Jack Bogle - Two Fund Portfolio

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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals. The correlations between them seem to back up my assumption as they are higher than the correlation between US Stocks and US SCV.
That is not the most likely outcome. A common mistake I see people make (and I've done this plenty myself) is to use short-term correlations to infer the long-term behavior of assets.
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Re: Jack Bogle - Two Fund Portfolio

Post by lostdog »

Young investors are seeing the arguments against the two fund undiversified portfolio. There is an example of this a couple pages back. We're making progress.

If not for the arguments, this would just be a virtual high five thread promoting an undiversified portfolio.

Since it's getting spammed all over the bogleheads board, it's a must for novice investors to see both sides.
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Re: Jack Bogle - Two Fund Portfolio

Post by absolute zero »

lostdog wrote: Sun May 09, 2021 8:20 am Young investors are seeing the arguments against the two fund undiversified portfolio. There is an example of this a couple pages back. We're making progress.

If not for the arguments, this would just be a virtual high five thread promoting an undiversified portfolio.

Since it's getting spammed all over the bogleheads board, it's a must for novice investors to see both sides.
I really don't have a problem with a thread where people give virtual high fives over their portfolio. If that was all that this thread was, I'd probably never post in it.

But your last point is what changes things - it's the fact that some forum members (primarily OP) link back to this thread constantly and share it as advice, sometimes even unsolicited advice. If one of the most prolific posters on the forum is going to be holding this thread up as investment advice, I feel compelled to point out the problems with this portfolio so that novice investors don't get steered in a direction that they don't understand.

If someone DOES wants to take on the (uncompensated) risk associated with this portfolio, then they are free to do so. But they should at least go in with eyes wide open, also knowing that this portfolio runs counter to modern and mainstream investment advice due to its lack of diversification.
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Re: Jack Bogle - Two Fund Portfolio

Post by Anon9001 »

vineviz wrote: Sun May 09, 2021 8:17 am That is not the most likely outcome. A common mistake I see people make (and I've done this plenty myself) is to use short-term correlations to infer the long-term behavior of assets.
I am borrowing this image from Nisi a screenshot from Swedroe book "The Quest for Alpha" showing there is no difference between including and excluding Ex-US stocks. This 1975-2009 is 34 years so long term. This is not surprising to me as why would multi-nationals which are headquartered outside USA will perform differently to multi-nationals headquartered inside USA? If the Ex-US Index were not full of multi-nationals but invested 100% in Ex-US Economies and US Index is invested 100% in US Economy only than there would be a huge difference between including and excluding Ex-US.
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Re: Jack Bogle - Two Fund Portfolio

Post by absolute zero »

Anon9001 wrote: Sun May 09, 2021 8:56 am
vineviz wrote: Sun May 09, 2021 8:17 am That is not the most likely outcome. A common mistake I see people make (and I've done this plenty myself) is to use short-term correlations to infer the long-term behavior of assets.
I am borrowing this image from Nisi a screenshot from Swedroe book "The Quest for Alpha" showing there is no difference between including and excluding Ex-US stocks. This 1975-2009 is 34 years so long term. This is not surprising to me as why would multi-nationals which are headquartered outside USA will perform differently to multi-nationals headquartered inside USA? If the Ex-US Index were not full of multi-nationals but invested 100% in Ex-US Economies and US Index is invested 100% in US Economy only than there would be a huge difference between including and excluding Ex-US.
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Uhh...have you looked at their respective performances during the past decade?
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Re: Jack Bogle - Two Fund Portfolio

Post by bertilak »

From Morningstar:
VTSAX: Vanguard Total Stock (US only)
VTIAX: Vanguard International

This goes back to the beginning of VTIAX in 1996, 25 years.
It is a growth chart, not a price chart.
The two diverged in 2009. Why the massive US run-up while international stagnated? Can anyone explain?

