Jack Bogle - Two Fund Portfolio

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Locked
Northern Flicker
Posts: 7773
Joined: Fri Apr 10, 2015 12:29 am

Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

midareff wrote: Fri May 14, 2021 6:02 pm
Please advise what Vanguard of other International Fund (ticker) you were in at that time as I'd like to check your recollection of the happenings 20 + years ago. VGTSX only goes back to 6/26/1996, and VTIAX goes back even less.

Using VGTSX and Morningstars proxy for International equity the performance from 2001 to date; .... international performance is up 183.19% vs. 346.73% for the S&P 500. Respectfully, there is no way that helped your portfolio but recollections are a wonderful thing.... unless you have numbers and tickers your just saying.

BTW, Monarchos won the Kentucky Derby in 2001 ... is that of any relevance today?
I held a combination of CREF Stock (which was still 100% US back then) and CREF Global Equities in proportion needed to make the allocation, then Vanguard funds from 1/1/2008 to present (vtmgx for int'l until 3/2020).

You can do the calculation with Vanguard index funds. The point you may be missing is the glide path. I went from 70% stocks to 60% stocks in 6/2007 and to 55% stocks on 12/31/2007. The dates of the two changes had to do with replacing TIAA Real Estate with a direct real estate holding and reflect the timings of cash flows from that, but the move from 70/30 to 55/45 completed on 12/31/2007 for the stock/bond portfolio was an intentional glide path allocation decision.

In the calculation, I used 70/30 from 6/2001 to 12/31/2007, and 55/45 starting 1/2/2008 as the stock/bond allocations, with 25% of stock in non-US stock, reflective of the stock/bond holdings I had. The reduction to 60% stock for the last half of 2007 as an intermediate step in the glide path change boosted return very slightly, but I left that out of the calculation because it was just a lucky timing artifact. I did not consider cash flows from ongoing portfolio contributions, which would not be easy to do.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
User avatar
Topic Author
abuss368
Posts: 25000
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Hi Bogleheads -

An excellent article from our mentor Jack Bogle “Simple Advice for Investors”

https://www.aarp.org/money/investing/in ... bogle.html

Tony
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
spdoublebass
Posts: 777
Joined: Thu Apr 27, 2017 10:04 pm
Location: NY

Re: Jack Bogle - Two Fund Portfolio

Post by spdoublebass »

abuss368 wrote: Sat May 15, 2021 7:10 am Hi Bogleheads -

An excellent article from our mentor Jack Bogle “Simple Advice for Investors”

https://www.aarp.org/money/investing/in ... bogle.html

Tony
From the article:

What role do you see in a person’s investment portfolio for foreign stocks?

In my first book, in 1993, I wrote that U.S. corporations get about 50 percent of their profits from international sources. So if you own a U.S. stock fund, you already own an international fund. Since then, the U.S. market is up about 720 percent, and the non-U.S. market — the European, Australian and Far East indexes — is up about 230 percent. And you are taking currency risk if you invest overseas.

So you were right, not advocating for overseas stocks.

But that doesn’t mean I’ll be right in the future. So given the tremendous excess of returns of the U.S. market over the past 25 years, maybe it is time for a few years of international outperformance. I would limit yourself to 20 percent of your portfolio in foreign stocks. I don’t do it myself.
I'm trying to think, but nothing happens
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

"So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
Da5id
Posts: 3067
Joined: Fri Feb 26, 2016 8:20 am

Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

Triple digit golfer wrote: Sat May 15, 2021 8:05 am "So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
Same. This strikes me as intellectually rather lazy. Whatever amount of int'l exposure you get from overseas sales by US companies somehow provides the correct amount of international diversification? Why isn't it too much or too little, but rather is just right? Further, if this were the case why would the graphs in the Vanguard paper https://www.vanguard.com/pdf/ISGGEB.pdf show any reduction in volatility as you own more international, since by owning 100% US you already own "enough" international?

I make no predictions about whether international will beat US stocks over any particular future time period. Or vise-versa. Investing in both gets rid of the need of making such prognostications and provides both diversification and a hedge against unforeseen issues in the US market. But after the relative increase in valuations of US stocks, this seems like an unusually odd time to encourage people to go all US. Seems like a risky and unnecessary bet to make.

Image
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

Da5id wrote: Sat May 15, 2021 8:22 am
Triple digit golfer wrote: Sat May 15, 2021 8:05 am "So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
Same. This strikes me as intellectually rather lazy. Whatever amount of int'l exposure you get from overseas sales by US companies somehow provides the correct amount of international diversification? Why isn't it too much or too little, but rather is just right? Further, if this were the case why would the graphs in the Vanguard paper https://www.vanguard.com/pdf/ISGGEB.pdf show any reduction in volatility as you own more international, since by owning 100% US you already own "enough" international?

I make no predictions about whether international will beat US stocks over any particular future time period. Or vise-versa. Investing in both gets rid of the need of making such prognostications and provides both diversification and a hedge against unforeseen issues in the US market. But after the relative increase in valuations of US stocks, this seems like an unusually odd time to encourage people to go all US. Seems like a risky and unnecessary bet to make.

Image
Agreed, and if U.S. provides international diversification due to overseas revenue, why wouldn't the same logic apply to holding international stocks with U.S. revenue?
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Northern Flicker wrote: Fri May 14, 2021 8:02 pm
midareff wrote: Fri May 14, 2021 6:02 pm
Please advise what Vanguard of other International Fund (ticker) you were in at that time as I'd like to check your recollection of the happenings 20 + years ago. VGTSX only goes back to 6/26/1996, and VTIAX goes back even less.

Using VGTSX and Morningstars proxy for International equity the performance from 2001 to date; .... international performance is up 183.19% vs. 346.73% for the S&P 500. Respectfully, there is no way that helped your portfolio but recollections are a wonderful thing.... unless you have numbers and tickers your just saying.

BTW, Monarchos won the Kentucky Derby in 2001 ... is that of any relevance today?
I held a combination of CREF Stock (which was still 100% US back then) and CREF Global Equities in proportion needed to make the allocation, then Vanguard funds from 1/1/2008 to present (vtmgx for int'l until 3/2020).

You can do the calculation with Vanguard index funds. The point you may be missing is the glide path. I went from 70% stocks to 60% stocks in 6/2007 and to 55% stocks on 12/31/2007. The dates of the two changes had to do with replacing TIAA Real Estate with a direct real estate holding and reflect the timings of cash flows from that, but the move from 70/30 to 55/45 completed on 12/31/2007 for the stock/bond portfolio was an intentional glide path allocation decision.

In the calculation, I used 70/30 from 6/2001 to 12/31/2007, and 55/45 starting 1/2/2008 as the stock/bond allocations, with 25% of stock in non-US stock, reflective of the stock/bond holdings I had. The reduction to 60% stock for the last half of 2007 as an intermediate step in the glide path change boosted return very slightly, but I left that out of the calculation because it was just a lucky timing artifact. I did not consider cash flows from ongoing portfolio contributions, which would not be easy to do.
Thanks for your thoughtful reply. I'm sure that made good sense at the time for you with your individual goals and destination point in mind. From the data I see historically, and it has been posted in any of a hundred other threads on the topic, International may outperform from time to time but looking over the scope of an investor's time horizon, from start to end, international has under performed and been a drag on final portfolio results. Look at the larger picture, 1900 forward or if you prefer 1950 forward. I've been in the market for 5 decades myself and a couple, or a few years here or there of international out-performance just aren't enough. Besides the actual performance issue is the fact that more than 42% of the sales of the S&P500 are internationally sourced. The S&P500 is already tied to the rest of the world in the manner that really counts.. $ale$ and profit$. Just because a company has it's legal domicile in Bulgaria or Ireland or other location that makes sense to them or their lawyers outside the US doesn't make it an International company, or an international company worth owning in place of S&P500 or US Total Stock Market investment dollars.

