/30% Int. Vanguard allocates 60%US/40%Int in its Target Retirement funds. Is there a close consensus among the wise on this allocation or perhaps an agreeable range?
Any advice or links to your favorite or discussions on this topic from investors who prefer to stay the course the lazy way is appreciated.
Our Bogleheads 3 fund portfolio posts 80%US/20%Int. Portfolio Visualizer's pre-loaded Bogleheads portfolio loads 70%US/30% Int. Vanguard allocates 60%US/40%Int in its Target Retirement funds. Is there a close consensus among the wise on this allocation or perhaps an agreeable range?
Any advice or links to your favorite or discussions on this topic from investors who prefer to stay the course the lazy way is appreciated.
The 1st mix was too volatile, and the 2nd was too idle. But the 3rd allocation was just right!
- burritoLover
- Posts: 4097
- Joined: Sun Jul 05, 2020 12:13 pm
Re: US vs Int stock allocation
0-40% international is the consensus here.
- burritoLover
- Posts: 4097
- Joined: Sun Jul 05, 2020 12:13 pm
Re: US vs Int stock allocation
If you believe a market-cap weighted US portfolio (Total stock VTI) is best, then there's no reason to not believe in a market-cap weighted global portfolio (Total World VT) IMO.
Re: US vs Int stock allocation
0% International for U.S. investors was suggested by Mr. Bogle, but he acknowledged that was a departure from the common advice.
People gave him a lot of flack for it. His follow on advice, was to look at it for yourself, and if you feel you need an allocation to international, suggested limiting it to no more than 20% of the equities. Sometimes suggesting maybe 10% in Developed Markets and 10% in Emerging Markets (which may offer some better diversification benefit and/or growth potential.)
People gave him a lot of flack for it. His follow on advice, was to look at it for yourself, and if you feel you need an allocation to international, suggested limiting it to no more than 20% of the equities. Sometimes suggesting maybe 10% in Developed Markets and 10% in Emerging Markets (which may offer some better diversification benefit and/or growth potential.)
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
- topper1296
- Posts: 836
- Joined: Fri Apr 03, 2009 10:50 pm
- Location: Nashville TN
Re: US vs Int stock allocation
This.
Personally, I've gone with the mid-point at 20%.
-
- Posts: 1167
- Joined: Sat Nov 09, 2019 9:09 am
Re: US vs Int stock allocation
You should watch this and then report back:
Why Jack Bogle Doesn't Own Non-U.S. Stocks
[Link reformatted by moderator oldcomputerguy]
Why Jack Bogle Doesn't Own Non-U.S. Stocks
[Link reformatted by moderator oldcomputerguy]
- burritoLover
- Posts: 4097
- Joined: Sun Jul 05, 2020 12:13 pm
-
- Posts: 4215
- Joined: Sun May 05, 2019 11:23 am
Re: US vs Int stock allocation
From Jeremy Siegel’s book “Stocks for the Long Run”:
"Invest a meaningful portion of your portfolio in international stocks. Siegel suggests parking a third of your assets in the stock of companies not based in the U.S. You might achieve this in part by buying U.S. stocks that generate much of their revenue abroad. Low-cost index funds that track the world’s stock markets can also be effective."
article link
"Invest a meaningful portion of your portfolio in international stocks. Siegel suggests parking a third of your assets in the stock of companies not based in the U.S. You might achieve this in part by buying U.S. stocks that generate much of their revenue abroad. Low-cost index funds that track the world’s stock markets can also be effective."
article link
- PicassoSparks
- Posts: 417
- Joined: Tue Apr 28, 2020 5:41 am
Re: US vs Int stock allocation
Earlier today, a similar thread was locked as the conversation became heated and circular.
As burritoLover said, you’ll find that 0%-market cap (about 40%) is the range of advice.
You’ll find that some people feel very strongly that US past outperformance is indicative of future returns (in a good way) and others feel that US past outperformance is indicative of future returns (in a bad way) and some people that say the Efficient Marker Hypothesis eans we should buy and hold the market caps.
There are some tax implications about holding ex-US that depend on where you are holding them, which might shape your personal thinking.
