Case for international

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
justsomeguy2018
Posts: 1242
Joined: Wed Oct 03, 2018 8:11 pm

Case for international

Post by justsomeguy2018 »

I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?

I think I am maybe 80/20 u.s./intl, give or take.
hi_there
Posts: 693
Joined: Sat Aug 29, 2020 7:00 pm

Re: Case for international

Post by hi_there »

If a disaster befalls US stocks, you can bet the rest of the world goes with it. In fact, we are likely to see capital flight from China, Brazil, or other markets that are seen as less risky in favor of US assets!

With that being said, it's hard to say it's bad to diversify across geographies to reflect total world market shares. You'll find that US equity market cap is in the 60% range.

The non-disaster causes of US underperformance are probably more realistic and important to consider. As a basic example, post-COVID rebound that favors non-tech sectors could mean US underperforms, since our stocks are so heavily weighted in FAANGs.
carminered2019
Posts: 892
Joined: Fri Jun 21, 2019 7:06 pm

Re: Case for international

Post by carminered2019 »

my 25% international is more for diversification.
dru808
Posts: 1539
Joined: Sat Oct 15, 2011 2:42 pm
Location: mid pac

Re: Case for international

Post by dru808 »

justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?

I think I am maybe 80/20 u.s./intl, give or take.
This is the only reason I allocate to international. I see it as a form of insurance. Can’t tell the future, but if I were to guess, an all US portfolio is likely to outperform. If US outperforms I’ll be fine. If catastrophe strikes, all US holders may be in a world of hurt.
User avatar
Noobvestor
Posts: 5786
Joined: Mon Aug 23, 2010 1:09 am

Re: Case for international

Post by Noobvestor »

On top of valuations, which per Vangaurd's recent whitepaper favor international, I hold 50% in part to avoid US geographical, political and economic risks. While it's true that in a crisis all stocks tend to tank together, more or less, there are long periods over which different national markets win. The idea of having more than half of my wealth invested in any one country, the US or otherwise, is frankly a bit horrifying.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
MadHungarian
Posts: 212
Joined: Tue Jan 02, 2018 4:53 pm

Re: Case for international

Post by MadHungarian »

I decided recently that at this point in my investing life, when i'm getting nearer to retirement, i'm more interested in diversification than in the highest possible returns. Thus i've increased my international% a bit, along with some other changes.
austin757
Posts: 235
Joined: Wed Jun 06, 2018 11:48 am

Re: Case for international

Post by austin757 »

I'm strongly considering going 100% EDC in my Roth IRA for the international exposure.
X528
Posts: 154
Joined: Fri Nov 30, 2018 8:51 am

Re: Case for international

Post by X528 »

hi_there wrote: Tue Jan 12, 2021 5:57 pm If a disaster befalls US stocks, you can bet the rest of the world goes with it. In fact, we are likely to see capital flight from China, Brazil, or other markets that are seen as less risky in favor of US assets!

With that being said, it's hard to say it's bad to diversify across geographies to reflect total world market shares. You'll find that US equity market cap is in the 60% range.

The non-disaster causes of US underperformance are probably more realistic and important to consider. As a basic example, post-COVID rebound that favors non-tech sectors could mean US underperforms, since our stocks are so heavily weighted in FAANGs.
Foreign stock markets can do better than the US:

https://www.firstlinks.com.au/wins-aust ... al-shares/
csmath
Posts: 543
Joined: Sat Oct 13, 2018 11:32 am

Re: Case for international

Post by csmath »

Not to derail the thread but does anyone else see that VXUS after hours (Vanguard Total International Stock ETF) just plummet 8% or am I looking at a glitch?

This is the first time I've ever even looked at VXUS after hours so...

Edit to add: Maybe this is typical and an issue with volume but I happened to notice it quoted next to the closing price today and it surprised me.
Last edited by csmath on Tue Jan 12, 2021 7:12 pm, edited 1 time in total.
Godot
Posts: 582
Joined: Fri Jun 08, 2018 3:44 pm
Location: Little Beirut

Re: Case for international

Post by Godot »

csmath wrote: Tue Jan 12, 2021 7:02 pm Not to derail the thread but does anyone else see that VXUS after hours (Vanguard Total International Stock ETF) just plummet 8% or am I looking at a glitch?

