Does "international" offer any diversification?

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Blue456
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Re: Does "international" offer any diversification?

Post by Blue456 »

MarkRoulo wrote: Sun Jan 09, 2022 10:50 am $US, *with* dividends and adjusted for inflation: -24% total return (which is still horrible for 30 years ...)
The return adjusted for inflation's the one that matters. Which illustrates the same issue. Investing into one country can result in a prolonged loss without recovery. Hence my investment into international is a form of insurance against such event.
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Re: Does "international" offer any diversification?

Post by MarkRoulo »

Blue456 wrote: Sun Jan 09, 2022 3:53 pm
MarkRoulo wrote: Sun Jan 09, 2022 10:50 am $US, *with* dividends and adjusted for inflation: -24% total return (which is still horrible for 30 years ...)
The return adjusted for inflation's the one that matters. Which illustrates the same issue. Investing into one country can result in a prolonged loss without recovery. Hence my investment into international is a form of insurance against such event.
I'm not arguing for or against adjusting for inflation (though I agree that real returns are what matter).

But with eight different ways to report the returns ($US vs Yen, dividends re-invested or just the index return, nominal or real) here I am quite certain that we'll waste a lot less time talking past each other if each of us specifies which of the eight returns we mean. It is bad enough discussing domestic returns and mixing up nominal and real. Add in the other two and ...
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Re: Does "international" offer any diversification?

Post by abuss368 »

sf_tech_saver wrote: Sat Jan 08, 2022 12:30 am
Warren Buffet wisely says all of this back and forth about VTI and VT is all just wasted energy and unless you are a pro to just buy VOO. :) He's probably right....
The Warren Buffett Two Fund Portfolio of S&P 500 and Treasuries / Cash is hard to beat.

Hope you are well.
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Re: Does "international" offer any diversification?

Post by abuss368 »

Will 2022 bring a different result for international? No one knows for sure. Maximum diversification at the lowest cost is an excellent strategy for the long term

Tony
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

abuss368 wrote: Tue Jan 11, 2022 9:31 pm Will 2022 bring a different result for international? No one knows for sure. Maximum diversification at the lowest cost is an excellent strategy for the long term

Tony
Have you changed your mind on international and got back in?
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Re: Does "international" offer any diversification?

Post by Sandtrap »

abuss368 wrote: Tue Jan 11, 2022 9:11 pm
sf_tech_saver wrote: Sat Jan 08, 2022 12:30 am
Warren Buffet wisely says all of this back and forth about VTI and VT is all just wasted energy and unless you are a pro to just buy VOO. :) He's probably right....
The Warren Buffett Two Fund Portfolio of S&P 500 and Treasuries / Cash is hard to beat.

Hope you are well.
Tony
+1
In the interest of simplicity, we brieftly had a percentage of international but dumped it.
For us, there were many reasons, including estate management for future hares. It works for us but not for others. It can't be denied that the Vanguard Target Date Funds and "Fund of Funds" have an ever increasing percentage of International for good reason, or some reason. . . . .

Hybrid 2 fund LMP. with a regretable brief foray into the world of REIT index funds.
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Re: Does "international" offer any diversification?

Post by abuss368 »

Sandtrap wrote: Wed Jan 12, 2022 9:02 am
abuss368 wrote: Tue Jan 11, 2022 9:11 pm
sf_tech_saver wrote: Sat Jan 08, 2022 12:30 am
Warren Buffet wisely says all of this back and forth about VTI and VT is all just wasted energy and unless you are a pro to just buy VOO. :) He's probably right....
The Warren Buffett Two Fund Portfolio of S&P 500 and Treasuries / Cash is hard to beat.

Hope you are well.
Tony
+1
In the interest of simplicity, we brieftly had a percentage of international but dumped it.
For us, there were many reasons, including estate management for future hares. It works for us but not for others. It can't be denied that the Vanguard Target Date Funds and "Fund of Funds" have an ever increasing percentage of International for good reason, or some reason. . . . .

Hybrid 2 fund LMP. with a regretable brief foray into the world of REIT index funds.
j :D
Thanks Jim. Did not know you exited international.

Tony
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Re: Does "international" offer any diversification?

Post by Sandtrap »

abuss368 wrote: Wed Jan 12, 2022 3:10 pm
Sandtrap wrote: Wed Jan 12, 2022 9:02 am
abuss368 wrote: Tue Jan 11, 2022 9:11 pm
sf_tech_saver wrote: Sat Jan 08, 2022 12:30 am
Warren Buffet wisely says all of this back and forth about VTI and VT is all just wasted energy and unless you are a pro to just buy VOO. :) He's probably right....
The Warren Buffett Two Fund Portfolio of S&P 500 and Treasuries / Cash is hard to beat.

