Poll: International vs Domestic Equity Percentage

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What percentage of your equity is international?

Poll ended at Mon Nov 05, 2007 7:50 pm

0%
3
1%
11-15%
4
2%
16-20%
15
7%
16-20%
15
7%
21-25%
18
9%
26-30%
38
18%
31-35%
31
15%
36-40%
23
11%
41-50%
34
16%
51-60%
20
9%
61-75%
5
2%
76-99%
4
2%
100%
1
0%
 
Total votes: 211

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White Coat Investor
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Poll: International vs Domestic Equity Percentage

Post by White Coat Investor » Sun Nov 04, 2007 7:50 pm

What percentage of your equity is invested in international (Non-US) stocks? For purposes of this poll, consider REITs equity. If you are from the UK or some other country, consider international as non-US stocks or refrain from answering the poll so as not to skew results.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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woof755
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Post by woof755 » Sun Nov 04, 2007 9:40 pm

I'm at 16% right now, DCAing into it every month for a goal of 30% of equities (20% of portfolio).

Not that this matters much, but I thought the poll could use a bump!
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." | | --Jason Zweig, quoted in The Bogleheads' Guide to Investing

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White Coat Investor
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Post by White Coat Investor » Sun Nov 04, 2007 10:14 pm

woof755 wrote: Not that this matters much, but I thought the poll could use a bump!
A bump less than 2 hours after the original post? This forum is getting too busy.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

biasion
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Post by biasion » Sun Nov 04, 2007 10:18 pm

[removed]
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White Coat Investor
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Post by White Coat Investor » Tue Nov 06, 2007 5:22 pm

We'll try one more bump to get the numbers a bit more robust.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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fishnskiguy
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Post by fishnskiguy » Tue Nov 06, 2007 5:39 pm

Our IPS calls for 20% Developed International, 9% EM and 8% PME. Since Vanguard's PM&M fund is 80% International, and since EM and PM&M are both at the upper end of their band, we are effectively 42% International at the moment.

Chris
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bolt
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Post by bolt » Tue Nov 06, 2007 6:18 pm

[removed at request of poster]

cudaman
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Post by cudaman » Tue Nov 06, 2007 8:44 pm

I always like these polls where you expect to see a normal distribution around some mean value. I clearly see the normal distribution except for that darn 41% - 50% crowd. There should only be about 7 people in this category instead of 18, so obviously about 11 people are overallocated and should be in some lower category. Correct? I mean we can't have that smooth bell curve with a hump in it, can we? :)

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tetractys
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Post by tetractys » Tue Nov 06, 2007 9:04 pm

I'll probably always be in the old 2/3 domestic 1/3 international camp...if there is such a thing. That's 33.3333% Intl. to 66.6666% domestic. 8) No one here has yet convinced me that the 50% plus in Intl. folks are anything more than recency buffs.

"I mean we can't have that smooth bell curve with a hump in it, can we?"

Uh huh cudaman, ... I would call that the 'recency buff hump.'

Peace and Love, Tet

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CountryBoy
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One perspective.....

Post by CountryBoy » Tue Nov 06, 2007 9:25 pm

My perspective is that I am a Diehard and I hold for the long term. But the long term is different length of time for different people. I am logged in at 31% with international with remainder in a large allocation in VTSMX and bonds.

All countries economies go through cycles and I can not see the US economy coming back for another 5-15 yrs. We are paying out too much money for oil, devaluing the dollar, and the foreigh markets are manufacturing and developing. And, they also have this notion about saving money rather than spending money.

That together with the US not willing to address serious problems of infrastructure like roads, electric grid, bldg of levees (Katrina), education, and of course the disarray and dominance of the financial services in our economy (with this three card monte scheme of subprime CDO's), and of course our political system has some very basic dysfunctional aspects to it.

No, I do not think this country is going to turn around within 5-15 yrs anymore than an aircraft carrier can turn on a dime. Americans at this point in time just do not get it when it comes to investing in infrastructure and I do not believe they ever will. Of course they used to. That is what made us great. But that was then and this is now and for the foreseeable future.

No, I think I made a serious mistake to have put so much money in VTSMX and so little in international. I should be at 50% but I lack the self confidence to do so and so am a sheep following the Diehard orthodoxy re intl allocation.

Rob't
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Post by Rob't » Tue Nov 06, 2007 10:19 pm

I wonder in considering equity percentage, do collateralized commodity futures, with a significant portion of their return depending on TIPS, count as equity, fixed, or some combination? Actually, likewise for REITs? As income is a significant portion of their return, are they reasonably considered pure equity? I answered 28.6%, but higher if PCRIX and VNQ move from equity to BTHOOM category.

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jpsinjpn
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Post by jpsinjpn » Wed Nov 07, 2007 4:14 am

Our target is currently 35% international (non-US). We will up that a bit to include more Japan because the longer we live in Tokyo, the deeper the roots reach. Who knows if or when we'll end up back in the US.
-JP

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cflannagan
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Post by cflannagan » Wed Nov 07, 2007 9:58 am

tetractys wrote:I'll probably always be in the old 2/3 domestic 1/3 international camp...if there is such a thing. That's 33.3333% Intl. to 66.6666% domestic. 8) No one here has yet convinced me that the 50% plus in Intl. folks are anything more than recency buffs.

