S&P500 vs World Performance

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Enzo IX
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Re: S&P500 vs World Performance

Post by Enzo IX » Fri May 22, 2020 2:20 pm

Maybe the developed countries on the other side of the pond, though evolution of their societies have lost their competitive advantage.

I remember when I needed a camshaft after a catastrophic failure :dollar in my Rossa Corsa Italian sports car, the dealer said he couldn't get one because Italy shuts down for basically one month in the summer and nothing gets done. That doesn't sound like a strategy that competes well against more developing countries in the longterm.

Secondly, I remember in another post when this subject periodically comes up, a poster suggested that the x-us funds, since they are not single country funds get clobbered each year because there is always one country's problem that brings the rest of them down. I thought that was an interesting thought.

I will say x-us is getting awfully cheap strictly based on fundamental financial ratios.

I personally have a good percentage in international but don't rebalance like typically one would, I just keep adding to it on the original percentage I came up with almost 20 years ago. As a result the percentage keeps coming down.

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pennsylvania211
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Re: S&P500 vs World Performance

Post by pennsylvania211 » Sat May 23, 2020 5:37 am

jibantik wrote:
Wed May 20, 2020 11:28 pm
pennsylvania211 wrote:
Wed May 20, 2020 8:12 pm
jibantik wrote:
Wed May 20, 2020 8:01 pm
pennsylvania211 wrote:
Wed May 20, 2020 7:17 pm
jibantik wrote:
Wed May 20, 2020 7:07 pm
Well, I am not really claiming anything...
jibantik wrote: It's clear to see which one is correct
Sure bud... :sharebeer

I'd like to see how it's so clear which one is correct.
Burden of proof is on you not me.

You are saying there is a teapot orbiting the sun and are asking me to prove you wrong because I don't believe you? Cmon now.
What claim did I make?
We all started at the universe of equities, THE market. Somehow you decided to subselect within that. You deviated from the null position. Either you did that as an arbitrary decision (bad) or did because you believe whatever sub-selection you chose is better than the market (also bad). Whatever decision led you to choose whatever sub-selection you have would be your "claim". Frankly, it doesn't really matter to me, it's wrong. You don't know better than the market, you are not a special stock picking savant.
Thanks for bringing this up.

"THE market" = all stocks + all bonds + all commodities + all real estate, etc etc etc

In this thread of S&P500 vs World Performance, the market is sub-selected to stocks from the start. You can still advocate for owning all stocks on the basis of "THE market" but that's an incomplete argument. If you truly believe in "THE market" then you should be advocating for owning all of the rest of "THE market" too.
jibantik wrote:
Wed May 20, 2020 11:28 pm
If you can somehow prove me you can predict how thousands of companies will perform decades into the future, I am all ears. But, it's going to take more than "US outperformed international between years XXXX and YYYY".

Also, I haven't made any arguments in this thread about my reasons for selecting US domestic. I made no claims on the basis of past performance. I didn't even make a claim about wanting to own "THE market". You may be either 1) thinking of someone else's comments 2) may possibly be in a strawman argument.

Here is how I started this conversation:
pennsylvania211 wrote:
Mon May 18, 2020 10:19 am
For anyone to claim superiority of one method over another, you have do demonstrate it with well reasoned argument and/or good evidence. I'd like to see an actual debate of merits but these things often turn into half-baked ego-filled spats which is a waste of everyone else's time.
Finally, you may be a well intentioned person (or not, I don't kn0w). But your tone came off as obnoxious. It made me react back obnoxiouslly too (to you and to other people), which I don't think is good for myself or for anyone else reading through the threads. So I'd prefer to dial that down mutually. If that can't happen, then I'd rather just stop participating in this discussion.
"In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses." - Jack Bogle

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climber2020
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Re: S&P500 vs World Performance

Post by climber2020 » Sat May 23, 2020 6:59 am

SethJane42 wrote:
Wed May 20, 2020 10:10 am
I've been told here more than once that any thinking contrary to the "one must own a fund that indexes every stock in the world" belief system is flawed thinking. Owning shares in the S&P 500 is flawed thinking. The last twenty years of amazing gains in my fund do not matter, and to continue on with the fund would be flawed thinking. Buying 1000 shares of AAPL when it was 12.31 a share based on my learning and research was flawed thinking and an act of causing "overweightness" in my portfolio. Who do I think I am to believe I could pick a stock on my own?

I would never call the dogmatic belief system that one should only own shares in a fund that indexes every stock in the world flawed thinking, or a bond fund that does the same. It will produce a certain range of returns over one's lifetime, under a certain level of risk. One can just get into such a fund and never think about investing again, except for making contributions. And this is great for a certain kind of personality or for a person with a certain level of knowledge about investing. I would never tell a person not to go with that strategy.

When I first got in 20 years ago, Mr. Bogle at Vanguard recommended the S&P 500 Index fund, as did my wise uncle, and the Grand Pooba of Omaha. Time has proven to me that they weren't flawed in their thinking. I don't do international. It doesn't interest me. It has never looked as good to me. Glad I didn't. I'm perfectly happy with my portfolio balance (which includes some stocks) and know it has beat the returns of anyone here that has just been in an all-world fund the last 20 years. That doesn't mean an all-world person should think his or her thinking was flawed. It was just a choice to go with a strategy that produces the returns that you have seen.
I doubt that most people on this forum would say that investing in an SP500 index fund is flawed in any way. 100% VFIAX (Vanguard 500 Index) is a diversified, perfectly reasonable portfolio, assuming the owner can tolerate the volatility of 100% stocks.