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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

Anon9001 wrote: Sun May 09, 2021 8:56 am
vineviz wrote: Sun May 09, 2021 8:17 am That is not the most likely outcome. A common mistake I see people make (and I've done this plenty myself) is to use short-term correlations to infer the long-term behavior of assets.
I am borrowing this image from Nisi a screenshot from Swedroe book "The Quest for Alpha" showing there is no difference between including and excluding Ex-US stocks.
How many Bogleheads have suffered as a result of this typographical error?
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Re: Jack Bogle - Two Fund Portfolio

Post by Anon9001 »

vineviz wrote: Sun May 09, 2021 9:12 am How many Bogleheads have suffered as a result of this typographical error?
So you are saying Swedroe put the numbers incorrectly in his book?
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

Anon9001 wrote: Sun May 09, 2021 9:22 am
vineviz wrote: Sun May 09, 2021 9:12 am How many Bogleheads have suffered as a result of this typographical error?
So you are saying Swedroe put the numbers incorrectly in his book?
The numbers in the book are incorrect, yes.
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Re: Jack Bogle - Two Fund Portfolio

Post by Anon9001 »

vineviz wrote: Sun May 09, 2021 9:27 am The numbers in the book are incorrect, yes.
So what are the correct numbers than for this 1975-2009?
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

Anon9001 wrote: Sun May 09, 2021 9:28 am
vineviz wrote: Sun May 09, 2021 9:27 am The numbers in the book are incorrect, yes.
So what are the correct numbers than for this 1975-2009?
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I used a slightly different bond index than Swedroe used, but that has an immaterial impact on the outcome.
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Re: Jack Bogle - Two Fund Portfolio

Post by DSBH »

If I understand correctly, adding say Total International Index to a Total Stock Index portfolio makes the resulting portfolio more diversified, e.g. a lower risk portfolio. Does it mean that the resulting lower risk portfolio will have a lower expected return in the long run as well?

I am not advocating anything, one way or another, just would like to understand the trade-off/reasoning.
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Re: Jack Bogle - Two Fund Portfolio

Post by Anon9001 »

vineviz wrote: Sun May 09, 2021 9:32 am I used a slightly different bond index than Swedroe used, but that has an immaterial impact on the outcome.
Interesting so there is a benefit to owning EAFE in combination to US. I would like to see US SCV also to see what 30% SCV 30% US 40% Bonds portfolio compares to this as correlation is lower between US SCV and US.
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Re: Jack Bogle - Two Fund Portfolio

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I removed a contentious post. As a reminder, see: Member Rights in a Dispute , 2nd paragraph

The concern is being addressed via PM.
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

DSBH wrote: Sun May 09, 2021 9:34 am If I understand correctly, adding say Total International Index to a Total Stock Index portfolio makes the resulting portfolio more diversified, e.g. a lower risk portfolio. Does it mean that the resulting lower risk portfolio will have a lower expected return in the long run as well?
It does not mean that, no, and in fact the opposite is true.

Reductions in risk that stem entirely from diversification do not reduce the expected return of the portfolio, and in fact if the portfolio is periodically rebalanced the growth rate of the diversified portfolio can actually be higher than the growth rate of EITHER individual holding.
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Re: Jack Bogle - Two Fund Portfolio

Post by RJC »

I still don't see international crush the US in any long-term time period. It's either been close or US dominating.

Can someone please share examples?
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

Anon9001 wrote: Sun May 09, 2021 9:37 am
vineviz wrote: Sun May 09, 2021 9:32 am I used a slightly different bond index than Swedroe used, but that has an immaterial impact on the outcome.
Interesting so there is a benefit to owning EAFE in combination to US. I would like to see US SCV also to see what 30% SCV 30% US 40% Bonds portfolio compares to this as correlation is lower between US SCV and US.
There are plenty of threads on SCV, and I don't want to pull this thread off-topic, but suffice it to say that from 1975 to 2009 an investor who owned only EAFE and SCV US stocks would have been much richer than one who owned only S&P 500 stocks.
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Re: Jack Bogle - Two Fund Portfolio

Post by lostdog »

It seems like for some that int vs domestic is a competition.

