Thinking of Dropping Out of International Stock Funds

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frugalecon
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Re: Thinking of Dropping Out of International Stock Funds

Post by frugalecon »

It was interesting to see the “ex-US stocks continue to soar” thread just a few lines away from this thread today. It really is great that Bogleheads can produce spirited discussion on different sides of a topic and stay civil. (Though the moderators play a role in that…thanks!)

I posted one reply to this thread, but I will offer another. My wealth position is overwhelmingly tied to the U.S. My spouse and I will receive significant Social Security and government pensions that will be paid with the tax receipts generated in the U.S. We own a house in a HCOL area in the U.S. that represents roughly 25% of our net worth. We have about 60% of our portfolio in U.S. stocks, and more than 20% in U.S. bonds. I view the 16 - 18% of our portfolio in international stocks to be in part insurance against unfavorable and idiosyncratic developments that might affect the U.S. economy. In truth, we are financially independent now (the FI part of FIRE!), but we haven’t retired yet. (Maybe 1 - 2 years.) I don’t rely on international outperforming to achieve any particular goals other than diversification of idiosyncratic U.S. risks. Maybe they will never materialize? I hope they don’t, because that would be bad for my overall wealth position! But if they do, I will have something to fall back on while the U.S. sorts out whatever problems arose. I won’t know if this turned out to be a good decision (in the ex post sense) until I draw my last breath. If it was, then that means that the lion’s share of my wealth position did better.
joylesshusband
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Re: Thinking of Dropping Out of International Stock Funds

Post by joylesshusband »

lostdog wrote: Wed Jul 28, 2021 11:02 am It's mostly about protecting young/novice investors.
An investor should need no protection. Young/novice or seasoned - does not matter.
All investing is about is evaluating risks, and taking risks.

_Protecting_ investors is a fallacy.
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Redsub
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Re: Thinking of Dropping Out of International Stock Funds

Post by Redsub »

I am original from England and I know that the international stocks never seem to do as well as the US.
But a few years ago after talking to a Vanguard advisor he mentioned that I should have more international stocks and bonds, at the time I said to my wife I was not sure. Thinking that the advisor knew better I moved some funds into international. Like you I looked at the performance and sold them and moved back to US funds.
The other problem is that the currency exchange rates can change which can make the international funds look better or worse.
Reading English newspapers I noticed that Vanguard are moving into the European market and whether Vanguard was trying to pad out these funds to spread out their risks?
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rh00p
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Re: Thinking of Dropping Out of International Stock Funds

Post by rh00p »

What would Jack Bogle do? 🤔 Oh yeah, he didn't particularly like international, that you don't need it. Said VTSAX inherently had enough international exposure. Also said if you do, cap it at 20%.
Preparing for the worst. Hoping for the best.
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Gort
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Re: Thinking of Dropping Out of International Stock Funds

Post by Gort »

rh00p wrote: Wed Jul 28, 2021 10:24 pm What would Jack Bogle do? 🤔 Oh yeah, he didn't particularly like international, that you don't need it. Said VTSAX inherently had enough international exposure. Also said if you do, cap it at 20%.
Well, the circle is now complete concerning this exhausted topic. Has anyone here learned anything new? Doubtful. Oh how I miss the Gamestop thread.
Last edited by Gort on Thu Jul 29, 2021 12:07 am, edited 1 time in total.
Nathan Drake
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Re: Thinking of Dropping Out of International Stock Funds

Post by Nathan Drake »

joylesshusband wrote: Wed Jul 28, 2021 6:08 pm
lostdog wrote: Wed Jul 28, 2021 11:02 am It's mostly about protecting young/novice investors.
An investor should need no protection. Young/novice or seasoned - does not matter.
All investing is about is evaluating risks, and taking risks.

_Protecting_ investors is a fallacy.
This is a very bizarre take, frankly
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Marseille07
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Re: Thinking of Dropping Out of International Stock Funds

Post by Marseille07 »

Nathan Drake wrote: Wed Jul 28, 2021 11:38 pm
joylesshusband wrote: Wed Jul 28, 2021 6:08 pm
lostdog wrote: Wed Jul 28, 2021 11:02 am It's mostly about protecting young/novice investors.
An investor should need no protection. Young/novice or seasoned - does not matter.
All investing is about is evaluating risks, and taking risks.

_Protecting_ investors is a fallacy.
This is a very bizarre take, frankly
It is, because the subject is missing. Protecting from what exactly? You can't really hedge equity risk with ex-US.
Jaymover
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Re: Thinking of Dropping Out of International Stock Funds

Post by Jaymover »

My take is that the population of the rest of the world is far more than the population of the US and so probably good to keep a reasonable bet on ex US to maintain diversification and a hedge. True that many US companies are international but there are obviously lots of good ex US companies making inroads into servicing their large domestic populations as well as other country populations.

Without getting too political, last year the US looked like it was going to implode, deficit out of control and unfunded pension liabilities are astronomical when compared to many other nations which suggests that it might not be good to have everything on the one horse moving forward.

Dividends are pretty nice in other parts of the world, eg FTSE I think almost 5% but yes shame about capital growth to date.
Nathan Drake
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Re: Thinking of Dropping Out of International Stock Funds

Post by Nathan Drake »

Marseille07 wrote: Wed Jul 28, 2021 11:44 pm
Nathan Drake wrote: Wed Jul 28, 2021 11:38 pm
joylesshusband wrote: Wed Jul 28, 2021 6:08 pm
lostdog wrote: Wed Jul 28, 2021 11:02 am It's mostly about protecting young/novice investors.
An investor should need no protection. Young/novice or seasoned - does not matter.
All investing is about is evaluating risks, and taking risks.

_Protecting_ investors is a fallacy.
This is a very bizarre take, frankly
It is, because the subject is missing. Protecting from what exactly? You can't really hedge equity risk with ex-US.
Of course you can. It's one of the best hedges of equity risk, in fact. If it wasn't, you US only folks wouldn't have anything to crow about this past decade.