I believe what people have taken issue with in this thread is that you are basing your decision primarily on past performance. So a few questions/observations:

1) Do you believe past performance is predictive of future results? If the answer to this question is yes, then any further discussion is likely to be nonproductive, as our core assumptions are not the same. There is no point in debating the benefits and disadvantages of one portfolio versus another if the participants do not agree on this first point.

2) If the answer to question number 1 is yes (which it appears to be based on your prior posts), then why the S&P 500? Why not choose a fund or stock that has done far better in the past? Like a 100% Apple portfolio or as I mentioned in a previous reply, 100% MNST (Monster Beverage Corporation) which has done far better than anything else mentioned in this thread.

3) Unless I'm mistaken, no one here is faulting you for choosing a 100% domestic stock allocation. The criticism is specifically directed at the reason you gave for choosing this allocation, which I interpret as "Fund A did well in the past so I expect it to do well in the future. Fund B did poorly in the past so I expect it to do poorly in the future."

Triple digit golfer
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Re: S&P500 vs World Performance

Post by Triple digit golfer » Sat May 23, 2020 7:13 am

For me it's just about diversification. A U.S. only equity portfolio is not diversified enough for my liking. Key word is "enough." To say it's diversified is absolutely correct, but so is a portfolio of five stocks from five different industries when you compare to somebody owning all or mostly all company stock. It's all relative.

Will a U.S. only portfolio work? Likely. But I value diversification greatly and the 20-40% that has typically been recommended by Vanguard and other sources is the sweet spot for me and my comfort level. Global market cap is too much for me. So, I hold a modest U.S. tilt and fully acknowledge that.

At the end of the day, the best portfolio is the portfolio that you will stick with. Ferdinand says it often and he is absolutely right.

Slick8503
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Re: S&P500 vs World Performance

Post by Slick8503 » Sat May 23, 2020 7:27 am

Enzo IX wrote:
Fri May 22, 2020 2:20 pm



Secondly, I remember in another post when this subject periodically comes up, a poster suggested that the x-us funds, since they are not single country funds get clobbered each year because there is always one country's problem that brings the rest of them down. I thought that was an interesting thought.
That’s all well and good as long as the single country you hold is never the one that gets clobbered.

Ironically, your example is the argument for and not against diversification.

Triple digit golfer
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Re: S&P500 vs World Performance

Post by Triple digit golfer » Sat May 23, 2020 7:35 am

Slick8503 wrote:
Sat May 23, 2020 7:27 am
Enzo IX wrote:
Fri May 22, 2020 2:20 pm



Secondly, I remember in another post when this subject periodically comes up, a poster suggested that the x-us funds, since they are not single country funds get clobbered each year because there is always one country's problem that brings the rest of them down. I thought that was an interesting thought.
That’s all well and good as long as the single country you hold is never the one that gets clobbered.

Ironically, your example is the argument for and not against diversification.
Plus, one country wouldn't bring down the entire international market unless it was one of the heavily weighted ones. Even then, it's a highly diversified fund. You take the bad with the good. No different than saying that a sector in the U.S. should be avoided because one company could bring it down. That's diversification. You are never the best but never the worst.

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Re: S&P500 vs World Performance

Post by abuss368 » Sat May 23, 2020 7:38 am

I read an article today from Warren Buffett where he said again to simply own the S&P 500.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

jibantik
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Re: S&P500 vs World Performance

Post by jibantik » Sat May 23, 2020 10:27 am

abuss368 wrote:
Sat May 23, 2020 7:38 am
I read an article today from Warren Buffett where he said again to simply own the S&P 500.
Checkmate total market investors. Speculator Warren Buffet said it so it MUST be right.
pennsylvania211 wrote:
Sat May 23, 2020 5:37 am
...
Also, I haven't made any arguments in this thread about my reasons for selecting US domestic. I made no claims on the basis of past performance. I didn't even make a claim about wanting to own "THE market". You may be either 1) thinking of someone else's comments 2) may possibly be in a strawman argument.
...
Total world market is speculation neutral. Any sub-selection of equities is making a bet on your sub-selection. So either you are making that bet randomly, in which case you wouldn't be making a claim, or you have <something> you are basing that decision on. That <something> would be your claim, whether you have explicitly said it or not, and the burden of proof is on you (not total market investors) as to why we should speculate away from the market to your sub-selection. If the evidence is not sufficient, then we have no choice but not to not sub-select the market and remain in a speculation-neutral position.

Now, I have no idea whether you speculated purely randomly or based on <something> but in either cause your are likely wrong. At least, I have not seen sufficient argument as to why I should speculate outside of the total market considering most of the cases on this forum are:
  • "X person said it" (see above)
  • Based on past performance
  • American exceptionalism bias

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Gort
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Re: S&P500 vs World Performance

Post by Gort » Sat May 23, 2020 10:50 am

Why would I set my asset allocation based on anonymous comments posted on this forum? I'll trust Vanguard's recommendations.

Carol88888
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Re: S&P500 vs World Performance

Post by Carol88888 » Sat May 23, 2020 11:41 am

There's been a terrible opportunity cost to having invested in international for the last decade.