This is the first time I've ever even looked at VXUS after hours so...
This is what I see: "After hours 62.20 −0.070"
"If by Godot I had meant God I would have said God, and not Godot." | ― Samuel Beckett
jhsu802701
Posts: 305
Joined: Fri Apr 03, 2020 2:42 pm

Re: Case for international

Post by jhsu802701 »

justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?

I think I am maybe 80/20 u.s./intl, give or take.
You're still too aggressive when it comes to US stocks and too conservative when it comes to international stocks. Except for Berkshire Hathaway (conservative blue chip), there's no reason to own US stocks at this time given the excessively high valuation multiples. It's more like 2000 or 2007 than 1974 or 1982.

International stocks are a MUCH better value, especially Japan and emerging markets. All those international stock markets are so much cheaper. The Big Mac Index shows nearly all currencies to be undervalued against the US dollar, and the few exceptions (like the Swiss franc) are selling for much smaller premiums than usual. It's like US stocks in the 1930s and 1940s.
DFJ: Japan - small cap dividend | DGS: emerging, small cap dividend | MOTI: international moat stocks | IQIN: large cap, developed | DGRE: emerging, dividend growth | GWX and FNDC: small cap, developed
csmath
Posts: 543
Joined: Sat Oct 13, 2018 11:32 am

Re: Case for international

Post by csmath »

Godot wrote: Tue Jan 12, 2021 7:12 pm
csmath wrote: Tue Jan 12, 2021 7:02 pm Not to derail the thread but does anyone else see that VXUS after hours (Vanguard Total International Stock ETF) just plummet 8% or am I looking at a glitch?

This is the first time I've ever even looked at VXUS after hours so...
This is what I see: "After hours 62.20 −0.070"
Curious what the time stamp on that quote is?

I'm seeing these on three different sites:
$57.28 (-8.01%) Last Updated: Jan 12, 2021 5:05 p.m. EST
$57.28 (-7.54%) Jan 12 05:05 pm EST
$57.28 (-8.01%) 17:05:20 - Real-time Data
lostdog
Posts: 3995
Joined: Thu Feb 04, 2016 2:15 pm

Re: Case for international

Post by lostdog »

csmath wrote: Tue Jan 12, 2021 7:16 pm
Godot wrote: Tue Jan 12, 2021 7:12 pm
csmath wrote: Tue Jan 12, 2021 7:02 pm Not to derail the thread but does anyone else see that VXUS after hours (Vanguard Total International Stock ETF) just plummet 8% or am I looking at a glitch?

This is the first time I've ever even looked at VXUS after hours so...
This is what I see: "After hours 62.20 −0.070"
Curious what the time stamp on that quote is?

I'm seeing these on three different sites:
$57.28 (-8.01%) Last Updated: Jan 12, 2021 5:05 p.m. EST
$57.28 (-7.54%) Jan 12 05:05 pm EST
$57.28 (-8.01%) 17:05:20 - Real-time Data
I'm seeing it too but another site has it at $62.20.
60% VTI+VXUS | 40% BNDW
csmath
Posts: 543
Joined: Sat Oct 13, 2018 11:32 am

Re: Case for international

Post by csmath »

lostdog wrote: Tue Jan 12, 2021 7:20 pm
csmath wrote: Tue Jan 12, 2021 7:16 pm
Godot wrote: Tue Jan 12, 2021 7:12 pm
csmath wrote: Tue Jan 12, 2021 7:02 pm Not to derail the thread but does anyone else see that VXUS after hours (Vanguard Total International Stock ETF) just plummet 8% or am I looking at a glitch?

This is the first time I've ever even looked at VXUS after hours so...
This is what I see: "After hours 62.20 −0.070"
Curious what the time stamp on that quote is?