There is 37 pages of back and forth on this thread, mostly about International and diversification. If diversification, from an international perspective, is the only free lunch on Wall Street, it is the most expensive lunch you could have eaten over your investing lifetime. I too ate the pablum coming from this echo chamber for a few years after I first read about this internet site in a Bill Bernstein book, maybe a dozen or likely more years ago. Lots of cute sayings here, they echo back and forth. Many are good, some are excellent, some just don't work as well as the saying would have you expect, but have lots of supporters who can point to specific periods in time when it applied. Over a lifetime it hasn't, over someone else's lifetime looking forward you never know what Mr. Market will do. Vanguard shows the Total US p/e @ 27.3 currently vs. 17.6 for International. Do I expect there will be a time, a year or a few where things return to what mean or average may actually apply in the 2020's .. sure I do. Do I expect the vibrancy and entrepreneurial capitalist spirit in the US to continue to outperform over extended time periods, same sure I do and that's good enough for Warren, was good enough for Jack and certainly is good enough for me.

I've said my peace, others have other opinions and I wish them investing success too. I know what's good for me and I intend to stay with it until data, not emotions or sayings, show me otherwise. Have a great weekend and thanks again for your thoughtful reply..
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Triple digit golfer wrote: Sat May 15, 2021 8:05 am "So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
What you own is a percentage of internationally created sales. The better off a country is the more money it's people have to spend, and the better your goods and services are the more they will spend with your company.
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Triple digit golfer wrote: Sat May 15, 2021 8:27 am
Da5id wrote: Sat May 15, 2021 8:22 am
Triple digit golfer wrote: Sat May 15, 2021 8:05 am "So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
Same. This strikes me as intellectually rather lazy. Whatever amount of int'l exposure you get from overseas sales by US companies somehow provides the correct amount of international diversification? Why isn't it too much or too little, but rather is just right? Further, if this were the case why would the graphs in the Vanguard paper https://www.vanguard.com/pdf/ISGGEB.pdf show any reduction in volatility as you own more international, since by owning 100% US you already own "enough" international?

I make no predictions about whether international will beat US stocks over any particular future time period. Or vise-versa. Investing in both gets rid of the need of making such prognostications and provides both diversification and a hedge against unforeseen issues in the US market. But after the relative increase in valuations of US stocks, this seems like an unusually odd time to encourage people to go all US. Seems like a risky and unnecessary bet to make.

Image
Agreed, and if U.S. provides international diversification due to overseas revenue, why wouldn't the same logic apply to holding international stocks with U.S. revenue?
It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

midareff wrote: Sat May 15, 2021 8:55 am
Triple digit golfer wrote: Sat May 15, 2021 8:05 am "So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
What you own is a percentage of internationally created sales. The better off a country is the more money it's people have to spend, and the better your goods and services are the more they will spend with your company.
Doesn't that mean that the U.S. (presumably the better off country in your example) helps foreign domiciled companies?

Instead of pontificating and slicing this a million ways and trying to justify that one country's stocks out of dozens of large countries is enough, I'd rather hold them all and know that it is enough. Holding them all is the default and I have no reason or special knowledge to do otherwise.
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

midareff wrote: Sat May 15, 2021 8:59 am
Triple digit golfer wrote: Sat May 15, 2021 8:27 am
Da5id wrote: Sat May 15, 2021 8:22 am
Triple digit golfer wrote: Sat May 15, 2021 8:05 am "So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
Same. This strikes me as intellectually rather lazy. Whatever amount of int'l exposure you get from overseas sales by US companies somehow provides the correct amount of international diversification? Why isn't it too much or too little, but rather is just right? Further, if this were the case why would the graphs in the Vanguard paper https://www.vanguard.com/pdf/ISGGEB.pdf show any reduction in volatility as you own more international, since by owning 100% US you already own "enough" international?

I make no predictions about whether international will beat US stocks over any particular future time period. Or vise-versa. Investing in both gets rid of the need of making such prognostications and provides both diversification and a hedge against unforeseen issues in the US market. But after the relative increase in valuations of US stocks, this seems like an unusually odd time to encourage people to go all US. Seems like a risky and unnecessary bet to make.

Image
Agreed, and if U.S. provides international diversification due to overseas revenue, why wouldn't the same logic apply to holding international stocks with U.S. revenue?
It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
We're buying future performance. Big difference. Your post almost literally says to buy the best past performers. Do you not see a problem with that? If I was buying past performance, I wouldn't touch a mutual fund. I'd just pick the single best performing stock and put 100% in it and borrow to put more in it.
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Triple digit golfer wrote: Sat May 15, 2021 9:01 am
midareff wrote: Sat May 15, 2021 8:55 am
Triple digit golfer wrote: Sat May 15, 2021 8:05 am "So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
What you own is a percentage of internationally created sales. The better off a country is the more money it's people have to spend, and the better your goods and services are the more they will spend with your company.
Doesn't that mean that the U.S. (presumably the better off country in your example) helps foreign domiciled companies?

Instead of pontificating and slicing this a million ways and trying to justify that one country's stocks out of dozens of large countries is enough, I'd rather hold them all and know that it is enough. Holding them all is the default and I have no reason or special knowledge to do otherwise.
Yes, it does imply that.

No pontificating involved. Your money, your portfolio, your allocation any way you like.
Da5id
Posts: 3067
Joined: Fri Feb 26, 2016 8:20 am

Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

midareff wrote: Sat May 15, 2021 8:59 am It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
If you are buying performance (and all you can really buy is past performance, mind you), you presumably are also getting risk. Or are you arguing that, whatever relative the earnings multiples, US will always have better risk adjusted performance? I'd prefer not to gamble on that. It feels like unwarranted confidence driven currently by recent performance. But each to their own.
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Triple digit golfer wrote: Sat May 15, 2021 9:03 am
midareff wrote: Sat May 15, 2021 8:59 am
Triple digit golfer wrote: Sat May 15, 2021 8:27 am
Da5id wrote: Sat May 15, 2021 8:22 am
Triple digit golfer wrote: Sat May 15, 2021 8:05 am "So if you own a U.S. stock fund, you already own an international fund."

I greatly respect and admire Jack Bogle. He's a personal hero of mine. But he's wrong here.
Same. This strikes me as intellectually rather lazy. Whatever amount of int'l exposure you get from overseas sales by US companies somehow provides the correct amount of international diversification? Why isn't it too much or too little, but rather is just right? Further, if this were the case why would the graphs in the Vanguard paper https://www.vanguard.com/pdf/ISGGEB.pdf show any reduction in volatility as you own more international, since by owning 100% US you already own "enough" international?

I make no predictions about whether international will beat US stocks over any particular future time period. Or vise-versa. Investing in both gets rid of the need of making such prognostications and provides both diversification and a hedge against unforeseen issues in the US market. But after the relative increase in valuations of US stocks, this seems like an unusually odd time to encourage people to go all US. Seems like a risky and unnecessary bet to make.