I have quite a strong bias towards the US because I believe we have the most dynamic economy in the world. Maybe at sometime in the future international will do well but in the meantime the US is good enough for me.

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William Million
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Re: S&P500 vs World Performance

Post by William Million » Sat May 23, 2020 11:49 am

Don't make investment decisions through rear view mirror. 20th century was the US century. Future might be different.

EddyB
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Re: S&P500 vs World Performance

Post by EddyB » Sat May 23, 2020 12:04 pm

Enzo IX wrote:
Fri May 22, 2020 2:20 pm
Maybe the developed countries on the other side of the pond, though evolution of their societies have lost their competitive advantage.

I remember when I needed a camshaft after a catastrophic failure :dollar in my Rossa Corsa Italian sports car, the dealer said he couldn't get one because Italy shuts down for basically one month in the summer and nothing gets done. That doesn't sound like a strategy that competes well against more developing countries in the longterm.
I hope the dealer keeps his special knowledge to himself and exploits it, rather than letting the whole market know to price it in.

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pennsylvania211
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Re: S&P500 vs World Performance

Post by pennsylvania211 » Sat May 23, 2020 5:10 pm

jibantik wrote:
Sat May 23, 2020 10:27 am
abuss368 wrote:
Sat May 23, 2020 7:38 am
I read an article today from Warren Buffett where he said again to simply own the S&P 500.
Checkmate total market investors. Speculator Warren Buffet said it so it MUST be right.
pennsylvania211 wrote:
Sat May 23, 2020 5:37 am
...
Also, I haven't made any arguments in this thread about my reasons for selecting US domestic. I made no claims on the basis of past performance. I didn't even make a claim about wanting to own "THE market". You may be either 1) thinking of someone else's comments 2) may possibly be in a strawman argument.
...
Total world market is speculation neutral. Any sub-selection of equities is making a bet on your sub-selection. So either you are making that bet randomly, in which case you wouldn't be making a claim, or you have <something> you are basing that decision on. That <something> would be your claim, whether you have explicitly said it or not, and the burden of proof is on you (not total market investors) as to why we should speculate away from the market to your sub-selection. If the evidence is not sufficient, then we have no choice but not to not sub-select the market and remain in a speculation-neutral position.

Now, I have no idea whether you speculated purely randomly or based on <something> but in either cause your are likely wrong. At least, I have not seen sufficient argument as to why I should speculate outside of the total market considering most of the cases on this forum are:
  • "X person said it" (see above)
  • Based on past performance
  • American exceptionalism bias
Why stop at just total world stocks?
"In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses." - Jack Bogle

Beensabu
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Re: S&P500 vs World Performance

Post by Beensabu » Sat May 23, 2020 7:27 pm

pennsylvania211 wrote:
Sat May 23, 2020 5:10 pm
Why stop at just total world stocks?
It allows you to check off some of these:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

There are some asset classes in "the market" which are simply not investable for the retail investor and others which they cannot access easily and inexpensively.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."

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Re: S&P500 vs World Performance

Post by bck63 » Sat May 23, 2020 7:39 pm

muffins14 wrote:
Tue May 19, 2020 9:11 pm
Emerging markets make up 10% of the world index. You could eliminate them entirely for your "comfort" and still greatly diversify over holding just the S&P 500.
Meh. 500 of the world's biggest and best companies is good enough. Optimal? Who knows? Good enough? Absolutely.

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pennsylvania211
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Re: S&P500 vs World Performance

Post by pennsylvania211 » Sat May 23, 2020 7:43 pm

Beensabu wrote:
Sat May 23, 2020 7:27 pm
pennsylvania211 wrote:
Sat May 23, 2020 5:10 pm
Why stop at just total world stocks?
It allows you to check off some of these:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

There are some asset classes in "the market" which are simply not investable for the retail investor and others which they cannot access easily and inexpensively.
You’re going to have to explain better than that. Total US Bond and Total International Bond, for example, appear to meet all of your reasons above. So why stop at just stocks :confused
Last edited by pennsylvania211 on Sat May 23, 2020 7:49 pm, edited 1 time in total.
"In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses." - Jack Bogle

lostdog
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Re: S&P500 vs World Performance

Post by lostdog » Sat May 23, 2020 7:47 pm

jibantik wrote:
Sat May 23, 2020 10:27 am
abuss368 wrote:
Sat May 23, 2020 7:38 am
I read an article today from Warren Buffett where he said again to simply own the S&P 500.
Checkmate total market investors. Speculator Warren Buffet said it so it MUST be right.
pennsylvania211 wrote:
Sat May 23, 2020 5:37 am
...
Also, I haven't made any arguments in this thread about my reasons for selecting US domestic. I made no claims on the basis of past performance. I didn't even make a claim about wanting to own "THE market". You may be either 1) thinking of someone else's comments 2) may possibly be in a strawman argument.
...
Total world market is speculation neutral. Any sub-selection of equities is making a bet on your sub-selection. So either you are making that bet randomly, in which case you wouldn't be making a claim, or you have <something> you are basing that decision on. That <something> would be your claim, whether you have explicitly said it or not, and the burden of proof is on you (not total market investors) as to why we should speculate away from the market to your sub-selection. If the evidence is not sufficient, then we have no choice but not to not sub-select the market and remain in a speculation-neutral position.