Diversification with atleast 30 to 40 percent international or even world market cap will give you what they haystack will give you. No performance chasing involved. No confirmation bias needed. No flexing past performance needed. Just accepting the return.
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

RJC wrote: Sun May 09, 2021 9:49 am I still don't see international crush the US in any long-term time period. It's either been close or US dominating.

Can someone please share examples?
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

lostdog wrote: Sun May 09, 2021 9:54 am It seems like for some that int vs domestic is a competition.

Diversification with atleast 30 to 40 percent international or even world market cap will give you what they haystack will give you. No performance chasing involved. No confirmation bias needed. No flexing past performance needed. Just accepting the return.
I agree. It's not a horse race.

The future is uncertain, and the only rational reaction to that uncertainty is to diversify.
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Re: Jack Bogle - Two Fund Portfolio

Post by RJC »

vineviz wrote: Sun May 09, 2021 9:57 am
RJC wrote: Sun May 09, 2021 9:49 am I still don't see international crush the US in any long-term time period. It's either been close or US dominating.

Can someone please share examples?
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viewtopic.php?t=253686
I meant examples that goes to today's date.
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Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

RJC wrote: Sun May 09, 2021 10:06 am I meant examples that goes to today's date.
Examples that cater to recency bias to prove what point exactly? The US has outperformed heavily in the last 10 years, what are you expecting such examples to show? And what action would be recommended by such graphs?
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Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals
But there are sector and style differences that can account for perhaps more differences in returns than country of domicile does. Rick Ferri has posted about this before.
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Re: Jack Bogle - Two Fund Portfolio

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This thread is dangerous for people under the age of 50 who might have 40, 50, or even 60 years of investing left.
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Re: Jack Bogle - Two Fund Portfolio

Post by 40 Years' Gatherin's »

I would substitute either the Core Bond Fund (VCORX) or the Intermediate Term Bond Fund (VBILX) in place of the Total Bond Fund in order to get more exposure to corporate bonds. Jack felt this way towards the end when he described the total bond index as "deeply flawed".
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Re: Jack Bogle - Two Fund Portfolio

Post by ruud »

abuss368 wrote: Sat May 08, 2021 8:14 pm I always tell folks “buy as much Total Stock as possible until it hurts. Then find a way to buy even more”.
Whatever happened to "ability, need, willingness" to take risk? Maybe some folks don't need so much stocks in their portfolio?
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Re: Jack Bogle - Two Fund Portfolio

Post by RJC »

Da5id wrote: Sun May 09, 2021 10:13 am
RJC wrote: Sun May 09, 2021 10:06 am I meant examples that goes to today's date.
Examples that cater to recency bias to prove what point exactly? The US has outperformed heavily in the last 10 years, what are you expecting such examples to show? And what action would be recommended by such graphs?
The point that it’s not recency bias if you have been staying the course. I’m not finding a good argument for switching now.
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Re: Jack Bogle - Two Fund Portfolio

Post by ruralavalon »

This is the longest comparison I could find with actual investable mutual funds, 24 years 1997-2021.

It's very time-dependent, 1997-2021 the two fund portfolio has both a higher return and lower volatility, virtually identical returns as of 2006-09, and more recently much better returns since 2009. Portfolio Visualizer.
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Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

RJC wrote: Sun May 09, 2021 11:03 am
Da5id wrote: Sun May 09, 2021 10:13 am
RJC wrote: Sun May 09, 2021 10:06 am I meant examples that goes to today's date.
Examples that cater to recency bias to prove what point exactly? The US has outperformed heavily in the last 10 years, what are you expecting such examples to show? And what action would be recommended by such graphs?
The point that it’s not recency bias if you have been staying the course. I’m not finding a good argument for switching now.
Sounds fair enough to me. My point in engaging in the thread isn't to try and persuade people that sticking with 2-fund is wrong. It isn't. It may work out better, may not. I just don't think betting on it is wise, I'd rather own the haystack. I'm more against evangelizing for 2-fund for people making new investment decisions, or worse for people deciding to drop int'l after a long run-up of US.
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Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

