I'll never regret not having international funds in my portfolio

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theorist
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Re: I'll never regret not having international funds in my portfolio

Post by theorist »

Da5id wrote: Mon Jun 14, 2021 1:12 pm
JonnyDVM wrote: Mon Jun 14, 2021 12:54 pm
Da5id wrote: Mon Jun 14, 2021 12:53 pm
goonie wrote: Mon Jun 14, 2021 12:27 pm I'll never regret not saying that I'll never regret something.
Same!
I wouldn’t not ever agree with that statement
Parsing all this is kind of like parsing "I don't know half of you half as well as I should like; and I like less than half of you half as well as you deserve."
Great way to sneak in a LOTR quote!
Da5id
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Re: I'll never regret not having international funds in my portfolio

Post by Da5id »

MorgansRun wrote: Mon Jun 14, 2021 1:35 pm My international exposure is S&P index companies who do business outside of the US. I'm sure there are many, but what's the flaw in that logic?
Japanese investor before the bubble burst "My international exposure is Nikkei companies who do business outside of Japan. I'm sure there are many, but what's the flaw in that logic?"
luckyducky99
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Re: I'll never regret not having international funds in my portfolio

Post by luckyducky99 »

c.f. this 16 page thread from last week viewtopic.php?f=10&t=171942
Onlineid3089
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Re: I'll never regret not having international funds in my portfolio

Post by Onlineid3089 »

We hold international because of the diversification and we also like the simplicity of target date funds in tax advantaged accounts. We do overweight US relative to the 40% international that target date funds typically have now as I do have a definite home country bias - I like to keep the taxable account with only VTSAX.
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Munir
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Re: I'll never regret not having international funds in my portfolio

Post by Munir »

I do not know how well international markets are regulated and what their quality of service and safety are. I know the US markets slightly better. To me, they are unequal markets. i cannot equate the two and say I need to diversify. I agree with the concept of diversification but only among markets that I know something about and who have some consumer protections. International markets have some countries that fit this definition but others that may not. This uncertainty negates any possible benefits from diversification even if international is outperforming US- which it isn't. Owning the Total Stock Market Fund provides sufficient diversification. Why want want more diversification with an uncertain product?
BalancedJCB19
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Re: I'll never regret not having international funds in my portfolio

Post by BalancedJCB19 »

Grt2bOutdoors wrote: Mon Jun 14, 2021 11:46 am
BalancedJCB19 wrote: Mon Jun 14, 2021 11:05 am I agree 100%.

For the record, we are in very good company because Warren Buffett's investing advice for average folks excludes international also.

Good Luck!
Ironic - since Warren owns international on companies outright. I don’t recall him saying specifically to avoid international companies.
I know, but I'm talking about the advice he gives to the average folks and for what he is doing for his wife. 90% in the Vanguard 500 and 10% in cash or some equivalent. He has been saying this for quite a while now.
NiceUnparticularMan
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Re: I'll never regret not having international funds in my portfolio

Post by NiceUnparticularMan »

MorgansRun wrote: Mon Jun 14, 2021 1:35 pm My international exposure is S&P index companies who do business outside of the US. I'm sure there are many, but what's the flaw in that logic?
So one issue with that logic is the percentage of non-U.S. revenues of SP500 companies depends heavily on sector. Last I knew, IT, materials, energy, and industrial companies had relatively higher non-U.S. revenues. Telecomm, utilities, real estate, health care, financials, and consumer relatively lower. So, by treating those revenues as your "international exposure," you are de facto weighting that exposure toward certain sectors and away from others, versus what you would get in something like Total International.

A second issue is you are of course weighting toward large company revenues only. Total International invests in something like 5300 companies.

A third issue is the weighting by countries are different than you would get with something like Total International.

A fourth issue is country-specific risk is not limited to the consumer sides. It really depends on the industry and its supply chains, but anything that is being produced in the U.S. has production side risk that is not eliminated just because that good or service is then exported. And then there is monetary, tax, and regulatory risk as well.