Now, I have no idea whether you speculated purely randomly or based on <something> but in either cause your are likely wrong. At least, I have not seen sufficient argument as to why I should speculate outside of the total market considering most of the cases on this forum are:
  • "X person said it" (see above)
  • Based on past performance
  • American exceptionalism bias
https://youtu.be/LwTHLtuToSY

You'll like this. Easily explained.
Global Market Cap Equity || Taxable: VTSAX+VTIAX || IRA: VTWAX

Beensabu
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Re: S&P500 vs World Performance

Post by Beensabu » Sat May 23, 2020 8:03 pm

pennsylvania211 wrote:
Sat May 23, 2020 7:43 pm
Beensabu wrote:
Sat May 23, 2020 7:27 pm
pennsylvania211 wrote:
Sat May 23, 2020 5:10 pm
Why stop at just total world stocks?
It allows you to check off some of these:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

There are some asset classes in "the market" which are simply not investable for the retail investor and others which they cannot access easily and inexpensively.
You’re going to have to explain better than that. Total US Bond and Total International Bond, for example, appear to meet all of your reasons above. So why stop at just stocks :confused
My apologies. Of course bonds are part of the market and Total US Bond and Total International Bond are certainly low cost index funds that are easily obtained.

It has been said before that a good way to hold the global market portfolio is to hold Total US Stock Market, Total International Stock Market, Total US Bond, and Total International Bond at their respective global market weights. Or just 25% in each for simplicity (this is a recommendation that Vanguard apparently had made to their PAS clients from what I've seen posted here in the past). I believe one of the greatest proponents of the global market portfolio on this forum capitulated late last year and exited their international holdings. It was sad for me to see. EDIT: Turns out my memory was wrong. Thank goodness.
Last edited by Beensabu on Sat May 23, 2020 11:02 pm, edited 1 time in total.
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pennsylvania211
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Re: S&P500 vs World Performance

Post by pennsylvania211 » Sat May 23, 2020 8:18 pm

Beensabu wrote:
Sat May 23, 2020 8:03 pm
pennsylvania211 wrote:
Sat May 23, 2020 7:43 pm
Beensabu wrote:
Sat May 23, 2020 7:27 pm
pennsylvania211 wrote:
Sat May 23, 2020 5:10 pm
Why stop at just total world stocks?
It allows you to check off some of these:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

There are some asset classes in "the market" which are simply not investable for the retail investor and others which they cannot access easily and inexpensively.
You’re going to have to explain better than that. Total US Bond and Total International Bond, for example, appear to meet all of your reasons above. So why stop at just stocks :confused
My apologies. Of course bonds are part of the market and Total US Bond and Total International Bond are certainly low cost index funds that are easily obtained.

It has been said before that a good way to hold the global market portfolio is to hold Total US Stock Market, Total International Stock Market, Total US Bond, and Total International Bond at their respective global market weights. Or just 25% in each for simplicity (this is a recommendation that Vanguard apparently had made to their PAS clients from what I've seen posted here in the past). I believe one of the greatest proponents of the global market portfolio on this forum capitulated late last year and exited their international holdings. It was sad for me to see.
That's fair and I can understand the position of trying to hold as much of the entire market as reasonably possible.
:sharebeer

Have you by any chance lived (or live) in a non-US country?
"In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses." - Jack Bogle

Normchad
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Re: S&P500 vs World Performance

Post by Normchad » Sat May 23, 2020 8:41 pm

pennsylvania211 wrote:
Sat May 23, 2020 8:18 pm
Beensabu wrote:
Sat May 23, 2020 8:03 pm
pennsylvania211 wrote:
Sat May 23, 2020 7:43 pm
Beensabu wrote:
Sat May 23, 2020 7:27 pm
pennsylvania211 wrote:
Sat May 23, 2020 5:10 pm
Why stop at just total world stocks?
It allows you to check off some of these:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

There are some asset classes in "the market" which are simply not investable for the retail investor and others which they cannot access easily and inexpensively.
You’re going to have to explain better than that. Total US Bond and Total International Bond, for example, appear to meet all of your reasons above. So why stop at just stocks :confused
My apologies. Of course bonds are part of the market and Total US Bond and Total International Bond are certainly low cost index funds that are easily obtained.

It has been said before that a good way to hold the global market portfolio is to hold Total US Stock Market, Total International Stock Market, Total US Bond, and Total International Bond at their respective global market weights. Or just 25% in each for simplicity (this is a recommendation that Vanguard apparently had made to their PAS clients from what I've seen posted here in the past). I believe one of the greatest proponents of the global market portfolio on this forum capitulated late last year and exited their international holdings. It was sad for me to see.
That's fair and I can understand the position of trying to hold as much of the entire market as reasonably possible.
:sharebeer

Have you by any chance lived (or live) in a non-US country?
This seems perfectly valid to me. But to be the devils advocate, this also doesn’t constitute “buying the entire haystack”. Where are the commodities? Precious metals? Real estate? Fine art?

For a lot of folks, we have different concepts of what constitutes “the market”. I primarily invest in VTI, but do have some international. For me, I do consider VTI to be “the market” I am concerned with. Obviously, the majority of the world is outside of the US. But the US is roughly half of the worlds GDP, and that is sufficient for me.