Short-term protection is not the point of diversification and never has been.
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TropikThunder
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Re: Thinking of Dropping Out of International Stock Funds

Post by TropikThunder »

nigel_ht wrote: Wed Jul 28, 2021 11:20 am Or maybe they should hear all the sides and make their own informed decision rather than just accept [Bogle's] opinion as the correct one.
Fixed that for you. :P
Marseille07
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Re: Thinking of Dropping Out of International Stock Funds

Post by Marseille07 »

Nathan Drake wrote: Thu Jul 29, 2021 12:02 am Of course you can. It's one of the best hedges of equity risk, in fact. If it wasn't, you US only folks wouldn't have anything to crow about this past decade.

Short-term protection is not the point of diversification and never has been.
I don't understand your definition of hedging. Generally it's used to describe a bet where, your primary bet goes south then your hedging bet flourishes. This is not at all what happens when you hold US & ex-US, as the correlation is something like 0.88.
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Re: Thinking of Dropping Out of International Stock Funds

Post by Nathan Drake »

Marseille07 wrote: Thu Jul 29, 2021 12:40 am
Nathan Drake wrote: Thu Jul 29, 2021 12:02 am Of course you can. It's one of the best hedges of equity risk, in fact. If it wasn't, you US only folks wouldn't have anything to crow about this past decade.

Short-term protection is not the point of diversification and never has been.
I don't understand your definition of hedging. Generally it's used to describe a bet where, your primary bet goes south then your hedging bet flourishes. This is not at all what happens when you hold US & ex-US, as the correlation is something like 0.88.
Then use a term other than hedge, because I want all my assets to have high expected “equity” returns over the long term. What is a short term hedge accomplishing? Not much

Correlation is short term focused and doesn’t take into account sequence or magnitude of returns which is the primary concern of SORR and the primary reason you add exUS and US together in a global portfolio
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pokebowl
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Re: Thinking of Dropping Out of International Stock Funds

Post by pokebowl »

wootwoot wrote: Wed Jul 28, 2021 8:35 am Good call OP. International funds are perpetually lagging in performance.
If that is the only criteria to invest or not invest. Let me steal an old image from forum member vineviz:

Image

The year is 1991 instead of 2021, based on the initial criteria above, do you bother with US at all after 20 years of under performance?

Ok, perhaps this market is different than 1991, but if performance is the basis, why US? When its lagged other countries significantly over the last 20 years, for example Australia:

Image


Hopefully when the all US folks retire, it will be similar to 2010 and not the 1960s. Would be a shame to have 20+ years of under-performance. :beer
Triple digit golfer
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Re: Thinking of Dropping Out of International Stock Funds

Post by Triple digit golfer »

^ Excellent post! ^
Greg in Idaho
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Re: Thinking of Dropping Out of International Stock Funds

Post by Greg in Idaho »

But I can sell my ex-US fund that is in my taxable account without paying much in gains, so there's that...
nigel_ht
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

pokebowl wrote: Thu Jul 29, 2021 2:13 am
wootwoot wrote: Wed Jul 28, 2021 8:35 am Good call OP. International funds are perpetually lagging in performance.
If that is the only criteria to invest or not invest. Let me steal an old image from forum member vineviz:

Image

The year is 1991 instead of 2021, based on the initial criteria above, do you bother with US at all after 20 years of under performance?
Chart is hugely misleading. There isn’t 20 years of underperformance.

Image

There are periods where one or the other leads in performance.

Picking a advantageous starting point to imply US trailed international for 20 years is disingenuous. Especially since it’s been pointed out several times.
Ok, perhaps this market is different than 1991, but if performance is the basis, why US? When its lagged other countries significantly over the last 20 years, for example Australia:

Image

Hopefully when the all US folks retire, it will be similar to 2010 and not the 1960s. Would be a shame to have 20+ years of under-performance. :beer
Same story:

Image

Using a different start date has US ahead.

https://www.portfoliovisualizer.com/bac ... tion3_3=40

All you have to do is look at the other chart and pick a start date where one or the other outperforms and then incorrectly claim X years of outperformance.

The other aspect is if you use a cap weight index like VXUS Australia is just 4-5%. To capture outperformance in smaller countries means giving them outsized impact on your portfolio…for every Australia there are likely a couple under performers.

I’ll keep 20% VXUS as a hedge but nothing so far in the data is compelling enough to say global market weight should be a default for all investors vs 80/20 VTI/VXUS.
Da5id
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Re: Thinking of Dropping Out of International Stock Funds

Post by Da5id »

nigel_ht wrote: Thu Jul 29, 2021 7:23 am There are periods where one or the other leads in performance.

Picking a advantageous starting point to imply US trailed international for 20 years is disingenuous. Especially since it’s been pointed out several times.
I actually think it was a totally fair point. While cherry picked begin/end dates can falsely "prove" many things, I think they are useful as counter examples to the many posts that talk about the US strong outperformance of the last 20 (OK actually last 8) years. They provide examples that help fight the recency bias that often pervades the discussion. So I think asking if someone would have the same viewpoint after a specific different 20 year period of international outperformance is reasonable, just that drawing broader conclusions from such a period is invalid.
Angst
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Re: Thinking of Dropping Out of International Stock Funds

Post by Angst »

nigel_ht wrote: Thu Jul 29, 2021 7:23 amAll you have to do is look at the other chart and pick a start date where one or the other outperforms and then incorrectly claim X years of outperformance.

The other aspect is if you use a cap weight index like VXUS Australia is just 4-5%. To capture outperformance in smaller countries means giving them outsized impact on your portfolio…for every Australia there are likely a couple under performers.

I’ll keep 20% VXUS as a hedge but nothing so far in the data is compelling enough to say global market weight should be a default for all investors vs 80/20 VTI/VXUS.
This, of course... except the problem is, for someone like me, on the cusp of retirement, Lady Luck will be picking my start date on a chart that has yet to be revealed to me, and I don't want my odds to be that 80% of my equity performance is going to be identical to the US market alone when I can choose to be a lot closer to the average global equity returns. There's no telling what the next 25 years may have in store for someone largely locked into US equity returns alone. I choose the basic safety offered by diversification.
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

Da5id wrote: Thu Jul 29, 2021 7:47 am
nigel_ht wrote: Thu Jul 29, 2021 7:23 am There are periods where one or the other leads in performance.