Image
Agreed, and if U.S. provides international diversification due to overseas revenue, why wouldn't the same logic apply to holding international stocks with U.S. revenue?
It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
We're buying future performance. Big difference. Your post almost literally says to buy the best past performers. Do you not see a problem with that? If I was buying past performance, I wouldn't touch a mutual fund. I'd just pick the single best performing stock and put 100% in it and borrow to put more in it.
We are buying lots of things that also include our expectation of future performance. If you go to Jai-Lai and Jose wins 54% of his games against Julio do you bet both to cover the night's winners? If you go to the track (ponies) and there is a 4 horse race do you bet them all to show? Historic performance is exactly what it is... a long term record of performance. Factually, the Vanguard Total International Stock Fund has returned 6.05% annually since inception, 11/29/2010, vs. 8.05% annually from inception on 11/13/2010 for the Total US Fund... Admiral Class in both cases. In fact, Total US has out-performed Total International @ the one year mark, 3 years, 5 years, ten years and life time. Using Credit Suisse data in another post tracked long term performance and the US markets out-performed International from (as I recall) 1900 or 1920 forward.

What exactly does "almost literally" mean? Under Cup A is an item that has outperformed the item under Cup B (and C & D and so forth) for the last 120 years. Which cup will you buy? ... and if you want to determine the hottest stock over whatever time period and put everything in that, well, it's your money but that sounds like lazy logic to me.
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Da5id wrote: Sat May 15, 2021 10:14 am
midareff wrote: Sat May 15, 2021 8:59 am It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
If you are buying performance (and all you can really buy is past performance, mind you), you presumably are also getting risk. Or are you arguing that, whatever relative the earnings multiples, US will always have better risk adjusted performance? I'd prefer not to gamble on that. It feels like unwarranted confidence driven currently by recent performance. But each to their own.
Amen, your money, your portfolio.... none of us have a real solid foundation of knowing what the sustainable p/e for a geographic region is going forward, or for how long going forward.
Da5id
Posts: 3067
Joined: Fri Feb 26, 2016 8:20 am

Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

midareff wrote: Sat May 15, 2021 10:27 am
Da5id wrote: Sat May 15, 2021 10:14 am
midareff wrote: Sat May 15, 2021 8:59 am It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
If you are buying performance (and all you can really buy is past performance, mind you), you presumably are also getting risk. Or are you arguing that, whatever relative the earnings multiples, US will always have better risk adjusted performance? I'd prefer not to gamble on that. It feels like unwarranted confidence driven currently by recent performance. But each to their own.
Amen, your money, your portfolio.... none of us have a real solid foundation of knowing what the sustainable p/e for a geographic region is going forward, or for how long going forward.
Totally agree!
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

midareff wrote: Sat May 15, 2021 10:25 am
Triple digit golfer wrote: Sat May 15, 2021 9:03 am
midareff wrote: Sat May 15, 2021 8:59 am
Triple digit golfer wrote: Sat May 15, 2021 8:27 am
Da5id wrote: Sat May 15, 2021 8:22 am

Same. This strikes me as intellectually rather lazy. Whatever amount of int'l exposure you get from overseas sales by US companies somehow provides the correct amount of international diversification? Why isn't it too much or too little, but rather is just right? Further, if this were the case why would the graphs in the Vanguard paper https://www.vanguard.com/pdf/ISGGEB.pdf show any reduction in volatility as you own more international, since by owning 100% US you already own "enough" international?

I make no predictions about whether international will beat US stocks over any particular future time period. Or vise-versa. Investing in both gets rid of the need of making such prognostications and provides both diversification and a hedge against unforeseen issues in the US market. But after the relative increase in valuations of US stocks, this seems like an unusually odd time to encourage people to go all US. Seems like a risky and unnecessary bet to make.

Image
Agreed, and if U.S. provides international diversification due to overseas revenue, why wouldn't the same logic apply to holding international stocks with U.S. revenue?
It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
We're buying future performance. Big difference. Your post almost literally says to buy the best past performers. Do you not see a problem with that? If I was buying past performance, I wouldn't touch a mutual fund. I'd just pick the single best performing stock and put 100% in it and borrow to put more in it.
We are buying lots of things that also include our expectation of future performance. If you go to Jai-Lai and Jose wins 54% of his games against Julio do you bet both to cover the night's winners? If you go to the track (ponies) and there is a 4 horse race do you bet them all to show? Historic performance is exactly what it is... a long term record of performance. Factually, the Vanguard Total International Stock Fund has returned 6.05% annually since inception, 11/29/2010, vs. 8.05% annually from inception on 11/13/2010 for the Total US Fund... Admiral Class in both cases. In fact, Total US has out-performed Total International @ the one year mark, 3 years, 5 years, ten years and life time. Using Credit Suisse data in another post tracked long term performance and the US markets out-performed International from (as I recall) 1900 or 1920 forward.

What exactly does "almost literally" mean? Under Cup A is an item that has outperformed the item under Cup B (and C & D and so forth) for the last 120 years. Which cup will you buy? ... and if you want to determine the hottest stock over whatever time period and put everything in that, well, it's your money but that sounds like lazy logic to me.
I'd buy all the cups and not chase which cup has done well in the past. You're speaking as if international has not had periods of outperformance. It most certainly has.

I don't buy the hottest stock. I buy them all. You are buying the hottest group of stocks, which is lazy logic.
Nathan Drake
Posts: 1175
Joined: Mon Apr 11, 2011 12:28 am

Re: Jack Bogle - Two Fund Portfolio

Post by Nathan Drake »

midareff wrote: Sat May 15, 2021 10:25 am
Triple digit golfer wrote: Sat May 15, 2021 9:03 am
midareff wrote: Sat May 15, 2021 8:59 am
Triple digit golfer wrote: Sat May 15, 2021 8:27 am
Da5id wrote: Sat May 15, 2021 8:22 am

Same. This strikes me as intellectually rather lazy. Whatever amount of int'l exposure you get from overseas sales by US companies somehow provides the correct amount of international diversification? Why isn't it too much or too little, but rather is just right? Further, if this were the case why would the graphs in the Vanguard paper https://www.vanguard.com/pdf/ISGGEB.pdf show any reduction in volatility as you own more international, since by owning 100% US you already own "enough" international?

I make no predictions about whether international will beat US stocks over any particular future time period. Or vise-versa. Investing in both gets rid of the need of making such prognostications and provides both diversification and a hedge against unforeseen issues in the US market. But after the relative increase in valuations of US stocks, this seems like an unusually odd time to encourage people to go all US. Seems like a risky and unnecessary bet to make.

Image
Agreed, and if U.S. provides international diversification due to overseas revenue, why wouldn't the same logic apply to holding international stocks with U.S. revenue?
It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
We're buying future performance. Big difference. Your post almost literally says to buy the best past performers. Do you not see a problem with that? If I was buying past performance, I wouldn't touch a mutual fund. I'd just pick the single best performing stock and put 100% in it and borrow to put more in it.
We are buying lots of things that also include our expectation of future performance. If you go to Jai-Lai and Jose wins 54% of his games against Julio do you bet both to cover the night's winners? If you go to the track (ponies) and there is a 4 horse race do you bet them all to show? Historic performance is exactly what it is... a long term record of performance. Factually, the Vanguard Total International Stock Fund has returned 6.05% annually since inception, 11/29/2010, vs. 8.05% annually from inception on 11/13/2010 for the Total US Fund... Admiral Class in both cases. In fact, Total US has out-performed Total International @ the one year mark, 3 years, 5 years, ten years and life time. Using Credit Suisse data in another post tracked long term performance and the US markets out-performed International from (as I recall) 1900 or 1920 forward.