I'm seeing these on three different sites:
$57.28 (-8.01%) Last Updated: Jan 12, 2021 5:05 p.m. EST
$57.28 (-7.54%) Jan 12 05:05 pm EST
$57.28 (-8.01%) 17:05:20 - Real-time Data
I'm seeing it too but another site has it at $62.20.
I'm guessing it is an artifact of low volume and delayed update to pricing on the sites I just happened to check first. I just clicked on a few google results randomly. I'm extremely ignorant about after hour trading.
HenrySouthernCal
Posts: 62
Joined: Thu Dec 21, 2017 11:33 pm

Re: Case for international

Post by HenrySouthernCal »

lostdog wrote: Tue Jan 12, 2021 7:20 pm
csmath wrote: Tue Jan 12, 2021 7:16 pm
Godot wrote: Tue Jan 12, 2021 7:12 pm
csmath wrote: Tue Jan 12, 2021 7:02 pm Not to derail the thread but does anyone else see that VXUS after hours (Vanguard Total International Stock ETF) just plummet 8% or am I looking at a glitch?

This is the first time I've ever even looked at VXUS after hours so...
This is what I see: "After hours 62.20 −0.070"
Curious what the time stamp on that quote is?

I'm seeing these on three different sites:
$57.28 (-8.01%) Last Updated: Jan 12, 2021 5:05 p.m. EST
$57.28 (-7.54%) Jan 12 05:05 pm EST
$57.28 (-8.01%) 17:05:20 - Real-time Data
I'm seeing it too but another site has it at $62.20.
I am seeing it 58.28 down 8.01% as of 5:05 PM.
Nothing to worry. It is normal for afterhours trading on less liquid asset. ETF afterhours don't have many brokers participating in the pricing. It could be just someone put a sell in market price order, a sole broker just took advantage on the pricing as no competing bid.
JBTX
Posts: 7903
Joined: Wed Jul 26, 2017 12:46 pm

Re: Case for international

Post by JBTX »

justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?

I think I am maybe 80/20 u.s./intl, give or take.
You are thinking about it correctly, but a 20% international allocation is not in line with what you have articulated (too low)
JBTX
Posts: 7903
Joined: Wed Jul 26, 2017 12:46 pm

Re: Case for international

Post by JBTX »

hi_there wrote: Tue Jan 12, 2021 5:57 pm If a disaster befalls US stocks, you can bet the rest of the world goes with it. In fact, we are likely to see capital flight from China, Brazil, or other markets that are seen as less risky in favor of US assets!

With that being said, it's hard to say it's bad to diversify across geographies to reflect total world market shares. You'll find that US equity market cap is in the 60% range.

The non-disaster causes of US underperformance are probably more realistic and important to consider. As a basic example, post-COVID rebound that favors non-tech sectors could mean US underperforms, since our stocks are so heavily weighted in FAANGs.
If this year has shown anything, it has shown that US exceptionalism is not always the case. The out size impact of covid on the US. The quite unusual political situation leading up to recent events. Ironically these had no lasting impact on US market performance, but it shows we are unique in the world and that could come in the form of future US underperformance.

I suspect if things tanked/crashed, etc, the rest of the world would too, but it is possible that the US could lag the world in market recovery.
User avatar
Doc
Posts: 9987
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: Case for international

Post by Doc »

justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but ...
carminered2019 wrote: Tue Jan 12, 2021 6:03 pm my 25% international is more for diversification.
My 25 cents.

1) Total international holds emerging markets. If I hold total international at market weights I would not even see the effect of a 10% outperformance of EM and I would lose sleep watching the news. So no emerging markets.

2) Given 1) the default option might be total foreign developed. But both domestic and foreign large cap are dominated by international companies so the only diversification you get is currency differences which often get hedged away. So no foreign developed.

3) Given 1) and 2) I chose a foreign small value ETF and a foreign active fund with an ER of 1.26%. OMG. (The active fund was a mid-cap value when I first bought it and it was the closest thing I could get to a foreign small value at the time.)

My foreign holding are 25 percent of total equity. (AKA 25 cents :D )
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
User avatar
sperry8
Posts: 2384
Joined: Sat Mar 29, 2008 9:25 pm
Location: Miami FL

Re: Case for international

Post by sperry8 »

justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?