Picking a advantageous starting point to imply US trailed international for 20 years is disingenuous. Especially since it’s been pointed out several times.
I actually think it was a totally fair point. While cherry picked begin/end dates can falsely "prove" many things, I think they are useful as counter examples to the many posts that talk about the US strong outperformance of the last 20 (OK actually last 8) years. They provide examples that help fight the recency bias that often pervades the discussion. So I think asking if someone would have the same viewpoint after a specific different 20 year period of international outperformance is reasonable, just that drawing broader conclusions from such a period is invalid.
Strong US performance is immaterial…the issue today is the high correlation between cap weighted US market and cap weighted ex-US market.

Diversification doesn’t do much when the assets are highly correlated. Owning Toyota, VW and Ford doesn’t do you much good when the entire car market is depressed.

There’s no indication that the markets will diverge which means holding ex-US doesn’t necessarily protect against 5-10-20 years of poor absolute performance which is what really matters.
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Re: Thinking of Dropping Out of International Stock Funds

Post by Da5id »

nigel_ht wrote: Thu Jul 29, 2021 8:46 am
Da5id wrote: Thu Jul 29, 2021 7:47 am
nigel_ht wrote: Thu Jul 29, 2021 7:23 am There are periods where one or the other leads in performance.

Picking a advantageous starting point to imply US trailed international for 20 years is disingenuous. Especially since it’s been pointed out several times.
I actually think it was a totally fair point. While cherry picked begin/end dates can falsely "prove" many things, I think they are useful as counter examples to the many posts that talk about the US strong outperformance of the last 20 (OK actually last 8) years. They provide examples that help fight the recency bias that often pervades the discussion. So I think asking if someone would have the same viewpoint after a specific different 20 year period of international outperformance is reasonable, just that drawing broader conclusions from such a period is invalid.
Strong US performance is immaterial…the issue today is the high correlation between cap weighted US market and cap weighted ex-US market.

Diversification doesn’t do much when the assets are highly correlated. Owning Toyota, VW and Ford doesn’t do you much good when the entire car market is depressed.

There’s no indication that the markets will diverge which means holding ex-US doesn’t necessarily protect against 5-10-20 years of poor absolute performance which is what really matters.
I addressed a specific point of yours, while you raised more general points about the entire topic. OK I guess.
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

Angst wrote: Thu Jul 29, 2021 8:44 am
nigel_ht wrote: Thu Jul 29, 2021 7:23 amAll you have to do is look at the other chart and pick a start date where one or the other outperforms and then incorrectly claim X years of outperformance.

The other aspect is if you use a cap weight index like VXUS Australia is just 4-5%. To capture outperformance in smaller countries means giving them outsized impact on your portfolio…for every Australia there are likely a couple under performers.

I’ll keep 20% VXUS as a hedge but nothing so far in the data is compelling enough to say global market weight should be a default for all investors vs 80/20 VTI/VXUS.
This, of course... except the problem is, for someone like me, on the cusp of retirement, Lady Luck will be picking my start date on a chart that has yet to be revealed to me, and I don't want my odds to be that 80% of my equity performance is going to be identical to the US market alone when I can choose to be a lot closer to the average global equity returns. There's no telling what the next 25 years may have in store for someone largely locked into US equity returns alone. I choose the basic safety offered by diversification.
True but honestly I don’t care if international is outperforming as long as US isn’t negative.

There’s only so many ways I’m willing to divide my portfolio. 20% cap weighted ex-US is all I’m willing to do from a diversification perspective. I’d rather put 10% into S&P Small Cap 600.
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TxFrog
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Re: Thinking of Dropping Out of International Stock Funds

Post by TxFrog »

In the 1990 US equities represented approximately 30% of the world market cap. Today that number is almost 60%.

IMO, if an investor excludes international equities they are essentially making a bet that that figure will exceed 60% over their investing lifetime.

Is it sustainable for US equities to over perform the next 40 years at the same rate? Will US equity market cap approach 70%, 80%, 90%, etc.?

I don’t know the answer, but I’m in my 30s and may be investing for another 50 or 60 years. Considering the globalization of the economy, reduction in world absolute poverty rates, penetration of internet across the globe and potential declining populations in developed markets, it’s not a bet I’m willing to make.
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Re: Thinking of Dropping Out of International Stock Funds

Post by Triple digit golfer »

nigel_ht wrote: Thu Jul 29, 2021 8:46 am
Da5id wrote: Thu Jul 29, 2021 7:47 am
nigel_ht wrote: Thu Jul 29, 2021 7:23 am There are periods where one or the other leads in performance.

Picking a advantageous starting point to imply US trailed international for 20 years is disingenuous. Especially since it’s been pointed out several times.
I actually think it was a totally fair point. While cherry picked begin/end dates can falsely "prove" many things, I think they are useful as counter examples to the many posts that talk about the US strong outperformance of the last 20 (OK actually last 8) years. They provide examples that help fight the recency bias that often pervades the discussion. So I think asking if someone would have the same viewpoint after a specific different 20 year period of international outperformance is reasonable, just that drawing broader conclusions from such a period is invalid.
Strong US performance is immaterial…the issue today is the high correlation between cap weighted US market and cap weighted ex-US market.

Diversification doesn’t do much when the assets are highly correlated. Owning Toyota, VW and Ford doesn’t do you much good when the entire car market is depressed.

There’s no indication that the markets will diverge which means holding ex-US doesn’t necessarily protect against 5-10-20 years of poor absolute performance which is what really matters.
The two can be highly correlated and returns can be significantly different. Look at the last ten years and that's all you need to know.

I wouldn't want to have been an ex-U.S. only investor the last ten years. And over the next ten, it may flip the other way, where I wouldn't want to be a U.S. only investor. That is the point the ex-U.S. proponents are making, or at least the one I'm making. I couldn't care less about correlations in this case. I care about preventing a dead decade, so to speak. And if all equities tank, I have 20% in bonds to offer some stability while the market hopefully claw their way back.
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

Da5id wrote: Thu Jul 29, 2021 8:49 am
nigel_ht wrote: Thu Jul 29, 2021 8:46 am
Da5id wrote: Thu Jul 29, 2021 7:47 am
nigel_ht wrote: Thu Jul 29, 2021 7:23 am There are periods where one or the other leads in performance.