Hope you are well.
Tony
+1
In the interest of simplicity, we brieftly had a percentage of international but dumped it.
For us, there were many reasons, including estate management for future hares. It works for us but not for others. It can't be denied that the Vanguard Target Date Funds and "Fund of Funds" have an ever increasing percentage of International for good reason, or some reason. . . . .

Hybrid 2 fund LMP. with a regretable brief foray into the world of REIT index funds.
j :D
Thanks Jim. Did not know you exited international.

Tony
As simple as possible for the hares.

J🌺
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Nathan Drake
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

Sandtrap wrote: Wed Jan 12, 2022 4:21 pm
abuss368 wrote: Wed Jan 12, 2022 3:10 pm
Sandtrap wrote: Wed Jan 12, 2022 9:02 am
abuss368 wrote: Tue Jan 11, 2022 9:11 pm
sf_tech_saver wrote: Sat Jan 08, 2022 12:30 am
Warren Buffet wisely says all of this back and forth about VTI and VT is all just wasted energy and unless you are a pro to just buy VOO. :) He's probably right....
The Warren Buffett Two Fund Portfolio of S&P 500 and Treasuries / Cash is hard to beat.

Hope you are well.
Tony
+1
In the interest of simplicity, we brieftly had a percentage of international but dumped it.
For us, there were many reasons, including estate management for future hares. It works for us but not for others. It can't be denied that the Vanguard Target Date Funds and "Fund of Funds" have an ever increasing percentage of International for good reason, or some reason. . . . .

Hybrid 2 fund LMP. with a regretable brief foray into the world of REIT index funds.
j :D
Thanks Jim. Did not know you exited international.

Tony
As simple as possible for the hares.

J🌺
Your capitulation was the necessary mechanism for exUS to start outperforming :D
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Re: Does "international" offer any diversification?

Post by Gaston »

Here is an extract from Larry Swedroe on international diversification which might help the OP shape his thoughts on this topic. The full text is here: (https://www.evidenceinvestor.com/invest ... 21-part-1/).
There were only three years of the 21 when the difference in returns between the S&P 500 Index and the MSCI EAFE Index was less than 5 percentage points. On the other hand, there were 14 years when it was at least 8 percentage points. There were also only three years when the return on the S&P 500 Index was within 10 percentage points of the return of the MSCI Emerging Markets Index. There were eight years when it was at least 20 percentage points and four when it was at least 30 percentage points. The largest gap was more than 53 percentage points. The data presents powerful evidence that the investment world is far from flat and that there are still significant benefits in international diversification.
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Re: Does "international" offer any diversification?

Post by BlueEars »

willthrill81 wrote: Sun Jan 09, 2022 10:07 am
Forester wrote: Sun Jan 09, 2022 9:40 am
stocksurfer wrote: Fri Jan 07, 2022 10:11 pm I'm trying to bring some sanity into my non-US holdings and I'm scratching my head. Most of the funds I look at, whether x-US, developed countries, or EM are dominated by multinationals. E.g. Nestle, LVHM, Taiwan Semiconductor, Samsung, Alibaba, Tencen, and the list goes on. How do these companies offer any diversification from the closely related US multinationals that dominate the US market funds? Don't they sell into the same markets, draw from the same suppliers, are affected by the same global business cycles, etc?
International might offer some protection against the US dollar becoming weaker. All things being equal on the currency front, I doubt it matters if you own the ex-US index, as opposed to a US SCV fund.
That's part of my problem with ex-U.S. stock; it's had 'dry spells' that were very lengthy, and a healthy part of this may be due to currency issues that take a long time to change. We're in a long 'dry spell' right now; ex-U.S. TSM has only returned 1.6% real since 2007. By comparison, SCV has historically offered great diversification as measured by have a significantly lower correlation with U.S. TSM than has ex-U.S. The higher long-term returns and much lower start date sensitivity of SCV have been big 'bonuses' too. Depending on the metrics used, since 1970, the most efficient portfolios for U.S. investors haven't included any ex-U.S. exposure at all. I do find ex-U.S. SCV to be very interesting though and potentially more worthwhile in terms of diversification than ex-U.S. TSM.
The last good extended period for international (both large cap and small cap) compared to the SP500 was approximately from 2002 through 2007. But both SCV and MCV did great versus the SP500 from 2001 through 2006. In fact, SCV and MCV beat the pants off internationals. Is this just coincidental that these periods have significant overlap? One possibility is that this followed the dot.com collapse and it's affect on the SP500. Did foreign stocks then look more attractive without such a tech component helping the US blend index?

