Jack Bogle - Two Fund Portfolio
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Re: Jack Bogle - Two Fund Portfolio
I'm pretty sure Tony meant S&P500 or US TSM being the "average." Even then, I wouldn't call two-funders "never be below average" unless your AA is at least 90/10. Fixed Income provides stability but also hurts the bottom line.
Re: Jack Bogle - Two Fund Portfolio
Can the average investor "stay the course" with an undiversified portfolio if there is a lost decade or longer for the U.S. while they sit and watch ex-US out-perform?
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Re: Jack Bogle - Two Fund Portfolio
And again, that is a circular definition that is misleading. x% US/(100-x%) US stocks will sometimes underperform portfolios with different assets mixed in. Those assets might be international, US SCV, EM, gold, real estate, whatever. That doesn't mean 2 fund isn't a reasonable choice. But saying it is "never below average" is IMO false advertising.Marseille07 wrote: ↑Fri Aug 06, 2021 11:28 am I'm pretty sure Tony meant S&P500 or US TSM being the "average." Even then, I wouldn't call two-funders "never be below average" unless your AA is at least 90/10. Fixed Income provides stability but also hurts the bottom line.
Saying Plan A will never be below average of those doing Plan A is just a tautology.
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Re: Jack Bogle - Two Fund Portfolio
I think we're in agreement. I'm not the one saying anything misleading...Da5id wrote: ↑Fri Aug 06, 2021 11:33 amAnd again, that is a circular definition that is misleading. x% US/(100-x%) US stocks will sometimes underperform portfolios with different assets mixed in. Those assets might be international, US SCV, EM, gold, real estate, whatever. That doesn't mean 2 fund isn't a reasonable choice. But saying it is "never below average" is IMO false advertising.Marseille07 wrote: ↑Fri Aug 06, 2021 11:28 am I'm pretty sure Tony meant S&P500 or US TSM being the "average." Even then, I wouldn't call two-funders "never be below average" unless your AA is at least 90/10. Fixed Income provides stability but also hurts the bottom line.
Saying Plan A will never be below average of those doing Plan A is just a tautology.
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Re: Jack Bogle - Two Fund Portfolio
How is owning the Total US Stock Market undiversified? Owning >3,000 companies is diversified in my book.
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Re: Jack Bogle - Two Fund Portfolio
Since it’s market cap weighted to only 1 country you’re highly exposed/concentrated to 5 stocksBluemnatra wrote: ↑Fri Aug 06, 2021 3:13 pmHow is owning the Total US Stock Market undiversified? Owning >3,000 companies is diversified in my book.
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Re: Jack Bogle - Two Fund Portfolio
Can the average investor "stay the course" with international in their portfolio if there is a lost decade or longer for ex-US while they sit and watch US out-perform? I don't think I need to post thread links because you post in many of the threads where folks discuss bailing on international but that's obviously been a No for many.
So each investor needs to honestly ask themselves: If I pick an equity allocation and it underperforms for a decade, which am I the most likely to stay the course with? For some, it's US, for some it's world cap, for some it's somewhere in between. And that's fine. Know thyself.
Re: Jack Bogle - Two Fund Portfolio
I agree that each to their own. I'm a little puzzled by "I sleep well if my allocation underperforms for a decade as long as it is composed of asset class X rather than a mix of asset classes". But then I think the "sleep well" thing is mostly rationalization of ones choices, whatever they may be.UpsetRaptor wrote: ↑Fri Aug 06, 2021 3:55 pmCan the average investor "stay the course" with international in their portfolio if there is a lost decade or longer for ex-US while they sit and watch US out-perform? I don't think I need to post thread links because you post in many of the threads where folks discuss bailing on international but that's obviously been a No for many.
So each investor needs to honestly ask themselves: If I pick an equity allocation and it underperforms for a decade, which am I the most likely to stay the course with? For some, it's US, for some it's world cap, for some it's somewhere in between. And that's fine. Know thyself.
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Re: Jack Bogle - Two Fund Portfolio
When was the last time international had a dead decade? Who here invests in exUS only? A mixture of exUS and US produced just fine results.UpsetRaptor wrote: ↑Fri Aug 06, 2021 3:55 pmCan the average investor "stay the course" with international in their portfolio if there is a lost decade or longer for ex-US while they sit and watch US out-perform? I don't think I need to post thread links because you post in many of the threads where folks discuss bailing on international but that's obviously been a No for many.
So each investor needs to honestly ask themselves: If I pick an equity allocation and it underperforms for a decade, which am I the most likely to stay the course with? For some, it's US, for some it's world cap, for some it's somewhere in between. And that's fine. Know thyself.
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Re: Jack Bogle - Two Fund Portfolio
My post was referring just to equities which are the same asset class regardless of domicile, but I do agree that most people seem to sleep better if they add in another asset class like fixed-income.Da5id wrote: ↑Fri Aug 06, 2021 4:07 pmI agree that each to their own. I'm a little puzzled by "I sleep well if my allocation underperforms for a decade as long as it is composed of asset class X rather than a mix of asset classes". But then I think the "sleep well" thing is mostly rationalization of ones choices, whatever they may be.UpsetRaptor wrote: ↑Fri Aug 06, 2021 3:55 pmCan the average investor "stay the course" with international in their portfolio if there is a lost decade or longer for ex-US while they sit and watch US out-perform? I don't think I need to post thread links because you post in many of the threads where folks discuss bailing on international but that's obviously been a No for many.