Picking a advantageous starting point to imply US trailed international for 20 years is disingenuous. Especially since it’s been pointed out several times.
I actually think it was a totally fair point. While cherry picked begin/end dates can falsely "prove" many things, I think they are useful as counter examples to the many posts that talk about the US strong outperformance of the last 20 (OK actually last 8) years. They provide examples that help fight the recency bias that often pervades the discussion. So I think asking if someone would have the same viewpoint after a specific different 20 year period of international outperformance is reasonable, just that drawing broader conclusions from such a period is invalid.
Strong US performance is immaterial…the issue today is the high correlation between cap weighted US market and cap weighted ex-US market.

Diversification doesn’t do much when the assets are highly correlated. Owning Toyota, VW and Ford doesn’t do you much good when the entire car market is depressed.

There’s no indication that the markets will diverge which means holding ex-US doesn’t necessarily protect against 5-10-20 years of poor absolute performance which is what really matters.
I addressed a specific point of yours, while you raised more general points about the entire topic. OK I guess.
Fair. Regarding the specific point by using cherry picked data you’re STILL hiding the fact that it’s cyclic and it turns out to be a wash over the long term for accumulators who are continuing to DCA into the market.

In BOTH cases the neutral chart showing periods of out and under performance should be shown so the other chart can be seen in context.

VTI or VT doesn’t appear to matter enough to strongly state one should be the default vs the other.

For folks in early retirement worried about US specific SORR international diversification is more relevant.
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Re: Thinking of Dropping Out of International Stock Funds

Post by Angst »

nigel_ht wrote: Thu Jul 29, 2021 8:51 am
Angst wrote: Thu Jul 29, 2021 8:44 am
nigel_ht wrote: Thu Jul 29, 2021 7:23 amAll you have to do is look at the other chart and pick a start date where one or the other outperforms and then incorrectly claim X years of outperformance.

The other aspect is if you use a cap weight index like VXUS Australia is just 4-5%. To capture outperformance in smaller countries means giving them outsized impact on your portfolio…for every Australia there are likely a couple under performers.

I’ll keep 20% VXUS as a hedge but nothing so far in the data is compelling enough to say global market weight should be a default for all investors vs 80/20 VTI/VXUS.
This, of course... except the problem is, for someone like me, on the cusp of retirement, Lady Luck will be picking my start date on a chart that has yet to be revealed to me, and I don't want my odds to be that 80% of my equity performance is going to be identical to the US market alone when I can choose to be a lot closer to the average global equity returns. There's no telling what the next 25 years may have in store for someone largely locked into US equity returns alone. I choose the basic safety offered by diversification.
True but honestly I don’t care if international is outperforming as long as US isn’t negative.

There’s only so many ways I’m willing to divide my portfolio. 20% cap weighted ex-US is all I’m willing to do from a diversification perspective. I’d rather put 10% into S&P Small Cap 600.
I understand, and I second the bit of additional SCV exposure.
:beer
Da5id
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Re: Thinking of Dropping Out of International Stock Funds

Post by Da5id »

nigel_ht wrote: Thu Jul 29, 2021 8:55 am
Da5id wrote: Thu Jul 29, 2021 8:49 am
nigel_ht wrote: Thu Jul 29, 2021 8:46 am
Da5id wrote: Thu Jul 29, 2021 7:47 am
nigel_ht wrote: Thu Jul 29, 2021 7:23 am There are periods where one or the other leads in performance.

Picking a advantageous starting point to imply US trailed international for 20 years is disingenuous. Especially since it’s been pointed out several times.
I actually think it was a totally fair point. While cherry picked begin/end dates can falsely "prove" many things, I think they are useful as counter examples to the many posts that talk about the US strong outperformance of the last 20 (OK actually last 8) years. They provide examples that help fight the recency bias that often pervades the discussion. So I think asking if someone would have the same viewpoint after a specific different 20 year period of international outperformance is reasonable, just that drawing broader conclusions from such a period is invalid.
Strong US performance is immaterial…the issue today is the high correlation between cap weighted US market and cap weighted ex-US market.

Diversification doesn’t do much when the assets are highly correlated. Owning Toyota, VW and Ford doesn’t do you much good when the entire car market is depressed.

There’s no indication that the markets will diverge which means holding ex-US doesn’t necessarily protect against 5-10-20 years of poor absolute performance which is what really matters.
I addressed a specific point of yours, while you raised more general points about the entire topic. OK I guess.
Fair. Regarding the specific point by using cherry picked data you’re STILL hiding the fact that it’s cyclic and it turns out to be a wash over the long term for accumulators who are continuing to DCA into the market.
But again, it is only at all useful as a counterpoint to performance graphs ending today. As an example that "things could be different over long stretches". It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul. Only that international can be higher performing over long stretches historically.

I believe it would change the discussion markedly in bogleheads if we were towards the end of a long cycle of int'l outperformance compared to the current state. And the graph is useful for at least trying to get people to think of that perspective. But I doubt much of anything changes peoples minds in these discussions, so...
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

Triple digit golfer wrote: Thu Jul 29, 2021 8:54 am
I wouldn't want to have been an ex-U.S. only investor the last ten years. And over the next ten, it may flip the other way, where I wouldn't want to be a U.S. only investor.
Why? Ex-US has a decent return doesn’t it? Just not as good as ours at the moment. If it flips and we’re running 5.39% real returns while ex-US is higher I’ll still be happy as a US investor.

It’s only when one is negative and the other positive that I’d wish I owned more of the other.

Are you unhappy with VTI because QQQ is higher? Are you unhappy with 70/30 because 100/0 is higher?
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jason2459
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Re: Thinking of Dropping Out of International Stock Funds

Post by jason2459 »

MrCheapo wrote: Tue Jul 27, 2021 11:17 am
...

Fortunately, I'm heavily exposed to US stocks which have put me in a nice position.

...

Thoughts?
Sorry I didn't read this entire thread and I'm sure there's very interesting content... But the above is all that matters to me.