Image
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

BlueEars wrote: Wed Jan 12, 2022 7:32 pm
willthrill81 wrote: Sun Jan 09, 2022 10:07 am
Forester wrote: Sun Jan 09, 2022 9:40 am
stocksurfer wrote: Fri Jan 07, 2022 10:11 pm I'm trying to bring some sanity into my non-US holdings and I'm scratching my head. Most of the funds I look at, whether x-US, developed countries, or EM are dominated by multinationals. E.g. Nestle, LVHM, Taiwan Semiconductor, Samsung, Alibaba, Tencen, and the list goes on. How do these companies offer any diversification from the closely related US multinationals that dominate the US market funds? Don't they sell into the same markets, draw from the same suppliers, are affected by the same global business cycles, etc?
International might offer some protection against the US dollar becoming weaker. All things being equal on the currency front, I doubt it matters if you own the ex-US index, as opposed to a US SCV fund.
That's part of my problem with ex-U.S. stock; it's had 'dry spells' that were very lengthy, and a healthy part of this may be due to currency issues that take a long time to change. We're in a long 'dry spell' right now; ex-U.S. TSM has only returned 1.6% real since 2007. By comparison, SCV has historically offered great diversification as measured by have a significantly lower correlation with U.S. TSM than has ex-U.S. The higher long-term returns and much lower start date sensitivity of SCV have been big 'bonuses' too. Depending on the metrics used, since 1970, the most efficient portfolios for U.S. investors haven't included any ex-U.S. exposure at all. I do find ex-U.S. SCV to be very interesting though and potentially more worthwhile in terms of diversification than ex-U.S. TSM.
The last good extended period for international (both large cap and small cap) compared to the SP500 was approximately from 2002 through 2007. But both SCV and MCV did great versus the SP500 from 2001 through 2006. In fact, SCV and MCV beat the pants off internationals. Is this just coincidental that these periods have significant overlap? One possibility is that this followed the dot.com collapse and it's affect on the SP500. Did foreign stocks then look more attractive without such a tech component helping the US blend index?

Image
Foreign valuations in 2000 were roughly the same as the US TSM - in other words, overvalued. They ended up doing marginally better than the US.

I would not compare US TSM today to exUS; the valuation spread is enormous now whereas in 2000 it was largely in lock-step.

Image
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Re: Does "international" offer any diversification?

Post by BlueEars »

Nathan Drake wrote: Wed Jan 12, 2022 8:01 pm
BlueEars wrote: Wed Jan 12, 2022 7:32 pm
willthrill81 wrote: Sun Jan 09, 2022 10:07 am
Forester wrote: Sun Jan 09, 2022 9:40 am
stocksurfer wrote: Fri Jan 07, 2022 10:11 pm I'm trying to bring some sanity into my non-US holdings and I'm scratching my head. Most of the funds I look at, whether x-US, developed countries, or EM are dominated by multinationals. E.g. Nestle, LVHM, Taiwan Semiconductor, Samsung, Alibaba, Tencen, and the list goes on. How do these companies offer any diversification from the closely related US multinationals that dominate the US market funds? Don't they sell into the same markets, draw from the same suppliers, are affected by the same global business cycles, etc?
International might offer some protection against the US dollar becoming weaker. All things being equal on the currency front, I doubt it matters if you own the ex-US index, as opposed to a US SCV fund.
That's part of my problem with ex-U.S. stock; it's had 'dry spells' that were very lengthy, and a healthy part of this may be due to currency issues that take a long time to change. We're in a long 'dry spell' right now; ex-U.S. TSM has only returned 1.6% real since 2007. By comparison, SCV has historically offered great diversification as measured by have a significantly lower correlation with U.S. TSM than has ex-U.S. The higher long-term returns and much lower start date sensitivity of SCV have been big 'bonuses' too. Depending on the metrics used, since 1970, the most efficient portfolios for U.S. investors haven't included any ex-U.S. exposure at all. I do find ex-U.S. SCV to be very interesting though and potentially more worthwhile in terms of diversification than ex-U.S. TSM.
The last good extended period for international (both large cap and small cap) compared to the SP500 was approximately from 2002 through 2007. But both SCV and MCV did great versus the SP500 from 2001 through 2006. In fact, SCV and MCV beat the pants off internationals. Is this just coincidental that these periods have significant overlap? One possibility is that this followed the dot.com collapse and it's affect on the SP500. Did foreign stocks then look more attractive without such a tech component helping the US blend index?

Image
Foreign valuations in 2000 were roughly the same as the US TSM - in other words, overvalued. They ended up doing marginally better than the US.

I would not compare US TSM today to exUS; the valuation spread is enormous now whereas in 2000 it was largely in lock-step.