So each investor needs to honestly ask themselves: If I pick an equity allocation and it underperforms for a decade, which am I the most likely to stay the course with? For some, it's US, for some it's world cap, for some it's somewhere in between. And that's fine. Know thyself.
Re: Jack Bogle - Two Fund Portfolio
I guess I wasn't clear. I don't get "I can sleep great with US stocks as my equity allocation if they underperform for a decade, but I lose sleep if I have 20-40% international in the mix when int'l underperforms". It doesn't seem very rational to me. Of course, investor psychology doesn't have to make sense. And some of the "Bogle/Buffett said" is part of the rationalization that would let people stick through the US underperformance when it materializes, which is fine I guess as flopping between US/Int'l is a poor choice. Mind you, I slept fine when I was 100% US, I now sleep fine with 60% US/40% Int'l, I don't seem to have the insomnia issues about my investment allocations that others do.UpsetRaptor wrote: ↑Fri Aug 06, 2021 4:39 pmMy post was referring just to equities which are the same asset class regardless of domicile, but I do agree that most people seem to sleep better if they add in another asset class like fixed-income.Da5id wrote: ↑Fri Aug 06, 2021 4:07 pmI agree that each to their own. I'm a little puzzled by "I sleep well if my allocation underperforms for a decade as long as it is composed of asset class X rather than a mix of asset classes". But then I think the "sleep well" thing is mostly rationalization of ones choices, whatever they may be.UpsetRaptor wrote: ↑Fri Aug 06, 2021 3:55 pmCan the average investor "stay the course" with international in their portfolio if there is a lost decade or longer for ex-US while they sit and watch US out-perform? I don't think I need to post thread links because you post in many of the threads where folks discuss bailing on international but that's obviously been a No for many.
So each investor needs to honestly ask themselves: If I pick an equity allocation and it underperforms for a decade, which am I the most likely to stay the course with? For some, it's US, for some it's world cap, for some it's somewhere in between. And that's fine. Know thyself.
Re: Jack Bogle - Two Fund Portfolio
The logic seems odd to me.
You can watch the U.S. under perform for a decade or longer but not ex-US?
You can watch the U.S. under perform for a decade or longer but not ex-US?
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Re: Jack Bogle - Two Fund Portfolio
US + fixed income has produced fine results. What's your point? There is more than one way to reach ones investment goals.Nathan Drake wrote: ↑Fri Aug 06, 2021 4:29 pmWhen was the last time international had a dead decade? Who here invests in exUS only? A mixture of exUS and US produced just fine results.UpsetRaptor wrote: ↑Fri Aug 06, 2021 3:55 pmCan the average investor "stay the course" with international in their portfolio if there is a lost decade or longer for ex-US while they sit and watch US out-perform? I don't think I need to post thread links because you post in many of the threads where folks discuss bailing on international but that's obviously been a No for many.
So each investor needs to honestly ask themselves: If I pick an equity allocation and it underperforms for a decade, which am I the most likely to stay the course with? For some, it's US, for some it's world cap, for some it's somewhere in between. And that's fine. Know thyself.
Re: Jack Bogle - Two Fund Portfolio
The blissful comfort of Jack Bogle's and Warren Buffett's endorsement of the strategy will carry true believers through the longest drought I guess.
Last edited by Da5id on Fri Aug 06, 2021 6:35 pm, edited 1 time in total.
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Re: Jack Bogle - Two Fund Portfolio
It might not?anon_investor wrote: ↑Fri Aug 06, 2021 5:41 pmUS + fixed income has produced fine results. What's your point? There is more than one way to reach ones investment goals.Nathan Drake wrote: ↑Fri Aug 06, 2021 4:29 pmWhen was the last time international had a dead decade? Who here invests in exUS only? A mixture of exUS and US produced just fine results.UpsetRaptor wrote: ↑Fri Aug 06, 2021 3:55 pmCan the average investor "stay the course" with international in their portfolio if there is a lost decade or longer for ex-US while they sit and watch US out-perform? I don't think I need to post thread links because you post in many of the threads where folks discuss bailing on international but that's obviously been a No for many.
So each investor needs to honestly ask themselves: If I pick an equity allocation and it underperforms for a decade, which am I the most likely to stay the course with? For some, it's US, for some it's world cap, for some it's somewhere in between. And that's fine. Know thyself.
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Re: Jack Bogle - Two Fund Portfolio
Single index concentration risk can be diversified by holding two domestic indexes, S&P500 and mid cap perhaps, that halves down the weighting/exposure to the 5/whatever stocks assuming weighted 50/50. Alternatively combining with international/foreign adds in stock + FX combined gains/losses diversification. Concentration risk is a major risk.Nathan Drake wrote: ↑Fri Aug 06, 2021 3:26 pmSince it’s market cap weighted to only 1 country you’re highly exposed/concentrated to 5 stocksBluemnatra wrote: ↑Fri Aug 06, 2021 3:13 pm How is owning the Total US Stock Market undiversified? Owning >3,000 companies is diversified in my book.