Sounds like you have Enough. Jack would be pleased and would say Stay the course.
Last edited by jason2459 on Thu Jul 29, 2021 9:09 am, edited 1 time in total.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
nigel_ht
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

Da5id wrote: Thu Jul 29, 2021 9:06 am It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul.
Are we reading the same international threads?
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Re: Thinking of Dropping Out of International Stock Funds

Post by Da5id »

nigel_ht wrote: Thu Jul 29, 2021 9:09 am
Da5id wrote: Thu Jul 29, 2021 9:06 am It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul.
Are we reading the same international threads?
Give me a few quotes where somebody says ex-US will provide better returns than US "over the long haul"? Some (including Vanguard) are saying due to valuations ex-US is a modestly to moderately better buy now, with big error bars. I guess it depends on what the "long haul" is. I'd say that is 20-30 years, a range at which most everyone should say "who knows?" There are a handful (Nathan comes to mind) who advocate for overweight ex-US currently, but the vast majority I see posting are arguing for market weight ex-US *at best*, which is hardly asserting that ex-US is going to win.
Triple digit golfer
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Re: Thinking of Dropping Out of International Stock Funds

Post by Triple digit golfer »

nigel_ht wrote: Thu Jul 29, 2021 9:08 am
Triple digit golfer wrote: Thu Jul 29, 2021 8:54 am
I wouldn't want to have been an ex-U.S. only investor the last ten years. And over the next ten, it may flip the other way, where I wouldn't want to be a U.S. only investor.
Why? Ex-US has a decent return doesn’t it? Just not as good as ours at the moment. If it flips and we’re running 5.39% real returns while ex-US is higher I’ll still be happy as a US investor.

It’s only when one is negative and the other positive that I’d wish I owned more of the other.

Are you unhappy with VTI because QQQ is higher? Are you unhappy with 70/30 because 100/0 is higher?
Let me flip the question back to you. Why is 0% the cutoff? Why would you be happy with 0.01% real but not -0.01% real?

If one returns -0.01% and the other returns 10%, you'd wish you owned more of the 10%, but if one returns 0.01% and the other 10%, you'd be happy with the 0.01%?
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Re: Thinking of Dropping Out of International Stock Funds

Post by Nathan Drake »

nigel_ht wrote: Thu Jul 29, 2021 9:08 am
Triple digit golfer wrote: Thu Jul 29, 2021 8:54 am
I wouldn't want to have been an ex-U.S. only investor the last ten years. And over the next ten, it may flip the other way, where I wouldn't want to be a U.S. only investor.
Why? Ex-US has a decent return doesn’t it? Just not as good as ours at the moment. If it flips and we’re running 5.39% real returns while ex-US is higher I’ll still be happy as a US investor.

It’s only when one is negative and the other positive that I’d wish I owned more of the other.

Are you unhappy with VTI because QQQ is higher? Are you unhappy with 70/30 because 100/0 is higher?
The more overvalued the US market gets the higher the chance for negative real returns particularly if inflation runs hot

It wasn’t too long ago this happened 00-09
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Nathan Drake
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Re: Thinking of Dropping Out of International Stock Funds

Post by Nathan Drake »

Da5id wrote: Thu Jul 29, 2021 9:14 am
nigel_ht wrote: Thu Jul 29, 2021 9:09 am
Da5id wrote: Thu Jul 29, 2021 9:06 am It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul.
Are we reading the same international threads?
Give me a few quotes where somebody says ex-US will provide better returns than US "over the long haul"? Some (including Vanguard) are saying due to valuations ex-US is a modestly to moderately better buy now, with big error bars. I guess it depends on what the "long haul" is. I'd say that is 20-30 years, a range at which most everyone should say "who knows?" There are a handful (Nathan comes to mind) who advocate for overweight ex-US currently, but the vast majority I see posting are arguing for market weight ex-US *at best*, which is hardly asserting that ex-US is going to win.
I don’t advocate for anyone else.

I think market cap weight is an appropriate default. I think 100% US is not appropriate and there are many lessons learned throughout history as to why.

I choose to slice and dice my portfolio due to increased risk premium exposure and diversification, and I tactically tilt towards exUS because I believe current market cap weight is not properly indicative of where the ratios should be over the long term… but that’s my strategy, I am not saying anyone else’s strategy is incorrect for them
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

Triple digit golfer wrote: Thu Jul 29, 2021 9:21 am
nigel_ht wrote: Thu Jul 29, 2021 9:08 am
Triple digit golfer wrote: Thu Jul 29, 2021 8:54 am
I wouldn't want to have been an ex-U.S. only investor the last ten years. And over the next ten, it may flip the other way, where I wouldn't want to be a U.S. only investor.
Why? Ex-US has a decent return doesn’t it? Just not as good as ours at the moment. If it flips and we’re running 5.39% real returns while ex-US is higher I’ll still be happy as a US investor.

It’s only when one is negative and the other positive that I’d wish I owned more of the other.

Are you unhappy with VTI because QQQ is higher? Are you unhappy with 70/30 because 100/0 is higher?
Let me flip the question back to you. Why is 0% the cutoff? Why would you be happy with 0.01% real but not -0.01% real?

If one returns -0.01% and the other returns 10%, you'd wish you owned more of the 10%, but if one returns 0.01% and the other 10%, you'd be happy with the 0.01%?
0% isn't necessarily the cutoff. I forget the exact amount but HomerJ always reminds folks that for 4% to work you only need some small % real over 30 years. That's my personal cutoff even if I don't remember what it is. lol.

Now if ex-US returns 10% while US is returning 0 then yes, you'd wish you had more ex-US. That really diverges from the trend to more correlation rather than less.

Personally I'd rather do 40% VTI/10% VXUS/10% VIOO than 60% VT.