I think I am maybe 80/20 u.s./intl, give or take.
It's not only earnings outperformance that can result in foreign equities going up more than US. If we are in a new down cycle for the USD - that will juice returns for US based investors in unhedged foreign equities.

https://www.thebalance.com/how-currenci ... ts-1978999

Many think that the decade of a strong (relatively speaking) USD is ending (or ended) and this means tailwinds for international and emerging markets. If true it should also result in hard scarce assets having tailwinds as well.
BH contests: 2020 #253 of 664 | 19 #233 of 645 | 18 #150 of 493 | 17 #516 of 647 | 16 #121 of 610 | 15 #18 of 552 | 14 #225 of 503 | 13 #383 of 433 | 12 #366 of 410 | 11 #113 of 369 | 10 #53 of 282
Valuethinker
Posts: 42408
Joined: Fri May 11, 2007 11:07 am

Re: Case for international

Post by Valuethinker »

justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?

I think I am maybe 80/20 u.s./intl, give or take.
Historically, by Vanguard's estimates, minimum volatility/ max return has come from holding anywhere between 20 to 40% of equity portfolio in international equities.

The bowl is shallow though, meaning that anywhere along that curve has had quite similar effects.

Hold what you are comfortable with, and can be comfortable with even if international underperforms for another 5 years, say. You might be right to hold international, eventually, but that can take a long time to prove out.
Valuethinker
Posts: 42408
Joined: Fri May 11, 2007 11:07 am

Re: Case for international

Post by Valuethinker »

Doc wrote: Wed Jan 13, 2021 10:40 am
justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but ...
carminered2019 wrote: Tue Jan 12, 2021 6:03 pm my 25% international is more for diversification.
My 25 cents.

1) Total international holds emerging markets. If I hold total international at market weights I would not even see the effect of a 10% outperformance of EM and I would lose sleep watching the news. So no emerging markets.

2) Given 1) the default option might be total foreign developed. But both domestic and foreign large cap are dominated by international companies so the only diversification you get is currency differences which often get hedged away. So no foreign developed.

3) Given 1) and 2) I chose a foreign small value ETF and a foreign active fund with an ER of 1.26%. OMG. (The active fund was a mid-cap value when I first bought it and it was the closest thing I could get to a foreign small value at the time.)

My foreign holding are 25 percent of total equity. (AKA 25 cents :D )
Doc

Are you able to share the name of those 2 funds?

Apologies if that is too private.

I hold the global equity index, but in some pensions I hold a World: UK 50:50 fund (it's what is offered in the indexed space). The Vanguard (Europe) fund happens to track a global index (FT) which includes China and other EM.

I also hold about 21% in global value, thus reducing my tilt towards large US & Chinese internet stocks. Vanguard is closing that ETF in February, so to the extent I stay with Vanguard I no longer have that option.

I also hold an Emerging Market dividend index fund which is way value-y. Price to book below 1. Russian nickel miners and banks. Only 30% China v 60% ish in the indices.

I also hold a Japanese Smaller Companies ETF (which has done quite well) and a Far East ex Japan Small Cap fund. I was going to sell that one, but the PE is reasonable (12-13x) and it was entirely full of companies I had never heard of, which I took to be a very good sign. If it had a tilt, it was away from China and towards Taiwan.

In fact both ETFs have almost no company I have ever heard of, which I took to be an excellent sign (given reasonable valuation parameters).
User avatar
Doc
Posts: 9987
Joined: Sat Feb 24, 2007 1:10 pm
Location: Two left turns from Larry

Re: Case for international

Post by Doc »

Valuethinker wrote: Wed Jan 13, 2021 11:09 am Are you able to share the name of those 2 funds?
The active large cap foreign fund is Artisan International Value Investor ARTKX. It is currently large value but as an active fund its style drifts a lot.

The foreign small value is currently Schwab Fundamental Intl Sm Co ETF FNDC but I have used Schwab International Small-Cap Equity ETF in the past.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
User avatar
Noobvestor
Posts: 5786
Joined: Mon Aug 23, 2010 1:09 am

Re: Case for international

Post by Noobvestor »

Valuethinker wrote: Wed Jan 13, 2021 11:03 am
justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?