So, I think it is true the SP500 provides more exposure to ex-U.S. consumer side risks than it otherwise would if all those revenues were from U.S. consumers.

But still, it ends up very distorted from what you would get with something like Total International, and you still have other sorts of country-specific risk even as to those revenues.
Grt2bOutdoors
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Re: I'll never regret not having international funds in my portfolio

Post by Grt2bOutdoors »

BalancedJCB19 wrote: Mon Jun 14, 2021 1:56 pm
Grt2bOutdoors wrote: Mon Jun 14, 2021 11:46 am
BalancedJCB19 wrote: Mon Jun 14, 2021 11:05 am I agree 100%.

For the record, we are in very good company because Warren Buffett's investing advice for average folks excludes international also.

Good Luck!
Ironic - since Warren owns international on companies outright. I don’t recall him saying specifically to avoid international companies.
I know, but I'm talking about the advice he gives to the average folks and for what he is doing for his wife. 90% in the Vanguard 500 and 10% in cash or some equivalent. He has been saying this for quite a while now.
What he plans for his wife is irrelevant. Think to yourself, you spend $10 million a year, your husband leaves you $1 billion and you are age 80. Even if Warren is wrong, she still will not run out of money in her lifetime. Are you so bold as to try the same with a pot of money that may just be enough? Get it wrong and you eat cold porridge. Warren gets it wrong and wife continues on as if nothing as happens.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Nathan Drake
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Re: I'll never regret not having international funds in my portfolio

Post by Nathan Drake »

Oh, you will likely regret it when international outperforms

You’ll then chase performance and get back in after it’s had a good run, you’ll lose out on return had your just stayed the course from the start
lostdog
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Re: I'll never regret not having international funds in my portfolio

Post by lostdog »

If you're looking for more confirmation to drop international, you'll most likely get it here.

What will you do when international starts to outperform for awhile?

Do you think the U.S. will outperform infinity and beyond?
H-Town
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Re: I'll never regret not having international funds in my portfolio

Post by H-Town »

BalancedJCB19 wrote: Mon Jun 14, 2021 1:56 pm
Grt2bOutdoors wrote: Mon Jun 14, 2021 11:46 am
BalancedJCB19 wrote: Mon Jun 14, 2021 11:05 am I agree 100%.

For the record, we are in very good company because Warren Buffett's investing advice for average folks excludes international also.

Good Luck!
Ironic - since Warren owns international on companies outright. I don’t recall him saying specifically to avoid international companies.
I know, but I'm talking about the advice he gives to the average folks and for what he is doing for his wife. 90% in the Vanguard 500 and 10% in cash or some equivalent. He has been saying this for quite a while now.
Does his wife or average folks even invest? Pfff!
HippoSir
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Re: I'll never regret not having international funds in my portfolio

Post by HippoSir »

tvubpwcisla wrote: Mon Jun 14, 2021 10:55 am I have decided to exclude international funds from my portfolio. I have watched a lot of videos about Mr. Bogle and he also excluded them and saw no reason to own any. What are your thoughts on either including or excluding international from your portfolio?
Seems like stock picking, but who am I to judge? I keep a value tilt which is stock picking as well. :sharebeer
Dave55
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Re: I'll never regret not having international funds in my portfolio

Post by Dave55 »

BalancedJCB19 wrote: Mon Jun 14, 2021 1:56 pm
Grt2bOutdoors wrote: Mon Jun 14, 2021 11:46 am
BalancedJCB19 wrote: Mon Jun 14, 2021 11:05 am I agree 100%.

For the record, we are in very good company because Warren Buffett's investing advice for average folks excludes international also.

Good Luck!
Ironic - since Warren owns international on companies outright. I don’t recall him saying specifically to avoid international companies.
I know, but I'm talking about the advice he gives to the average folks and for what he is doing for his wife. 90% in the Vanguard 500 and 10% in cash or some equivalent. He has been saying this for quite a while now.
What is an "average folk"? The guy with $350K portfolio or one with $600K?

