Flannelbeard wrote: ↑Fri Jun 18, 2021 8:30 am
esteen wrote: ↑Thu Jun 17, 2021 11:38 pm
There are a few in this thread who have pointed out that, over the next 35 years, there are many factors (saving/spending rates, general AA, income growth, etc) that matter way more than this US/International debate. Thank you for bringing a heated topic into perspective. It's fun to discuss/debate, and I like to debate it too, but at the end of the day it's relative peanuts compared to many other things that will better your financial or non-financial life.
It's your bet
that it's peanuts. That's really the crux of this debate. 100% US investors claim it doesn't matter at all and take an active bet to back that horse, whereas world market cap investors take action to diversify because it might
I wonder if in some alternate universe, with the web coming to fruition a couple decades earlier, and Jack Bogle born in Japan, if we could peer into 1990 www.bogleheads.jp
. Recall at the time that Japan was viewed as a rising economic powerhouse, and their stock market was around 40% of the world stock market capitalization, having eclipsed the US a couple years prior. Without the benefit of hindsight to claim that it was a bubble, let's look back to the prevailing opinion outside Japan at the time which was that Japan was eating the world despite being a small nation due to the Japanese peoples' high intelligence and ironclad, unbeatable work ethic. One Japanese worker had to be equal to two, maybe three Americans. There was something special
about them, something inherent to their country and/or culture which explained why they were the new top dog and would continue to be so. Sound familiar?
I wonder, would Bogleheads Japan look much like this site does today, the arguments substituted nearly word for word to swap the two countries?
"You could invest outside Japan. In the end it doesn't matter. Jack said so."
"The regulatory environment and company structure in Japan is simply superior to the rest of the world."
"Japanese companies get a large portion of their revenue internationally, so you've already got significant international exposure from the Nikkei."
esteen wrote: ↑Thu Jun 17, 2021 11:38 pm
Marking someone who doesn't agree with your opinion as having "psychological bias" is a good example of moving the debate away from a healthy sharing of ideas and toward exclusivity and labeling. Let's all encourage the facts, opinions, and prognostications on each side and so everyone can decide for themselves.
For what it's worth I have 25% of my equities allocation in international (ex-US), and 75% in US. Because that's the exact right percentage that will outperform all other tilts, and the rest of you are doomed to paltry future returns. J/k... it's because it lets me sleep well at night
I disagree. Let's call a spade a spade, within forum guidelines of course. Psychological biases are an incredibly relevant part of the discussion. Let's put all the cards on the table, because hiding some of the most important ones only benefits one side here.
I suppose I'm saying it's peanuts because my expectation is if the world (ex-US) outperforms the US, or vice versa, they'll still be within a few percentage points of each other. I'm not expecting a Japan-like catastrophe. You postulate the US could have one... and I guess they could! But of course the argument could be made about the developed ex-US world. What if, for example, Europe and China markets went into a 30 year spiral when the US did not? What do we think are the relative chances of one versus the other? Plus, everyone always brings up Japan when comparing the US to Japan is apples-to-oranges for so many reasons. Huge differences in population, natural resources, military might, influence on other developed nations, agriculture, oil, etc etc. The US has a lot more to fall back on.
I'm not saying the US will remain the preeminent world power forever. In fact I personally believe we'll fall out of favor at some point, just like other empires/civilizations always have in the past. Because people are people, no matter which country they're in, and it only takes a few super-special game changers to alter the path of a world power or create a new one. But I can't imagine that happening overnight. I can't even imagine it happening in 10 years. I could see some outperformance, but a countrywide catastrophe (that didn't also significantly affect non-US markets) seems far-fetched. Is there US exceptionalism? To me, I don't believe there is lasting
exceptionalism (again, because people are people everywhere). But I think the last century has provided evidence of recent
exceptionalism. And that is hard to go away overnight.
All that said, even if the US grossly underperformed, savings/spending rate and general asset allocation are STILL more important. For example, what does it matter if you picked VTWAX if your savings rate was $1/year? You've got to save to invest.
In some ways all of it is "active bets" because, for example, by having your AA in more stocks and less real estate, you're betting stocks will provide better growth (you may not; just an example). Or you bet that market cap weights are the best way to capture growth potential, rather than equal weighting or some other weighting strategy. There's a difference between making an "active bet" on a single stock (AAPL!) or ETF (ARKK!) and arguing diversification benefits of 3,500 stocks vs 8,500 stocks. It just doesn't have the same incremental diversification benefit. It feels to me you assign risk to all US stocks at the level of a single security. But I guess it boils down to how risky you think one nation is. I don't think the US is that risky.
On psychological biases, they are definitely a huge part of investing, but I don't understand your explanation. Calling a spade a spade and putting all cards on the table... I don't get what that has to do with psychological biases for US vs World investing. For example if someone says "I think the US has certain advantages that will continue to allow it's myriad companies to enjoy growth above the average non-US nation", that is not a psychological bias at all. It's an opinion, it's based on some historical data and some conjecture, and you can't say it's "true" or "false". It's a guess.
All this stuff is a guess. Even VTWAX.