Da5id wrote: Sun May 09, 2021 11:18 am
RJC wrote: Sun May 09, 2021 11:03 am
Da5id wrote: Sun May 09, 2021 10:13 am
RJC wrote: Sun May 09, 2021 10:06 am I meant examples that goes to today's date.
Examples that cater to recency bias to prove what point exactly? The US has outperformed heavily in the last 10 years, what are you expecting such examples to show? And what action would be recommended by such graphs?
The point that it’s not recency bias if you have been staying the course. I’m not finding a good argument for switching now.
Sounds fair enough to me. My point in engaging in the thread isn't to try and persuade people that sticking with 2-fund is wrong. It isn't. It may work out better, may not. I just don't think betting on it is wise, I'd rather own the haystack. I'm more against evangelizing for 2-fund for people making new investment decisions, or worse for people deciding to drop int'l after a long run-up of US.
Bingo bango. Many of us feel the same way.
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals. The correlations between them seem to back up my assumption as they are higher than the correlation between US Stocks and US SCV.
Yep, but some BHs want to argue that int'l is a must. Just like an EF is not a must for everyone.
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Triple digit golfer wrote: Sun May 09, 2021 11:20 am
Da5id wrote: Sun May 09, 2021 11:18 am
RJC wrote: Sun May 09, 2021 11:03 am
Da5id wrote: Sun May 09, 2021 10:13 am
RJC wrote: Sun May 09, 2021 10:06 am I meant examples that goes to today's date.
Examples that cater to recency bias to prove what point exactly? The US has outperformed heavily in the last 10 years, what are you expecting such examples to show? And what action would be recommended by such graphs?
The point that it’s not recency bias if you have been staying the course. I’m not finding a good argument for switching now.
Sounds fair enough to me. My point in engaging in the thread isn't to try and persuade people that sticking with 2-fund is wrong. It isn't. It may work out better, may not. I just don't think betting on it is wise, I'd rather own the haystack. I'm more against evangelizing for 2-fund for people making new investment decisions, or worse for people deciding to drop int'l after a long run-up of US.
Bingo bango. Many of us feel the same way.
Some feel like EF's are a must. Some feel that int'l is a must. But are they?
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Re: The Callan Periodic Table of Investment Returns

Post by mikejuss »

Taylor Larimore wrote: Wed May 05, 2021 1:43 pmHere is a link to The Callan Periodic Table of Investment Returns:

https://www.wtwealthmanagement.com/docu ... -table.pdf

Best wishes.
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This is a fascinating table, Mr. Larimore; thank you for posting it.

My own high-level takeaways: I'm surprised that the performance of international equities (developed and emerging markets) is relatively stronger than that of small- and large-cap US equities. This amounts to a good case for having at least a little ex-US exposure. I'm also surprised at how well REITs performed: I avoid them because I don't like having investments that are sector specific, but perhaps I should give them another look. :beer
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Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

anon_investor wrote: Sun May 09, 2021 11:29 am
Triple digit golfer wrote: Sun May 09, 2021 11:20 am
Da5id wrote: Sun May 09, 2021 11:18 am
RJC wrote: Sun May 09, 2021 11:03 am
Da5id wrote: Sun May 09, 2021 10:13 am

Examples that cater to recency bias to prove what point exactly? The US has outperformed heavily in the last 10 years, what are you expecting such examples to show? And what action would be recommended by such graphs?
The point that it’s not recency bias if you have been staying the course. I’m not finding a good argument for switching now.
Sounds fair enough to me. My point in engaging in the thread isn't to try and persuade people that sticking with 2-fund is wrong. It isn't. It may work out better, may not. I just don't think betting on it is wise, I'd rather own the haystack. I'm more against evangelizing for 2-fund for people making new investment decisions, or worse for people deciding to drop int'l after a long run-up of US.
Bingo bango. Many of us feel the same way.
Some feel like EF's are a must. Some feel that int'l is a must. But are they?
It depends on context. But being a must isn't the threshold. Recommending a stock portfolio to new investors that excludes more than half the world's publicly traded companies and more importantly, nearly half the world's market capitalization, and calling it the haystack is incredibly irresponsible.
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