Image
The Shiller CAPE uses the SP500 which has a very large component now in tech. Those tech PE's are very high. If you look at SCV for instance, the PE's are down from a decade ago. So just relying on the SP500 to compare to international is kind of overemphasizing tech. Not that I have anything against tech stocks and have a very large part of it in my portfolio. But I am quite willing to go towards value indexes when they show some sustained strength. Also quite willing to go into international after some sustained strength.

Here are relative PE changes which I periodically get from Vanguard:

Image
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Re: Does "international" offer any diversification?

Post by lostdog »

VT/VTWAX and chill... :beer
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Re: Does "international" offer any diversification?

Post by Triple digit golfer »

lostdog wrote: Wed Jan 12, 2022 9:06 pm VT/VTWAX and chill... :beer
+1
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Re: Does "international" offer any diversification?

Post by Adam Mundorf »

lostdog wrote: Wed Jan 12, 2022 9:06 pm VT/VTWAX and chill... :beer
This is what I settled on as well. I sleep like a baby.
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Re: Does "international" offer any diversification?

Post by mrspock »

mrpotatoheadsays wrote: Sat Jan 08, 2022 4:28 pm
stocksurfer wrote: Fri Jan 07, 2022 10:11 pm Am I missing something? :?:
History.

Consider the Nikkei; it's been over thirty years and it still hasn't recovered. The US market could do the same thing; the Shiller PE (https://www.multpl.com/shiller-pe) looks ominous.

Nikkei:
Image
Terrible, borderline misleading example. Care to tell the class what the PE of the Nikkei was at the peak? Let me help: around 100.

When the S&P hits 18,000 with earnings not going up a nickel…. let us all know. Until then this is a hallow comparison.

In short, it’s very, very unlikely you’d see a 20 year run in the “dog house” at the present PEs of the US market. It simply wouldn’t take that long before US equities would be so cheaply priced, they’d get bid up from lows.
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Re: Does "international" offer any diversification?

Post by bogledogle87 »

Of course. The fact that that equities across many geographical areas perform differently in varying directions and magnitudes at different times is the very definition of diversification at work.
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Re: Does "international" offer any diversification?

Post by Tom_T »

I've read a zillion posts on this topic, and it boils down to the fact that some people are absolutely convinced that a portfolio containing international has a high probability of underperforming a U.S. one in the future -- and other people are convinced of the exact opposite. Each side has logical reasons. Therefore, pick one and go with it. Eventually we will know who was right (depending on when we stop counting.)
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

Tom_T wrote: Thu Jan 13, 2022 1:27 pm I've read a zillion posts on this topic, and it boils down to the fact that some people are absolutely convinced that a portfolio containing international has a high probability of underperforming a U.S. one in the future -- and other people are convinced of the exact opposite. Each side has logical reasons. Therefore, pick one and go with it. Eventually we will know who was right (depending on when we stop counting.)
History shows us that one camp is correct and the other position isn’t aligned with the cyclicality of the data
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Re: Does "international" offer any diversification?

Post by GaryA505 »

Nathan Drake wrote: Thu Jan 13, 2022 1:29 pm
Tom_T wrote: Thu Jan 13, 2022 1:27 pm I've read a zillion posts on this topic, and it boils down to the fact that some people are absolutely convinced that a portfolio containing international has a high probability of underperforming a U.S. one in the future -- and other people are convinced of the exact opposite. Each side has logical reasons. Therefore, pick one and go with it. Eventually we will know who was right (depending on when we stop counting.)
History shows us that one camp is correct and the other position isn’t aligned with the cyclicality of the data
History shows that when one camp is sure they're correct, sometimes they're not.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Does "international" offer any diversification?

Post by Triple digit golfer »

bogledogle87 wrote: Thu Jan 13, 2022 1:22 pm Of course. The fact that that equities across many geographical areas perform differently in varying directions and magnitudes at different times is the very definition of diversification at work.
Humans are interesting, emotional creatures, subject to biases and behavioral errors.

It's interesting that many people are willing and able to hold a portfolio of U.S. stocks and not mind at all, and probably don't even know, when certain sectors lag. It's inevitable that if you break up any fund into bunches (sectors, styles, sizes, countries, etc.) that those bunches will not all perform the same. Most will fully accept not bat an eye if technology outperforms financials, industrials outperform energy, utilities outperform communications, and so on. Total market investors feel the same about large vs. small and growth vs. value.

Yet, when you throw countries in there, suddenly it all goes out the window and we have to, for some reason I don't understand, hone in on the performance of the U.S. total market vs. all other markets as a whole.

