Does "international" offer any diversification?

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fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Bluemnatra wrote: Fri Jan 14, 2022 10:59 am
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.
visualguy wrote: Fri Jan 14, 2022 10:59 am
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.
Can you guys tell me your reasoning for avoiding all non-US stocks?
Bluemnatra
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Re: Does "international" offer any diversification?

Post by Bluemnatra »

visualguy wrote: Fri Jan 14, 2022 10:59 am
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.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
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fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am
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.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
Why do you think US should perform better over time than ex-US?
Bluemnatra
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Re: Does "international" offer any diversification?

Post by Bluemnatra »

fixi reinhart wrote: Fri Jan 14, 2022 11:12 am
Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am
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.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
Why do you think US should perform better over time than ex-US?
My reasons likely won't change your mind.
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fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Bluemnatra wrote: Fri Jan 14, 2022 11:15 am
My reasons likely won't change your mind.
I am all in US as well. Don't worry. :wink:

Just want to hear some arguments.
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vineviz
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Re: Does "international" offer any diversification?

Post by vineviz »

visualguy wrote: Fri Jan 14, 2022 10:59 am
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.
It's the same "issue": over the past six decades the "outperformance" of US stocks relative to ex-US stocks is not statistically significant. From 1961 to 2021 the average annual return of US stocks was 11.9% versus 11.2% for ex-US stocks.

And as recently as 2014, the cumulative return of US stocks was actually lower than that of ex-US stocks. It seems that people don't realize how much the recent past can overwhelm their ability to take in the long run behavior of assets.
Last edited by vineviz on Fri Jan 14, 2022 11:23 am, edited 1 time in total.
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fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

vineviz wrote: Fri Jan 14, 2022 11:19 am
It's the same "issue": over the past six decades the "outperformance" of US stocks relative to ex-US stocks is not statistically significant. From 1961 to 2021 the average annual return of US stocks was 11.9% versus 11.2% for ex-US stocks.

And as recently as 2016, the cumulative return of US stocks was actually lower than that of ex-US stocks. It seems that people don't realize how much the recent past can overwhelm their ability to take in the long run behavior of assets.
Let's not forget that much of ex-US stocks (especially Europe and Japan) were totally destroyed in WW2, so they had some catching up to do.

Maybe it's good if the countries you invest in have a MOAT?
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burritoLover
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Re: Does "international" offer any diversification?

Post by burritoLover »

Just pick the asset with higher past outperformance over certain time periods. It's amazing that this is the primary strategy of many.
fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

burritoLover wrote: Fri Jan 14, 2022 11:21 am Just pick the asset with higher past outperformance over certain time periods. It's amazing that this is the primary strategy of many.
That's probably the only reason why you like SCV. Because of the good backtest.
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burritoLover
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Re: Does "international" offer any diversification?

Post by burritoLover »

fixi reinhart wrote: Fri Jan 14, 2022 11:23 am
burritoLover wrote: Fri Jan 14, 2022 11:21 am Just pick the asset with higher past outperformance over certain time periods. It's amazing that this is the primary strategy of many.
That's probably the only reason why you like SCV. Because of the good backtest.
Yeah, it's been awesome the last 20 years. :oops:
lostdog
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Re: Does "international" offer any diversification?

Post by lostdog »

pokebowl wrote: Thu Jan 13, 2022 9:39 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
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:
:sharebeer
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lostdog
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Re: Does "international" offer any diversification?

Post by lostdog »

Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am
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.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
This seems more like "hand waving" and "I don't care" when facts are presented to you.

At least you admit for novice investors to see.
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fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

burritoLover wrote: Fri Jan 14, 2022 11:37 am
fixi reinhart wrote: Fri Jan 14, 2022 11:23 am
burritoLover wrote: Fri Jan 14, 2022 11:21 am Just pick the asset with higher past outperformance over certain time periods. It's amazing that this is the primary strategy of many.
That's probably the only reason why you like SCV. Because of the good backtest.
Yeah, it's been awesome the last 20 years. :oops:
So you like it because value outperformed pre-1992 and has been statistically insignificant ever since?
Bluemnatra
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Re: Does "international" offer any diversification?