anon_investor wrote: Sun May 09, 2021 11:28 am
Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals. The correlations between them seem to back up my assumption as they are higher than the correlation between US Stocks and US SCV.
Yep, but some BHs want to argue that int'l is a must. Just like an EF is not a must for everyone.
I don't see anyone arguing that including international stocks is "a must". On that characterization I call "straw man". There's a big difference between saying people SHOULD diversify their portfolio and saying they MUST diversify their portfolio: who is served by conflating the two statements?

Furthermore, the analogy between emergency funds and equity diversification is a weak one. Not everyone needs an emergency fund, and not everyone needs to own stocks. But everyone who DOES have an emergency fund should make sure it's invested in something relatively liquid, and everyone who DOES own stocks should avoid making uncompensated concentrated bets with those stocks.
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Re: Jack Bogle - Two Fund Portfolio

Post by 1789 »

Triple digit golfer wrote: Sun May 09, 2021 11:38 am
anon_investor wrote: Sun May 09, 2021 11:29 am
Triple digit golfer wrote: Sun May 09, 2021 11:20 am
Da5id wrote: Sun May 09, 2021 11:18 am
RJC wrote: Sun May 09, 2021 11:03 am

The point that it’s not recency bias if you have been staying the course. I’m not finding a good argument for switching now.
Sounds fair enough to me. My point in engaging in the thread isn't to try and persuade people that sticking with 2-fund is wrong. It isn't. It may work out better, may not. I just don't think betting on it is wise, I'd rather own the haystack. I'm more against evangelizing for 2-fund for people making new investment decisions, or worse for people deciding to drop int'l after a long run-up of US.
Bingo bango. Many of us feel the same way.
Some feel like EF's are a must. Some feel that int'l is a must. But are they?
It depends on context. But being a must isn't the threshold. Recommending a stock portfolio to new investors that excludes more than half the world's publicly traded companies and more importantly, nearly half the world's market capitalization, and calling it the haystack is incredibly irresponsible.
To my understanding the haystack discussed in this thread is consistent with Bogle’s haystack, right or wrong. His haystack Dont have international.
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Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

1789 wrote: Sun May 09, 2021 11:43 am
Triple digit golfer wrote: Sun May 09, 2021 11:38 am It depends on context. But being a must isn't the threshold. Recommending a stock portfolio to new investors that excludes more than half the world's publicly traded companies and more importantly, nearly half the world's market capitalization, and calling it the haystack is incredibly irresponsible.
To my understanding the haystack discussed in this thread is consistent with Bogle’s haystack, right or wrong. His haystack Dont have international.
The simple principle of "buy the haystack" is "don't try and pick winners and losers, take what the markets give you". Bogle's distaste for int'l is oddly in conflict with that simple principle, as he apparently believed he could pick winners (broad US market) vs losers (int'l markets). Looking backwards, he was correct in terms of returns from the time he advocated for that and now. Looking forward who knows. Me, I'd rather buy the whole haystack rather than defining the haystack down to something someone believes are "the winners" and making bets on how it will end up.
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

vineviz wrote: Sun May 09, 2021 11:41 am
anon_investor wrote: Sun May 09, 2021 11:28 am
Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals. The correlations between them seem to back up my assumption as they are higher than the correlation between US Stocks and US SCV.
Yep, but some BHs want to argue that int'l is a must. Just like an EF is not a must for everyone.
I don't see anyone arguing that including international stocks is "a must". On that characterization I call "straw man". There's a big difference between saying people SHOULD diversify their portfolio and saying they MUST diversify their portfolio: who is served by conflating the two statements?