What exactly does "almost literally" mean? Under Cup A is an item that has outperformed the item under Cup B (and C & D and so forth) for the last 120 years. Which cup will you buy? ... and if you want to determine the hottest stock over whatever time period and put everything in that, well, it's your money but that sounds like lazy logic to me.
Expectation of future performance is also based on the PRICE YOU ARE PAYING for an asset that generates cashflow. US TSM has almost twice the valuations of exUS right now. The "performance" you have gained over the past decade or two has been overwhelmingly speculative, rather than based on superior earnings.

This same mentality of performance chasing would have led an investor in the early 80s to completely abandon US stocks because exUS had absolutely crushed US over the past few decades. But guess what? That party couldn't last forever, and exUS valuations dwarfed US stocks as the 90s approached. Eventually, that ended up unwinding and US stocks ended up with better returns simply because they had much better valuations and were unloved by investors for many years prior....sounds similar, doesn't it?

The price you pay for an asset class matters.
Northern Flicker
Posts: 7773
Joined: Fri Apr 10, 2015 12:29 am

Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

midareff wrote: Thanks for your thoughtful reply. I'm sure that made good sense at the time for you with your individual goals and destination point in mind. From the data I see historically, and it has been posted in any of a hundred other threads on the topic, International may outperform from time to time but looking over the scope of an investor's time horizon, from start to end, international has under performed and been a drag on final portfolio results. Look at the larger picture, 1900 forward or if you prefer 1950 forward. I've been in the market for 5 decades myself and a couple, or a few years here or there of international out-performance just aren't enough. Besides the actual performance issue is the fact that more than 42% of the sales of the S&P500 are internationally sourced.
Fortunately, the primary risk I was, and am trying to protect against by diversifying internationally, namely robust inflation in the US, has not materialized during my investing timeline. I have limited non-US equities to 25% of equities as my best guess/analysis/whatever of what is enough to provide meaningful diversification of risks without excessive risk of assets diverging negatively from consumption from unfavorable exchange rates when I need to use the assets.

Yes, diversification made sense back in 2001, and it makes the same sense today. I could not have predicted the outcome that I experienced, and I would have done fine with a US-only portfolio as well, but proper diversification puts us in a position to be successful with a wider range of outcomes than does a less diversified portfolio.

Outcomes that could have happened, but didn't, and outcomes that could happen, but may not, should not be excluded from an analysis of what seems to be the best diversification for our personal needs.

I would caution against choosing to do int'l diversification or setting the allocation based on an assumption or prediction of mean-reversion. That type of reasoning more often leads one to throwing in the towel and locking in underperformance if and when you are disappointed that the prediction failed.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Triple digit golfer wrote: Sat May 15, 2021 11:00 am
midareff wrote: Sat May 15, 2021 10:25 am
Triple digit golfer wrote: Sat May 15, 2021 9:03 am
midareff wrote: Sat May 15, 2021 8:59 am
Triple digit golfer wrote: Sat May 15, 2021 8:27 am

Agreed, and if U.S. provides international diversification due to overseas revenue, why wouldn't the same logic apply to holding international stocks with U.S. revenue?
It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
We're buying future performance. Big difference. Your post almost literally says to buy the best past performers. Do you not see a problem with that? If I was buying past performance, I wouldn't touch a mutual fund. I'd just pick the single best performing stock and put 100% in it and borrow to put more in it.
We are buying lots of things that also include our expectation of future performance. If you go to Jai-Lai and Jose wins 54% of his games against Julio do you bet both to cover the night's winners? If you go to the track (ponies) and there is a 4 horse race do you bet them all to show? Historic performance is exactly what it is... a long term record of performance. Factually, the Vanguard Total International Stock Fund has returned 6.05% annually since inception, 11/29/2010, vs. 8.05% annually from inception on 11/13/2010 for the Total US Fund... Admiral Class in both cases. In fact, Total US has out-performed Total International @ the one year mark, 3 years, 5 years, ten years and life time. Using Credit Suisse data in another post tracked long term performance and the US markets out-performed International from (as I recall) 1900 or 1920 forward.

What exactly does "almost literally" mean? Under Cup A is an item that has outperformed the item under Cup B (and C & D and so forth) for the last 120 years. Which cup will you buy? ... and if you want to determine the hottest stock over whatever time period and put everything in that, well, it's your money but that sounds like lazy logic to me.
I'd buy all the cups and not chase which cup has done well in the past. You're speaking as if international has not had periods of outperformance. It most certainly has.

I don't buy the hottest stock. I buy them all. You are buying the hottest group of stocks, which is lazy logic.
I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
User avatar
ruralavalon
Posts: 21390
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Jack Bogle - Two Fund Portfolio

Post by ruralavalon »

Northern Flicker wrote: Sat May 15, 2021 12:27 pm
midareff wrote: Thanks for your thoughtful reply. I'm sure that made good sense at the time for you with your individual goals and destination point in mind. From the data I see historically, and it has been posted in any of a hundred other threads on the topic, International may outperform from time to time but looking over the scope of an investor's time horizon, from start to end, international has under performed and been a drag on final portfolio results. Look at the larger picture, 1900 forward or if you prefer 1950 forward. I've been in the market for 5 decades myself and a couple, or a few years here or there of international out-performance just aren't enough. Besides the actual performance issue is the fact that more than 42% of the sales of the S&P500 are internationally sourced.
Fortunately, the primary risk I was, and am trying to protect against by diversifying internationally, namely robust inflation in the US, has not materialized during my investing timeline. I have limited non-US equities to 25% of equities as my best guess/analysis/whatever of what is enough to provide meaningful diversification of risks [emphasis added] without excessive risk of assets diverging negatively from consumption from unfavorable exchange rates when I need to use the assets.

Yes, diversification made sense back in 2001, and it makes the same sense today. I could not have predicted the outcome that I experienced, and I would have done fine with a US-only portfolio as well, but proper diversification puts us in a position to be successful with a wider range of outcomes than does a less diversified portfolio.

Outcomes that could have happened, but didn't, and outcomes that could happen, but may not, should not be excluded from an analysis of what seems to be the best diversification for our personal needs.

I would caution against choosing to do int'l diversification or setting the allocation based on an assumption or prediction of mean-reversion. That type of reasoning more often leads one to throwing in the towel and locking in underperformance if and when you are disappointed that the prediction failed.
I loved this part of your post -- "as my best guess/analysis/whatever of what is enough to provide meaningful diversification of risks".

I think that people who express great certainty on this issue are fooling themselves. In my opinion we should all be humble in approaching this issue.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

midareff wrote: Sat May 15, 2021 12:40 pm
Triple digit golfer wrote: Sat May 15, 2021 11:00 am
midareff wrote: Sat May 15, 2021 10:25 am
Triple digit golfer wrote: Sat May 15, 2021 9:03 am
midareff wrote: Sat May 15, 2021 8:59 am

It does, but at the end of the day aren't we buying market performance with our dollars? If you prefer to buy diversification over long term market performance please continue to do so.
We're buying future performance. Big difference. Your post almost literally says to buy the best past performers. Do you not see a problem with that? If I was buying past performance, I wouldn't touch a mutual fund. I'd just pick the single best performing stock and put 100% in it and borrow to put more in it.
We are buying lots of things that also include our expectation of future performance. If you go to Jai-Lai and Jose wins 54% of his games against Julio do you bet both to cover the night's winners? If you go to the track (ponies) and there is a 4 horse race do you bet them all to show? Historic performance is exactly what it is... a long term record of performance. Factually, the Vanguard Total International Stock Fund has returned 6.05% annually since inception, 11/29/2010, vs. 8.05% annually from inception on 11/13/2010 for the Total US Fund... Admiral Class in both cases. In fact, Total US has out-performed Total International @ the one year mark, 3 years, 5 years, ten years and life time. Using Credit Suisse data in another post tracked long term performance and the US markets out-performed International from (as I recall) 1900 or 1920 forward.