It's silly. I don't look at U.S. vs. international any more than I look at technology vs. financials, large vs. small, value vs. growth. To me, the total world market is the reasonable and rational equity portfolio and I don't mentally break it up into arbitrary components.
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

GaryA505 wrote: Thu Jan 13, 2022 1:54 pm
Nathan Drake wrote: Thu Jan 13, 2022 1:29 pm
Tom_T wrote: Thu Jan 13, 2022 1:27 pm I've read a zillion posts on this topic, and it boils down to the fact that some people are absolutely convinced that a portfolio containing international has a high probability of underperforming a U.S. one in the future -- and other people are convinced of the exact opposite. Each side has logical reasons. Therefore, pick one and go with it. Eventually we will know who was right (depending on when we stop counting.)
History shows us that one camp is correct and the other position isn’t aligned with the cyclicality of the data
History shows that when one camp is sure they're correct, sometimes they're not.
It’s like arguing 1 + 1 isn’t 2.

Markets cycle. US outperforms. ExUS outperforms.

It’s not a static constantly outperforming state of affairs, sorry. But some genuinely believe that
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Re: Does "international" offer any diversification?

Post by GaryA505 »

Nathan Drake wrote: Thu Jan 13, 2022 2:20 pm
GaryA505 wrote: Thu Jan 13, 2022 1:54 pm
Nathan Drake wrote: Thu Jan 13, 2022 1:29 pm
Tom_T wrote: Thu Jan 13, 2022 1:27 pm I've read a zillion posts on this topic, and it boils down to the fact that some people are absolutely convinced that a portfolio containing international has a high probability of underperforming a U.S. one in the future -- and other people are convinced of the exact opposite. Each side has logical reasons. Therefore, pick one and go with it. Eventually we will know who was right (depending on when we stop counting.)
History shows us that one camp is correct and the other position isn’t aligned with the cyclicality of the data
History shows that when one camp is sure they're correct, sometimes they're not.
It’s like arguing 1 + 1 isn’t 2.

Markets cycle. US outperforms. ExUS outperforms.

It’s not a static constantly outperforming state of affairs, sorry. But some genuinely believe that
But nobody knows which one will perform more often, or even if they will both outperform anywhere close to the same amount over time. The US and ex-US markets haven't "cycled" equally in the past. Should we expect that to change?

I wish it was as simple as 1 + 1.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Re: Does "international" offer any diversification?

Post by Tom_T »

My preference is to be more diversified, and if that means I might get a lower return, then I can live with it because it will be good enough. And maybe I'll do better. If you get 12% and I get 7%, I won't run out of money.
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

GaryA505 wrote: Thu Jan 13, 2022 2:28 pm
Nathan Drake wrote: Thu Jan 13, 2022 2:20 pm
GaryA505 wrote: Thu Jan 13, 2022 1:54 pm
Nathan Drake wrote: Thu Jan 13, 2022 1:29 pm
Tom_T wrote: Thu Jan 13, 2022 1:27 pm I've read a zillion posts on this topic, and it boils down to the fact that some people are absolutely convinced that a portfolio containing international has a high probability of underperforming a U.S. one in the future -- and other people are convinced of the exact opposite. Each side has logical reasons. Therefore, pick one and go with it. Eventually we will know who was right (depending on when we stop counting.)
History shows us that one camp is correct and the other position isn’t aligned with the cyclicality of the data
History shows that when one camp is sure they're correct, sometimes they're not.
It’s like arguing 1 + 1 isn’t 2.

Markets cycle. US outperforms. ExUS outperforms.

It’s not a static constantly outperforming state of affairs, sorry. But some genuinely believe that
But nobody knows which one will perform more often, or even if they will both outperform anywhere close to the same amount over time. The US and ex-US markets haven't "cycled" equally in the past. Should we expect that to change?

I wish it was as simple as 1 + 1.
And that’s a great argument for owning international

Even if you think US will outperform over the very long term, it has to fit in nicely with your particular investment sequence for that sort of bet to pay off.
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Re: Does "international" offer any diversification?

Post by GaryA505 »

And then there's this, which would suggest that the 80/20 US/ex-US allocation seen often here is reasonable and prudent, given a long retirement horizon:
https://ibb.co/q15Y6h9
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

GaryA505 wrote: Thu Jan 13, 2022 3:26 pm And then there's this, which would suggest that the 80/20 US/ex-US allocation seen often here is reasonable and prudent, given a long retirement horizon:
https://ibb.co/q15Y6h9
Yes, if the future is exactly like it was from 1970-2021
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Re: Does "international" offer any diversification?

Post by invest2bfree »

stocksurfer wrote: Fri Jan 07, 2022 10:11 pm I'm trying to bring some sanity into my non-US holdings and I'm scratching my head. Most of the funds I look at, whether x-US, developed countries, or EM are dominated by multinationals. E.g. Nestle, LVHM, Taiwan Semiconductor, Samsung, Alibaba, Tencen, and the list goes on. How do these companies offer any diversification from the closely related US multinationals that dominate the US market funds? Don't they sell into the same markets, draw from the same suppliers, are affected by the same global business cycles, etc?

