Global Ex.US vs Developed Ex.US

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the_wiki
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Global Ex.US vs Developed Ex.US

Post by the_wiki »

I was noticing yesterday that going with a Global Total international fund seems to offer nothing over just investing in Developed markets, going back 36 years. Seems like the only difference is the higher fee for global vs developed only

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Seems really weird how equal they are. Emerging is only 25% or so of the Total international portfolio, but considering how much it outperforms in certain years, it is odd that adds nothing to the returns of the total index vs just developed alone (this only only goes back 28 years):

https://www.portfoliovisualizer.com/bac ... ion3_3=100

And it's still true if we compare actual vanguard funds, going back 22 years:

https://www.portfoliovisualizer.com/bac ... ion3_3=100



It seems like we need to hold a much greater percentage of Emerging markets than market cap if we want to see any benefit, but even so, all the outperformance in concentrated in a few years during the 2000-2008 downturn:

https://www.portfoliovisualizer.com/bac ... tion3_3=50


Given the slightly higher fees, exposure to problematic governments, higher risk and the fact that it isn't adding anything at market cap, maybe VEA is a better buy than VXUS?
homebuyer6426
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Re: Global Ex.US vs Developed Ex.US

Post by homebuyer6426 »

My issue with drawing any conclusions here is that data about an asset class that goes back only to 1986 is not sufficient. Especially international when the unusual Japan bubble was occurring at that time.

I'd like it if someone could tell me the real ex-US return going back to at least 1950.
Gaston
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Re: Global Ex.US vs Developed Ex.US

Post by Gaston »

the_wiki wrote: Thu Sep 22, 2022 10:22 am Given the slightly higher fees, exposure to problematic governments, higher risk and the fact that it isn't adding anything at market cap, maybe VEA is a better buy than VXUS?
I share your view and own VEA for exactly the reasons you site. VEA invests in almost no dictatorial regimes, and I like it that way.
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vineviz
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Re: Global Ex.US vs Developed Ex.US

Post by vineviz »

the_wiki wrote: Thu Sep 22, 2022 10:22 am Given the slightly higher fees, exposure to problematic governments, higher risk and the fact that it isn't adding anything at market cap, maybe VEA is a better buy than VXUS?
This line of reasoning appears to begin from a decision that you don't want to own emerging markets stocks and then goes looking for reasons to justify that preference.

It is is objectively true that emerging markets stocks more powerful diversifiers of US stocks than developing markets stocks. The expense difference is trivial, and the so-called "exposure to problematic governments" and "higher risk" are not exactly secrets (to the extent that they are even true).

And if the conclusion is that market cap weight of EM does not offer enough diversification for your tastes, how is it a reasonable or rational solution that you shouldn't own any?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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the_wiki
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Re: Global Ex.US vs Developed Ex.US

Post by the_wiki »

vineviz wrote: Thu Sep 22, 2022 11:26 am
the_wiki wrote: Thu Sep 22, 2022 10:22 am Given the slightly higher fees, exposure to problematic governments, higher risk and the fact that it isn't adding anything at market cap, maybe VEA is a better buy than VXUS?
This line of reasoning appears to begin from a decision that you don't want to own emerging markets stocks and then goes looking for reasons to justify that preference.
Actually, I was just comparing them to try to decide if I wanted to keep investing in them separately, or simplify with a fund like VXUS when I discovered they track identically, not looking to support an agenda.


It is is objectively true that emerging markets stocks more powerful diversifiers of US stocks than developing markets stocks. The expense difference is trivial, and the so-called "exposure to problematic governments" and "higher risk" are not exactly secrets (to the extent that they are even true).
That does not to appear to be true at market cap weight, if 36 years of identical returns are enough data
And if the conclusion is that market cap weight of EM does not offer enough diversification for your tastes, how is it a reasonable or rational solution that you shouldn't own any?
holding more than market cap would be a specific tilt involving more risk. I didn't necessarily say I was against it, but it is a different discussion.
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the_wiki
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Re: Global Ex.US vs Developed Ex.US

Post by the_wiki »

homebuyer6426 wrote: Thu Sep 22, 2022 10:36 am My issue with drawing any conclusions here is that data about an asset class that goes back only to 1986 is not sufficient. Especially international when the unusual Japan bubble was occurring at that time.

I'd like it if someone could tell me the real ex-US return going back to at least 1950.
Tracking virtually identically for all those years seems like a lot of data. They track as closely as S&P500 vs Total US Stock market.
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vineviz
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Re: Global Ex.US vs Developed Ex.US

Post by vineviz »

the_wiki wrote: Thu Sep 22, 2022 11:57 am
That does not to appear to be true at market cap weight, if 36 years of identical returns are enough data
It is true, though. That truth is merely hiding in the way the data was analyzed.
the_wiki wrote: Thu Sep 22, 2022 11:57 am
And if the conclusion is that market cap weight of EM does not offer enough diversification for your tastes, how is it a reasonable or rational solution that you shouldn't own any?
holding more than market cap would be a specific tilt involving more risk. I didn't necessarily say I was against it, but it is a different discussion.
Holding less than market cap is also "a specific tilt involving more risk".

I think the best lens to use is one of diversification, because it removes the overlay of performance chasing that comes from just looking at raw returns.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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