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
Gaston
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Re: I'll never regret not having international funds in my portfolio

Post by Gaston »

I think I can make a case for not holding international, but I won’t bore this audience with a list of reasons. I‘ll just say that I’ve bowed to the Boglehead view that one never knows what the future will bring, so one should maintain a broadly-diversified portfolio, including international. Which I do.

And to the OP: Yes, this question has made its rounds many times, but IMHO it hurts nothing to ask it again.
Johnathon Livingston
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Re: I'll never regret not having international funds in my portfolio

Post by Johnathon Livingston »

tvubpwcisla wrote: Mon Jun 14, 2021 10:55 am I have decided to exclude international funds from my portfolio. I have watched a lot of videos about Mr. Bogle and he also excluded them and saw no reason to own any. What are your thoughts on either including or excluding international from your portfolio?
I hold a significant amount of ex-US but I think it’s reasonable to define the market you choose to invest in in terms of your country and your currency. Investing in ex-US forces you to trade currency. It is reasonable to view equities investment as an entrepreneurial risk and currency and foreign political risks as not not being risks that you want to assume as part of equity investing— ie you want to own companies and not trade currency or worry about what the EU or the Chinese Communist Party or the Brazilian government are going to do next. Choosing to avoid those risks comes at the expense of market concentration risk. But some view the US market concentration risk as being less than the risks associated with ex-US or they don’t feel comfortable with ex-US for other reasons. I totally get it. So to you I say, good for you. Do what works for you and may you succeed gloriously.
bondsr4me
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Re: I'll never regret not having international funds in my portfolio

Post by bondsr4me »

tvubpwcisla wrote: Mon Jun 14, 2021 10:55 am I have decided to exclude international funds from my portfolio. I have watched a lot of videos about Mr. Bogle and he also excluded them and saw no reason to own any. What are your thoughts on either including or excluding international from your portfolio?
no international for me….regardless of what Jack Bogle said….I make the decisions for my portfolio….everyone has to do what they feel comfortable with holding.
jebmke
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Re: I'll never regret not having international funds in my portfolio

Post by jebmke »

Things I have excluded:

Gold
Hard real estate
Crypto
Junk bonds
Commodities

There; just save myself 5 posts
When you discover that you are riding a dead horse, the best strategy is to dismount.
stan1
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Re: I'll never regret not having international funds in my portfolio

Post by stan1 »

I've been in my Equity 9ths portfolio since 2008:

4/9 US Total Stock Market
2/9 US SCV
2/9 ex US Total Stock Market
1/9 ex US small (now ex US small value)

Still reflects diversification along with a pragmatic view that US govt has and will continue to go to some pretty extreme lengths to support US based companies.
goblue100
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Re: I'll never regret not having international funds in my portfolio

Post by goblue100 »

nisiprius wrote: Mon Jun 14, 2021 12:48 pm I continue to hold one of the most unorthodox opinions of all. I don't think it matters much.
I think this is true of almost all the hot button topics on the forum. Take SS at 62 or 70? Take your choice. It probably won't matter in the long run for most people. Pay off your mortgage or invest a lump sum? Once again, I don't think it matters nearly as much as most people want to believe.
The key is we have mostly put ourselves in good positions by having the ability to make these decisions. The ability matters far more than the actual decision.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns
Da5id
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Re: I'll never regret not having international funds in my portfolio

Post by Da5id »

goblue100 wrote: Mon Jun 14, 2021 6:45 pm
nisiprius wrote: Mon Jun 14, 2021 12:48 pm I continue to hold one of the most unorthodox opinions of all. I don't think it matters much.
I think this is true of almost all the hot button topics on the forum. Take SS at 62 or 70? Take your choice. It probably won't matter in the long run for most people. Pay off your mortgage or invest a lump sum? Once again, I don't think it matters nearly as much as most people want to believe.
The key is we have mostly put ourselves in good positions by having the ability to make these decisions. The ability matters far more than the actual decision.
One of my favorite web comics explains the fervor quite clearly, which I'm happy to quote whenever this comes up.