As burritoLover said, you’ll find that 0%-market cap (about 40%) is the range of advice.
You’ll find that some people feel very strongly that US past outperformance is indicative of future returns (in a good way) and others feel that US past outperformance is indicative of future returns (in a bad way) and some people that say the Efficient Marker Hypothesis eans we should buy and hold the market caps.
There are some tax implications about holding ex-US that depend on where you are holding them, which might shape your personal thinking.
Re: US vs Int stock allocation
I'm a 0%er currently.
I am curious what the winter will look like in Europe with less/no Russian natural gas and heating products.
I know "International" is not Europe only, but there could be some serious issues as winter approaches.
0% to 30% seems reasonable as long as you can tolerate the underperformance. I just can't see a scenario where US is -10% and International is +10%. Too connected. But, I know nothing in general.
I am curious what the winter will look like in Europe with less/no Russian natural gas and heating products.
I know "International" is not Europe only, but there could be some serious issues as winter approaches.
0% to 30% seems reasonable as long as you can tolerate the underperformance. I just can't see a scenario where US is -10% and International is +10%. Too connected. But, I know nothing in general.
Re: US vs Int stock allocation
There will be foreign tax withholding on ex-US holdings regardless of where you hold them, if you hold them in a taxable account you may be eligible to get a tax credit to offset the foreign taxes that were withheld.PicassoSparks wrote: ↑Thu Jul 07, 2022 8:03 am...
There are some tax implications about holding ex-US that depend on where you are holding them, which might shape your personal thinking.
While nobody knows nothin' about what the future returns will be, there are some risks that are always there and 'knowable'.
There are risks holding securities not issued in your own country, denominated in a currency you can actually use, that you don't have with securities issued in the country you're a citizen of.
In a broad aggregate ex-US stocks tend to be smaller and more volatile stocks than a broad US holding.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Re: US vs Int stock allocation
"Optimal" allocation is only known in hindsight. Recently the "optimal" allocation was 100% US. Some people think this means something about the future. I don't personally.Goldilocks wrote: ↑Thu Jul 07, 2022 7:23 am I'm searching for optimal advice on what the stock allocation of US vs International should be within the equity portion of a 3 fund portfolio.
There is no consensus, and no agreement about "the wise". As mentioned above, the general range is 0%-market international (though a few argue for overweighting int'l based on valuations). I'd say 0%, 20%, and 40% (~market cap weight) are all pretty popular options among posters. Bogle believed in 0% or up to 20% if you felt international was important. Some give that greater weight than others.Goldilocks wrote: ↑Thu Jul 07, 2022 7:23 am Is there a close consensus among the wise on this allocation or perhaps an agreeable range?
Any advice or links to your favorite or discussions on this topic from investors who prefer to stay the course the lazy way is appreciated.
I like this link: https://www.bogleheads.org/blog/2020/03 ... d-part-1/
I also like looking at this graph.
Recent US outperformance had a noticeable valuation component. I don't use valuations tactically (I use 60%US/40% ex-US fixed, though I guess I'd be fine with VT), but I think it is an interesting graph anyway.
Pick something you can live with, and then try and ignore the noise. There is lots of noise on the topic, and whatever you pick chasing performance is a bad plan. This is true if you have some international and want to switch to US now, and it is true if you decide on 100% US and international goes on a tear in the coming years.
If you don't want to come up with something yourself, picking some fund companies target date or life strategy fund seems like a plausible idea.
n.b. I'm not predicting *anything* about relative US vs ex-US risk adjusted performance over any future period. I make the assumption that the market prices are efficient enough and don't try and outguess them. For me that applies to picking stocks or sectors or countries or actively managed funds.
-
- Posts: 1833
- Joined: Tue Feb 07, 2017 8:08 am
Re: US vs Int stock allocation
I do 3% just for a slight diversification but would be comfortable with 0%. I don't see much growth in Europe in the near future, and China seems to be cooking the books. India I am less sure about, we might see a lot of growth there but I don't know if it will be enough to pull up the rest of the index. I could be wrong (and have been wrong).