Furthermore, the analogy between emergency funds and equity diversification is a weak one. Not everyone needs an emergency fund, and not everyone needs to own stocks. But everyone who DOES have an emergency fund should make sure it's invested in something relatively liquid, and everyone who DOES own stocks should avoid making uncompensated concentrated bets with those stocks.
So is anything less than world market cap unacceptable? Many BHs don't hold that much int'l.
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Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

anon_investor wrote: Sun May 09, 2021 12:00 pm
vineviz wrote: Sun May 09, 2021 11:41 am
anon_investor wrote: Sun May 09, 2021 11:28 am
Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals. The correlations between them seem to back up my assumption as they are higher than the correlation between US Stocks and US SCV.
Yep, but some BHs want to argue that int'l is a must. Just like an EF is not a must for everyone.
I don't see anyone arguing that including international stocks is "a must". On that characterization I call "straw man". There's a big difference between saying people SHOULD diversify their portfolio and saying they MUST diversify their portfolio: who is served by conflating the two statements?

Furthermore, the analogy between emergency funds and equity diversification is a weak one. Not everyone needs an emergency fund, and not everyone needs to own stocks. But everyone who DOES have an emergency fund should make sure it's invested in something relatively liquid, and everyone who DOES own stocks should avoid making uncompensated concentrated bets with those stocks.
So is anything less than world market cap unacceptable? Many BHs don't hold that much int'l.
Replying to a post about "straw man", you transformed his "should" into "must" (how I interpret the word unacceptable). Huh.

My answer to you would be of course it is not "unacceptable".
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Da5id wrote: Sun May 09, 2021 12:06 pm
anon_investor wrote: Sun May 09, 2021 12:00 pm
vineviz wrote: Sun May 09, 2021 11:41 am
anon_investor wrote: Sun May 09, 2021 11:28 am
Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals. The correlations between them seem to back up my assumption as they are higher than the correlation between US Stocks and US SCV.
Yep, but some BHs want to argue that int'l is a must. Just like an EF is not a must for everyone.
I don't see anyone arguing that including international stocks is "a must". On that characterization I call "straw man". There's a big difference between saying people SHOULD diversify their portfolio and saying they MUST diversify their portfolio: who is served by conflating the two statements?

Furthermore, the analogy between emergency funds and equity diversification is a weak one. Not everyone needs an emergency fund, and not everyone needs to own stocks. But everyone who DOES have an emergency fund should make sure it's invested in something relatively liquid, and everyone who DOES own stocks should avoid making uncompensated concentrated bets with those stocks.
So is anything less than world market cap unacceptable? Many BHs don't hold that much int'l.
Replying to a post about "straw man", you transformed his "should" into "must" (how I interpret the word unacceptable). Huh.

My answer to you would be of course it is not "unacceptable".
Well "should" is almost the same as "must" in this forum, since people are looking for recommendations. No one has to do anything recommended or suggested on any thread in this forum. It just seems that for anyone that purposely decides to not hold international, they are some that cannot accept that decision.
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Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

anon_investor wrote: Sun May 09, 2021 12:18 pm
Da5id wrote: Sun May 09, 2021 12:06 pm Replying to a post about "straw man", you transformed his "should" into "must" (how I interpret the word unacceptable). Huh.

My answer to you would be of course it is not "unacceptable".
Well "should" is almost the same as "must" in this forum, since people are looking for recommendations. No one has to do anything recommended or suggested on any thread in this forum. It just seems that for anyone that purposely decides to not hold international, they are some that cannot accept that decision.
Should is by no means the same as must. In this forum, or elsewhere.
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Da5id wrote: Sun May 09, 2021 12:22 pm
anon_investor wrote: Sun May 09, 2021 12:18 pm
Da5id wrote: Sun May 09, 2021 12:06 pm Replying to a post about "straw man", you transformed his "should" into "must" (how I interpret the word unacceptable). Huh.