What exactly does "almost literally" mean? Under Cup A is an item that has outperformed the item under Cup B (and C & D and so forth) for the last 120 years. Which cup will you buy? ... and if you want to determine the hottest stock over whatever time period and put everything in that, well, it's your money but that sounds like lazy logic to me.
I'd buy all the cups and not chase which cup has done well in the past. You're speaking as if international has not had periods of outperformance. It most certainly has.

I don't buy the hottest stock. I buy them all. You are buying the hottest group of stocks, which is lazy logic.
I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
Point being, your only argument is performance chasing, which is an awful reason to invest in anything.
Da5id
Posts: 3067
Joined: Fri Feb 26, 2016 8:20 am

Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

midareff wrote: Sat May 15, 2021 12:40 pm I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
The part I find oddest about this view is that it assumes widely know facts aren't incorporated into current prices or valuations. That everyone can know with some great degree of certainty future returns (US outperformance at presumably comparable risk) and buy that future with no corresponding cost. Well, anything is possible I guess
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Triple digit golfer wrote: Sat May 15, 2021 12:55 pm
midareff wrote: Sat May 15, 2021 12:40 pm
Triple digit golfer wrote: Sat May 15, 2021 11:00 am
midareff wrote: Sat May 15, 2021 10:25 am
Triple digit golfer wrote: Sat May 15, 2021 9:03 am

We're buying future performance. Big difference. Your post almost literally says to buy the best past performers. Do you not see a problem with that? If I was buying past performance, I wouldn't touch a mutual fund. I'd just pick the single best performing stock and put 100% in it and borrow to put more in it.
We are buying lots of things that also include our expectation of future performance. If you go to Jai-Lai and Jose wins 54% of his games against Julio do you bet both to cover the night's winners? If you go to the track (ponies) and there is a 4 horse race do you bet them all to show? Historic performance is exactly what it is... a long term record of performance. Factually, the Vanguard Total International Stock Fund has returned 6.05% annually since inception, 11/29/2010, vs. 8.05% annually from inception on 11/13/2010 for the Total US Fund... Admiral Class in both cases. In fact, Total US has out-performed Total International @ the one year mark, 3 years, 5 years, ten years and life time. Using Credit Suisse data in another post tracked long term performance and the US markets out-performed International from (as I recall) 1900 or 1920 forward.

What exactly does "almost literally" mean? Under Cup A is an item that has outperformed the item under Cup B (and C & D and so forth) for the last 120 years. Which cup will you buy? ... and if you want to determine the hottest stock over whatever time period and put everything in that, well, it's your money but that sounds like lazy logic to me.
I'd buy all the cups and not chase which cup has done well in the past. You're speaking as if international has not had periods of outperformance. It most certainly has.

I don't buy the hottest stock. I buy them all. You are buying the hottest group of stocks, which is lazy logic.
I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
Point being, your only argument is performance chasing, which is an awful reason to invest in anything.
I suppose if you read only a portion of what I have written you would be tempted to say that. Some folks invest in real estate, some the stock market, some in other things. Roughly 44% of the sales income and resulting profits come from international sources. I consider that result for the S&P500 and somewhat similar result fore the 3781 stocks in the Total US Market sufficient diversification for risk amelioration. If you are investing for reasons other than performance and return on your money that's your business. LOL, another descriptive adjective guy, how awful.

If all asset classes performed the same there would not be a need to have different asset classes, would there? If investing your hard earned money in under-performing asset classes is your thing good luck with that. If frogs had wings they wouldn't need to hop would they? Have a great weekend.
Last edited by midareff on Sat May 15, 2021 1:08 pm, edited 1 time in total.
Northern Flicker
Posts: 7773
Joined: Fri Apr 10, 2015 12:29 am

Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

ruralavalon wrote: I loved this part of your post -- "as my best guess/analysis/whatever of what is enough to provide meaningful diversification of risks".

I think that people who express great certainty on this issue are fooling themselves. In my opinion we should all be humble in approaching this issue.
It was an actual analysis that I used, but that language was a deference to my belief in the efficient market hypothesis, which I fully believed back in 2001, and still assume to be true for the purposes of any investing decisions that I make. I based the allocation decision on two considerations.

1. Efficient frontier curves I had seen for the S&P 500 and MSCI EAFE indices covering the period roughly 1970-1992 (I don't remember the precise years) showed the optimal risk-return tradeoff at 76% US and 24% EAFE. Even for a period particularly favorable for non-US stocks, the risk of increasing the non-US allocation past about 24% was not rewarded fully.

2. There was a case for holding stocks at global market cap, and a case for holding a US-only portfolio. Splitting the difference by taking the average of the two also landed close to 24%.

The coincidence of the two outcomes felt compelling to me, so that's what I chose, rounding to 25% on my last rebalance.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

midareff wrote: Sat May 15, 2021 1:05 pm
Triple digit golfer wrote: Sat May 15, 2021 12:55 pm
midareff wrote: Sat May 15, 2021 12:40 pm
Triple digit golfer wrote: Sat May 15, 2021 11:00 am
midareff wrote: Sat May 15, 2021 10:25 am

We are buying lots of things that also include our expectation of future performance. If you go to Jai-Lai and Jose wins 54% of his games against Julio do you bet both to cover the night's winners? If you go to the track (ponies) and there is a 4 horse race do you bet them all to show? Historic performance is exactly what it is... a long term record of performance. Factually, the Vanguard Total International Stock Fund has returned 6.05% annually since inception, 11/29/2010, vs. 8.05% annually from inception on 11/13/2010 for the Total US Fund... Admiral Class in both cases. In fact, Total US has out-performed Total International @ the one year mark, 3 years, 5 years, ten years and life time. Using Credit Suisse data in another post tracked long term performance and the US markets out-performed International from (as I recall) 1900 or 1920 forward.

What exactly does "almost literally" mean? Under Cup A is an item that has outperformed the item under Cup B (and C & D and so forth) for the last 120 years. Which cup will you buy? ... and if you want to determine the hottest stock over whatever time period and put everything in that, well, it's your money but that sounds like lazy logic to me.
I'd buy all the cups and not chase which cup has done well in the past. You're speaking as if international has not had periods of outperformance. It most certainly has.

I don't buy the hottest stock. I buy them all. You are buying the hottest group of stocks, which is lazy logic.
I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
Point being, your only argument is performance chasing, which is an awful reason to invest in anything.
I suppose if you read only a portion of what I have written you would be tempted to say that. Some folks invest in real estate, some the stock market, some in other things. Roughly 44% of the sales income and resulting profits come from international sources. I consider that result for the S&P500 and somewhat similar result fore the 3781 stocks in the Total US Market sufficient diversification for risk amelioration. If you are investing for reasons other than performance and return on your money that's your business. LOL, another descriptive adjective guy, how awful.