Whilst the S&P500 might source much earnings from foreign activities, many firms hedge their FX exposure, which tends to lower volatility but up's concentration risk. Relatively mild/modest ongoing/regular additional rewards may be of no use if/when a concentrated large loss event occurs. And the longer you're in the game the greater the chance of hitting 'exceptional' circumstances at some point.
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Re: Jack Bogle - Two Fund Portfolio
What is the foreign equivalent to the S&P 500 index and how far back does that index go?
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Re: Jack Bogle - Two Fund Portfolio
MSCI EAFE 1969.Bluemnatra wrote: ↑Fri Aug 06, 2021 7:54 pm What is the foreign equivalent to the S&P 500 index and how far back does that index go?
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Re: Jack Bogle - Two Fund Portfolio
The logic goes both ways. Whatever you choose, you have to be prepared for it to underperform for some periods, whether it's US exclusively or includes ex-US.
Your original question:
Can the average investor "stay the course" with US if there is a lost decade where ex-US outperforms
and the converse
Can the average investor "stay the course" with ex-US if there is a lost decade where US outperforms
are both equally pertinent.
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Re: Jack Bogle - Two Fund Portfolio
One side is extreme at 100% in one territory, the other side is notUpsetRaptor wrote: ↑Fri Aug 06, 2021 8:56 pmThe logic goes both ways. Whatever you choose, you have to be prepared for it to underperform for some periods, whether it's US exclusively or includes ex-US.
Your original question:
Can the average investor "stay the course" with US if there is a lost decade where ex-US outperforms
and the converse
Can the average investor "stay the course" with ex-US if there is a lost decade where US outperforms
are both equally pertinent.
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Re: Jack Bogle - Two Fund Portfolio
Nathan, you and I are going to have to agree to disagree about how "extreme" it is to own "only" US equities. VTI represents thousands of stocks across all styles and sectors, with global exposure, >50% global market cap, covering a market with centuries of strong (out)performance, in an era of increasing globalization where the correlation to ex-US is increasing (.88 since 2000) which by definition means the diversification benefit of adding ex-US has been decreasing.Nathan Drake wrote: ↑Fri Aug 06, 2021 9:06 pmOne side is extreme at 100% in one territory, the other side is notUpsetRaptor wrote: ↑Fri Aug 06, 2021 8:56 pmThe logic goes both ways. Whatever you choose, you have to be prepared for it to underperform for some periods, whether it's US exclusively or includes ex-US.
Your original question:
Can the average investor "stay the course" with US if there is a lost decade where ex-US outperforms
and the converse
Can the average investor "stay the course" with ex-US if there is a lost decade where US outperforms
are both equally pertinent.
But one thing I must say, I admire your resolve and determination to your cause. Looking back, you've been beating the drum since about 2012 of international looks more attractive because of valuations, and you have ostensibly zero wistfulness of your switch in 2010 from 100% US to 50:50. If I ever need to track down someone who owes me money, are you available for hire?
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Re: Jack Bogle - Two Fund Portfolio
If you switched from 100% US only in 2010 and went 50/50 Us and exUS how do you ever recoup the lost growth from US outperformance? Would you need the exact inverse to happen for the same amount of time? Or would you need longer?
And if you don't mind me asking what prompted the switch at that time? I'm currently reading Vanguards "Global Equity Investing: The Benefits of diversification and sizing your allocation" https://personal.vanguard.com/pdf/ISGGE ... Online.pdf and one point was decreased volatility, "we show the benefit of diversification. While the United States had the lowest volatility of any individual country examined, its volatility was slightly higher than that of the global market index." (in the graph it was almost indistinguishable), I'll continue reading...
And if you don't mind me asking what prompted the switch at that time? I'm currently reading Vanguards "Global Equity Investing: The Benefits of diversification and sizing your allocation" https://personal.vanguard.com/pdf/ISGGE ... Online.pdf and one point was decreased volatility, "we show the benefit of diversification. While the United States had the lowest volatility of any individual country examined, its volatility was slightly higher than that of the global market index." (in the graph it was almost indistinguishable), I'll continue reading...
Last edited by Bluemnatra on Fri Aug 06, 2021 10:47 pm, edited 3 times in total.
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Re: Jack Bogle - Two Fund Portfolio
This is what Jack Bogle warned about. This is why it is important to stay the course. 100% US for life!Bluemnatra wrote: ↑Fri Aug 06, 2021 10:31 pm If you switched from 100% US only in 2010 and went 50/50 Us and exUS how do you ever recoup the lost growth from US outperformance? Would you need the exact inverse to happen for the same amount of time? Or would you need longer?
