I think its an interesting discussion.nedsaid wrote: ↑Sun Apr 11, 2021 2:42 pmYes, you are just chasing returns. I am so old that I remember when standard wisdom was that International Stocks had slightly higher returns than the S&P 500 over the long term with lower correlation. It seemed like a no brainer to include International Stocks in a portfolio. Now that the U.S. has outperformed International since 2009, it is a no brainer to ignore International Stocks.jeffh19 wrote: ↑Sun Apr 11, 2021 2:29 pm I meant to add to my post above, I’m also thinking of moving international index money into VTI/VUG/BTC
Which for a noble head seems counterintuitive as US seems really over valued and vxus isn’t and hasn’t performed for crap compared to US for longer than I’ve been investing, and I don’t know if people really expect that to change maybe ever.
I have to ask myself, is this right or am I just chasing returns?
Boglehead portfolios used to include TIPS and REITs. Both have been largely abandoned. Now we are abandoning International. So we are down to two. Bonds aren't doing well and U.S. Stocks are outperforming bonds, won't be long we will be down to one fund. The next prolonged bear market will bring us to Zero.
I have often joked that we are racing towards the Zero Fund Portfolio, and we will brag about stuffing our cash into mattresses. My best selling book will detail how you can diversify by stuffing your cash into three mattresses, the three mattress portfolio. What could be simpler than stuffing mattresses with cash?
Don't ignore the old principles of diversification. If everything in your portfolio is working well at the same time, it is a sign that you might not be diversified enough. The U.S. Stock Market has done well because the U.S. is regarded as a safe haven, or as I like to say it, the least dirty shirt in the laundry hamper. The U.S. Dollar has been strong since the 2008-2009 financial crisis and this has greatly contributed to the outperformance of the U.S. Stock Market relative to other nations. This condition will not continue forever.
I think we have to look at each asset class and maybe adjust for the current world. I dont know if its a great idea to think we should hold the same assets/diversify in the same way people did 20-50 years ago. I'm also of a mindset of pure growth, and I also havent health with a very prolonged down market like the late 60s to early 80s etc. I think theres a good chance we are headed towards a major economic....something. Will stocks crash, or melt up with inflation etc? I have no idea. I do see the USD getting weaker for sure with all the QE and will they be able to stop the money printer?
I think its not super wise to invest in bonds right now, and I dont see them getting better at all with the current economic situation either. With the debt/money printing how can they afford to raise bonds that much? I think lots of money has seen this and the SP500 has almost turned into a store of value now as people move away from bonds etc. Real Estate I dont think is great either going forward with renters able to rent free for the last year or more and that is going until at least June. Another thing is businesses probably aren't going to be using as much office space as they have found people can work from home just fine, they could save a ton on rent, and also how many businesses didnt/wont survive the pandemic? I'm not saying real estate is a bad investment, and also not that people cant succeed managing real estate themselves either. I have heard of a lot of people wanting/getting out of real estate though. Obviously the vanguard real estate ETF still did very well. I may be 100% wrong in all my thinking. There is real estate exposure in VTSAX, I guess its enough for me. I've never been big into real estate, especially IRL, and its underperformed VTSAX/has more tax enough to where I've never diversified into any REITs.
With international..it seems that market hasn't outperformed US for God knows how long....and it also seems to follow the US market too. US market goes down, International seems to follow it most of the time. Its rare that I see international have a great day and US doesnt. There are some great companies in VXUS sure, and I dont know most of them but it also seems like the most dominant companies in the world are US. I just dont know if I really see international being a great dominant performer in the future especially if the US market tanks a bunch. Also if the USD weakens, a ton of international $ weakens too. Obviously not all, and maybe not the biggest international countries or performers I guess.
I've just heard a lot of people I respect financially say that diversification sometimes is diworsification, and you want most of/only the best and most dominant assets. Obviously its just hard to know what they will be in the future. One billionaire was saying advisors would want him to sell his best asset as it went to the moon, to diversify and buy more of 3 lesser things. He specifically mentioned advisors of his telling him to sell AAPL from 2012 on, or take some profits off the table and reinvest them in 3 medicare tech companies who he knew wouldn't have the return that AAPL would have, and kept it all in Apple and rode the massive wave up.
I think now more than ever things might be more top heavy than they ever have been.
I also am an idiot and dont know what I'm talking about either.