I don't think folks being overly judgmental over stuff that likely isn't going to decisively change the outcome is helpful in "protecting young investors".
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

Da5id wrote: Thu Jul 29, 2021 9:14 am
nigel_ht wrote: Thu Jul 29, 2021 9:09 am
Da5id wrote: Thu Jul 29, 2021 9:06 am It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul.
Are we reading the same international threads?
Give me a few quotes where somebody says ex-US will provide better returns than US "over the long haul"? Some (including Vanguard) are saying due to valuations ex-US is a modestly to moderately better buy now, with big error bars. I guess it depends on what the "long haul" is. I'd say that is 20-30 years, a range at which most everyone should say "who knows?" There are a handful (Nathan comes to mind) who advocate for overweight ex-US currently, but the vast majority I see posting are arguing for market weight ex-US *at best*, which is hardly asserting that ex-US is going to win.
Some posters exhibit a lot of negativity toward anything that isn't *at least* market weight and disparage Bogle's "20% international if you must" stance.

Taylor once commented that since Bogle said at most 20% and Vanguard said at least 20% that it was a happy medium. So far the data suggests that's a reasonable course of action.
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Re: Thinking of Dropping Out of International Stock Funds

Post by Triple digit golfer »

nigel_ht wrote: Thu Jul 29, 2021 9:39 am
Triple digit golfer wrote: Thu Jul 29, 2021 9:21 am
nigel_ht wrote: Thu Jul 29, 2021 9:08 am
Triple digit golfer wrote: Thu Jul 29, 2021 8:54 am
I wouldn't want to have been an ex-U.S. only investor the last ten years. And over the next ten, it may flip the other way, where I wouldn't want to be a U.S. only investor.
Why? Ex-US has a decent return doesn’t it? Just not as good as ours at the moment. If it flips and we’re running 5.39% real returns while ex-US is higher I’ll still be happy as a US investor.

It’s only when one is negative and the other positive that I’d wish I owned more of the other.

Are you unhappy with VTI because QQQ is higher? Are you unhappy with 70/30 because 100/0 is higher?
Let me flip the question back to you. Why is 0% the cutoff? Why would you be happy with 0.01% real but not -0.01% real?

If one returns -0.01% and the other returns 10%, you'd wish you owned more of the 10%, but if one returns 0.01% and the other 10%, you'd be happy with the 0.01%?
0% isn't necessarily the cutoff. I forget the exact amount but HomerJ always reminds folks that for 4% to work you only need some small % real over 30 years. That's my personal cutoff even if I don't remember what it is. lol.

Now if ex-US returns 10% while US is returning 0 then yes, you'd wish you had more ex-US. That really diverges from the trend to more correlation rather than less.

Personally I'd rather do 40% VTI/10% VXUS/10% VIOO than 60% VT.

I don't think folks being overly judgmental over stuff that likely isn't going to decisively change the outcome is helpful in "protecting young investors".
That AA is certainly within the realm of reasonable. Too little international for my liking, but the small cap helps diversify further away from the broad U.S. market. I would sleep better with that portfolio than I would if the 10% VIOO was in VTI.
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Re: Thinking of Dropping Out of International Stock Funds

Post by Da5id »

nigel_ht wrote: Thu Jul 29, 2021 9:47 am
Da5id wrote: Thu Jul 29, 2021 9:14 am
nigel_ht wrote: Thu Jul 29, 2021 9:09 am
Da5id wrote: Thu Jul 29, 2021 9:06 am It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul.
Are we reading the same international threads?
Give me a few quotes where somebody says ex-US will provide better returns than US "over the long haul"? Some (including Vanguard) are saying due to valuations ex-US is a modestly to moderately better buy now, with big error bars. I guess it depends on what the "long haul" is. I'd say that is 20-30 years, a range at which most everyone should say "who knows?" There are a handful (Nathan comes to mind) who advocate for overweight ex-US currently, but the vast majority I see posting are arguing for market weight ex-US *at best*, which is hardly asserting that ex-US is going to win.
Some posters exhibit a lot of negativity toward anything that isn't *at least* market weight
Huh. I don't see many like that at all.
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Re: Thinking of Dropping Out of International Stock Funds

Post by Da5id »

Nathan Drake wrote: Thu Jul 29, 2021 9:35 am
Da5id wrote: Thu Jul 29, 2021 9:14 am
nigel_ht wrote: Thu Jul 29, 2021 9:09 am
Da5id wrote: Thu Jul 29, 2021 9:06 am It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul.
Are we reading the same international threads?
Give me a few quotes where somebody says ex-US will provide better returns than US "over the long haul"? Some (including Vanguard) are saying due to valuations ex-US is a modestly to moderately better buy now, with big error bars. I guess it depends on what the "long haul" is. I'd say that is 20-30 years, a range at which most everyone should say "who knows?" There are a handful (Nathan comes to mind) who advocate for overweight ex-US currently, but the vast majority I see posting are arguing for market weight ex-US *at best*, which is hardly asserting that ex-US is going to win.
I don’t advocate for anyone else.

I think market cap weight is an appropriate default. I think 100% US is not appropriate and there are many lessons learned throughout history as to why.

I choose to slice and dice my portfolio due to increased risk premium exposure and diversification, and I tactically tilt towards exUS because I believe current market cap weight is not properly indicative of where the ratios should be over the long term… but that’s my strategy, I am not saying anyone else’s strategy is incorrect for them
I tend to take posting one's position as implicit advocacy for it. You are putting your money where your mouth is so to speak. But OK fair enough.
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Re: Thinking of Dropping Out of International Stock Funds

Post by nigel_ht »

Triple digit golfer wrote: Thu Jul 29, 2021 9:48 am
nigel_ht wrote: Thu Jul 29, 2021 9:39 am
Personally I'd rather do 40% VTI/10% VXUS/10% VIOO than 60% VT.

I don't think folks being overly judgmental over stuff that likely isn't going to decisively change the outcome is helpful in "protecting young investors".
That AA is certainly within the realm of reasonable. Too little international for my liking, but the small cap helps diversify further away from the broad U.S. market. I would sleep better with that portfolio than I would if the 10% VIOO was in VTI.
With the Vanguard paper noting that correlation trended up and plateaued at 80% I'm not expecting a lot of diversification benefits in global large cap. If either the Chinese or US economies crater I think it'll show up across the board.