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Re: Jack Bogle - Two Fund Portfolio
UpsetRaptor wrote: ↑Fri Aug 06, 2021 9:26 pmNathan, you and I are going to have to agree to disagree about how "extreme" it is to own "only" US equities. VTI represents thousands of stocks across all styles and sectors, with global exposure, >50% global market cap, covering a market with centuries of strong (out)performance, in an era of increasing globalization where the correlation to ex-US is increasing (.88 since 2000) which by definition means the diversification benefit of adding ex-US has been decreasing.Nathan Drake wrote: ↑Fri Aug 06, 2021 9:06 pmOne side is extreme at 100% in one territory, the other side is notUpsetRaptor wrote: ↑Fri Aug 06, 2021 8:56 pmThe logic goes both ways. Whatever you choose, you have to be prepared for it to underperform for some periods, whether it's US exclusively or includes ex-US.
Your original question:
Can the average investor "stay the course" with US if there is a lost decade where ex-US outperforms
and the converse
Can the average investor "stay the course" with ex-US if there is a lost decade where US outperforms
are both equally pertinent.
But one thing I must say, I admire your resolve and determination to your cause. Looking back, you've been beating the drum since about 2012 of international looks more attractive because of valuations, and you have ostensibly zero wistfulness of your switch in 2010 from 100% US to 50:50. If I ever need to track down someone who owes me money, are you available for hire?
The same arguments could have been made with Japanese stocks in the 50s through 80s. Very diversified, gets most of its revenue from overseas. Represents a large number of stocks. Despite this fact, the valuations made Japanese stocks a poor investment decision that had consequences for decades. US large cap equities hasn't gotten quite as richly valued, but it's been very richly valued before in the past and it's seen very long stretches of not only "poor" performance, but negative performance.
VTSAX has thousands of stocks, but the weighting of so many of them has very little consequence. The mega-caps are so large that they represent a huge amount of concentration in just a few recent high fliers.
Looking at the historical data we don't see extended periods of poor performance for a globally diversified portfolio, absent the great depression. This fact should not allow a US only investor to "sleep better" at night knowing this, quite the opposite. The correlations aren't a meaningful stat as they only represent short term trading. It's the long-term dispersion of returns that matters. And those can (and do) diverge quite substantially.
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Re: Jack Bogle - Two Fund Portfolio
My portfolio was very small in 2010 as I was just starting to invest. VTSAX just so happened to be my first investment because I couldn't afford the minimums to invest in two funds, and at the time VTSAX had the cheapest expenses. When you invest in one fund for a little while you start to look at the evidence to see if you should diversify more as your savings increases.Bluemnatra wrote: ↑Fri Aug 06, 2021 10:31 pm If you switched from 100% US only in 2010 and went 50/50 Us and exUS how do you ever recoup the lost growth from US outperformance? Would you need the exact inverse to happen for the same amount of time? Or would you need longer?
And if you don't mind me asking what prompted the switch at that time? I'm currently reading Vanguards "Global Equity Investing: The Benefits of diversification and sizing your allocation" https://personal.vanguard.com/pdf/ISGGE ... Online.pdf and one point was decreased volatility, "we show the benefit of diversification. While the United States had the lowest volatility of any individual country examined, its volatility was slightly higher than that of the global market index." (in the graph it was almost indistinguishable), I'll continue reading...
I don't consider it a "loss". It's strategy. Back in 2010 P/E for US and exUS was roughly the same. You can't predict the future - so, investing in global market caps seems to be the sensible strategy. I have since increased my diversification a bit more by allocating to additional risk premium factors such as small cap value. My performance over the past decade has been a healthy 10% annualized. Yes, it's shy of the 14% received by a 100% US stock portfolio, but the past is unlikely to repeat and again, the future is not knowable. If US repeats 00-09 and exUS has a healthy positive return, those "paper gains" today being cheered on by the US only crowd could quickly evaporate into underperforance of a globally diversified portfolio.
Of course if everyone knew what the future would have held and what to invest in over this past decade it would not have been US stocks at all, it would have been Crypto.
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Re: Jack Bogle - Two Fund Portfolio
Is there a way to illustrate this using the portfolio visualizer to back test and asset allocation?Nathan Drake wrote: ↑Fri Aug 06, 2021 10:51 pmUpsetRaptor wrote: ↑Fri Aug 06, 2021 9:26 pmNathan, you and I are going to have to agree to disagree about how "extreme" it is to own "only" US equities. VTI represents thousands of stocks across all styles and sectors, with global exposure, >50% global market cap, covering a market with centuries of strong (out)performance, in an era of increasing globalization where the correlation to ex-US is increasing (.88 since 2000) which by definition means the diversification benefit of adding ex-US has been decreasing.Nathan Drake wrote: ↑Fri Aug 06, 2021 9:06 pmOne side is extreme at 100% in one territory, the other side is notUpsetRaptor wrote: ↑Fri Aug 06, 2021 8:56 pmThe logic goes both ways. Whatever you choose, you have to be prepared for it to underperform for some periods, whether it's US exclusively or includes ex-US.
Your original question:
Can the average investor "stay the course" with US if there is a lost decade where ex-US outperforms
and the converse
Can the average investor "stay the course" with ex-US if there is a lost decade where US outperforms
are both equally pertinent.
But one thing I must say, I admire your resolve and determination to your cause. Looking back, you've been beating the drum since about 2012 of international looks more attractive because of valuations, and you have ostensibly zero wistfulness of your switch in 2010 from 100% US to 50:50. If I ever need to track down someone who owes me money, are you available for hire?