If all asset classes performed the same there would not be a need to have different asset classes, would there? If investing your hard earned money in under-performing asset classes is your thing good luck with that. If frogs had wings they wouldn't need to hop would they? Have a great weekend.
Classic performance chasing. Let's call it what it is. Performance is only known in hindsight.
User avatar
ruralavalon
Posts: 21390
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Jack Bogle - Two Fund Portfolio

Post by ruralavalon »

Northern Flicker wrote: Sat May 15, 2021 1:40 pm . . . . .
1. Efficient frontier curves I had seen for the S&P 500 and MSCI EAFE indices covering the period roughly 1970-1992 (I don't remember the precise years) showed the optimal risk-return tradeoff at 76% US and 24% EAFE. Even for a period particularly favorable for non-US stocks, the risk of increasing the non-US allocation past about 24% was not rewarded fully.
. . . . .
I would be interested in knowing where you saw that, if you can recall.

I usually suggest the range of 20-30% of stocks in international stocks as a reasonable range. So my end result is the same as yours.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
User avatar
anon_investor
Posts: 6922
Joined: Mon Jun 03, 2019 1:43 pm

Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Triple digit golfer wrote: Sat May 15, 2021 2:21 pm
midareff wrote: Sat May 15, 2021 1:05 pm
Triple digit golfer wrote: Sat May 15, 2021 12:55 pm
midareff wrote: Sat May 15, 2021 12:40 pm
Triple digit golfer wrote: Sat May 15, 2021 11:00 am

I'd buy all the cups and not chase which cup has done well in the past. You're speaking as if international has not had periods of outperformance. It most certainly has.

I don't buy the hottest stock. I buy them all. You are buying the hottest group of stocks, which is lazy logic.
I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
Point being, your only argument is performance chasing, which is an awful reason to invest in anything.
I suppose if you read only a portion of what I have written you would be tempted to say that. Some folks invest in real estate, some the stock market, some in other things. Roughly 44% of the sales income and resulting profits come from international sources. I consider that result for the S&P500 and somewhat similar result fore the 3781 stocks in the Total US Market sufficient diversification for risk amelioration. If you are investing for reasons other than performance and return on your money that's your business. LOL, another descriptive adjective guy, how awful.

If all asset classes performed the same there would not be a need to have different asset classes, would there? If investing your hard earned money in under-performing asset classes is your thing good luck with that. If frogs had wings they wouldn't need to hop would they? Have a great weekend.
Classic performance chasing. Let's call it what it is. Performance is only known in hindsight.
Kind of like how you won't know if you need an emergency fund until after you need it? :twisted:
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

anon_investor wrote: Sat May 15, 2021 2:54 pm
Triple digit golfer wrote: Sat May 15, 2021 2:21 pm
midareff wrote: Sat May 15, 2021 1:05 pm
Triple digit golfer wrote: Sat May 15, 2021 12:55 pm
midareff wrote: Sat May 15, 2021 12:40 pm

I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
Point being, your only argument is performance chasing, which is an awful reason to invest in anything.
I suppose if you read only a portion of what I have written you would be tempted to say that. Some folks invest in real estate, some the stock market, some in other things. Roughly 44% of the sales income and resulting profits come from international sources. I consider that result for the S&P500 and somewhat similar result fore the 3781 stocks in the Total US Market sufficient diversification for risk amelioration. If you are investing for reasons other than performance and return on your money that's your business. LOL, another descriptive adjective guy, how awful.

If all asset classes performed the same there would not be a need to have different asset classes, would there? If investing your hard earned money in under-performing asset classes is your thing good luck with that. If frogs had wings they wouldn't need to hop would they? Have a great weekend.
Classic performance chasing. Let's call it what it is. Performance is only known in hindsight.
Kind of like how you won't know if you need an emergency fund until after you need it? :twisted:
An emergency plan is important. A specific mentally segregated fund, not so much.
User avatar
midareff
Posts: 7585
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: Jack Bogle - Two Fund Portfolio

Post by midareff »

Triple digit golfer wrote: Sat May 15, 2021 2:21 pm
midareff wrote: Sat May 15, 2021 1:05 pm
Triple digit golfer wrote: Sat May 15, 2021 12:55 pm
midareff wrote: Sat May 15, 2021 12:40 pm
Triple digit golfer wrote: Sat May 15, 2021 11:00 am

I'd buy all the cups and not chase which cup has done well in the past. You're speaking as if international has not had periods of outperformance. It most certainly has.

I don't buy the hottest stock. I buy them all. You are buying the hottest group of stocks, which is lazy logic.
I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
Point being, your only argument is performance chasing, which is an awful reason to invest in anything.
I suppose if you read only a portion of what I have written you would be tempted to say that. Some folks invest in real estate, some the stock market, some in other things. Roughly 44% of the sales income and resulting profits come from international sources. I consider that result for the S&P500 and somewhat similar result fore the 3781 stocks in the Total US Market sufficient diversification for risk amelioration. If you are investing for reasons other than performance and return on your money that's your business. LOL, another descriptive adjective guy, how awful.

If all asset classes performed the same there would not be a need to have different asset classes, would there? If investing your hard earned money in under-performing asset classes is your thing good luck with that. If frogs had wings they wouldn't need to hop would they? Have a great weekend.
Classic performance chasing. Let's call it what it is. Performance is only known in hindsight.
That's the beauty of this side of the world triple digit. We are free to call it as we want.
User avatar
anon_investor
Posts: 6922
Joined: Mon Jun 03, 2019 1:43 pm

Re: Jack Bogle - Two Fund Portfolio

Post by anon_investor »

Triple digit golfer wrote: Sat May 15, 2021 3:02 pm
anon_investor wrote: Sat May 15, 2021 2:54 pm
Triple digit golfer wrote: Sat May 15, 2021 2:21 pm
midareff wrote: Sat May 15, 2021 1:05 pm
Triple digit golfer wrote: Sat May 15, 2021 12:55 pm

Point being, your only argument is performance chasing, which is an awful reason to invest in anything.
I suppose if you read only a portion of what I have written you would be tempted to say that. Some folks invest in real estate, some the stock market, some in other things. Roughly 44% of the sales income and resulting profits come from international sources. I consider that result for the S&P500 and somewhat similar result fore the 3781 stocks in the Total US Market sufficient diversification for risk amelioration. If you are investing for reasons other than performance and return on your money that's your business. LOL, another descriptive adjective guy, how awful.

If all asset classes performed the same there would not be a need to have different asset classes, would there? If investing your hard earned money in under-performing asset classes is your thing good luck with that. If frogs had wings they wouldn't need to hop would they? Have a great weekend.
Classic performance chasing. Let's call it what it is. Performance is only known in hindsight.
Kind of like how you won't know if you need an emergency fund until after you need it? :twisted:
An emergency plan is important. A specific mentally segregated fund, not so much.
My EF is part of my emergency plan. My EF is made up of I Bonds, which are only electronically segregated, still part of my fixed income AA.
Triple digit golfer
Posts: 7700
Joined: Mon May 18, 2009 5:57 pm

Re: Jack Bogle - Two Fund Portfolio

Post by Triple digit golfer »

midareff wrote: Sat May 15, 2021 3:07 pm
Triple digit golfer wrote: Sat May 15, 2021 2:21 pm
midareff wrote: Sat May 15, 2021 1:05 pm
Triple digit golfer wrote: Sat May 15, 2021 12:55 pm
midareff wrote: Sat May 15, 2021 12:40 pm

I specifically acknowledged in several posts that International has had periods of out-performance, just not enough of them or by enough. Did you overlook that or was it just not convenient to mention in your response? LOL, the hottest group of 3,781 stocks... for over 100 years. I too could assign definitional terms to practical approaches. However, if you choose to invest in what are proven long term under-performers, that's your business and I won't waste adjectives or descriptions on it. Good luck with your plan.
Point being, your only argument is performance chasing, which is an awful reason to invest in anything.
I suppose if you read only a portion of what I have written you would be tempted to say that. Some folks invest in real estate, some the stock market, some in other things. Roughly 44% of the sales income and resulting profits come from international sources. I consider that result for the S&P500 and somewhat similar result fore the 3781 stocks in the Total US Market sufficient diversification for risk amelioration. If you are investing for reasons other than performance and return on your money that's your business. LOL, another descriptive adjective guy, how awful.