Image

Nobody knows in advance if owning international will be really important or a detriment. I'd rather hedge my bets against US stocks having a big shortfall personally. But I do agree that it is second order compared to % equities (of whatever mixture) and savings rate for example.
Trader Joe
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Re: I'll never regret not having international funds in my portfolio

Post by Trader Joe »

tvubpwcisla wrote: Mon Jun 14, 2021 10:55 am I have decided to exclude international funds from my portfolio. I have watched a lot of videos about Mr. Bogle and he also excluded them and saw no reason to own any. What are your thoughts on either including or excluding international from your portfolio?
Yes, I agree with you 100%. I am doing the same and not only do I have 0 regrets, I continue to reap the rewards of this decision.
UpperNwGuy
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Re: I'll never regret not having international funds in my portfolio

Post by UpperNwGuy »

Last week's US vs ex-US thread was much better than this one. It actually had some substantive discussion.
Da5id
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Re: I'll never regret not having international funds in my portfolio

Post by Da5id »

UpperNwGuy wrote: Mon Jun 14, 2021 6:55 pm Last week's US vs ex-US thread was much better than this one. It actually had some substantive discussion.
Yeah, I do like arguing about what graphs and data mean compared to "Bogle! Buffett! Go US!!!!"
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anon_investor
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Re: I'll never regret not having international funds in my portfolio

Post by anon_investor »

UpperNwGuy wrote: Mon Jun 14, 2021 6:55 pm Last week's US vs ex-US thread was much better than this one. It actually had some substantive discussion.
Did that one get locked too?
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anon_investor
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Re: I'll never regret not having international funds in my portfolio

Post by anon_investor »

jebmke wrote: Mon Jun 14, 2021 5:39 pm Things I have excluded:

Gold
Hard real estate
Crypto
Junk bonds
Commodities

There; just save myself 5 posts
Is there soft real estate?
DB2
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Re: I'll never regret not having international funds in my portfolio

Post by DB2 »

There is nothing like a good new daily international thread.

I look at it as owning good companies that exist outside of the U.S. The U.S. has the best today (overall), and is weighted appropriately via global market cap enough in my view through VT/VTWAX, but otherwise I feel like I am holding too much FAANGM with VTI/VTSAX alone.
Last edited by DB2 on Mon Jun 14, 2021 9:57 pm, edited 1 time in total.
cheerfulcharlie
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Re: I'll never regret not having international funds in my portfolio

Post by cheerfulcharlie »

These Int'l vs. US threads are a great opportunity for members to share posts that justify their reasons for the choices they made and by doing so, feel better about themselves.

Along that vein, I would just add to the current discussion that I expect that most people who hold Int'l aren't doing so out of a fervent belief that Int'l will outperform US. Indeed, most people who hold Int'l probably expect that there is a good likelihood that Int'l may well underperform US. Rather, a big reason why people are holding Int'l is the same reason people hold bonds in their portfolio. They aren't doing so because they believe bonds will outperform equity over the long run, but rather because of the diversification benefit it offers (i.e. risk mitigation). Just like those who hold bonds are doing so to mitigate the risk of equities crashing, those who hold Int'l equities are hedging their bets against US-only equities.

I would also emphasize that holding Int'l makes more sense for those of us who plan to spend retirement in various jurisdictions outside the US. Holding Int'l in this case makes more sense as a hedge against US-only inflation.