The same arguments could have been made with Japanese stocks in the 50s through 80s. Very diversified, gets most of its revenue from overseas. Represents a large number of stocks. Despite this fact, the valuations made Japanese stocks a poor investment decision that had consequences for decades. US large cap equities hasn't gotten quite as richly valued, but it's been very richly valued before in the past and it's seen very long stretches of not only "poor" performance, but negative performance.
VTSAX has thousands of stocks, but the weighting of so many of them has very little consequence. The mega-caps are so large that they represent a huge amount of concentration in just a few recent high fliers.
Looking at the historical data we don't see extended periods of poor performance for a globally diversified portfolio, absent the great depression. This fact should not allow a US only investor to "sleep better" at night knowing this, quite the opposite. The correlations aren't a meaningful stat as they only represent short term trading. It's the long-term dispersion of returns that matters. And those can (and do) diverge quite substantially.
"The greatest enemy of a good plan is the dream of a perfect plan"
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Re: Jack Bogle - Two Fund Portfolio
Right. But this thread started with someone not staying the course and ditching international. Not the other way around. So it kind of adds to lostdog’s point.UpsetRaptor wrote: ↑Fri Aug 06, 2021 3:55 pmCan the average investor "stay the course" with international in their portfolio if there is a lost decade or longer for ex-US while they sit and watch US out-perform? I don't think I need to post thread links because you post in many of the threads where folks discuss bailing on international but that's obviously been a No for many.
So each investor needs to honestly ask themselves: If I pick an equity allocation and it underperforms for a decade, which am I the most likely to stay the course with? For some, it's US, for some it's world cap, for some it's somewhere in between. And that's fine. Know thyself.
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Re: Jack Bogle - Two Fund Portfolio
Okay, say 2020-2030 is a repeat of 00-09, at the end of 2030 would the end result be the same if you stayed 100% US 2010 through 2030? I'm really just trying to learn and not trying to be critical at all, because this is what I've gone through in my own mind and I decided in the end to keep it simple and stay the course fully expecting underperformance for stretches of time, but in the end believing the results will be very similar.Nathan Drake wrote: ↑Fri Aug 06, 2021 10:58 pmMy portfolio was very small in 2010 as I was just starting to invest. VTSAX just so happened to be my first investment because I couldn't afford the minimums to invest in two funds, and at the time VTSAX had the cheapest expenses. When you invest in one fund for a little while you start to look at the evidence to see if you should diversify more as your savings increases.Bluemnatra wrote: ↑Fri Aug 06, 2021 10:31 pm If you switched from 100% US only in 2010 and went 50/50 Us and exUS how do you ever recoup the lost growth from US outperformance? Would you need the exact inverse to happen for the same amount of time? Or would you need longer?
And if you don't mind me asking what prompted the switch at that time? I'm currently reading Vanguards "Global Equity Investing: The Benefits of diversification and sizing your allocation" https://personal.vanguard.com/pdf/ISGGE ... Online.pdf and one point was decreased volatility, "we show the benefit of diversification. While the United States had the lowest volatility of any individual country examined, its volatility was slightly higher than that of the global market index." (in the graph it was almost indistinguishable), I'll continue reading...
I don't consider it a "loss". It's strategy. Back in 2010 P/E for US and exUS was roughly the same. You can't predict the future - so, investing in global market caps seems to be the sensible strategy. I have since increased my diversification a bit more by allocating to additional risk premium factors such as small cap value. My performance over the past decade has been a healthy 10% annualized. Yes, it's shy of the 14% received by a 100% US stock portfolio, but the past is unlikely to repeat and again, the future is not knowable. If US repeats 00-09 and exUS has a healthy positive return, those "paper gains" today being cheered on by the US only crowd could quickly evaporate into underperforance of a globally diversified portfolio.
Of course if everyone knew what the future would have held and what to invest in over this past decade it would not have been US stocks at all, it would have been Crypto.
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Re: Jack Bogle - Two Fund Portfolio
Yes, their tools allow for that. You need to input regular contributions for the backtest.Bluemnatra wrote: ↑Fri Aug 06, 2021 11:02 pmIs there a way to illustrate this using the portfolio visualizer to back test and asset allocation?Nathan Drake wrote: ↑Fri Aug 06, 2021 10:51 pmUpsetRaptor wrote: ↑Fri Aug 06, 2021 9:26 pmNathan, you and I are going to have to agree to disagree about how "extreme" it is to own "only" US equities. VTI represents thousands of stocks across all styles and sectors, with global exposure, >50% global market cap, covering a market with centuries of strong (out)performance, in an era of increasing globalization where the correlation to ex-US is increasing (.88 since 2000) which by definition means the diversification benefit of adding ex-US has been decreasing.Nathan Drake wrote: ↑Fri Aug 06, 2021 9:06 pmOne side is extreme at 100% in one territory, the other side is notUpsetRaptor wrote: ↑Fri Aug 06, 2021 8:56 pm
The logic goes both ways. Whatever you choose, you have to be prepared for it to underperform for some periods, whether it's US exclusively or includes ex-US.