If all asset classes performed the same there would not be a need to have different asset classes, would there? If investing your hard earned money in under-performing asset classes is your thing good luck with that. If frogs had wings they wouldn't need to hop would they? Have a great weekend.
Classic performance chasing. Let's call it what it is. Performance is only known in hindsight.
That's the beauty of this side of the world triple digit. We are free to call it as we want.
You can call it whatever you want. I'll call it what it actually is.
User avatar
tradri
Posts: 607
Joined: Tue Mar 23, 2021 5:42 pm

Re: Jack Bogle - Two Fund Portfolio

Post by tradri »

Can you guys stop glorifying the US?

The data is in, and it is clear that South Africa is the most business friendly and entrepreneurial country in the world, which can be seen by its 100+ years of incredible stock market performance.

Anybody that isn't convinced to put all their money into the South African stock market is just foolish in my opinion.

Image
Northern Flicker
Posts: 7773
Joined: Fri Apr 10, 2015 12:29 am

Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

ruralavalon wrote: Sat May 15, 2021 2:51 pm
Northern Flicker wrote: Sat May 15, 2021 1:40 pm . . . . .
1. Efficient frontier curves I had seen for the S&P 500 and MSCI EAFE indices covering the period roughly 1970-1992 (I don't remember the precise years) showed the optimal risk-return tradeoff at 76% US and 24% EAFE. Even for a period particularly favorable for non-US stocks, the risk of increasing the non-US allocation past about 24% was not rewarded fully.
. . . . .
I would be interested in knowing where you saw that, if you can recall.

I usually suggest the range of 20-30% of stocks in international stocks as a reasonable range. So my end result is the same as yours.
In the 1990's when int'l diversification started becoming fashionable/practical in the US, the efficient frontier graphs for SP500 and MSCI EAFE were floating around in marketing materials from fund companies and brokers promoting the diversification. Here is one through 2007 which skews more toward EAFE after its outperformance 2002-2007:

https://www.msci.com/documents/10199/3d ... 964b65c997

More recent end dates skew more toward US. I don't recommend the method due to the sample bias from different historical periods, but it is one of the tools I used 20 years ago for this purpose, perhaps naively so.
Last edited by Northern Flicker on Sat May 15, 2021 5:04 pm, edited 1 time in total.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Northern Flicker
Posts: 7773
Joined: Fri Apr 10, 2015 12:29 am

Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

I would argue that an implication of assuming the efficient market hypothesis is true is that any mix of US and non-US equities is equally good from the perspective of expected return (EMH implies that all historical outcome data is irrelevant). In that view, the goal of choosing an allocation would be to minimize the variance of long-term returns in real terms.
Last edited by Northern Flicker on Sat May 15, 2021 5:17 pm, edited 1 time in total.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Northern Flicker
Posts: 7773
Joined: Fri Apr 10, 2015 12:29 am

Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

I tend to believe that Mr. Bogle's position on this was influenced significantly by his still being the CEO of Vanguard when int'l equity index funds were first rolled out at Vanguard. Investors today who can buy shares of an EM equity ETF with a mouse click may have no concept for just how challenging it would have been to implement and operate an EM equity index fund at reasonable cost in 1994 when VEIEX was launched.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
User avatar
LadyGeek
Site Admin
Posts: 72941
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Jack Bogle - Two Fund Portfolio

Post by LadyGeek »

I removed an off-topic post. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.
Please remove the emotion from your post and state your concerns in a civil, factual manner.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
Topic Author
abuss368
Posts: 25000
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Jack Bogle - Two Fund Portfolio

Post by abuss368 »

Bogleheads -

An excellent article by our mentor John C. Bogle: “Why you don’t need international stocks; Why to hire an Advisor”

https://www.mymoneyblog.com/bogle-interview.html

Enjoy!
Tony
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
LadyGeek
Site Admin
Posts: 72941
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Jack Bogle - Two Fund Portfolio

Post by LadyGeek »

The article mentions target date funds, as well as holding some international.

I would be remiss to point out that target date funds are excellent one-fund solutions and are highly recommended for new investors.

I would also be remiss pointing out that the target date funds, such as the 60/40 target fund, contain both international stock and bond funds. The closest match is the Vanguard Target Retirement 2025 Fund (VTTVX):

Code: Select all

Ranking by percentage
1		Vanguard Total Stock Market Index Fund Investor Shares	        34.70%
2		Vanguard Total Bond Market II Index Fund Investor Shares**	28.40%
3		Vanguard Total International Stock Index Fund Investor Shares	23.50%
4		Vanguard Total International Bond Index Fund Investor Shares 1	12.10%
5		Vanguard Short-Term Inflation-Protected Securities Index Fund	0.90%
6		Vanguard Total International Bond II Index Fund	                0.40%
Total		                                                              100.00%
Let the experts worry about the internal composition. For new investors or anyone who doesn't want to mess around with investments, it's a one-click solution. No muss, no fuss, done.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
FIREchief
Posts: 6762
Joined: Fri Aug 19, 2016 6:40 pm

Re: Jack Bogle - Two Fund Portfolio

Post by FIREchief »

LadyGeek wrote: Sun May 16, 2021 2:21 pm I would be remiss to point out that target date funds are excellent one-fund solutions and are highly recommended for new investors.
I'm on the other side of the fence. I see target date funds as "one size fits all" approaches. Just as with "one size fits all" clothing, it's really about a bad fit for everybody.
Let the experts worry about the internal composition. For new investors or anyone who doesn't want to mess around with investments, it's a one-click solution. No muss, no fuss, done.
I really don't understand who these experts are. Do they have a long term proven record of being "right" with future market predictions? I'm guessing not. So why would I defer to their expertise with target funds. I believe that people who don't want to mess around with investments are just irresponsible people. If they're investing 10% to 20% of their hard earned money, than they owe it to themselves to at least learn some basics. I've suggested to close family members (when asked) that their best resource may be to join Bogleheads and read the three fund thread. I've also told them that the US vs. total world debate is a "Ford vs. Chevy" discussion that will never be solved, while sharing that I've been 100% US for most of my investing lifetime. Also, if anybody under 50 asked me for how to invest their ongoing 401k/IRA contributions I would tell them that I would put 100% into equities and just focus on job/family/life. That's a far distance from using a target date fund.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Nathan Drake
Posts: 1175
Joined: Mon Apr 11, 2011 12:28 am

Re: Jack Bogle - Two Fund Portfolio

Post by Nathan Drake »