BTW, not that it matters, but my Int'l target is 29% of my equities. Yes, it is a total arbitrary percentage, but it is one that I selected because I felt that I could live with it long term.
Normchad
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Re: I'll never regret not having international funds in my portfolio

Post by Normchad »

Da5id wrote: Mon Jun 14, 2021 6:51 pm
goblue100 wrote: Mon Jun 14, 2021 6:45 pm
nisiprius wrote: Mon Jun 14, 2021 12:48 pm I continue to hold one of the most unorthodox opinions of all. I don't think it matters much.
I think this is true of almost all the hot button topics on the forum. Take SS at 62 or 70? Take your choice. It probably won't matter in the long run for most people. Pay off your mortgage or invest a lump sum? Once again, I don't think it matters nearly as much as most people want to believe.
The key is we have mostly put ourselves in good positions by having the ability to make these decisions. The ability matters far more than the actual decision.
One of my favorite web comics explains the fervor quite clearly, which I'm happy to quote whenever this comes up.

Image

Nobody knows in advance if owning international will be really important or a detriment. I'd rather hedge my bets against US stocks having a big shortfall personally. But I do agree that it is second order compared to % equities (of whatever mixture) and savings rate for example.
This is a great thread. Note that the OP made no predictions about the performance of international. Didn’t even touch on it.

The only assertion made is that they won’t have any regrets stemming from not having any.

And they might very well be correct. Depends on their personality I suppose.

This board is full of very smart, well informed, well reasoned people. And a bunch are 100% US. And a bunch use international. In cases like these, where there isn’t a broad consensus, I figure neither answer is clearly superior to the other.

I do have international, but I’m not hard over on it. Having 100% US is very likely perfectly fine. And if it’s wring, it’s probably not wrong by much.
RJ5
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Re: I'll never regret not having international funds in my portfolio

Post by RJ5 »

I am 100% VT/VTWAX in tax advantaged accounts
and 60% VTSAX + 40% VTIAX in taxable accounts (re-balanced to match VT/VTWAX once a year)

Investing ~ 20% of my income (including the match) into the above funds over the next 30 years, it doesn't matter US vs INTL...I own it all
SteadyOne
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Re: I'll never regret not having international funds in my portfolio

Post by SteadyOne »

Dave55 wrote: Mon Jun 14, 2021 4:20 pm
BalancedJCB19 wrote: Mon Jun 14, 2021 1:56 pm
Grt2bOutdoors wrote: Mon Jun 14, 2021 11:46 am
BalancedJCB19 wrote: Mon Jun 14, 2021 11:05 am I agree 100%.

For the record, we are in very good company because Warren Buffett's investing advice for average folks excludes international also.

Good Luck!
Ironic - since Warren owns international on companies outright. I don’t recall him saying specifically to avoid international companies.
I know, but I'm talking about the advice he gives to the average folks and for what he is doing for his wife. 90% in the Vanguard 500 and 10% in cash or some equivalent. He has been saying this for quite a while now.
What is an "average folk"? The guy with $350K portfolio or one with $600K?

Dave
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Beensabu
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Re: I'll never regret not having international funds in my portfolio

Post by Beensabu »

anon_investor wrote: Mon Jun 14, 2021 7:02 pm
jebmke wrote: Mon Jun 14, 2021 5:39 pm Things I have excluded:

Gold
Hard real estate
Crypto
Junk bonds
Commodities

There; just save myself 5 posts
Is there soft real estate?
Swampland?
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."
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oldzey
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Re: I'll never regret not having international funds in my portfolio

Post by oldzey »

I'll never regret finding Bogleheads.org

A successful index fund investor goes through four phases:
1) Darkness - takes advice from everyone;
2) Enlightenment - realizes a market return is superior to their return;
3) Complexity - overdoing everything to find optimal;
4) Simplicity - invests in a few total market funds
-– Rick Ferri
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman
Thesaints
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Re: I'll never regret not having international funds in my portfolio

Post by Thesaints »

I still can't understand why investing in 3 funds should be considered "simpler" than investing in 6. Effort needed is exactly the same.
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Mountain Doc
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Re: I'll never regret not having international funds in my portfolio