Your original question:
Can the average investor "stay the course" with US if there is a lost decade where ex-US outperforms
and the converse
Can the average investor "stay the course" with ex-US if there is a lost decade where US outperforms
are both equally pertinent.
But one thing I must say, I admire your resolve and determination to your cause. Looking back, you've been beating the drum since about 2012 of international looks more attractive because of valuations, and you have ostensibly zero wistfulness of your switch in 2010 from 100% US to 50:50. If I ever need to track down someone who owes me money, are you available for hire?
The same arguments could have been made with Japanese stocks in the 50s through 80s. Very diversified, gets most of its revenue from overseas. Represents a large number of stocks. Despite this fact, the valuations made Japanese stocks a poor investment decision that had consequences for decades. US large cap equities hasn't gotten quite as richly valued, but it's been very richly valued before in the past and it's seen very long stretches of not only "poor" performance, but negative performance.
VTSAX has thousands of stocks, but the weighting of so many of them has very little consequence. The mega-caps are so large that they represent a huge amount of concentration in just a few recent high fliers.
Looking at the historical data we don't see extended periods of poor performance for a globally diversified portfolio, absent the great depression. This fact should not allow a US only investor to "sleep better" at night knowing this, quite the opposite. The correlations aren't a meaningful stat as they only represent short term trading. It's the long-term dispersion of returns that matters. And those can (and do) diverge quite substantially.
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Re: Jack Bogle - Two Fund Portfolio
That's not really knowable if the end result is the same. But assuming it is, why would you want a portfolio that is more prone to prolonged negative or flat performance than one that more consistently goes up?Bluemnatra wrote: ↑Fri Aug 06, 2021 11:09 pmOkay, say 2020-2030 is a repeat of 00-09, at the end of 2030 would the end result be the same if you stayed 100% US 2010 through 2030? I'm really just trying to learn and not trying to be critical at all, because this is what I've gone through in my own mind and I decided in the end to keep it simple and stay the course fully expecting underperformance for stretches of time, but in the end believing the results will be very similar.Nathan Drake wrote: ↑Fri Aug 06, 2021 10:58 pmMy portfolio was very small in 2010 as I was just starting to invest. VTSAX just so happened to be my first investment because I couldn't afford the minimums to invest in two funds, and at the time VTSAX had the cheapest expenses. When you invest in one fund for a little while you start to look at the evidence to see if you should diversify more as your savings increases.Bluemnatra wrote: ↑Fri Aug 06, 2021 10:31 pm If you switched from 100% US only in 2010 and went 50/50 Us and exUS how do you ever recoup the lost growth from US outperformance? Would you need the exact inverse to happen for the same amount of time? Or would you need longer?
And if you don't mind me asking what prompted the switch at that time? I'm currently reading Vanguards "Global Equity Investing: The Benefits of diversification and sizing your allocation" https://personal.vanguard.com/pdf/ISGGE ... Online.pdf and one point was decreased volatility, "we show the benefit of diversification. While the United States had the lowest volatility of any individual country examined, its volatility was slightly higher than that of the global market index." (in the graph it was almost indistinguishable), I'll continue reading...
I don't consider it a "loss". It's strategy. Back in 2010 P/E for US and exUS was roughly the same. You can't predict the future - so, investing in global market caps seems to be the sensible strategy. I have since increased my diversification a bit more by allocating to additional risk premium factors such as small cap value. My performance over the past decade has been a healthy 10% annualized. Yes, it's shy of the 14% received by a 100% US stock portfolio, but the past is unlikely to repeat and again, the future is not knowable. If US repeats 00-09 and exUS has a healthy positive return, those "paper gains" today being cheered on by the US only crowd could quickly evaporate into underperforance of a globally diversified portfolio.
Of course if everyone knew what the future would have held and what to invest in over this past decade it would not have been US stocks at all, it would have been Crypto.
It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
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Re: Jack Bogle - Two Fund Portfolio
For me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
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Re: Jack Bogle - Two Fund Portfolio
I would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
- anon_investor
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Re: Jack Bogle - Two Fund Portfolio
Are you full on world market cap now?Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
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Re: Jack Bogle - Two Fund Portfolio
60/40anon_investor wrote: ↑Sat Aug 07, 2021 9:00 amAre you full on world market cap now?Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
- anon_investor
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Re: Jack Bogle - Two Fund Portfolio
That is pretty close to world market cap (58/42). Do you have a ratio float range?Triple digit golfer wrote: ↑Sat Aug 07, 2021 9:07 am60/40anon_investor wrote: ↑Sat Aug 07, 2021 9:00 amAre you full on world market cap now?Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
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Re: Jack Bogle - Two Fund Portfolio
I haven't thought much about it, but 60/40 sounds good long term even if market cap floats around. If it goes to 50/50 that'll mean international outperformed and I'll probably be buying more U.S. to offset. And vice versa.anon_investor wrote: ↑Sat Aug 07, 2021 9:10 amThat is pretty close to world market cap (58/42). Do you have a ratio float range?Triple digit golfer wrote: ↑Sat Aug 07, 2021 9:07 am60/40anon_investor wrote: ↑Sat Aug 07, 2021 9:00 amAre you full on world market cap now?Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 am
For me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?