I looked a few charts on portfolio visualizer. For example, VEA has 0.9 correlation with the US Market. EEM goes down to 0.8. So yes, slightly different sector weights, slightly different local factors, and currency effects, but overall everything pretty much marches in lock-step as far as I can see. Am I just not looking right?

I guess I was somehow hoping that some countries would have business cycles that are decoupled from the US and that I could buy into that, but I suppose this is the 21st century and I'm antiquated? :shock:

Two funds that seemed interesting are DGS and EWX (both EM small cap): looking at the top holdings shows very few companies I recognize, the top holding accounts for just around 1% of the fund. However.... both have ~30% invested in Taiwan and the top 3 countries account for 50-60% of holdings. (And I won't mention ER.) VSS (x-US small cap) does a better job at diversifying across countries IMHO, but according to PV it showed 0.86 US market correlation over the past decade.

Am I missing something? :?:
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In 2010 it was the reverse.
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Re: Does "international" offer any diversification?

Post by Thesaints »

Does "international" offer any diversification?
Does owning Delta and UAL stock offer any diversification, compared to owning only one of the two alone ? Both are domestic commercial airlines, so I'd say no diversification, right ?
Does adding Virgin Atlantic stock to the mix add diversification ? They are a UK commercial airline, but a substantial part of their business is flights to/from the US and Delta actually owns 49% of the common stocks. That means VS stocks does not add any diversification, surely.


The above conclusions, patently wrong, are based on the very same considerations made in this thread about adding international stocks to one's domestic portfolio.
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Re: Does "international" offer any diversification?

Post by SeasOfCheese »

I can't decide which is hated more on BH, ex-US or dividend stocks. Or maybe gold.

FWIW, I am 42% ex-US as of this morning. Ignoring my miners which I put in the gold bin. :beer
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Re: Does "international" offer any diversification?

Post by willthrill81 »

SeasOfCheese wrote: Thu Jan 13, 2022 4:04 pm I can't decide which is hated more on BH, ex-US or dividend stocks. Or maybe gold.

FWIW, I am 42% ex-US as of this morning. Ignoring my miners which I put in the gold bin. :beer
Certainly gold is held in greater disdain here than ex-U.S. stock, despite that it's been a better diversifying asset over the last 50 years, though it certainly might fail in that regard over the next 50. YMMV.
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Re: Does "international" offer any diversification?

Post by pokebowl »

SeasOfCheese wrote: Thu Jan 13, 2022 4:04 pm I can't decide which is hated more on BH, ex-US or dividend stocks. Or maybe gold.

FWIW, I am 42% ex-US as of this morning. Ignoring my miners which I put in the gold bin. :beer
Gold was so 2021. We are now on 2022 where we as a community have modified these time tested quotes to align to current trends:

Don’t look for the needle in the haystack. Just buy the haystack US stocks.”

"Owning the whole stock US market over the long term is a winner's game, but attempting to beat the market is a loser's game"

"Nobody knows nothing Everyone knows US out-performance will continue"

:mrgreen:
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

willthrill81 wrote: Thu Jan 13, 2022 9:21 pm
SeasOfCheese wrote: Thu Jan 13, 2022 4:04 pm I can't decide which is hated more on BH, ex-US or dividend stocks. Or maybe gold.

FWIW, I am 42% ex-US as of this morning. Ignoring my miners which I put in the gold bin. :beer
Certainly gold is held in greater disdain here than ex-U.S. stock, despite that it's been a better diversifying asset over the last 50 years, though it certainly might fail in that regard over the next 50. YMMV.
Gold may be useful for withdrawals in a small amount as a diversified, but it’s record as a long term grower is worthy of scrutiny

I don’t see a any reason to own it in accumulation
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Re: Does "international" offer any diversification?

Post by willthrill81 »

Nathan Drake wrote: Fri Jan 14, 2022 1:35 am
willthrill81 wrote: Thu Jan 13, 2022 9:21 pm
SeasOfCheese wrote: Thu Jan 13, 2022 4:04 pm I can't decide which is hated more on BH, ex-US or dividend stocks. Or maybe gold.

FWIW, I am 42% ex-US as of this morning. Ignoring my miners which I put in the gold bin. :beer
Certainly gold is held in greater disdain here than ex-U.S. stock, despite that it's been a better diversifying asset over the last 50 years, though it certainly might fail in that regard over the next 50. YMMV.
Gold may be useful for withdrawals in a small amount as a diversified, but it’s record as a long term grower is worthy of scrutiny

I don’t see a any reason to own it in accumulation
I don't want to derail this thread, so I'll just refer to the recent 'efficient portfolios' thread regarding Tyler9000's recent post on Portfolio Charts.
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Re: Does "international" offer any diversification?