Post by Mountain Doc »

I think these posts will largely disappear the next time international outperforms for 5-10 years. I believe many people who are just now deciding they don't need international are simply performance chasers, but they rationalize it in other ways because they don't want to believe they are performance chasers.
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JoMoney
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Re: I'll never regret not having international funds in my portfolio

Post by JoMoney »

I don't have a international allocation.
I do think international has a better story for not being as over-valued as U.S. stocks, and are certainly "due" for a (relative) winning period over U.S. stocks sooner or later.
I'm still not changing my allocation, I could be wrong and international continue to have lack-luster performance, but either way there are extra costs and tax considerations as well, and I really don't want to get into the game of chasing what I think will might perform better next year.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Cyrix6x86
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Re: I'll never regret not having international funds in my portfolio

Post by Cyrix6x86 »

I've lived overseas for 8 years, so it makes sense to have some international exposure. It would be a huge disconnect to look at the skyscrapers going up around me and the way people have been pulled out of poverty for me to think that owning international is a decision I will regret in 40-50 years.

75/25 domestic/international at the moment, with the 25% being in FZILX.

I would probably move to 50/50 if the TSP had a true International fund.
visualguy
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Re: I'll never regret not having international funds in my portfolio

Post by visualguy »

Cyrix6x86 wrote: Tue Jun 15, 2021 12:00 am It would be a huge disconnect to look at the skyscrapers going up around me and the way people have been pulled out of poverty for me to think that owning international is a decision I will regret in 40-50 years.
Not clear... It's possible that they spend their resources on pulling people out of poverty and building skyscrapers rather than on making some foreign stockholders richer :wink:

The US is actually pretty unique in prioritizing the interests of stockholders and the stock market to an extreme level. This corporate and government culture isn't exactly universal...
namajones
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Re: I'll never regret not having international funds in my portfolio

Post by namajones »

tvubpwcisla wrote: Mon Jun 14, 2021 10:55 am I have decided to exclude international funds from my portfolio. I have watched a lot of videos about Mr. Bogle and he also excluded them and saw no reason to own any. What are your thoughts on either including or excluding international from your portfolio?
VT is the most boglish of funds. Market weight, entire world. If you can't predict the future, why would you go any other way?

If you want yesterday's returns, you'll need a time machine.
namajones
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Re: I'll never regret not having international funds in my portfolio

Post by namajones »

Cyrix6x86 wrote: Tue Jun 15, 2021 12:00 am I've lived overseas for 8 years, so it makes sense to have some international exposure. It would be a huge disconnect to look at the skyscrapers going up around me and the way people have been pulled out of poverty for me to think that owning international is a decision I will regret in 40-50 years.
People who never get out of the country, physically or virtually, obviously don't see what's going on outside of the country. That's unfortunate, I think, from any number of perspectives, including financial.

One of my best friends is Chinese--the most widely traveled person I know. She loves VT as much as I do, and for the same reasons.
GregG3
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Re: I'll never regret not having international funds in my portfolio

Post by GregG3 »

In a relatively recent newsletter of the Morningstar, the authors estimated that the S&P500 companies derive over 30% of their revenue internationally. I believe Mr. Bogle and Mr. Buffett considered that the exposure to international markets by the top US companies was sufficient for an average US investor and further diversification was not necessary.

This logic implies that the FTSE All World Index carries a much larger exposure to the international markets than the US market cap would suggest.
pseudoiterative
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Re: I'll never regret not having international funds in my portfolio

Post by pseudoiterative »

Burton Malkiel addresses international equity exposure when discussing asset allocation in his book "A Random Walk Down Wall Street".

I'll attempt to paraphrase one of the punchlines:

Suppose you have an equity portfolio with a single US stock. Call the corresponding unsystematic risk of that single-stock portfolio 100% . By restructuring your equity portfolio to instead be a collection of 40+ (diversified) US stocks you can reduce that risk to about 40% . If you allow yourself to invest in international stocks as well as US stocks, you can reduce the risk of your portfolio to around 20% -- the risk is halved compared to a pure US equity portfolio.