FIREchief wrote: Sun May 16, 2021 3:15 pm
Ladygeek wrote: Sun May 16, 2021 2:21 pm I would be remiss to point out that target date funds are excellent one-fund solutions and are highly recommended for new investors.
I'm on the other side of the fence. I see target date funds as "one size fits all" approaches. Just as with "one size fits all" clothing, it's really about a bad fit for everybody.
Let the experts worry about the internal composition. For new investors or anyone who doesn't want to mess around with investments, it's a one-click solution. No muss, no fuss, done.
I really don't understand who these experts are. Do they have a long term proven record of being "right" with future market predictions? I'm guessing not. So why would I defer to their expertise with target funds. I believe that people who don't want to mess around with investments are just irresponsible people. If they're investing 10% to 20% of their hard earned money, than they owe it to themselves to at least learn some basics. I've suggested to close family members (when asked) that their best resource may be to join Bogleheads and read the three fund thread. I've also told them that the US vs. total world debate is a "Ford vs. Chevy" discussion that will never be solved, while sharing that I've been 100% US for most of my investing lifetime. Also, if anybody under 50 asked me for how to invest their ongoing 401k/IRA contributions I would tell them that I would put 100% into equities and just focus on job/family/life. That's a far distance from using a target date fund.
Target date funds are fantastic because they are a great default choice, simple, low fees, and provide for an automated approach that your typical investor can stick to in many 401k plans. To say it's a "bad for for everybody" seems pretty misguided. They are a great default choice that would fit well for the vast majority of investors to reach their retirement goals, and only if you are capable of staying the course with something riskier (such as higher allocation in stocks or factors like SCV), would it make sense to DIY.

In most cases, it's probably better to invest in a Target Date fund and be completely ignorant about what what you are investing in, than fall victim to overconfidence and invest in things like individual stocks and so forth thinking you can beat the market.
User avatar
ruralavalon
Posts: 21390
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Jack Bogle - Two Fund Portfolio

Post by ruralavalon »

LadyGeek wrote: Sun May 16, 2021 2:21 pm I would be remiss to point out that target date funds are excellent one-fund solutions and are highly recommended for new investors.
A target date fund is an excellent way for a novice to start. It's very diversified.

An allocation fund seems to insulate the investor against behavioral errors, and so produce higher investor returns. Morningstar (8/15/2019) "Mind the Gap 2019", link.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
User avatar
vineviz
Posts: 10262
Joined: Tue May 15, 2018 1:55 pm

Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

FIREchief wrote: Sun May 16, 2021 3:15 pm I really don't understand who these experts are. Do they have a long term proven record of being "right" with future market predictions? I'm guessing not.
Making market predictions is, in fact, NOT what these folks are experts in. Nor is that the value they bring to the table.

The expertise is related to matching the asset allocation of the fund to the lifecycle of the investors in the fund, and in managing the risk levels and diversification levels accordingly.

Only a tiny minority of target date funds take any sort of tactical approach to asset allocation, and Vanguard surely does not do this.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Northern Flicker
Posts: 7773
Joined: Fri Apr 10, 2015 12:29 am

Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

FIREchief wrote: I believe that people who don't want to mess around with investments are just irresponsible people.
Evidence shows that a majority of retirement savers who have educated themselves enough to mess around with their investments will just lower their returns by various errors and/or take undue risk. (I'm using majority in the literal sense, ie "a majority of" is not equivalent to "all").
Last edited by Northern Flicker on Sun May 16, 2021 6:53 pm, edited 1 time in total.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
User avatar
FIREchief
Posts: 6762
Joined: Fri Aug 19, 2016 6:40 pm

Re: Jack Bogle - Two Fund Portfolio

Post by FIREchief »

I'm sure glad I didn't have target date funds over three decades ago when I started investing. I just put 100% into S&P 500 index funds and focused on life. It worked out well! 8-) You won't find that in any target date funds. They're much more "sophisticated." :oops:
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Da5id
Posts: 3067
Joined: Fri Feb 26, 2016 8:20 am

Re: Jack Bogle - Two Fund Portfolio

Post by Da5id »

FIREchief wrote: Sun May 16, 2021 5:41 pm I'm sure glad I didn't have target date funds over three decades ago when I started investing. I just put 100% into S&P 500 index funds and focused on life. It worked out well! 8-) You won't find that in any target date funds. They're much more "sophisticated." :oops:
Target date funds 30 years out are maybe 90% stocks. While I'd not choose them myself for some reasons, I think they are a solid choice for the vast majority of investors. The behavioral issues (including some exhibited in this thread) that many investors have are mitigated by all-in-ones. all-in-ones are IMO a good default choice until or unless people figure out reasons to do something more specifically tailored to their needs and to their risk tolerance.
Nathan Drake
Posts: 1175
Joined: Mon Apr 11, 2011 12:28 am

Re: Jack Bogle - Two Fund Portfolio

Post by Nathan Drake »

FIREchief wrote: Sun May 16, 2021 5:41 pm I'm sure glad I didn't have target date funds over three decades ago when I started investing. I just put 100% into S&P 500 index funds and focused on life. It worked out well! 8-) You won't find that in any target date funds. They're much more "sophisticated." :oops:
Too bad you didn’t throw all your money into Microsoft, Amazon, Apple, etc at the very start instead of holding a bunch of losers in the S&P 500

:oops:
User avatar
vineviz
Posts: 10262
Joined: Tue May 15, 2018 1:55 pm

Re: Jack Bogle - Two Fund Portfolio

Post by vineviz »

FIREchief wrote: Sun May 16, 2021 5:41 pm I'm sure glad I didn't have target date funds over three decades ago when I started investing. I just put 100% into S&P 500 index funds and focused on life. It worked out well! 8-) You won't find that in any target date funds. They're much more "sophisticated." :oops:
We don’t all get to choose the year we’re born, unfortunately.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Northern Flicker
Posts: 7773
Joined: Fri Apr 10, 2015 12:29 am

Re: Jack Bogle - Two Fund Portfolio

Post by Northern Flicker »

FIREchief wrote: Sun May 16, 2021 5:41 pm I'm sure glad I didn't have target date funds over three decades ago when I started investing. I just put 100% into S&P 500 index funds and focused on life. It worked out well! 8-) You won't find that in any target date funds. They're much more "sophisticated." :oops:
A lot of individual investors are 100% stock because they want the robust return. But when the market is down 40%, some/many of them lose their nerve and bail. TDF's and balanced funds help investors with less resolve than yourself stay the course, improving returns for them.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
User avatar
FIREchief
Posts: 6762
Joined: Fri Aug 19, 2016 6:40 pm

Re: Jack Bogle - Two Fund Portfolio

Post by FIREchief »

Nathan Drake wrote: Sun May 16, 2021 6:05 pm
FIREchief wrote: Sun May 16, 2021 5:41 pm I'm sure glad I didn't have target date funds over three decades ago when I started investing. I just put 100% into S&P 500 index funds and focused on life. It worked out well! 8-) You won't find that in any target date funds. They're much more "sophisticated." :oops:
Too bad you didn’t throw all your money into Microsoft, Amazon, Apple, etc at the very start instead of holding a bunch of losers in the S&P 500

:oops:
I believe that the "Microsoft, Amazon, Apple, etc." of my day were things like IBM, Kodak, Bell and Howell and Zerox. :oops:

Hey, if that works for you, than more power to you!! :beer The problem with "conventional wisdom" is that it often......isn't wise. 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
Locked