43% Total Stock Market | 53% Consumer Staples | 4% Short Term Reserves
-
- Posts: 4215
- Joined: Sun May 05, 2019 11:23 am
Re: US vs Int stock allocation
Are you 3% Total International, or do you slice and dice (perhaps eliminating Europe and China)?homebuyer6426 wrote: ↑Thu Jul 07, 2022 8:38 am I do 3% just for a slight diversification but would be comfortable with 0%. I don't see much growth in Europe in the near future, and China seems to be cooking the books. India I am less sure about, we might see a lot of growth there but I don't know if it will be enough to pull up the rest of the index. I could be wrong (and have been wrong).
-
- Posts: 1833
- Joined: Tue Feb 07, 2017 8:08 am
Re: US vs Int stock allocation
Total. I bought it in 2013 planning to maintain it as 1/3 of my asset allocation but never made more than 1 contribution.
43% Total Stock Market | 53% Consumer Staples | 4% Short Term Reserves
Re: US vs Int stock allocation
I'm think international is a good idea. But honestly, 3% is so small I'd just go to 0%. A 3% holding does so little, better to be simple IMO and own 0%.Robot Monster wrote: ↑Thu Jul 07, 2022 8:44 amAre you 3% Total International, or do you slice and dice (perhaps eliminating Europe and China)?homebuyer6426 wrote: ↑Thu Jul 07, 2022 8:38 am I do 3% just for a slight diversification but would be comfortable with 0%. I don't see much growth in Europe in the near future, and China seems to be cooking the books. India I am less sure about, we might see a lot of growth there but I don't know if it will be enough to pull up the rest of the index. I could be wrong (and have been wrong).
Re: US vs Int stock allocation
Please use the search feature. There will be no new information discussed in this thread
Crom laughs at your Four Winds
Re: US vs Int stock allocation
I agree - at least 10% or just simplify to zero.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: US vs Int stock allocation
+1burritoLover wrote: ↑Thu Jul 07, 2022 7:44 am If you believe a market-cap weighted US portfolio (Total stock VTI) is best, then there's no reason to not believe in a market-cap weighted global portfolio (Total World VT) IMO.
Nailed it.
Stocks-80% || Bonds-20% || Taxable-VTI/VXUS || IRA-VT/BNDW
- burritoLover
- Posts: 4097
- Joined: Sun Jul 05, 2020 12:13 pm
Re: US vs Int stock allocation
Portfolio decisions should not be based on your ability predict how long of stock drought is possible in the future of one country (US). That is really the risk here - that the US has an extended lost period that impacts your ability to retire when you want or causes a sequence of return risk that depletes all your money. Do you really think you have the ability to predict the likelihood of something like this? And the "all markets are interconnected" argument is not convincing as we know long periods of poor performance of single countries can occur despite this "globalization". Saying this won't happen in the US is yet another prediction of markets that you have to rely on.
Re: US vs Int stock allocation
Well saidburritoLover wrote: ↑Thu Jul 07, 2022 9:07 am Portfolio decisions should not be based on your ability predict how long of stock drought is possible in the future of one country (US). That is really the risk here - that the US has an extended lost period that impacts your ability to retire when you want or causes a sequence of return risk that depletes all your money. Do you really think you have the ability to predict the likelihood of something like this? And the "all markets are interconnected" argument is not convincing as we know long periods of poor performance of single countries can occur despite this "globalization". Saying this won't happen in the US is yet another prediction of markets that you have to rely on.
Here is a quick YouTube video that will help the OP.
https://youtu.be/4UptQLLwnog
Stocks-80% || Bonds-20% || Taxable-VTI/VXUS || IRA-VT/BNDW
-
- Posts: 6235
- Joined: Mon Apr 11, 2011 12:28 am
Re: US vs Int stock allocation
There have been MUCH worse scenarios for US vs exUS historically, so your imagination isn’t in accord with historical record
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
-
- Posts: 4881
- Joined: Wed Mar 31, 2010 4:39 pm
Re: US vs Int stock allocation
I skew more towards intl. however, I like delegating this to smart people and using TD/All in one funds. Let someone else make the decision…
“At some point you are trading time you will never get back for money you will never spend.“ |
“How do you want to spend the best remaining year of your life?“
-
- Posts: 1833
- Joined: Tue Feb 07, 2017 8:08 am
Re: US vs Int stock allocation
That's right of course, but it's in taxable.