Speaking only for myself, that's good enough. Others may have different preferences.
Re: Jack Bogle - Two Fund Portfolio
100% Japan stocks for life!...anon_investor wrote: ↑Fri Aug 06, 2021 10:32 pmThis is what Jack Bogle warned about. This is why it is important to stay the course. 100% US for life!Bluemnatra wrote: ↑Fri Aug 06, 2021 10:31 pm If you switched from 100% US only in 2010 and went 50/50 Us and exUS how do you ever recoup the lost growth from US outperformance? Would you need the exact inverse to happen for the same amount of time? Or would you need longer?
Because a wise investing man in Japan said so.
Stocks-80% || Bonds-20% || Taxable-VTI/VXUS || IRA-VT/BNDW
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Re: Jack Bogle - Two Fund Portfolio
That's almost 2 years ago. I think it's OK to update your IPS from time to time.spdoublebass wrote: ↑Fri Aug 06, 2021 11:07 pm Right. But this thread started with someone not staying the course and ditching international. Not the other way around. So it kind of adds to lostdog’s point.
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Re: Jack Bogle - Two Fund Portfolio
As I said, others have different preferences. So, enjoy the other half of the world's equity market capitalization! You must have the patience of a saint! Hang in there.Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
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Re: Jack Bogle - Two Fund Portfolio
All outperformance in the last 70 years occurred in about the last decade. Now would seem like a terrible time to not hang in there. Hang I shall!GoneOnTilt wrote: ↑Sat Aug 07, 2021 11:22 amAs I said, others have different preferences. So, enjoy the other half of the world's equity market capitalization! You must have the patience of a saint! Hang in there.Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
I can't predict the future, so past performance is really of little use.
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Re: Jack Bogle - Two Fund Portfolio
I would prefer total market (thousands of companies) but S&P 500 tracks total market so closely you need some magnification to see the difference in a comparison chart.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
Never the less, I now own S&P 500, having swapped into it when I TLHd Total Stock Market a while back. It would cost to switch back so I stay where I am. I still have a few thousand get-out-of-income-taxes cards to cash in!
I keep telling myself about that close tracking AND (in contradiction to that) tell myself that S&P 500 is "curated" to hold only the best stocks! Perhaps irrational, but comforting.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Re: Jack Bogle - Two Fund Portfolio
A Japanese investor saw huge increases in 50s - 80s and probably thought the same thing. Why would I need to invest in anything else?GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
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- anon_investor
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Re: Jack Bogle - Two Fund Portfolio
We don't live in Japan. Japan was not a hegemon, it never was, even though it tried to be (see WWII).Nathan Drake wrote: ↑Sat Aug 07, 2021 1:03 pmA Japanese investor saw huge increases in 50s - 80s and probably thought the same thing. Why would I need to invest in anything else?GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
- anon_investor
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Re: Jack Bogle - Two Fund Portfolio
So you're saying international needed a lost decade from US just to get to even?Triple digit golfer wrote: ↑Sat Aug 07, 2021 12:45 pmAll outperformance in the last 70 years occurred in about the last decade. Now would seem like a terrible time to not hang in there. Hang I shall!GoneOnTilt wrote: ↑Sat Aug 07, 2021 11:22 amAs I said, others have different preferences. So, enjoy the other half of the world's equity market capitalization! You must have the patience of a saint! Hang in there.Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
I can't predict the future, so past performance is really of little use.
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Re: Jack Bogle - Two Fund Portfolio
I'm sure a Japanese investor in this time also felt his choice was infallible. Japan never crumbled as a country during this period. It just experienced very poor returns due to overvaluation and speculative fervor.anon_investor wrote: ↑Sat Aug 07, 2021 1:09 pmWe don't live in Japan. Japan was not a hegemon, it never was, even though it tried to be (see WWII).Nathan Drake wrote: ↑Sat Aug 07, 2021 1:03 pmA Japanese investor saw huge increases in 50s - 80s and probably thought the same thing. Why would I need to invest in anything else?GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
US is not immune to speculative fervors.
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Re: Jack Bogle - Two Fund Portfolio
I was just being a wise guy. At the end of the day, I think we're both going to do great! I do own a small amount of ex-US in two balanced funds I own, simply because they fit my needs and happen to own ex-US. That's fine. Lots of great companies in there too. For whatever reason, the S&P 500 sits well with me and helps me stay the course.Triple digit golfer wrote: ↑Sat Aug 07, 2021 12:45 pmAll outperformance in the last 70 years occurred in about the last decade. Now would seem like a terrible time to not hang in there. Hang I shall!GoneOnTilt wrote: ↑Sat Aug 07, 2021 11:22 amAs I said, others have different preferences. So, enjoy the other half of the world's equity market capitalization! You must have the patience of a saint! Hang in there.Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 amFor me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?Nathan Drake wrote: ↑Fri Aug 06, 2021 11:13 pm It's not very difficult to keep it simple with a globally diversified portfolio. You could dump it in a Target Date fund (1 FUND! Simple) and get US, exUS and Fixed income in one package.
Speaking only for myself, that's good enough. Others may have different preferences.
I can't predict the future, so past performance is really of little use.