I also don’t think it’s random chance that explains US out performance. I think there are things about the US that led to that, and are likely to benefit it in the future.

There are some awesome international companies. And I do own some international via VSMGX, but I’m not a huge believer in it. I’m not convinced that I can personally take advantage of potential international outperformance.

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dmcmahon
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Re: S&P500 vs World Performance

Post by dmcmahon » Sat May 23, 2020 9:14 pm

Carol88888 wrote:
Sat May 23, 2020 11:41 am
There's been a terrible opportunity cost to having invested in international for the last decade.

I have quite a strong bias towards the US because I believe we have the most dynamic economy in the world. Maybe at sometime in the future international will do well but in the meantime the US is good enough for me.
As I am painfully aware!

tibbitts
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Re: S&P500 vs World Performance

Post by tibbitts » Sat May 23, 2020 9:33 pm

Carol88888 wrote:
Sat May 23, 2020 11:41 am
There's been a terrible opportunity cost to having invested in international for the last decade.

I have quite a strong bias towards the US because I believe we have the most dynamic economy in the world. Maybe at sometime in the future international will do well but in the meantime the US is good enough for me.
The problem with statements like that is you could make the same argument for other characteristics of groups of equities besides domicile, and then drill down to specific equities themselves. It's somewhat arbitrary to say that stock selection based on domicile is reasonable, but similar selection based on any other characteristic isn't.

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pennsylvania211
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Re: S&P500 vs World Performance

Post by pennsylvania211 » Sat May 23, 2020 9:41 pm

Normchad wrote:
Sat May 23, 2020 8:41 pm
pennsylvania211 wrote:
Sat May 23, 2020 8:18 pm
Beensabu wrote:
Sat May 23, 2020 8:03 pm
pennsylvania211 wrote:
Sat May 23, 2020 7:43 pm
Beensabu wrote:
Sat May 23, 2020 7:27 pm


It allows you to check off some of these:

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

There are some asset classes in "the market" which are simply not investable for the retail investor and others which they cannot access easily and inexpensively.
You’re going to have to explain better than that. Total US Bond and Total International Bond, for example, appear to meet all of your reasons above. So why stop at just stocks :confused
My apologies. Of course bonds are part of the market and Total US Bond and Total International Bond are certainly low cost index funds that are easily obtained.

It has been said before that a good way to hold the global market portfolio is to hold Total US Stock Market, Total International Stock Market, Total US Bond, and Total International Bond at their respective global market weights. Or just 25% in each for simplicity (this is a recommendation that Vanguard apparently had made to their PAS clients from what I've seen posted here in the past). I believe one of the greatest proponents of the global market portfolio on this forum capitulated late last year and exited their international holdings. It was sad for me to see.
That's fair and I can understand the position of trying to hold as much of the entire market as reasonably possible.
:sharebeer

Have you by any chance lived (or live) in a non-US country?
This seems perfectly valid to me. But to be the devils advocate, this also doesn’t constitute “buying the entire haystack”. Where are the commodities? Precious metals? Real estate? Fine art?

For a lot of folks, we have different concepts of what constitutes “the market”. I primarily invest in VTI, but do have some international. For me, I do consider VTI to be “the market” I am concerned with. Obviously, the majority of the world is outside of the US. But the US is roughly half of the worlds GDP, and that is sufficient for me.

I also don’t think it’s random chance that explains US out performance. I think there are things about the US that led to that, and are likely to benefit it in the future.

There are some awesome international companies. And I do own some international via VSMGX, but I’m not a huge believer in it. I’m not convinced that I can personally take advantage of potential international outperformance.
+1

Stocks, bonds, real estate, metals, commodities, art, etc are all part of the market/haystack.

If one advocates for buying "THE market/haystack" but stops at buying total world stock only, then there's a big deficit in consistency. That needs explanation.
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Re: S&P500 vs World Performance

Post by pennsylvania211 » Sat May 23, 2020 9:44 pm

tibbitts wrote:
Sat May 23, 2020 9:33 pm
Carol88888 wrote:
Sat May 23, 2020 11:41 am
There's been a terrible opportunity cost to having invested in international for the last decade.

I have quite a strong bias towards the US because I believe we have the most dynamic economy in the world. Maybe at sometime in the future international will do well but in the meantime the US is good enough for me.
The problem with statements like that is you could make the same argument for other characteristics of groups of equities besides domicile, and then drill down to specific equities themselves. It's somewhat arbitrary to say that stock selection based on domicile is reasonable, but similar selection based on any other characteristic isn't.
I think that has the makings of a solid debate -- whether US businesses hold a special place versus world businesses. I can see some of the good arguments for both sides.
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Re: S&P500 vs World Performance

Post by RadAudit » Sun May 24, 2020 7:03 am

Actually, I like Rick Ferri's explanation.
If you want to know why international has underperformed in the past decade, just do a comparison of funds on the Vanguard website using VTSAX and VTIAX. The reason will be clear when you get to industries. International stock indices have heavier weighting to materials, energy, consumer defensive, and lower weighting in technology, healthcare.