Post by Bluemnatra »

lostdog wrote: Fri Jan 14, 2022 12:05 pm
Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am
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.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
This seems more like "hand waving" and "I don't care" when facts are presented to you.

At least you admit for novice investors to see.
You are entitled to your opinion. That is all it is. Fact is through 2021 US has outperformed. Cherry pick your dates all you want. Buy all the international you want. However, investing in the world market cap weighted does not make you a superior investor. It is simply a decision you have made after conducting your own research.

Everyone should make their own decisions based on their own research.
"The greatest enemy of a good plan is the dream of a perfect plan"
fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Bluemnatra wrote: Fri Jan 14, 2022 12:21 pm
You are entitled to your opinion. That is all it is. Fact is through 2021 US has outperformed. Cherry pick your dates all you want. Buy all the international you want. However, investing in the world market cap weighted does not make you a superior investor. It is simply a decision you have made after conducting your own research.

Everyone should make their own decisions based on their own research.
Yes, there are good reasons to stick to US-only. :beer
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burritoLover
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Re: Does "international" offer any diversification?

Post by burritoLover »

fixi reinhart wrote: Fri Jan 14, 2022 12:21 pm
burritoLover wrote: Fri Jan 14, 2022 11:37 am
fixi reinhart wrote: Fri Jan 14, 2022 11:23 am
burritoLover wrote: Fri Jan 14, 2022 11:21 am Just pick the asset with higher past outperformance over certain time periods. It's amazing that this is the primary strategy of many.
That's probably the only reason why you like SCV. Because of the good backtest.
Yeah, it's been awesome the last 20 years. :oops:
So you like it because value outperformed pre-1992 and has been statistically insignificant ever since?
I invest in it because I want a riskier portfolio than the market and I believe in it as a risk premium. I believe the peer-reviewed academic research in regards to factors describing the majority of the difference in returns between two diversified portfolios. SCV as risk story makes sense to me. And its premium has persisted across different markets and countries.

I know it is hard to believe that someone wouldn't solely invest in something based on the best back test. On the other hand, we have all-in US group that believe that the US will outperform with less risk. Which makes absolutely no sense.
bogledogle87
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Re: Does "international" offer any diversification?

Post by bogledogle87 »

4% outperformance over the first 2 weeks of 2022 should demonstrate that yes, diversification works and is and important part of portfolio construction.
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Re: Does "international" offer any diversification?

Post by vineviz »

Bluemnatra wrote: Fri Jan 14, 2022 12:21 pm Everyone should make their own decisions based on their own research.
There's a very real risk, as threads like this tend to illustrate, in asking people to "do their own research" when clearly not everyone has a strong enough background in statistical reasoning and/or financial theory to conduct that research properly.

Answering the OP's question ("does "international" offer any diversification?") requires more than just looking up a growth chart for a randomly selected time period and calling it a day.

And while there is no moral superiority in having a globally diversified portfolio, and people may differ about whether diversification is even an important trait in their own personal portfolio, anyone who conducts their "own research" and gets an answer of "no" to the OP's question has undoubtedly made an analytical error somewhere.
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fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

vineviz wrote: Fri Jan 14, 2022 1:04 pm
And while there is no moral superiority in having a globally diversified portfolio, and people may differ about whether diversification is even an important trait in their own personal portfolio, anyone who conducts their "own research" and gets an answer of "no" to the OP's question has undoubtedly made an analytical error somewhere.
Has Warren Buffett made an analytical error by holding practically all of his net worth in BRK, a US company?
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Re: Does "international" offer any diversification?