I think I am maybe 80/20 u.s./intl, give or take.
Historically, by Vanguard's estimates, minimum volatility/ max return has come from holding anywhere between 20 to 40% of equity portfolio in international equities.
Not sure about returns, but volatility reduction spans from 0% to around 75%. Source: https://advisors.vanguard.com/insights/ ... linvesting

Image
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
User avatar
FelixTheCat
Posts: 2003
Joined: Sat Sep 24, 2011 12:39 am

Re: Case for international

Post by FelixTheCat »

Bogle and Buffett did not endorse international. I'm going with their advice.
Felix is a wonderful, wonderful cat.
Nathan Drake
Posts: 856
Joined: Mon Apr 11, 2011 12:28 am

Re: Case for international

Post by Nathan Drake »

FelixTheCat wrote: Wed Jan 13, 2021 1:58 pm Bogle and Buffett did not endorse international. I'm going with their advice.
Buffett owns plenty of international
Topic Author
justsomeguy2018
Posts: 1242
Joined: Wed Oct 03, 2018 8:11 pm

Re: Case for international

Post by justsomeguy2018 »

jhsu802701 wrote: Tue Jan 12, 2021 7:13 pm ...there's no reason to own US stocks at this time given the excessively high valuation multiples.
While this may turn out to be true, this seems like a market-timing type comment. Do you follow the Boglehead philiosophy?

Is your suggestion to sell all my U.S. equity and buy international?
ApeAttack
Posts: 51
Joined: Wed Dec 23, 2020 8:28 pm

Re: Case for international

Post by ApeAttack »

carminered2019 wrote: Tue Jan 12, 2021 6:03 pm my 25% international is more for diversification.
I've read countless threads on international vs US, and often see opinions ranging from 0% to market cap for international. I honestly have no clue what will do better over the next 20+ years, but I selected 20% international as a reasonable compromise. Although it almost certainly won't turn out to be optimal, it still should get me to my goal of retiring comfortably.
Just another lazy index investor.
freyj6
Posts: 392
Joined: Thu Jun 19, 2014 2:09 am

Re: Case for international

Post by freyj6 »

https://www.starcapital.de/en/research/ ... -valuation

This might be interesting for those with 0% international allocation. Countries rated by current valuations.
esteen
Posts: 151
Joined: Thu May 23, 2019 12:31 am

Re: Case for international

Post by esteen »

carminered2019 wrote: Tue Jan 12, 2021 6:03 pm my 25% international is more for diversification.
+1

Also I've read enough about the rise and fall of historical world powers to be wary of the very-long-term (next 50-100yrs) dominance of US stocks.
jhsu802701
Posts: 305
Joined: Fri Apr 03, 2020 2:42 pm

Re: Case for international

Post by jhsu802701 »

justsomeguy2018 wrote: Thu Jan 14, 2021 1:15 am
jhsu802701 wrote: Tue Jan 12, 2021 7:13 pm ...there's no reason to own US stocks at this time given the excessively high valuation multiples.
While this may turn out to be true, this seems like a market-timing type comment. Do you follow the Boglehead philiosophy?

Is your suggestion to sell all my U.S. equity and buy international?
Yes, I believe that investors should sell US stocks and buy international stocks. I agree with parts of the Boglehead philosophy but not all of it. Higher valuations mean more risk and less potential reward. Lower valuations mean less risk and more potential reward. Given that international stock ETFs (and most underlying currencies) are MUCH cheaper than US stock ETFs, I believe in owning the former instead of the latter.
DFJ: Japan - small cap dividend | DGS: emerging, small cap dividend | MOTI: international moat stocks | IQIN: large cap, developed | DGRE: emerging, dividend growth | GWX and FNDC: small cap, developed
Triple digit golfer
Posts: 7251
Joined: Mon May 18, 2009 5:57 pm

Re: Case for international

Post by Triple digit golfer »

jhsu802701 wrote: Thu Jan 14, 2021 1:22 pm
justsomeguy2018 wrote: Thu Jan 14, 2021 1:15 am
jhsu802701 wrote: Tue Jan 12, 2021 7:13 pm ...there's no reason to own US stocks at this time given the excessively high valuation multiples.
While this may turn out to be true, this seems like a market-timing type comment. Do you follow the Boglehead philiosophy?