In addition, the US dollar has been strong.
When those conditions change, the argument will change. But it does seem a tad silly, to say that you know in advance that a major portion of the world's assets will never be more valuable compared to other portions of the world's assets than they are today and thereby justify your decision not to diversify. But, it's your money.
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Re: S&P500 vs World Performance

Post by lostdog » Sun May 24, 2020 8:05 am

RadAudit wrote:
Sun May 24, 2020 7:03 am
Actually, I like Rick Ferri's explanation.
If you want to know why international has underperformed in the past decade, just do a comparison of funds on the Vanguard website using VTSAX and VTIAX. The reason will be clear when you get to industries. International stock indices have heavier weighting to materials, energy, consumer defensive, and lower weighting in technology, healthcare.

In addition, the US dollar has been strong.
When those conditions change, the argument will change. But it does seem a tad silly, to say that you know in advance that a major portion of the world's assets will never be more valuable compared to other portions of the world's assets than they are today and thereby justify your decision not to diversify. But, it's your money.
Performance chasing is the big one for them. Atleast some of them admit it and acknowledge they'll move to international when it starts doing well.

The others think the US will outperform now and into the infinite future. Very odd indeed. Either they're wrapped up in their cultish behavior, in denial or lack knowledge and will "get it" at some point. It takes time.
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Re: S&P500 vs World Performance

Post by Rick Ferri » Sun May 24, 2020 9:45 am

International vs. US is mostly about industry weights.

You've heard for years that the US is "outsourcing manufacturing jobs overseas." Well, that shows up in industry weights. The US is heavy in the "gig" economy and health care. The rest of the world is heavy in manufacturing, energy, and materials. The performance of industry sectors rotates around over time. In the last ten years it was the former, in the ten years before that it was the later. The mystery is solved once you understand this.

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Re: S&P500 vs World Performance

Post by Triple digit golfer » Sun May 24, 2020 9:51 am

Rick Ferri wrote:
Sun May 24, 2020 9:45 am
International vs. US is mostly about industry weights.

You've heard for years that the US is "outsourcing manufacturing jobs overseas." Well, that shows up in industry weights. The US is heavy in the "gig" economy and health care. The rest of the world is heavy in manufacturing, energy, and materials. The performance of industry sectors rotates around over time. In the last ten years it was the former, in the ten years before that it was the later. The mystery is solved once you understand this.

Rick Ferri
So it's not really about the countries at all, or to a much smaller extent than many may think.

To me this is an even greater case for global diversification. Very few people advocate over weighing sectors, but do exactly that by excluding international stocks.

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Re: S&P500 vs World Performance

Post by lostdog » Sun May 24, 2020 10:42 am

Rick Ferri wrote:
Sun May 24, 2020 9:45 am
International vs. US is mostly about industry weights.

You've heard for years that the US is "outsourcing manufacturing jobs overseas." Well, that shows up in industry weights. The US is heavy in the "gig" economy and health care. The rest of the world is heavy in manufacturing, energy, and materials. The performance of industry sectors rotates around over time. In the last ten years it was the former, in the ten years before that it was the later. The mystery is solved once you understand this.

Rick Ferri
+1

Such a simple explanation. Thanks Rick.
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Re: S&P500 vs World Performance

Post by lostdog » Sun May 24, 2020 10:43 am

Triple digit golfer wrote:
Sun May 24, 2020 9:51 am
Rick Ferri wrote:
Sun May 24, 2020 9:45 am
International vs. US is mostly about industry weights.

You've heard for years that the US is "outsourcing manufacturing jobs overseas." Well, that shows up in industry weights. The US is heavy in the "gig" economy and health care. The rest of the world is heavy in manufacturing, energy, and materials. The performance of industry sectors rotates around over time. In the last ten years it was the former, in the ten years before that it was the later. The mystery is solved once you understand this.

Rick Ferri
So it's not really about the countries at all, or to a much smaller extent than many may think.

To me this is an even greater case for global diversification. Very few people advocate over weighing sectors, but do exactly that by excluding international stocks.
+1. A simple explanation. This 1000 times.

Rick drops his mic and leaves the room.
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Re: S&P500 vs World Performance

Post by unclescrooge » Sun May 24, 2020 12:01 pm

minimalistmarc wrote:
Mon May 18, 2020 6:04 am
Isn’t American outperformance mostly down to FAANG?

Who knows where the next FAANG will originate?

I mean, in the next few decades we’ll probably have self driving flying cars, cures for lots of incurable diseases, amazing new green technology. I’d rather cast my net wide.

It’s an easier decision for me because I’m in the U.K. and don’t want to have any home bias
But are you just replacing it with a US bias?

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Re: S&P500 vs World Performance

Post by minimalistmarc » Sun May 24, 2020 5:38 pm

unclescrooge wrote:
Sun May 24, 2020 12:01 pm
minimalistmarc wrote:
Mon May 18, 2020 6:04 am
Isn’t American outperformance mostly down to FAANG?

Who knows where the next FAANG will originate?

I mean, in the next few decades we’ll probably have self driving flying cars, cures for lots of incurable diseases, amazing new green technology. I’d rather cast my net wide.

It’s an easier decision for me because I’m in the U.K. and don’t want to have any home bias
But are you just replacing it with a US bias?
No, I’m an all worlder, so just hold the market weight of US.

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Re: S&P500 vs World Performance

Post by international001 » Mon May 25, 2020 8:15 am

Enzo IX wrote:
Fri May 22, 2020 2:20 pm

I remember when I needed a camshaft after a catastrophic failure :dollar in my Rossa Corsa Italian sports car, the dealer said he couldn't get one because Italy shuts down for basically one month in the summer and nothing gets done. That doesn't sound like a strategy that competes well against more developing countries in the longterm.
That's one of the most absurd reasons I have heard in this blog for a while
Something that happens every year, and you think the markets haven't priced this in?