Post by jason2459 »

fixi reinhart wrote: Fri Jan 14, 2022 1:10 pm
vineviz wrote: Fri Jan 14, 2022 1:04 pm
And while there is no moral superiority in having a globally diversified portfolio, and people may differ about whether diversification is even an important trait in their own personal portfolio, anyone who conducts their "own research" and gets an answer of "no" to the OP's question has undoubtedly made an analytical error somewhere.
Has Warren Buffett made an analytical error by holding practically all of his net worth in BRK, a US company?
Doesn't most CEOs of large organizations hold most of their net worth in the companies they run or have ran? Just look at someone like Tim Cook who's equity shares bonus dwarfs his paycheck or Elon Musk as an extreme example of not getting a pay check and only equity shares in his company.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

jason2459 wrote: Fri Jan 14, 2022 1:14 pm
Doesn't most CEOs of large organizations hold most of their net worth in the companies they run or have ran? Just look at someone like Tim Cook who's equity shares bonus dwarfs his paycheck or Elon Musk as an extreme example of not getting a pay check and only equity shares in his company.
The difference is that Berkshire was designed to be an investment vehicle and Warren Buffett is the greatest investor of all time.
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

fixi reinhart wrote: Fri Jan 14, 2022 1:16 pm
jason2459 wrote: Fri Jan 14, 2022 1:14 pm
Doesn't most CEOs of large organizations hold most of their net worth in the companies they run or have ran? Just look at someone like Tim Cook who's equity shares bonus dwarfs his paycheck or Elon Musk as an extreme example of not getting a pay check and only equity shares in his company.
The difference is that Berkshire was designed to be an investment vehicle and Warren Buffett is the greatest investor of all time.
Berkshire invests internationally

I am not sure why one would assume that just because Berkshire (a company) does something that it’s a proxy for a personalized financial plan for an individual investor. The goals and objectives are very much different
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fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Nathan Drake wrote: Fri Jan 14, 2022 1:20 pm
Berkshire invests internationally

I am not sure why one would assume that just because Berkshire (a company) does something that it’s a proxy for a personalized financial plan for an individual investor
Exactly. That's my point!! Many US companies make investments outside the US.


Also, Buffett cares about the underlying business fundamentals.

He doesn't care if it's based in the US, UK, Israel, Japan or China. (He invests in all of those places)

What matters is the business, not global diversification just for the sake of diversifying.
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Re: Does "international" offer any diversification?

Post by Triple digit golfer »

fixi reinhart wrote: Fri Jan 14, 2022 1:10 pm
vineviz wrote: Fri Jan 14, 2022 1:04 pm
And while there is no moral superiority in having a globally diversified portfolio, and people may differ about whether diversification is even an important trait in their own personal portfolio, anyone who conducts their "own research" and gets an answer of "no" to the OP's question has undoubtedly made an analytical error somewhere.
Has Warren Buffett made an analytical error by holding practically all of his net worth in BRK, a US company?
Practically all? What percentage? 99%? So he's still got close to ten figures not in Berkshire Hathaway?

So if Berkshire goes to zero, he's still one of the richest people in the country.
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Nathan Drake wrote: Fri Jan 14, 2022 1:20 pm I am not sure why one would assume that just because Berkshire (a company) does something that it’s a proxy for a personalized financial plan for an individual investor. The goals and objectives are very much different
Berkshire's goal is long-term increases in earnings-per-share. Wealth maximization.
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

fixi reinhart wrote: Fri Jan 14, 2022 1:22 pm
Nathan Drake wrote: Fri Jan 14, 2022 1:20 pm
Berkshire invests internationally

I am not sure why one would assume that just because Berkshire (a company) does something that it’s a proxy for a personalized financial plan for an individual investor
Exactly. That's my point!! Many US companies make investments outside the US.


Also, Buffett cares about the underlying business fundamentals.

He doesn't care if it's based in the US, UK, Israel, Japan or China. (He invests in all of those places)

What matters is the business, not global diversification just for the sake of diversifying.
That’s not the right conclusion. Berkshire is a US company that primarily invests in US companies, likely because that’s what they are best at evaluating.