My answer to you would be of course it is not "unacceptable".
Well "should" is almost the same as "must" in this forum, since people are looking for recommendations. No one has to do anything recommended or suggested on any thread in this forum. It just seems that for anyone that purposely decides to not hold international, they are some that cannot accept that decision.
Should is by no means the same as must. In this forum, or elsewhere.
In conceed, there really are no musts aside from legal limitations in investing. Though for the international proponents, for a US investors is world market cap the best way to go? I still see disagreements on this.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Bogleheads -

An excellent article from Allan Roth regarding Jack Bogle’s thoughts of Total Stock Market and the S&P 500.

https://www.cbsnews.com/news/john-c-bog ... ck-market/

Tony
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Re: Jack Bogle - Two Fund Portfolio

Post by Nathan Drake »

anon_investor wrote: Sun May 09, 2021 12:37 pm
Da5id wrote: Sun May 09, 2021 12:22 pm
anon_investor wrote: Sun May 09, 2021 12:18 pm
Da5id wrote: Sun May 09, 2021 12:06 pm Replying to a post about "straw man", you transformed his "should" into "must" (how I interpret the word unacceptable). Huh.

My answer to you would be of course it is not "unacceptable".
Well "should" is almost the same as "must" in this forum, since people are looking for recommendations. No one has to do anything recommended or suggested on any thread in this forum. It just seems that for anyone that purposely decides to not hold international, they are some that cannot accept that decision.
Should is by no means the same as must. In this forum, or elsewhere.
In conceed, there really are no musts aside from legal limitations in investing. Though for the international proponents, for a US investors is world market cap the best way to go? I still see disagreements on this.

The good news is that the amount of diversification needed, though hotly debated, doesn't necessarily need to be market weight to add significant protection. Just 30-40%, as most Target Date Funds recommend, is a perfectly adequate position.

lostdog wrote: Sun May 09, 2021 9:54 am It seems like for some that int vs domestic is a competition.

Diversification with atleast 30 to 40 percent international or even world market cap will give you what they haystack will give you. No performance chasing involved. No confirmation bias needed. No flexing past performance needed. Just accepting the return.
Indeed. And I am a market cap-international investor (60%) since 2015 or so and have been investing since 2006. My annual returns have been around 10%. Has S&P performed better over the period? Sure. But I don't have any FOMO about losing out on a few percentage points over a certain period of time. There seems to be this myth propagated by the performance chasers that defend the US only investment style that a diversified portfolio has done poorly. It has not. I am not 100% invested in exUS stocks (the opposite of what US only are advocating for).

I have a greater FOLO that my US investments, now with P/E multiples twice that of my international holdings, will experience a very prolonged contraction. Luckily, my exposure to US TSM is only approximately 25% of my portfolio, and I have a sizable US SCV tilt.
Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals. The correlations between them seem to back up my assumption as they are higher than the correlation between US Stocks and US SCV.
How long is long enough? These are all highly sensitive to starting/ending dates and can go on for decades. Correlation in the short term will not tell us the magnitude over the long-term. Case in point: this decade. US and exUS are correlated. One has done quite a bit better than the other.

And, as we can see from many of the charts, the difference in performance is mostly down to P/E expansion. That's an investment strategy built on a house of sand.
goonie wrote: Sun May 09, 2021 10:39 am This thread is dangerous for people under the age of 50 who might have 40, 50, or even 60 years of investing left.
Indeed. And it's dangerous when people take the OP's position as fact. "Buy the haystack" but omit most of the equities around the globe. "The two fund portfolio will never underperform" [despite countless evidence to the contrary].

The OP is doing a disservice with his lack of honesty regarding this strategy.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

vineviz wrote: Sun May 09, 2021 11:41 am
I don't see anyone arguing that including international stocks is "a must". On that characterization I call "straw man". There's a big difference between saying people SHOULD diversify their portfolio and saying they MUST diversify their portfolio: who is served by conflating the two statements?