While the US will become less important over time, over the next decade or two I don't see scenarios where we can repeat 1929 and not have a global impact.
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Re: Thinking of Dropping Out of International Stock Funds

Post by tibbitts »

Da5id wrote: Thu Jul 29, 2021 9:14 am
nigel_ht wrote: Thu Jul 29, 2021 9:09 am
Da5id wrote: Thu Jul 29, 2021 9:06 am It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul.
Are we reading the same international threads?
Give me a few quotes where somebody says ex-US will provide better returns than US "over the long haul"? Some (including Vanguard) are saying due to valuations ex-US is a modestly to moderately better buy now, with big error bars. I guess it depends on what the "long haul" is. I'd say that is 20-30 years, a range at which most everyone should say "who knows?" There are a handful (Nathan comes to mind) who advocate for overweight ex-US currently, but the vast majority I see posting are arguing for market weight ex-US *at best*, which is hardly asserting that ex-US is going to win.
My guess is that there would be some concern for overweighting ex-US due to what are still in most cases higher costs (due to tax policy if nothing else, although many index funds and ETFs are still higher cost in ex-US versions), and currency fluctuation (given spending in USD.) I believe most people recognize that differences are likely to be moderate over longer periods, although there will always be exceptions to be found in retrospect with careful selection of start and end dates.
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Re: Thinking of Dropping Out of International Stock Funds

Post by Nathan Drake »

nigel_ht wrote: Thu Jul 29, 2021 10:01 am
Triple digit golfer wrote: Thu Jul 29, 2021 9:48 am
nigel_ht wrote: Thu Jul 29, 2021 9:39 am
Personally I'd rather do 40% VTI/10% VXUS/10% VIOO than 60% VT.

I don't think folks being overly judgmental over stuff that likely isn't going to decisively change the outcome is helpful in "protecting young investors".
That AA is certainly within the realm of reasonable. Too little international for my liking, but the small cap helps diversify further away from the broad U.S. market. I would sleep better with that portfolio than I would if the 10% VIOO was in VTI.
With the Vanguard paper noting that correlation trended up and plateaued at 80% I'm not expecting a lot of diversification benefits in global large cap. If either the Chinese or US economies crater I think it'll show up across the board.

While the US will become less important over time, over the next decade or two I don't see scenarios where we can repeat 1929 and not have a global impact.
You don’t need 1929 for your stocks to do poorly or go nowhere

Japan tanked and yet US rose during the same period of the 90s
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Da5id
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Re: Thinking of Dropping Out of International Stock Funds

Post by Da5id »

tibbitts wrote: Thu Jul 29, 2021 10:02 am
Da5id wrote: Thu Jul 29, 2021 9:14 am
nigel_ht wrote: Thu Jul 29, 2021 9:09 am
Da5id wrote: Thu Jul 29, 2021 9:06 am It doesn't hide (or address) the cyclic nature, it isn't meant to make the point that international is *better* over the long haul.
Are we reading the same international threads?
Give me a few quotes where somebody says ex-US will provide better returns than US "over the long haul"? Some (including Vanguard) are saying due to valuations ex-US is a modestly to moderately better buy now, with big error bars. I guess it depends on what the "long haul" is. I'd say that is 20-30 years, a range at which most everyone should say "who knows?" There are a handful (Nathan comes to mind) who advocate for overweight ex-US currently, but the vast majority I see posting are arguing for market weight ex-US *at best*, which is hardly asserting that ex-US is going to win.
My guess is that there would be some concern for overweighting ex-US due to what are still in most cases higher costs (due to tax policy if nothing else, although many index funds and ETFs are still higher cost in ex-US versions), and currency fluctuation (given spending in USD.) I believe most people recognize that differences are likely to be moderate over longer periods, although there will always be exceptions to be found in retrospect with careful selection of start and end dates.
Sure. I'm not saying overweighting ex-US is a good thing, I don't do it myself. I'm just saying I see few advocating for it. Which was a response to nigel_ht apparently thinking that is more common a position in these threads than I do.
tibbitts
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Re: Thinking of Dropping Out of International Stock Funds

Post by tibbitts »

jason2459 wrote: Thu Jul 29, 2021 9:09 am
Sounds like you have Enough. Jack would be pleased and would say Stay the course.
An interesting question to pose to Bogle if we could would be whether he'd still favor stay-the-course if a particular investor's course for a very long time had been, say, ex-US at market cap weight. To me it seems like there is far more potential damage to be done by not staying the course, except in cases of an obviously poor allocation. And I'm not sure ex-US at market cap would meet his criteria for an "obviously poor" allocation (as would for example an allocation to a single stock, or single-sector fund), even though he was known to favor a lower percentage of international. But Bogle was known to make occasional exceptions to stay-the-course, not entirely for personal reasons, so I'm not sure what he'd suggest.
EnjoyIt
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Re: Thinking of Dropping Out of International Stock Funds

Post by EnjoyIt »

lostdog wrote: Wed Jul 28, 2021 9:49 am
Nathan Drake wrote: Wed Jul 28, 2021 9:37 am
YRT70 wrote: Wed Jul 28, 2021 9:26 am Might not be the best timing. Then again, who knows.

Image

Image
Valuations don’t matter. US stocks going to Japan levels of P/E!

Apple stock to be worth more than all exUS market caps combined!!!

Thank you Jack!!!
I invest in U.S. only because it will outperform to infinity and beyond! Thanks Jack, you are right and will be right forever!
It sounds like sarcasm, but I’m concerned it is not.

The shear thought that valuations don’t matter and stocks have only one way to go but up especially if those stocks are based in the US is nonsensical. Bogle also talked about reversion to the mean.

I’m no international evangelist but I do realize that “to the moon” is not a rational strategy
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EnjoyIt
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Re: Thinking of Dropping Out of International Stock Funds

Post by EnjoyIt »

Triple digit golfer wrote: Wed Jul 28, 2021 11:22 am
nigel_ht wrote: Wed Jul 28, 2021 11:17 am
Triple digit golfer wrote: Wed Jul 28, 2021 11:10 am
smalliebigs wrote: Wed Jul 28, 2021 11:06 am Protect them? From what? People that are on this forum are already considered very successful (in theory) when it comes to investing/personal finance.
People often discover this forum by accident when starting out their investing journey and are looking for advice.