That’s not an endorsement to shun investing in actual companies domiciled outside the US, that are far more exposed to international markets, and importantly valuation pricing in those markets, which offer long term dispersion of returns.
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

fixi reinhart wrote: Fri Jan 14, 2022 1:24 pm
Nathan Drake wrote: Fri Jan 14, 2022 1:20 pm I am not sure why one would assume that just because Berkshire (a company) does something that it’s a proxy for a personalized financial plan for an individual investor. The goals and objectives are very much different
Berkshire's goal is long-term increases in earnings-per-share. Wealth maximization.
That is not an individual investor’s goal

Charlie Munger often speaks of “Diworsification”, which may be OK for a company whose interest is maximizing returns, but is awful personal finance advice for someone wishing to reliably sustain retirement spending
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fixi reinhart
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Nathan Drake wrote: Fri Jan 14, 2022 1:25 pm
That’s not the right conclusion. Berkshire is a US company that primarily invests in US companies, likely because that’s what they are best at evaluating.

That’s not an endorsement to shun investing in actual companies domiciled outside the US, that are far more exposed to international markets, and importantly valuation pricing in those markets, which offer long term dispersion of returns.
Yes, most of their investments are US based.

I don't know why the domicile of the investments is that important.

What matters is how the underlying businesses do over time.
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

Nathan Drake wrote: Fri Jan 14, 2022 1:27 pm
That is not an individual investor’s goal

Charlie Munger often speaks of “Diworsification”, which may be OK for a company whose interest is maximizing returns, but is awful personal finance advice for someone wishing to reliably sustain retirement spending
Well, I certainly would like to maximize my wealth. :D

Charlie Munger views investing through the lens of opportunity costs. You always weigh the options you have against each other and pick the one most attractive on a relative basis.

Warren often said, a few great businesses is all you need in this life.
But he also knows that the average investor can't pick stocks.
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Re: Does "international" offer any diversification?

Post by vineviz »

fixi reinhart wrote: Fri Jan 14, 2022 1:10 pm
vineviz wrote: Fri Jan 14, 2022 1:04 pm
And while there is no moral superiority in having a globally diversified portfolio, and people may differ about whether diversification is even an important trait in their own personal portfolio, anyone who conducts their "own research" and gets an answer of "no" to the OP's question has undoubtedly made an analytical error somewhere.
Has Warren Buffett made an analytical error by holding practically all of his net worth in BRK, a US company?
All we can infer from the fact that Buffet holds primarily US-listed companies is that he prefers to do so.

It's his wealth and clearly he should manage it as he sees fit. I'm in no position to say whether his portfolio is better or worse than, say, the portfolio held by Vanguard LifeStrategy Growth Fund (VASGX). That doesn't prevent us from concluding definitively that his portfolio is less diversified than VASGX.
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Re: Does "international" offer any diversification?

Post by fixi reinhart »

vineviz wrote: Fri Jan 14, 2022 1:36 pm
All we can infer from the fact that Buffet holds primarily US-listed companies is that he prefers to do so.

It's his wealth and clearly he should manage it as he sees fit. I'm in no position to say whether his portfolio is better or worse than, say, the portfolio held by Vanguard LifeStrategy Growth Fund (VASGX). That doesn't prevent us from concluding definitively that his portfolio is less diversified than VASGX.
Of course it's more concentrated, he's an active investor.

The point is, that he doesn't think in terms of "i have to be in singapore, and brazil and india". he looks at business fundamentals instead of at the "macro" picture, regardless of where they are domiciled.
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

fixi reinhart wrote: Fri Jan 14, 2022 1:40 pm
vineviz wrote: Fri Jan 14, 2022 1:36 pm
All we can infer from the fact that Buffet holds primarily US-listed companies is that he prefers to do so.