Post by nigel_ht »

willthrill81 wrote: Sat Jan 08, 2022 4:39 pm
mrpotatoheadsays wrote: Sat Jan 08, 2022 4:28 pm
stocksurfer wrote: Fri Jan 07, 2022 10:11 pm Am I missing something? :?:
History.

Consider the Nikkei; it's been over thirty years and it still hasn't recovered. The US market could do the same thing; the Shiller PE (https://www.multpl.com/shiller-pe) looks ominous.
While I agree that the U.S. stock market's valuations certainly seem to portend below average future returns, they are only about half what the Nikkei's reached before it started its 30+ year slump.
When we hit Nikkei valuations I'm cashing out completely and to heck with naysayers about timing and how it's all about time in the market.
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Re: Does "international" offer any diversification?

Post by willthrill81 »

nigel_ht wrote: Fri Jan 14, 2022 9:59 am
willthrill81 wrote: Sat Jan 08, 2022 4:39 pm
mrpotatoheadsays wrote: Sat Jan 08, 2022 4:28 pm
stocksurfer wrote: Fri Jan 07, 2022 10:11 pm Am I missing something? :?:
History.

Consider the Nikkei; it's been over thirty years and it still hasn't recovered. The US market could do the same thing; the Shiller PE (https://www.multpl.com/shiller-pe) looks ominous.
While I agree that the U.S. stock market's valuations certainly seem to portend below average future returns, they are only about half what the Nikkei's reached before it started its 30+ year slump.
When we hit Nikkei valuations I'm cashing out completely and to heck with naysayers about timing and how it's all about time in the market.
I agree and have said the same. No way in heck I'm paying anything close to 90x for earnings.
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

willthrill81 wrote: Fri Jan 14, 2022 10:03 am
I agree and have said the same. No way in heck I'm paying anything close to 90x for earnings.
That's a good argument against total market indexing, with Tesla at a PE of 338.23.
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Re: Does "international" offer any diversification?

Post by willthrill81 »

fixi reinhart wrote: Fri Jan 14, 2022 10:05 am
willthrill81 wrote: Fri Jan 14, 2022 10:03 am
I agree and have said the same. No way in heck I'm paying anything close to 90x for earnings.
That's a good argument against total market indexing, with Tesla at a PE of 338.23.
Not necessarily. TSM being tilted toward a few highly valued companies does not mean that TSM is bad.

I've thought for years that Amazon was overvalued and I still do, but I cannot deny that it's returned 30% annualized nominal over the last 3 years.

But if valuations for TSM as a whole get anywhere close to double their current levels (i.e., where Japan got to), that's far too bubbly for me.
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

willthrill81 wrote: Fri Jan 14, 2022 10:09 am
Not necessarily. TSM being tilted toward a few highly valued companies does not mean that TSM is bad.

I've thought for years that Amazon was overvalued and I still do, but I cannot deny that it's returned 30% annualized nominal over the last 3 years.

But if valuations for TSM as a whole get anywhere close to double their current levels (i.e., where Japan got to), that's far too bubbly for me.
If we ever get to that point there will be a really good story supporting these valuations. (and in a low interest rate environment they might not be wrong :annoyed )
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Re: Does "international" offer any diversification?

Post by vanbogle59 »

fixi reinhart wrote: Fri Jan 14, 2022 10:13 am If we ever get to that point ...
....the other half of my 50/50 portfolio will be so large my boat will have a boat.
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Re: Does "international" offer any diversification?

Post by willthrill81 »

fixi reinhart wrote: Fri Jan 14, 2022 10:13 am
willthrill81 wrote: Fri Jan 14, 2022 10:09 am
Not necessarily. TSM being tilted toward a few highly valued companies does not mean that TSM is bad.

I've thought for years that Amazon was overvalued and I still do, but I cannot deny that it's returned 30% annualized nominal over the last 3 years.

But if valuations for TSM as a whole get anywhere close to double their current levels (i.e., where Japan got to), that's far too bubbly for me.
If we ever get to that point there will be a really good story supporting these valuations. (and in a low interest rate environment they might not be wrong :annoyed )
There was a good story supporting the U.S.'s valuations in the late 1990s (e.g., 'it's different this time'), but the story was only that and not reality.

Considering where interest rates are now, they would seemingly have to go quite negative to logically support a CAPE of 90.
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Re: Does "international" offer any diversification?