I recommend reading the book.
pseudoiterative
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Re: I'll never regret not having international funds in my portfolio

Post by pseudoiterative »

Normchad wrote: Mon Jun 14, 2021 9:18 pm This board is full of very smart, well informed, well reasoned people. And a bunch are 100% US. And a bunch use international. In cases like these, where there isn’t a broad consensus, I figure neither answer is clearly superior to the other.
Here's my dumb idea of the day:
  1. survey each boglehead forum member for their equity allocation (% US, % non-US) and market value of their equity portfolio
  2. use the survey data to construct an index that approximates the US / international exposure of the market-weighted "average" boglehead forum member portfolio
  3. launch a low-fee ETF to passively track that boglehead-forum-portfolio index
  4. convince boglehead forum members to switch their equity portfolios to the new boglehead forum ETF ("what could be more bogleheadish")
Stargazer65
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Re: I'll never regret not having international funds in my portfolio

Post by Stargazer65 »

I'm maintaining, and will continue to hold the best ratio of International to Domestic equity. For anyone that doesn't know what the best ratio is, just ask here.
bumbojumbo
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Re: I'll never regret not having international funds in my portfolio

Post by bumbojumbo »

MorgansRun wrote: Mon Jun 14, 2021 1:35 pm My international exposure is S&P index companies who do business outside of the US. I'm sure there are many, but what's the flaw in that logic?
Apple sells computers so why bother investing in other computer companies?
NiceUnparticularMan
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Re: I'll never regret not having international funds in my portfolio

Post by NiceUnparticularMan »

visualguy wrote: Tue Jun 15, 2021 2:34 am The US is actually pretty unique in prioritizing the interests of stockholders and the stock market to an extreme level. This corporate and government culture isn't exactly universal...
I wouldn't say it is "universal," but it is also a lot less "unique" to the U.S. these days than some people seem to think.

It also has a less certain relationship to stock market results than some people seem to think.

Here is a 2017 attempt to examine all this rigorously:

https://ecgi.global/sites/default/files ... rsiems.pdf

One interesting result is in Figure 1 on Page 8. By the index of shareholder protections they are using, in 1990, among the 30 countries in this study, the U.S. was basically tied with France for second place, just behind Malaysia. By 2013, though, many of the countries in the study had increased their protections a lot, and the U.S. only a little. As a result there were more countries around the same level as the U.S. or indeed sometimes a bit ahead.

As described in the paper, all this is in part the result of ongoing international efforts to standardize shareholder protections around what is sometimes known as the "Anglo-American model." They also suggest that the economic and financial development of various countries is creating more demand for such legal reforms. And I think a lot of people in the U.S., particularly people who may have formed their impressions of these subjects some time ago, may not be aware the extent to which those efforts have been successful in more recent years.

The rest of the paper then tries to assess whether these legal and regulatory changes have actually had a positive influence on stock market development.

And in fact there is SOME positive correlation with things like stock market capitalization and value of shares traded. But the evidence is pretty weak.

There are also some other interesting observations, including that better-developing stock markets may actually help cause legal reforms (rather than the other way around), and that increasing stockholder protections may correlate with things like reducing the number of listed companies.

Anyway, I think personal investors should take at least three things away from studies like this. First, the concept of the U.S. as being an extreme outlier in terms of shareholder protections is quite outdated at this point. Second, the relationship between shareholder protections and things like stock market capitalizations and stock values is weak enough, and subject to enough reverse causality, that it definitely is not true one can predict a country having slightly better protections today means it will have higher increases in capitalizations and stock values going forward, nor indeed higher protections going forward indefinitely.

And finally, given this dynamic situation and all the causal complexity, it seems rather implausible that a personal investor could look at all this and come up with a forward-looking model that would imply a different capital weighting than the one already being chosen by global investors.