The people with thousands of posts are probably successful, but look at all the posters with just a handful of posts. On top of that, there are probably 20x as many non-members lurking, reading these posts right now. I'd love for even one to read one of my posts and take something good from it. A good start would be starting their investing journey with world market cap equities or close to it, and only adjusting from there if they can justify it.
That's your opinion.

It CAN be a good starting point but there are multiple good starting points. Others believe that 20% international is good enough for diversification. Others believe that just doing VTI is good enough to start with.

And post count isn't indicative of success.
Of course it is my opinion. I would never claim otherwise.

No, post count is not necessarily indicative of success, but I would guess that people with thousands of posts have figured out the basics by now or they never will. They've put in the time here. Someone with thousands of posts is not likely to be swayed by opinions about U.S. vs. international ratio, but a new member may be. The new members are often recent college graduates, people just starting to make enough money to be able to invest, or people reaching mid-career and realizing they haven't gotten the start they would have liked, among others.

Generally speaking, I think it is highly likely that people with 0-10 posts are more likely to be influenced by opinion than people with 1,000+ posts. And yes, that is my opinion as well. :happy
Just looking around over the many years I would agree that people who have been on this forum for years with higher post counts tend to understand not to time the market, recency bias, and other behavioral mistakes. As an example in March 2020 when the market dropped there was much discussion about market timing. Most of the people who have been members for a long time tried to persuade not to market time. Despite that even long time members got freaked out and considered selling.

So yes, in my opinion longevity on this forum does correlate with less behavioral errors. But it is not 100% correlated.
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EnjoyIt
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Re: Thinking of Dropping Out of International Stock Funds

Post by EnjoyIt »

Visitor76 wrote: Wed Jul 28, 2021 12:26 pm
Nathan Drake wrote: Wed Jul 28, 2021 11:05 am
Visitor76 wrote: Wed Jul 28, 2021 10:12 am
lostdog wrote: Wed Jul 28, 2021 9:27 am
Visitor76 wrote: Wed Jul 28, 2021 9:25 am

I sold my International fund because it was a drag on my portfolio (I don't own individual stocks). Then I reallocated my existing portfolio into a growth/value blend.
When will you get back in? If the US index was lagging, would you have dropped that?
I would not drop out of US equities entirely if International was out performing. I see International is being far more volatile than US.

I have no plans of getting back into International; but would consider International funds again if they can produce annual competitive returns with that of the US.
So you’ll get in after the price has already gone up?

Okay…
I would rather put money into a fund that is on the way up as opposed to investing said money into an under performer.
I think that is the exact definition of performance chasing.

Studies show that performance chasing underperforms buy and hold.
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Marseille07
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Re: Thinking of Dropping Out of International Stock Funds

Post by Marseille07 »

EnjoyIt wrote: Thu Jul 29, 2021 10:46 am Studies show that performance chasing underperforms buy and hold.
Not sure who is performance chasing here then. We're talking about US vs ex-US, but both are B&H.
EnjoyIt
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Re: Thinking of Dropping Out of International Stock Funds

Post by EnjoyIt »

nigel_ht wrote: Thu Jul 29, 2021 8:55 am
Da5id wrote: Thu Jul 29, 2021 8:49 am
nigel_ht wrote: Thu Jul 29, 2021 8:46 am
Da5id wrote: Thu Jul 29, 2021 7:47 am
nigel_ht wrote: Thu Jul 29, 2021 7:23 am There are periods where one or the other leads in performance.

Picking a advantageous starting point to imply US trailed international for 20 years is disingenuous. Especially since it’s been pointed out several times.
I actually think it was a totally fair point. While cherry picked begin/end dates can falsely "prove" many things, I think they are useful as counter examples to the many posts that talk about the US strong outperformance of the last 20 (OK actually last 8) years. They provide examples that help fight the recency bias that often pervades the discussion. So I think asking if someone would have the same viewpoint after a specific different 20 year period of international outperformance is reasonable, just that drawing broader conclusions from such a period is invalid.
Strong US performance is immaterial…the issue today is the high correlation between cap weighted US market and cap weighted ex-US market.

Diversification doesn’t do much when the assets are highly correlated. Owning Toyota, VW and Ford doesn’t do you much good when the entire car market is depressed.

There’s no indication that the markets will diverge which means holding ex-US doesn’t necessarily protect against 5-10-20 years of poor absolute performance which is what really matters.
I addressed a specific point of yours, while you raised more general points about the entire topic. OK I guess.
Fair. Regarding the specific point by using cherry picked data you’re STILL hiding the fact that it’s cyclic and it turns out to be a wash over the long term for accumulators who are continuing to DCA into the market.

In BOTH cases the neutral chart showing periods of out and under performance should be shown so the other chart can be seen in context.

VTI or VT doesn’t appear to matter enough to strongly state one should be the default vs the other.

For folks in early retirement worried about US specific SORR international diversification is more relevant.
Neigel-ht,
That last paragraph is a very good point. For those who are closer to their retirement or are already retired, having everything in the best performing asset class isn’t the main goal anymore. Making sure that a poor sequence of returns doesn’t cost you a worse retirement is a far bigger goal. Diversifying into international, in my opinion provides me more downside protection during retirement.
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EnjoyIt
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Re: Thinking of Dropping Out of International Stock Funds

Post by EnjoyIt »

Marseille07 wrote: Thu Jul 29, 2021 10:54 am
EnjoyIt wrote: Thu Jul 29, 2021 10:46 am Studies show that performance chasing underperforms buy and hold.
Not sure who is performance chasing here then. We're talking about US vs ex-US, but both are B&H.
The person who wrote they will buy EX-US if EX-US starts performing better.
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Marseille07
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Re: Thinking of Dropping Out of International Stock Funds

Post by Marseille07 »

EnjoyIt wrote: Thu Jul 29, 2021 11:04 am
Marseille07 wrote: Thu Jul 29, 2021 10:54 am
EnjoyIt wrote: Thu Jul 29, 2021 10:46 am Studies show that performance chasing underperforms buy and hold.
Not sure who is performance chasing here then. We're talking about US vs ex-US, but both are B&H.
The person who wrote they will buy EX-US if EX-US starts performing better.
Thanks. Gotcha, I missed the post :beer
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