Post by willthrill81 »

vanbogle59 wrote: Fri Jan 14, 2022 10:15 am
fixi reinhart wrote: Fri Jan 14, 2022 10:13 am If we ever get to that point ...
....the other half of my 50/50 portfolio will be so large my boat will have a boat.
:sharebeer
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

willthrill81 wrote: Fri Jan 14, 2022 10:20 am
There was a good story supporting the U.S.'s valuations in the late 1990s (e.g., 'it's different this time'), but the story was only that and not reality.

Considering where interest rates are now, they would seemingly have to go quite negative to logically support a CAPE of 90.
They don't have to go negative.

Lowering the discount rate close to zero (which it currently is) makes very high PEs for stocks "rational".
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Re: Does "international" offer any diversification?

Post by Da5id »

vanbogle59 wrote: Fri Jan 14, 2022 10:15 am
fixi reinhart wrote: Fri Jan 14, 2022 10:13 am If we ever get to that point ...
....the other half of my 50/50 portfolio will be so large my boat will have a boat.
:sharebeer
Yeah. Same here. 30% of my portfolio is VTI. If VTI continues to soar (who knows?), well, the excess will be harvested and rebalanced to ex-US and to bonds.
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Re: Does "international" offer any diversification?

Post by vineviz »

GaryA505 wrote: Thu Jan 13, 2022 2:28 pm The US and ex-US markets haven't "cycled" equally in the past. Should we expect that to change?
Actually, they have cycled equally (more or less) in the past. From 1961 to 2021, US stocks outperformed ex-US stocks in 31 of the 61 calendar years. That's as close to 50% of the time as you can get.

The recent streak of US outperformance is highly unusual compared to prior periods, in fact. From 1961 through 2012, US stocks outperformed in only 44% of the calendar year periods which makes the 2013 to 2021 run look somewhat anomalous.

What the future holds is unknowable, but it is worth observing that streaks of US outperformance have occurred before only to see the tables turn at some point. From 1989 to 2001, for example, the US outperformed in 10 of those 13 years but then underperformed in the next six consecutive years (and 8 out of the next 11 years).
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Re: Does "international" offer any diversification?

Post by Bogle101 »

All international did was drag my returns for 10 years. I've decided to just ride or die with the US market. Many US companies have exposure across the globe in my opinion.
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Bogle101 wrote: Fri Jan 14, 2022 10:49 am All international did was drag my returns for 10 years. I've decided to just ride or die with the US market. Many US companies have exposure across the globe in my opinion.
As long as there isn't a major geopolitical event impacting the long-term prospects of the US negatively, it will likely work out fine.
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Re: Does "international" offer any diversification?

Post by Bluemnatra »

vineviz wrote: Fri Jan 14, 2022 10:44 am
GaryA505 wrote: Thu Jan 13, 2022 2:28 pm The US and ex-US markets haven't "cycled" equally in the past. Should we expect that to change?
Actually, they have cycled equally (more or less) in the past. From 1961 to 2021, US stocks outperformed ex-US stocks in 31 of the 61 calendar years. That's as close to 50% of the time as you can get.

The recent streak of US outperformance is highly unusual compared to prior periods, in fact. From 1961 through 2012, US stocks outperformed in only 44% of the calendar year periods which makes the 2013 to 2021 run look somewhat anomalous.

What the future holds is unknowable, but it is worth observing that streaks of US outperformance have occurred before only to see the tables turn at some point. From 1989 to 2001, for example, the US outperformed in 10 of those 13 years but then underperformed in the next six consecutive years (and 8 out of the next 11 years).
These are good points not lost on me as a US only investor. However, instead of changing lanes only to wish I was in the other lane is not appealing to me and I will stay the course knowing international will at some point outperform US. I choose simplicity. You may choose differently.
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Re: Does "international" offer any diversification?

Post by visualguy »

vineviz wrote: Fri Jan 14, 2022 10:44 am
GaryA505 wrote: Thu Jan 13, 2022 2:28 pm The US and ex-US markets haven't "cycled" equally in the past. Should we expect that to change?
Actually, they have cycled equally (more or less) in the past. From 1961 to 2021, US stocks outperformed ex-US stocks in 31 of the 61 calendar years. That's as close to 50% of the time as you can get.

The recent streak of US outperformance is highly unusual compared to prior periods, in fact. From 1961 through 2012, US stocks outperformed in only 44% of the calendar year periods which makes the 2013 to 2021 run look somewhat anomalous.

What the future holds is unknowable, but it is worth observing that streaks of US outperformance have occurred before only to see the tables turn at some point. From 1989 to 2001, for example, the US outperformed in 10 of those 13 years but then underperformed in the next six consecutive years (and 8 out of the next 11 years).
The issue is the magnitude of out-performance, not the number of years.
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