Furthermore, the analogy between emergency funds and equity diversification is a weak one. Not everyone needs an emergency fund, and not everyone needs to own stocks. But everyone who DOES have an emergency fund should make sure it's invested in something relatively liquid, and everyone who DOES own stocks should avoid making uncompensated concentrated bets with those stocks.
Hi Vince -

Would you consider an uncompensated concentrated bets a sector bet such as investing in REITs? At one time I had a large allocation to REITs based on the recommendations of David Swensen as noted in his book “Unconventional Success”.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Nathan Drake wrote: Sun May 09, 2021 1:11 pm
Indeed. And I am a market cap-international investor (60%) since 2015 or so and have been investing since 2006. My annual returns have been around 10%. Has S&P performed better over the period? Sure. But I don't have any FOMO about losing out on a few percentage points over a certain period of time. There seems to be this myth propagated by the performance chasers that defend the US only investment style that a diversified portfolio has done poorly. It has not. I am not 100% invested in exUS stocks (the opposite of what US only are advocating for).
You are unlike most US investors, at least judging by the number of recent crypto threads FOMO is strong. That is pure performance chasing.
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Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

Anon9001 wrote: Sun May 09, 2021 8:01 am Most likely there will be no difference between Two Fund and Three Fund portfolios long term due to both US and Ex-US stock indexes being invested majority multi-nationals. The correlations between them seem to back up my assumption as they are higher than the correlation between US Stocks and US SCV.
If there most likely will be no difference, then the difference is in which strategy has more risk of unlikely, but possible extreme events.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

abuss368 wrote: Sun May 09, 2021 1:19 pm
vineviz wrote: Sun May 09, 2021 11:41 am
I don't see anyone arguing that including international stocks is "a must". On that characterization I call "straw man". There's a big difference between saying people SHOULD diversify their portfolio and saying they MUST diversify their portfolio: who is served by conflating the two statements?

Furthermore, the analogy between emergency funds and equity diversification is a weak one. Not everyone needs an emergency fund, and not everyone needs to own stocks. But everyone who DOES have an emergency fund should make sure it's invested in something relatively liquid, and everyone who DOES own stocks should avoid making uncompensated concentrated bets with those stocks.
Hi Vince -

Would you consider an uncompensated concentrated bets a sector bet such as investing in REITs? At one time I had a large allocation to REITs based on the recommendations of David Swensen as noted in his book “Unconventional Success”.

Tony
I see no reason to hold a dedicated REIT fund.
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Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

DSBH wrote: Sun May 09, 2021 9:34 am If I understand correctly, adding say Total International Index to a Total Stock Index portfolio makes the resulting portfolio more diversified, e.g. a lower risk portfolio. Does it mean that the resulting lower risk portfolio will have a lower expected return in the long run as well?

I am not advocating anything, one way or another, just would like to understand the trade-off/reasoning.
If two investments have the same expected return, but less than full correlation, any combination of the two will have the same expected return, but many combinations will have lower risk because of the lack of full correlation.

My takeaway from the recent US outperformance is not that US equities will win but that the deviation between US and non-US equities can be significant enough that being 100% US or 100% non-US is exposed to diversifiable risk.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

vineviz wrote: Sun May 09, 2021 2:01 pm
abuss368 wrote: Sun May 09, 2021 1:19 pm
vineviz wrote: Sun May 09, 2021 11:41 am
I don't see anyone arguing that including international stocks is "a must". On that characterization I call "straw man". There's a big difference between saying people SHOULD diversify their portfolio and saying they MUST diversify their portfolio: who is served by conflating the two statements?

Furthermore, the analogy between emergency funds and equity diversification is a weak one. Not everyone needs an emergency fund, and not everyone needs to own stocks. But everyone who DOES have an emergency fund should make sure it's invested in something relatively liquid, and everyone who DOES own stocks should avoid making uncompensated concentrated bets with those stocks.
Hi Vince -

Would you consider an uncompensated concentrated bets a sector bet such as investing in REITs? At one time I had a large allocation to REITs based on the recommendations of David Swensen as noted in his book “Unconventional Success”.

Tony
I see no reason to hold a dedicated REIT fund.
Vince -

What do you base that on? I thoughts REITs have a lot fo overlap with small cap funds?

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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