43% Total Stock Market | 53% Consumer Staples | 4% Short Term Reserves
-
- Posts: 3339
- Joined: Thu May 19, 2016 5:04 pm
Re: US vs Int stock allocation
Currently I am 72:28
- willthrill81
- Posts: 32250
- Joined: Thu Jan 26, 2017 2:17 pm
- Location: USA
- Contact:
Re: US vs Int stock allocation
The rather strong bias of most investors around the world to invest heavily in their own home country means that there isn't a completely free flow of capital to those markets which have the highest expected returns, as many assume. That alone indicates that we shouldn't expect U.S. and ex-U.S. stocks to necessarily be equivalent in any way. Further, the two are not the same with regard to costs or taxes for U.S.-based investors, and what the Federal Reserve does, for instance, will have a more pronounced effect on U.S. than ex-U.S. stocks.
The Sensible Steward
- ClevrChico
- Posts: 3259
- Joined: Tue Apr 03, 2012 8:24 pm
Re: US vs Int stock allocation
A lot of foreign companies have large markets in the US. How many of us have a Samsung phone or drive Toyota and Honda? Most grocery stores are full of Nestle products. So if you want the "total market", international makes sense.
How that relates to allocation, that's up to you. Market Cap or significantly less both work.
How that relates to allocation, that's up to you. Market Cap or significantly less both work.
Re: US vs Int stock allocation
My initial reaction to seeing this thread was the same as when Vader found out Padme was dead.
-
- Posts: 4215
- Joined: Sun May 05, 2019 11:23 am
Re: US vs Int stock allocation
US vs Int can be locked, but never dies...
Re: US vs Int stock allocation
Maybe we need a single monthly "rehash the tired international argument" thread. And one for dividend focused investing. Sigh.
Or we could combine those things, ex-US has a higher dividend yield, therefore...
Re: US vs Int stock allocation
Excellent. So there has been a year in the past 40 or so where US was deep negative and International was double digit positive? Not just a 1-4% difference where International beat US? US +10 and Int +13 or US +15 and Int +20 for example.Nathan Drake wrote: ↑Thu Jul 07, 2022 9:28 amThere have been MUCH worse scenarios for US vs exUS historically, so your imagination isn’t in accord with historical record
-
- Posts: 6235
- Joined: Mon Apr 11, 2011 12:28 am
Re: US vs Int stock allocation
1966-1982 had roughly negative real returns for US and positive real returns for exUSbloom2708 wrote: ↑Thu Jul 07, 2022 11:01 amExcellent. So there has been a year in the past 40 or so where US was deep negative and International was double digit positive? Not just a 1-4% difference where International beat US? US +10 and Int +13 or US +15 and Int +20 for example.Nathan Drake wrote: ↑Thu Jul 07, 2022 9:28 amThere have been MUCH worse scenarios for US vs exUS historically, so your imagination isn’t in accord with historical record
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
-
- Posts: 1054
- Joined: Wed Jun 27, 2012 12:05 pm
Re: US vs Int stock allocation
I went with the "wisdom of crowds".
I painstakingly went through the 10 largest by asset companies Target Retirement funds and calculated what their mix was. It averaged 35% International and 55%/45% Stocks/Bonds at retirement.
Then I made an algorithm to increase/decrease my stock/bond allocation as I further or closer to the retirement amount that I have decided on. The bond amount has a +/- 5% tolerance limit on it. So as I get closer to my retirement target, I reduce stock and increase bonds.
This year it has me selling bonds and buying more stock.
It takes the emotion out of it and I just look at the numbers and make moves to get the numbers back to target.
Hopefully it works.
I painstakingly went through the 10 largest by asset companies Target Retirement funds and calculated what their mix was. It averaged 35% International and 55%/45% Stocks/Bonds at retirement.
Then I made an algorithm to increase/decrease my stock/bond allocation as I further or closer to the retirement amount that I have decided on. The bond amount has a +/- 5% tolerance limit on it. So as I get closer to my retirement target, I reduce stock and increase bonds.