"I mean we can't have that smooth bell curve with a hump in it, can we?"

Uh huh cudaman, ... I would call that the 'recency buff hump.'

Peace and Love, Tet
I don't understand this perspective - we tout index funds because it mirrors the market - and if we want to truly mirror the market, you don't go 30% of equities in international.

International market is now roughly 60% of overall world market.

So if we mirror the market, we should have 60% of equities in international, 40% in domestic.

But the question is, do we want to mirror the market, or do we want to use the home country bias?

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fire5soon
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Post by fire5soon » Wed Nov 07, 2007 10:02 am

cflannagan wrote:I don't understand this perspective - we tout index funds because it mirrors the market - and if we want to truly mirror the market, you don't go 30% of equities in international.
I personally use index funds to have low cost and to reduce manager risk... not to mirror the market. I do use TSM & TM Intl in taxable accounts but that is for tax purposes.

There are some 4-fund TSM'ers, but I feel that most of us use index funds to reduce manager risk and for low costs.

BTW-I'm in the 30-40% range for Intl.
A man is a success if he gets up in the morning and gets to bed at night, and in between he does what he wants to do. - Bob Dylan

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tetractys
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Post by tetractys » Wed Nov 07, 2007 4:12 pm

cflannagan wrote:
tetractys wrote:I'll probably always be in the old 2/3 domestic 1/3 international camp...if there is such a thing. That's 33.3333% Intl. to 66.6666% domestic. 8) No one here has yet convinced me that the 50% plus in Intl. folks are anything more than recency buffs.

"I mean we can't have that smooth bell curve with a hump in it, can we?"

Uh huh cudaman, ... I would call that the 'recency buff hump.'

Peace and Love, Tet
I don't understand this perspective - we tout index funds because it mirrors the market - and if we want to truly mirror the market, you don't go 30% of equities in international.

International market is now roughly 60% of overall world market.

So if we mirror the market, we should have 60% of equities in international, 40% in domestic.

But the question is, do we want to mirror the market, or do we want to use the home country bias?
I belong to a different "we" (a subset of another larger and perhaps more wonderful "we" which also includes "market mirrorers" like "you.") that is not so concerned with "mirroring the market." WE utilize modern portfolio theory (MPT) in accordance with our risk profile. To each we their own, you!!

Peace, Tet

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CountryBoy
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jpsinjpn could you clarify

Post by CountryBoy » Wed Nov 07, 2007 9:59 pm

jpsinjpn could you clarify,

Could you explain why you want to increase your AA of Japan. I read in my FT today that its consumer index hit zero and that that is an indicator of recession for them historically. Also one of the big party leaders just resigned.

I know we all gotta buy low and sell high (long term of course), but you seem especially corageous. Could you explain why you buy now?
Last edited by CountryBoy on Thu Nov 08, 2007 1:57 pm, edited 1 time in total.

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Cloud
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Post by Cloud » Wed Nov 07, 2007 10:20 pm

Remember someday we'll be cashing out and spending in US Dollars not Euros. How much currency risk do I dare incur? The last few years it's been very beneficial but what if the dollar comes back?

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jpsinjpn
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Re: jpsinjpn could you clarify

Post by jpsinjpn » Thu Nov 08, 2007 3:18 am

CountryBoy wrote:jpsinjpn could you clarify,

Could you explain why you want to increase your AA of Japan. I read in my FT today that its index hit zero and is an indicator of recession and one of the big party leaders just resigned.

I know we all gotta buy low and sell high (long term of course), but you seem especially corageous. Could you explain why you buy now?
Hi Country Boy,

Tilting a little toward Japan for me has nothing to do with courage or market timing. I'm an American living in Japan and until recently have always thought I would retire back in the US. Probably still will, but the chance of us staying in Japan is higher than it used to be. Also, even if we do move back to the US, we have relatives here and will travel here frequently. Call it home-away-from-home country bias. I'm not betting the farm on Japanese stocks; just want to tilt my investments toward the country where I'll be spending at least some of my money in retirement. (I also own more US stocks than the 40% or so they represent in the world market.)
-JP

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Post by Valuethinker » Thu Nov 08, 2007 4:17 am

Cloud wrote:Remember someday we'll be cashing out and spending in US Dollars not Euros. How much currency risk do I dare incur? The last few years it's been very beneficial but what if the dollar comes back?
The difference in inflation between 2 countries, in the long run, drives their currencies.

So the country with higher inflation, for goods that you can consume in both countries (traded goods) will have the lower currency in the long run.

The difference in cost of living is price of services which are not traded between countries, mostly (which are a big part of what you buy: WalMart is a service company). So in the US case, healthcare costs have tended to run ahead of other countries (leading to medical tourism) but most other costs are lower (especially commercial real estate costs, employment costs ex healthcare, transport, fuel etc.) than in Japan and Europe.