Is your suggestion to sell all my U.S. equity and buy international?
Yes, I believe that investors should sell US stocks and buy international stocks. I agree with parts of the Boglehead philosophy but not all of it. Higher valuations mean more risk and less potential reward. Lower valuations mean less risk and more potential reward. Given that international stock ETFs (and most underlying currencies) are MUCH cheaper than US stock ETFs, I believe in owning the former instead of the latter.
Do you own any U.S. stocks or only international? What is your AA in general and when have you changed it?
jhsu802701
Posts: 305
Joined: Fri Apr 03, 2020 2:42 pm

Re: Case for international

Post by jhsu802701 »

Triple digit golfer wrote: Thu Jan 14, 2021 1:27 pm Do you own any U.S. stocks or only international?
My only US stock is Berkshire Hathaway. The rest of my equities are in the form of international stock ETFs.
DFJ: Japan - small cap dividend | DGS: emerging, small cap dividend | MOTI: international moat stocks | IQIN: large cap, developed | DGRE: emerging, dividend growth | GWX and FNDC: small cap, developed
jibantik
Posts: 508
Joined: Fri Nov 24, 2017 1:05 pm

Re: Case for international

Post by jibantik »

justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?
Nope, you have it backwards.

Holding market weight does not need to have a case made for it. It is THE speculation-free portfolio. Moving away from the null position requires a case to be made. So really, the question is, what is your case for moving away from international equities and overweighting US equities? If you don't have one, then you should hold market weight.
User avatar
ReformedSpender
Posts: 555
Joined: Fri Mar 16, 2018 1:24 pm
Location: Stone's Throw from Vanguard

Re: Case for international

Post by ReformedSpender »

VXUS just made a fresh 52 week high today. Here's to many more

:beer :beer
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.
Da5id
Posts: 2542
Joined: Fri Feb 26, 2016 8:20 am

Re: Case for international

Post by Da5id »

There is no need to own US stocks. Many international companies have significant US sales, giving you plenty of exposure to the US market*

* see Poe's law if in doubt
Triple digit golfer
Posts: 7251
Joined: Mon May 18, 2009 5:57 pm

Re: Case for international

Post by Triple digit golfer »

jibantik wrote: Thu Jan 14, 2021 1:42 pm
justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?
Nope, you have it backwards.

Holding market weight does not need to have a case made for it. It is THE speculation-free portfolio. Moving away from the null position requires a case to be made. So really, the question is, what is your case for moving away from international equities and overweighting US equities? If you don't have one, then you should hold market weight.
I hold about 70% U.S. and 30% international.

My reason for the U.S. tilt is that I fear if U.S. significantly outperforms, everybody around me who only invests in U.S. will get rich and I'll be broke.

If others who use target funds with 40% international get rich because international outperforms, then I won't be too far behind, at least.

I never claim this is logical. It just works for me. 70/30 is what I'm most comfortable with and what I'll stay the course with, and that's why it's the best split for me.
jibantik
Posts: 508
Joined: Fri Nov 24, 2017 1:05 pm

Re: Case for international

Post by jibantik »

Triple digit golfer wrote: Thu Jan 14, 2021 3:09 pm
jibantik wrote: Thu Jan 14, 2021 1:42 pm
justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm ...
...
Holding market weight does not need to have a case made for it. It is THE speculation-free portfolio. Moving away from the null position requires a case to be made. So really, the question is, what is your case for moving away from international equities and overweighting US equities? If you don't have one, then you should hold market weight.
I hold about 70% U.S. and 30% international.

My reason for the U.S. tilt is that I fear if U.S. significantly outperforms, everybody around me who only invests in U.S. will get rich and I'll be broke.

If others who use target funds with 40% international get rich because international outperforms, then I won't be too far behind, at least.

I never claim this is logical. It just works for me. 70/30 is what I'm most comfortable with and what I'll stay the course with, and that's why it's the best split for me.
It doesn't need to be logical. It's your portfolio and your choice to do what is comfortable for you.

I do think it's important that people be informed of potential biases to be aware of when deciding whether to move away from market weight and I'd certainly prefer if more people on this site recommended market weight as the starting (and likely ending position) for an equity portfolio because I have yet to see a convincing argument for speculation.
secondopinion
Posts: 586
Joined: Wed Dec 02, 2020 1:18 pm

Re: Case for international

Post by secondopinion »

justsomeguy2018 wrote: Tue Jan 12, 2021 5:35 pm I have a strong tilt to U.S. but have slowly oriented more % to International over recent months. Not because I necessarily think International will outperform U.S. in the future, but I've become leery of any number of possible disasters that could wreck havoc with an all U.S. portfolio. So I do it for the diversification benefit mostly.