This year it has me selling bonds and buying more stock.
It takes the emotion out of it and I just look at the numbers and make moves to get the numbers back to target.
Hopefully it works.
-
- Posts: 2327
- Joined: Mon Oct 31, 2011 8:36 pm
Re: US vs Int stock allocation
I've got market weight intl (40%), but I'm concerned about Europe's economy. For example:bloom2708 wrote: ↑Thu Jul 07, 2022 8:13 am I'm a 0%er currently.
I am curious what the winter will look like in Europe with less/no Russian natural gas and heating products.
I know "International" is not Europe only, but there could be some serious issues as winter approaches.
0% to 30% seems reasonable as long as you can tolerate the underperformance. I just can't see a scenario where US is -10% and International is +10%. Too connected. But, I know nothing in general.
- Bread/soup lines have become established in some of the most affluent parts of London.
- The Dutch government has begun forcing farmers off their land (they're protesting right now).
- The German Economics Minister (Green Party) has publicly declared his intention to shutdown all German industry.
- The recently augmented Russia intends to ship wheat to Africa and the Middle East, but none to Europe.
Re: US vs Int stock allocation
"Never bet against America."
I'm going the Warren Buffett route and not investing internationally until I see a good reason to. Right now international struggles to perform at even half the rate of US small caps and the emerging market can't even keep up with long term bonds.
If this ever changes, and I do think it will, then it won't be at the drop of a hat. We'll be able to see this performance slowly rise and become competitive as economics change through the decades. I am especially interested in the emerging market considering it constitutes a whopping 85% of the human race and an ever rising percentage of global GDP. But until it performs well with regards to the stock market I see no reason to invest early. Even with America's crashes it has still been the dominating nation to invest in long term. Especially considering how large cap companies already get a pretty significant amount of foreign exposure, I am comfortable with keeping my retirement investments "at home."
I'm going the Warren Buffett route and not investing internationally until I see a good reason to. Right now international struggles to perform at even half the rate of US small caps and the emerging market can't even keep up with long term bonds.
If this ever changes, and I do think it will, then it won't be at the drop of a hat. We'll be able to see this performance slowly rise and become competitive as economics change through the decades. I am especially interested in the emerging market considering it constitutes a whopping 85% of the human race and an ever rising percentage of global GDP. But until it performs well with regards to the stock market I see no reason to invest early. Even with America's crashes it has still been the dominating nation to invest in long term. Especially considering how large cap companies already get a pretty significant amount of foreign exposure, I am comfortable with keeping my retirement investments "at home."
60% VT 40% BNDW (no bonds in Roth)
-
- Posts: 16054
- Joined: Fri Nov 06, 2020 12:41 pm
Re: US vs Int stock allocation
Tbh Mr. Bogle's reasoning wasn't sound. One can flip the argument and say we don't need US stocks because foreign global companies earn money in the US.tvubpwcisla wrote: ↑Thu Jul 07, 2022 7:59 am You should watch this and then report back:
Why Jack Bogle Doesn't Own Non-U.S. Stocks
[Link reformatted by moderator oldcomputerguy]
Re: US vs Int stock allocation
I believe in international diversification, but with recent trends of slowing globalization, expropriation, and geopolitical tension, I no longer believe it is smart to invest in countries that are not close allies of the country where you are a resident/citizen. The local investors in a non-friendly country will be treated in a more beneficial way by their government than foreign investors; meaning that there is a subset of investors that face a lower risk than you do when you invest in these countries. For example, a Chinese investor investing in China faces a lower risk of adverse action by the Chinese government against their investment than you do as an American investor. The same applies to investments in many other countries (Russia obviously comes to mind though its only a small component of emerging markets indexes). Because these local investors face lower risks, they will be willing to pay a higher price for their domestic stocks, and so the extra risk you take as a foreign investor is uncompensated. I don't like uncompensated risks.
Therefore, I've re-allocated my international holdings to only include western Europe, Canada, Australia, and Japan. These likely offer a lower diversification benefit in good times, but avoids the uncompensated risks described above.
(Professor Fama made the same argument in a recent Rational Reminder podcast).