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Re: S&P500 vs World Performance

Post by Rosencrantz1 » Mon May 25, 2020 11:52 am

pennsylvania211 wrote:
Sat May 23, 2020 9:41 pm

+1

Stocks, bonds, real estate, metals, commodities, art, etc are all part of the market/haystack.

If one advocates for buying "THE market/haystack" but stops at buying total world stock only, then there's a big deficit in consistency. That needs explanation.
Excellent point. Do the 'all worlders' have world weight of international bonds and real estate?

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Re: S&P500 vs World Performance

Post by absolute zero » Mon May 25, 2020 12:09 pm

Total world market index funds are currently 57% US and 43% non-US. I can understand if someone said they wanted to invest 57% of their stocks in the US market, and the rest in an international fund. And *maintain* that fixed allocation. But I have a hard time understanding the logic of a total world market fund.

In 1989, Japan made up ~45% of global stocks by market cap. If you owned a total world market index fund (if they existed back then) then you would be HEAVILY invested in Japan. That would've turned out poorly.

Perhaps it's just a weakness in market cap weighting, as a strategy itself. If one country starts doing well, you will inherently be purchasing more and more of that country's stocks on it's way up. But high and sell low?? :confused

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Re: S&P500 vs World Performance

Post by Stef » Mon May 25, 2020 12:13 pm

absolute zero wrote:
Mon May 25, 2020 12:09 pm
In 1989, Japan made up ~45% of global stocks by market cap. If you owned a total world market index fund (if they existed back then) then you would be HEAVILY invested in Japan. That would've turned out poorly.
But you had a 20% cagr over a 40 year period before that. You are just assuming that you started investing when Japan had a CAPE of 90 and never made further contributions after that. Not really a real world scenario.

You just delivered a pretty strong argument against US only investing.

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Re: S&P500 vs World Performance

Post by asif408 » Mon May 25, 2020 12:19 pm

absolute zero wrote:
Mon May 25, 2020 12:09 pm
Total world market index funds are currently 57% US and 43% non-US. I can understand if someone said they wanted to invest 57% of their stocks in the US market, and the rest in an international fund. And *maintain* that fixed allocation. But I have a hard time understanding the logic of a total world market fund.

In 1989, Japan made up ~45% of global stocks by market cap. If you owned a total world market index fund (if they existed back then) then you would be HEAVILY invested in Japan. That would've turned out poorly.

Perhaps it's just a weakness in market cap weighting, as a strategy itself. If one country starts doing well, you will inherently be purchasing more and more of that country's stocks on it's way up. But high and sell low?? :confused
Your reasoning makes sense, but the problem with that suggestion is that most people on this board would overweight US if they didn't buy all world. Almost no one here underweights the US that doesn't own a total world fund.

I personally heavily underweigt US stocks, but I realize almost no one is going to do that, and most are performance chasers, you only have to see the numerous why international threads over the last few months. No one is posting about dramatically reducing their US stock allocation.

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Re: S&P500 vs World Performance

Post by mathwhiz » Mon May 25, 2020 12:22 pm

Bogle Had a Point on International Stocks

Vanguard's founder didn't see the need for them, and the markets haven't shown reason to suggest he was wrong.

https://www.morningstar.com/articles/97 ... nal-stocks

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Re: S&P500 vs World Performance

Post by Beensabu » Mon May 25, 2020 2:46 pm

absolute zero wrote:
Mon May 25, 2020 12:09 pm
Perhaps it's just a weakness in market cap weighting, as a strategy itself. If one country starts doing well, you will inherently be purchasing more and more of that country's stocks on it's way up. But high and sell low?? :confused
The S&P 500 and Total US Market Index Funds are market cap weighted. If one company in the S&P 500 or Total US Market starts doing well, you will inherently be purchasing more and more of that company's stocks on its way up.
absolute zero wrote:In 1989, Japan made up ~45% of global stocks by market cap. If you owned a total world market index fund (if they existed back then) then you would be HEAVILY invested in Japan. That would've turned out poorly.
Information technology makes up 25.7% of the S&P 500, and health care makes up 15.4%. If you own a S&P 500 fund then you are heavily invested in information technology and health care. If either or both of these sectors underperforms a less heavily weighted sector in the future, how will that turn out? Is that a reason not to invest in the S&P 500?
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Re: S&P500 vs World Performance

Post by Triple digit golfer » Mon May 25, 2020 3:03 pm

Beensabu wrote:
Mon May 25, 2020 2:46 pm
Information technology makes up 25.7% of the S&P 500, and health care makes up 15.4%. If you own a S&P 500 fund then you are heavily invested in information technology and health care. If either or both of these sectors underperforms a less heavily weighted sector in the future, how will that turn out? Is that a reason not to invest in the S&P 500?
No, it's a reason not to invest solely in the U.S. market and to instead diversify internationally, which reduces your country and sector exposure.

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Re: S&P500 vs World Performance

Post by jibantik » Mon May 25, 2020 3:04 pm

lostdog wrote:
Sat May 23, 2020 7:47 pm
https://youtu.be/LwTHLtuToSY

You'll like this. Easily explained.
Great video! Summed up nicely.
absolute zero wrote:
Mon May 25, 2020 12:09 pm
...