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Re: Jack Bogle - Two Fund Portfolio
No. I'm saying that the 60 or so years from 1950 on had even performance.anon_investor wrote: ↑Sat Aug 07, 2021 1:10 pmSo you're saying international needed a lost decade from US just to get to even?Triple digit golfer wrote: ↑Sat Aug 07, 2021 12:45 pmAll outperformance in the last 70 years occurred in about the last decade. Now would seem like a terrible time to not hang in there. Hang I shall!GoneOnTilt wrote: ↑Sat Aug 07, 2021 11:22 amAs I said, others have different preferences. So, enjoy the other half of the world's equity market capitalization! You must have the patience of a saint! Hang in there.Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 amI would want to own it. I'd also like to own the other half of the world's equity market capitalization.GoneOnTilt wrote: ↑Sat Aug 07, 2021 7:03 am
For me, it's simple as well. I own five hundred of the largest, most successful companies in the world, domiciled in my home country. Who wouldn't want to own such an investment?
Speaking only for myself, that's good enough. Others may have different preferences.
I can't predict the future, so past performance is really of little use.
I read it somewhere. No idea how to actually validate.
Edit: yes, that's what I'm saying, I suppose. Didn't think of that. Maybe international had a lost decade in there as well, so U.S. needed international to have a lost decade to be even as well!
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Re: Jack Bogle - Two Fund Portfolio
Not necessarily. Many investors who enter retirement choose to purchase a SPIA with a portion of their assets. Millions of people retire each year, https://tinyurl.com/yznjj6cyTriple digit golfer wrote: ↑Sat Aug 07, 2021 12:45 pm I can't predict the future, so past performance is really of little use.
New retirees often use a portion of their tax-advantaged accounts to purchase their annuity.
Morningstar data for the following comparison goes back to August 1999.
So for the equities portion of the 2021 retiree's portfolio, the performance difference over the past 22 years has had a meaningful difference in their financial security vis-à-vis the amount available for SPIA purchases.
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* |
FIRE'd July 2023
- UpsetRaptor
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Re: Jack Bogle - Two Fund Portfolio
This is false. The US outperformed ex-US in the second half of the 20th century, the 1st half of the 20th century, the whole of the 20th century, and in the period from, say, 1950-2010. One can find a 2-3 decade period that captures the majority of Japan's hyper-bubble that has ex-US outperform, but expand it out to any 50 year period and the long term US outperformance of the century that shows in the Simson-Marsh data manifests.Triple digit golfer wrote: ↑Sat Aug 07, 2021 2:16 pmNo. I'm saying that the 60 or so years from 1950 on had even performance.anon_investor wrote: ↑Sat Aug 07, 2021 1:10 pmSo you're saying international needed a lost decade from US just to get to even?Triple digit golfer wrote: ↑Sat Aug 07, 2021 12:45 pmAll outperformance in the last 70 years occurred in about the last decade. Now would seem like a terrible time to not hang in there. Hang I shall!GoneOnTilt wrote: ↑Sat Aug 07, 2021 11:22 amAs I said, others have different preferences. So, enjoy the other half of the world's equity market capitalization! You must have the patience of a saint! Hang in there.Triple digit golfer wrote: ↑Sat Aug 07, 2021 8:57 am
I would want to own it. I'd also like to own the other half of the world's equity market capitalization.
I can't predict the future, so past performance is really of little use.
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Re: Jack Bogle - Two Fund Portfolio
Some reading for you:UpsetRaptor wrote: ↑Sat Aug 07, 2021 3:24 pmThis is false. The US outperformed ex-US in the second half of the 20th century, the 1st half of the 20th century, the whole of the 20th century, and in the period from, say, 1950-2010. One can find a 2-3 decade period that captures the majority of Japan's hyper-bubble that has ex-US outperform, but expand it out to any 50 year period and the long term US outperformance of the century that shows in the Simson-Marsh data manifests.Triple digit golfer wrote: ↑Sat Aug 07, 2021 2:16 pmNo. I'm saying that the 60 or so years from 1950 on had even performance.anon_investor wrote: ↑Sat Aug 07, 2021 1:10 pmSo you're saying international needed a lost decade from US just to get to even?Triple digit golfer wrote: ↑Sat Aug 07, 2021 12:45 pmAll outperformance in the last 70 years occurred in about the last decade. Now would seem like a terrible time to not hang in there. Hang I shall!GoneOnTilt wrote: ↑Sat Aug 07, 2021 11:22 am
As I said, others have different preferences. So, enjoy the other half of the world's equity market capitalization! You must have the patience of a saint! Hang in there.
I can't predict the future, so past performance is really of little use.
Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks. Want to know how much of that outperformance has come since 2009?
All of it!
This has led the US to where we are today with the US stock market as the largest in the world, by far. But the largest stocks/countries/sectors usually underperform going forward. The culprit is market cap weighting.
This is “the market” according to the TRUE passive investor. But why is market cap weighting sub-optimal?
Here’s a chart from Ned Davis that compares the S&P 500 to investing in the largest stock in the market at the time. It’s a laundry list of the top American companies like Wal-Mart, Google, IBM, and Amazon.
And it’s a HORRIBLE idea.
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