Therefore, I've re-allocated my international holdings to only include western Europe, Canada, Australia, and Japan. These likely offer a lower diversification benefit in good times, but avoids the uncompensated risks described above.
(Professor Fama made the same argument in a recent Rational Reminder podcast).
Re: US vs Int stock allocation
I maintain about 60% US/40% ex-US. This is roughly global market cap weight and rounding to 10% makes re-balancing simpler.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
Re: US vs Int stock allocation
+1
This is the optimal ratio.
Then ’tis like the breath of an unfee’d lawyer.
Re: US vs Int stock allocation
At one point I had about that ratio and was thinking I'd work up to 30%, but then the last few years happened and it's more like 77:23 now. I haven't been motivated to rebalance. I did rebalance somewhat in equity/fixed when equities were doing significantly better, but not so much domestic/international for whatever reason.
- 9-5 Suited
- Posts: 1307
- Joined: Thu Jun 23, 2016 12:14 pm
Re: US vs Int stock allocation
China is only 8% of VXUS. That makes it less than 2% of the portfolio of a traditional three fund 60/40 global cap weight portfolio. Investing need not be overly optimized.DonIce wrote: ↑Fri Jul 08, 2022 12:34 am I believe in international diversification, but with recent trends of slowing globalization, expropriation, and geopolitical tension, I no longer believe it is smart to invest in countries that are not close allies of the country where you are a resident/citizen. The local investors in a non-friendly country will be treated in a more beneficial way by their government than foreign investors; meaning that there is a subset of investors that face a lower risk than you do when you invest in these countries. For example, a Chinese investor investing in China faces a lower risk of adverse action by the Chinese government against their investment than you do as an American investor. The same applies to investments in many other countries (Russia obviously comes to mind though its only a small component of emerging markets indexes). Because these local investors face lower risks, they will be willing to pay a higher price for their domestic stocks, and so the extra risk you take as a foreign investor is uncompensated. I don't like uncompensated risks.
Therefore, I've re-allocated my international holdings to only include western Europe, Canada, Australia, and Japan. These likely offer a lower diversification benefit in good times, but avoids the uncompensated risks described above.
(Professor Fama made the same argument in a recent Rational Reminder podcast).
Re: US vs Int stock allocation
I know nothing. I cannot predict the future. There have been long periods when US stocks outperformed foreign stocks and vice versa. The financial markets do not have to cooperate with your life plans. The Japanese stock market, as an example, has been a down market for a very long period in the past. What would you do if you were a Japanese stock investor? US stocks could stay down or flat for a very long time as well, but for different reasons - who knows?
My allocation is: 50% Total US stock and 50% Total International Stock.
My allocation is: 50% Total US stock and 50% Total International Stock.
Re: US vs Int stock allocation
Sure. That said, China is only one country... many other countries in emerging markets have the same types of risks as I described, not just China. Secondly, on this forum, people debate the finer points of whether their fixed income allocation should be in total bond market vs treasury bonds, whether their treasury bonds should be intermediate or a short term / long term barbell, how many of their government bonds should be tips vs nominals, etc. Those kinds of choices are all likely to have a smaller impact than choosing whether or not to include emerging markets in your equity side.9-5 Suited wrote: ↑Fri Jul 08, 2022 7:22 pm China is only 8% of VXUS. That makes it less than 2% of the portfolio of a traditional three fund 60/40 global cap weight portfolio. Investing need not be overly optimized.
Really what I'm suggesting is not any more complex than a standard VTI/VXUS/BND boglehead portfolio. Just swap over to VTI/VEA/BND instead.
-
- Posts: 6235
- Joined: Mon Apr 11, 2011 12:28 am
Re: US vs Int stock allocation
That could be a false assumption. If you hold 15-20% of equities in EM it can have a profound impact, especially if DM and US goes through a rough patch and EM does notDonIce wrote: ↑Fri Jul 08, 2022 11:43 pmSure. That said, China is only one country... many other countries in emerging markets have the same types of risks as I described, not just China. Secondly, on this forum, people debate the finer points of whether their fixed income allocation should be in total bond market vs treasury bonds, whether their treasury bonds should be intermediate or a short term / long term barbell, how many of their government bonds should be tips vs nominals, etc. Those kinds of choices are all likely to have a smaller impact than choosing whether or not to include emerging markets in your equity side.9-5 Suited wrote: ↑Fri Jul 08, 2022 7:22 pm China is only 8% of VXUS. That makes it less than 2% of the portfolio of a traditional three fund 60/40 global cap weight portfolio. Investing need not be overly optimized.