Is this the right way to think of it?

I think I am maybe 80/20 u.s./intl, give or take.
I hold international not because of the worst case, but because they do not always move together in general (reducing a little risk). It has little to do with who will do better in a given circumstance; certainly one kind of stock will do better, but how can we know in advance?
Noobvestor wrote: Wed Jan 13, 2021 1:35 pm Not sure about returns, but volatility reduction spans from 0% to around 75%. Source: https://advisors.vanguard.com/insights/ ... linvesting

Image
I have 30% international even before seeing this chart; it seems to support the decision.
jibantik wrote: Thu Jan 14, 2021 1:42 pm Holding market weight does not need to have a case made for it. It is THE speculation-free portfolio.
Market-weight may be "speculation-free" if you take the definition of stocks as the criteria for inclusion, but risk tolerance is probably going to decide something else for the portfolio. We do not market-weight across assets (stocks versus bonds versus some other asset); risk tolerance is the determining factor here. The origin of the stock does matter in a risk-sense, and that must be considered.

Risk managing is never speculation-free, but properly managing risk is responsible.
It is better to be half-wrong than have a 50% chance of being all-wrong. With the former, you will learn and have money to try again. Otherwise, you will never learn and will have nothing eventually.
walks a lot
Posts: 7
Joined: Wed Jan 13, 2021 3:55 pm

Re: Case for international

Post by walks a lot »

Decades ago, when I started investing, I decided on a hefty allocation to international stocks, around 30%. My reasoning was:

1. Something like 95% of the world population is outside the US. How can I ignore 95% of the world population?

2. There are top notch companies scattered all over the world. Some will say you don't need international stocks because US companies have foreign exposure. A fair point. But, the flip side is also true, international companies are not limited to their home country. They also have foreign exposure, including US exposure (examples are BP, Toyota, Honda).

3. These foreign countries are filled with smart, capable people, who want to improve their lot in life. And there are so many of them (see point 1 above).

So I congratulated myself for being so clever, sat back, and waited for the money to roll in.

Still waiting....

It wasn't a complete catastrophe. International outperformed some years. But not that many. And it's not like international made nothing over the decades, especially if you include dividends.

If I gave up and went 100% US now, I can just see the year 2030 headline: "International stocks trounce US stocks for past decade".

Currently at 60% US, 40% International. I'll just keep waiting....
jibantik
Posts: 508
Joined: Fri Nov 24, 2017 1:05 pm

Re: Case for international

Post by jibantik »

walks a lot wrote: Thu Jan 14, 2021 5:50 pm Decades ago, when I started investing, I decided on a hefty allocation to international stocks, around 30%. My reasoning was:

1. Something like 95% of the world population is outside the US. How can I ignore 95% of the world population?

2. There are top notch companies scattered all over the world. Some will say you don't need international stocks because US companies have foreign exposure. A fair point. But, the flip side is also true, international companies are not limited to their home country. They also have foreign exposure, including US exposure (examples are BP, Toyota, Honda).

3. These foreign countries are filled with smart, capable people, who want to improve their lot in life. And there are so many of them (see point 1 above).

So I congratulated myself for being so clever, sat back, and waited for the money to roll in.

Still waiting....

It wasn't a complete catastrophe. International outperformed some years. But not that many. And it's not like international made nothing over the decades, especially if you include dividends.

If I gave up and went 100% US now, I can just see the year 2030 headline: "International stocks trounce US stocks for past decade".

Currently at 60% US, 40% International. I'll just keep waiting....
Good job staying the course. When you have a diversified portfolio, having some subset of the portfolio outperform another subset of the portfolio is working as intended. If you invested in 100% US equities, do you think some subsets of that will not outperform other subsets? Would you then move to that subset and only have large cap US, for example. Nah, you did the right thing. STAY THE COURSE.
ParlayBogle
Posts: 99
Joined: Mon Jun 11, 2012 9:01 pm

Re: Case for international

Post by ParlayBogle »

Past 3 months VXUS is up 15.4%, VTI only up 11.8%. Let's go!!!!
Post Reply