In 1989, Japan made up ~45% of global stocks by market cap. If you owned a total world market index fund (if they existed back then) then you would be HEAVILY invested in Japan. That would've turned out poorly.

...
It's really easy to know what was a bad decision in retrospect, isn't it? Of course, if people know some stock will do poorly they would avoid them. Now, show me evidence that you can reliably predict how thousands of global companies will perform decades into the future and then I can happily move out of investing in the total market.
mathwhiz wrote:
Mon May 25, 2020 12:22 pm
Bogle Had a Point on International Stocks

Vanguard's founder didn't see the need for them, and the markets haven't shown reason to suggest he was wrong.

https://www.morningstar.com/articles/97 ... nal-stocks
So, I guess if Bogle said there was a teapot orbiting the sun you would believe him since someone hasn't proven it wrong.

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Re: S&P500 vs World Performance

Post by Triple digit golfer » Mon May 25, 2020 3:14 pm

absolute zero wrote:
Mon May 25, 2020 12:09 pm
Total world market index funds are currently 57% US and 43% non-US. I can understand if someone said they wanted to invest 57% of their stocks in the US market, and the rest in an international fund. And *maintain* that fixed allocation. But I have a hard time understanding the logic of a total world market fund.

In 1989, Japan made up ~45% of global stocks by market cap. If you owned a total world market index fund (if they existed back then) then you would be HEAVILY invested in Japan. That would've turned out poorly.

Perhaps it's just a weakness in market cap weighting, as a strategy itself. If one country starts doing well, you will inherently be purchasing more and more of that country's stocks on it's way up. But high and sell low?? :confused
Sounds like an argument against cap weighted funds, not international investing. In fact, if I was scared about too much in one country, sector, company, etc., adding 43% of the world's companies that I previously excluded would seem to be a prudent idea to diversify away from having too much of one company or country at the top.

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Re: S&P500 vs World Performance

Post by NerveDoc » Mon May 25, 2020 3:41 pm

Vanguard recommends global cap weighting in equities, or if not that, at least 40% international. https://youtu.be/wbK5Q_RNFhw

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Re: S&P500 vs World Performance

Post by Index24 » Mon May 25, 2020 4:20 pm

SethJane42 wrote:
Sun May 17, 2020 8:26 am
I've been investing a long time, and I've yet to see the advantage in being in all stocks vs. The S&P 500 Index fund. It's about the bottom line, not theory. If I would have been in all stocks since I started, I'd be much poorer. As I said, my time on earth is limited, and since being in all stocks has yet to prove it's the winner over the S&P 500 in the long run, I'm sticking with what has made me the most money. It's about money, not theories.
:idea:

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Re: S&P500 vs World Performance

Post by Stef » Mon May 25, 2020 4:24 pm

SethJane42 wrote:
Sun May 17, 2020 8:26 am
I've been investing a long time, and I've yet to see the advantage in being in all stocks vs. The S&P 500 Index fund. It's about the bottom line, not theory. If I would have been in all stocks since I started, I'd be much poorer. As I said, my time on earth is limited, and since being in all stocks has yet to prove it's the winner over the S&P 500 in the long run, I'm sticking with what has made me the most money. It's about money, not theories.
So you are totally ignoring Jack Bogles advice to not chose funds based on their past performance?

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Re: S&P500 vs World Performance

Post by lostdog » Mon May 25, 2020 4:32 pm

NerveDoc wrote:
Mon May 25, 2020 3:41 pm
Vanguard recommends global cap weighting in equities, or if not that, at least 40% international. https://youtu.be/wbK5Q_RNFhw
+1

I'll take a guess in the next 10 years Vanguard will replace the seperate US and international funds with Total World in their Target Retirement and Life Strategy funds.
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Re: S&P500 vs World Performance

Post by Rick Ferri » Tue May 26, 2020 11:27 am

US GDP is currently composed of different industries weights than it was 50 years ago. Manufacturing as a percentage of nominal GDP peaked in the early 1950s at about 27%, then started to decline as it became cheaper to manufacture overseas. We still use all the products manufactured overseas, and since we consume them, shouldn't we invest in the companies that make them as part of a diversified portfolio? I think so.

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Re: S&P500 vs World Performance

Post by pennsylvania211 » Tue May 26, 2020 8:46 pm

jibantik wrote:
Mon May 25, 2020 3:04 pm
So, I guess if Bogle said there was a teapot orbiting the sun you would believe him since someone hasn't proven it wrong.
Hey bud.... when you speak about buying "THE market" but stop at just world stocks, can you please explain how that logic works? "THE market" also includes bonds, real estate, metals, commodities, etc etc
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Re: S&P500 vs World Performance

Post by Stef » Wed May 27, 2020 12:07 am

pennsylvania211 wrote:
Tue May 26, 2020 8:46 pm
Hey bud.... when you speak about buying "THE market" but stop at just world stocks, can you please explain how that logic works? "THE market" also includes bonds, real estate, metals, commodities, etc etc
What about oldtimer cars? Art? Why aren't you buying those?

Are you really being serious?

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Re: S&P500 vs World Performance

Post by l1am » Wed May 27, 2020 3:01 am

OP, you should also compare SPY vs VGT.

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