Indeed, I'd suggest it is a situation tailor-made for personal investors to be influenced by cognitive and emotional biases.
lostdog
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Re: I'll never regret not having international funds in my portfolio

Post by lostdog »

Mountain Doc wrote: Mon Jun 14, 2021 11:23 pm I think these posts will largely disappear the next time international outperforms for 5-10 years. I believe many people who are just now deciding they don't need international are simply performance chasers, but they rationalize it in other ways because they don't want to believe they are performance chasers.
+1 Exactly.

This needs to continued to be emphasized for the new and novice investors to see so they don't make a huge mistake.

It's mainly performance chasing, jingoism, personal ideologies of countries and cultures outside the U.S., lack.of formal education, dogma and crystal balls.
Tom_T
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Re: I'll never regret not having international funds in my portfolio

Post by Tom_T »

GregG3 wrote: Tue Jun 15, 2021 3:56 am In a relatively recent newsletter of the Morningstar, the authors estimated that the S&P500 companies derive over 30% of their revenue internationally. I believe Mr. Bogle and Mr. Buffett considered that the exposure to international markets by the top US companies was sufficient for an average US investor and further diversification was not necessary.

This logic implies that the FTSE All World Index carries a much larger exposure to the international markets than the US market cap would suggest.
Isn't this misleading? A U.S. corporation is still a U.S. corporation. Let me use a simplistic example, and then someone can tell me that I'm not thinking straight. Let's say something "horrible" happens to Apple here in the U.S.. I don't know -- antitrust breakup, a new tax... make up your own disaster. It's not going to matter if Apple gets x% of its revenue from international, because Apple as an entity will be in a world of trouble.

My question is: isn't there a distinction between getting a percentage of revenue from international markets, vs. being a non-U.S. entity?
NiceUnparticularMan
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Re: I'll never regret not having international funds in my portfolio

Post by NiceUnparticularMan »

GregG3 wrote: Tue Jun 15, 2021 3:56 am In a relatively recent newsletter of the Morningstar, the authors estimated that the S&P500 companies derive over 30% of their revenue internationally. I believe Mr. Bogle and Mr. Buffett considered that the exposure to international markets by the top US companies was sufficient for an average US investor and further diversification was not necessary.
To summarize my prior post above, the ex-U.S.-source revenues in S&P 500 are distorted from actual ex-U.S. stocks in a long list of ways, including by sectors, by company size, and by country. Revenues being sourced ex-U.S. also does not imply they have no U.S. producer-side risk (including tax and regulatory risk).
This logic implies that the FTSE All World Index carries a much larger exposure to the international markets than the US market cap would suggest.
I'm not quite sure what argument you are making here, but I note that of course ex-U.S. companies also have U.S.-source revenues. Using a reasonable global index of some sort implies you have balanced this all out on both the consumer and producer sides. Using only U.S. means you are way overloading on producer-side risk in the U.S., still overloading on consumer-side risk in the U.S., and getting a very distorted exposure to ex-U.S.-source revenues.
IlliniDave
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Re: I'll never regret not having international funds in my portfolio

Post by IlliniDave »

I've got a dollop of both developed and emerging markets, former indexed, latter relatively low-cost active. Percentage-wise I'm too lazy to add it up but probably 20-30% of equity. I'm ambivalent of how valuable they are to my strategy. A handful of years ago the notion allocating per worldwide market cap (at the time it was roughly 45% US, 55% ex-US, iirc) was a popular topic but that was always a bit much for me.
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Morse Code
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Re: I'll never regret not having international funds in my portfolio

Post by Morse Code »

Thesaints wrote: Mon Jun 14, 2021 11:09 pm I still can't understand why investing in 3 funds should be considered "simpler" than investing in 6. Effort needed is exactly the same.
Or why total market investing is "simpler" than factor investing. I have a "Larry Portfolio"...four funds.
Livin' the dream
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