Most of what you consume is actually services. That $20 Chinese fan in WalMart, probably only has about $8 of Chinese content, and $12 of shipping, insurance, distribution, retail markup, which is US content. Then of course there is healthcare, property taxes, utility bills etc. all of which are services consumption (you can't buy your electricity in the UK even if you should want to).

For reasons which I've never understood, and violate economic theory, a MS licensed piece of software in the UK is the same price in pounds ($2:£1) that it is in dollars in the US (although our 17.5% sales tax is included in that figure). MS has some good reasons why this is not ripping the customer off ;-).

On the so called Purchasing Power Parity basis (equivalent prices for traded goods) the US dollar is clearly undervalued against the Euro and the pound by at least 20% (check the number of British tourists in Manhattan at the mo') and still somewhat overvalued against some Far Eastern currencies.

One should probably start from the position that one should be 100% hedged (ie 100% in US dollars) because that is where you consume and then make a guess, based on past correlations and volatilities, about the diversification benefits from holding foreign securities and currency.

I think most studies suggest this peaks at 20-30% of your equity portfolio. It's much less clear there is benefit to international bond diversification (partly because there aren't many cheap ways of doing it).

I would tend to hold c. 30-35% of my equity exposure in foreign stocks, and all my fixed income exposure in US securities. If I was a USD investor (I am not, and my assets are mostly in British Pounds, so I tend to diversify my equities very widely, but compared to the US, most of what we consume in Britain is imported, and I travel a lot into, for example, Euro countries).

I tend to feel Vanguard/ Boggle has been a bit behind the curve in recommending foreign exposure, but are now catching up.

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Post by wearethefall » Thu Nov 08, 2007 4:48 am

Valuethinker what do you see as a reasonable range of foreign equity exposure for the U.K. investor?

I'm currently at 50%.

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Post by Valuethinker » Thu Nov 08, 2007 5:17 am

wearethefall wrote:Valuethinker what do you see as a reasonable range of foreign equity exposure for the U.K. investor?

I'm currently at 50%.
That's probably in the right range. UK companies (FTSE100) are unusually heavily exposed to the dollar (think Shell, BP, Glaxo Smithkline).

I don't know whether it is 50% or 65% but I suspect it is within these 2 bounds, depending on how much of your future consumption might be, for example, living in France, in which case you would need more Euros.

FWIW the pound and the Euro look terribly overvalued right now: the pound because London is a world safe haven for billionaires from all over, and the Euro for its own reasons (mostly the weakness of the dollar). When that will correct is anyone's best guess.

hafis50
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Post by hafis50 » Thu Nov 08, 2007 11:24 am

Here's a new presentation by Peng Chen (Ibbotson):

Dynamics in the Correlations of Global Equity and Bond Returns: Implications for Asset Allocation, Nov 2007
Correlation among global equity markets have increased, reflecting the more integrated global economy.
× However, allocating to just one country or specific region will
result portfolio expose to unsystematic risks

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paulob
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Post by paulob » Thu Nov 08, 2007 1:47 pm

I voted 76-99%. However, this is not a permanent or static allocation. I'm glad to see I am not alone in this category, no matter how small the minority percentage calculates to be.
Paul

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CountryBoy
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Valuethinker, Hello

Post by CountryBoy » Thu Nov 08, 2007 2:04 pm

Hope this finds you well. Could you please clarify for me why it is you do not have a higher foreign equity exposure?

All countries have problems, however in the last 3-5 yrs. the US has developed some specific ones that suggest I lighten up a bit on my VTSMX. The problems include:

The problems that the US economy faces are I believe secular or long term in nature.

ooo...The US is paying out too much money for oil and those dollars are devaluing the dollar. The foreign markets are the ones doing the manufacturing and developing. America’s primary industry is now the “financial services” industry. And so many of those Asian countries continue to have this notion about saving money rather than following the American way of spending money.

ooo...The nation is not willing or able to address serious problems of infrastructure such as roads, electric grids, building of levees (Katrina), education, and of course the disarray and dominance of the financial services in our economy. The three card monte scheme of subprime CDO's, etc. rolls on.

ooo...Our political system has some very fundamental dysfunctional aspects to it; corporate interests are entrenched for the foreseeable future and payments for unmanageable debt and deficits will continue for a very long time.

ooo...Other nations are increasingly able to find and make markets independent of the US market. Some countries prefer to deal in their own sphere, be it Asian or other, for different economic, political, and cultural reasons. As a result the degree of coupling decreases with time. Since oil rich countries do not want to invest all their growing wealth in one nation (i.e. treasury bills, etc.) they must needs find other countries that are not coupled with the West.

ooo...We are a wonderful country with a wonderful history. But that was then and these conditions I cite are now and for the foreseeable future.

ooo...I do not think this country is going to turn around within 5-15 yrs anymore than an aircraft carrier can turn on a dime.

I think I made a serious mistake to have put so much money in VTSMX and so little in international. I should be at 50% but I lack the self-confidence to do so and so am a sheep following the Diehard orthodoxy re international allocation.

Since you travel or work abroad and are so well read, I of course value your perspective.

Thanks.

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