Really what I'm suggesting is not any more complex than a standard VTI/VXUS/BND boglehead portfolio. Just swap over to VTI/VEA/BND instead.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
-
- Posts: 240
- Joined: Sat May 02, 2020 2:31 pm
Re: US vs Int stock allocation
If you do international, stay out of Europe. The war in Ukraine, will deprive Europe from cheap Russian raw materials. Europe is cooked.
Re: US vs Int stock allocation
Presumably the consensus path for the conflict is already priced into the market, so you'd have to both have a non-consensus view and be correct to make a non-market-weight approach to Europe worthwhile.gubernaculum wrote: ↑Fri Jul 08, 2022 11:55 pm If you do international, stay out of Europe. The war in Ukraine, will deprive Europe from cheap Russian raw materials. Europe is cooked.
Re: US vs Int stock allocation
I guess there is yet another reason for direct indexing. Say you want an index that provides convenient exposure to intl markets excluding certain undesirable ones. For example you may want only UK, EU, Canada, Australia, Japan and South Korea.
Re: US vs Int stock allocation
People have a strong desire to "optimize" their portfolio. Alas, no one knows the future, but opinions are abundant and the "thrill of the the chase" can be alluring.
Don't strive for perfection. You will not find it...unless by dumb luck.
I agree with 20% as the minimum for diversification. Of course, some do more and that is absolutely ok as well. As is often said...just try to find something you can stick with for the long term. Also, do not underestimate the value of simplicity in your portfolio (fewer funds / ETFs to get where you want to go).
Best wishes.
Don't strive for perfection. You will not find it...unless by dumb luck.
I agree with 20% as the minimum for diversification. Of course, some do more and that is absolutely ok as well. As is often said...just try to find something you can stick with for the long term. Also, do not underestimate the value of simplicity in your portfolio (fewer funds / ETFs to get where you want to go).
Best wishes.
- burritoLover
- Posts: 4097
- Joined: Sun Jul 05, 2020 12:13 pm
Re: US vs Int stock allocation
Once it becomes obvious that the US is possibly on a steady decline or permanent stagnation and EM is poised to take off, money will have already rotated out of the US and into EM. You'll be like the Japanese investor trying to sell a large chunk of their portfolio to buy into the US.Trance wrote: ↑Thu Jul 07, 2022 11:35 pm "Never bet against America."
I'm going the Warren Buffett route and not investing internationally until I see a good reason to. Right now international struggles to perform at even half the rate of US small caps and the emerging market can't even keep up with long term bonds.
If this ever changes, and I do think it will, then it won't be at the drop of a hat. We'll be able to see this performance slowly rise and become competitive as economics change through the decades. I am especially interested in the emerging market considering it constitutes a whopping 85% of the human race and an ever rising percentage of global GDP. But until it performs well with regards to the stock market I see no reason to invest early. Even with America's crashes it has still been the dominating nation to invest in long term. Especially considering how large cap companies already get a pretty significant amount of foreign exposure, I am comfortable with keeping my retirement investments "at home."
- Charles Joseph
- Posts: 2394
- Joined: Tue Apr 05, 2022 10:49 pm
Re: US vs Int stock allocation
I have absolutely 0% interest in ex-US stocks and therefore hold nearly 100% US equities.Goldilocks wrote: ↑Thu Jul 07, 2022 7:23 am I'm searching for optimal advice on what the stock allocation of US vs International should be within the equity portion of a 3 fund portfolio. We're holding the Vanguard Total US Stock Market Index Funds (VTSAX/VTI) and International (VTIAX/VXUS) in IRAs plus similar funds in a 401k.
"The big money is not in the buying and selling, but in the waiting." - Charles Munger