It's his wealth and clearly he should manage it as he sees fit. I'm in no position to say whether his portfolio is better or worse than, say, the portfolio held by Vanguard LifeStrategy Growth Fund (VASGX). That doesn't prevent us from concluding definitively that his portfolio is less diversified than VASGX.
Of course it's more concentrated, he's an active investor.

The point is, that he doesn't think in terms of "i have to be in singapore, and brazil and india". he looks at business fundamentals instead of at the "macro" picture, regardless of where they are domiciled.
His preference for US is almost entirely due to his track record in that market, his deep knowledge of that market, and his ability to evaluate it properly.

It does not say anything about whether exUS is going to be a good/bad investment over the long term, but as an active investor he may have enough self awareness to avoid markets he does not fully understand or simply isn’t comfortable with.

That’s consistent with his strategy even within the realm of the US stocks he selects
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Re: Does "international" offer any diversification?

Post by vineviz »

fixi reinhart wrote: Fri Jan 14, 2022 1:40 pm
vineviz wrote: Fri Jan 14, 2022 1:36 pm
All we can infer from the fact that Buffet holds primarily US-listed companies is that he prefers to do so.

It's his wealth and clearly he should manage it as he sees fit. I'm in no position to say whether his portfolio is better or worse than, say, the portfolio held by Vanguard LifeStrategy Growth Fund (VASGX). That doesn't prevent us from concluding definitively that his portfolio is less diversified than VASGX.
Of course it's more concentrated, he's an active investor.

The point is, that he doesn't think in terms of "i have to be in singapore, and brazil and india". he looks at business fundamentals instead of at the "macro" picture, regardless of where they are domiciled.
He looks at business fundamentals because he's running a business. That's what any good CEO should do. But this observation still doesn't change the answer to the OP's question.
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Re: Does "international" offer any diversification?

Post by GaryA505 »

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).
Can you point us to the data or chart for 1961 to 2021. I'd love to see something more than what I usually can find.
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Re: Does "international" offer any diversification?

Post by Bluemnatra »

vineviz wrote: Fri Jan 14, 2022 1:04 pm
Bluemnatra wrote: Fri Jan 14, 2022 12:21 pm Everyone should make their own decisions based on their own research.
There's a very real risk, as threads like this tend to illustrate, in asking people to "do their own research" when clearly not everyone has a strong enough background in statistical reasoning and/or financial theory to conduct that research properly.

Answering the OP's question ("does "international" offer any diversification?") requires more than just looking up a growth chart for a randomly selected time period and calling it a day.

And while there is no moral superiority in having a globally diversified portfolio, and people may differ about whether diversification is even an important trait in their own personal portfolio, anyone who conducts their "own research" and gets an answer of "no" to the OP's question has undoubtedly made an analytical error somewhere.
With all due respect you are displaying superiority. Undoubtedly Jack Bogle has done more for individual investors than anyone. Undoubtedly he was privy to the exact research and information you had available and he came to the answer "no" to the OP's question. So please do by all means point out where Jack Bogle made an analytical error. Because since he made the call in '94 you'd be wrong and he'd be right.
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Re: Does "international" offer any diversification?

Post by Bluemnatra »

Additionally those who don't take the time to do their own research and reach their own conclusions deserve whichever results they get. good or bad.

To somehow say that you've more a better analytical call than Jack Bogle is laughable to me and tells me all I need as far as ignoring your advise on diversification.
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Re: Does "international" offer any diversification?

Post by vanbogle59 »

Bluemnatra wrote: Fri Jan 14, 2022 2:28 pm With all due respect you are displaying superiority. Undoubtedly Jack Bogle has done more for individual investors than anyone. Undoubtedly he was privy to the exact research and information you had available and he came to the answer "no" to the OP's question. So please do by all means point out where Jack Bogle made an analytical error. Because since he made the call in '94 you'd be wrong and he'd be right.
Are you sure you are comparing apples to apples?
It's one thing to say xUS is not necessary for the average investor's personal portfolio.
It's quite another to say xUS does not "offer any diversification".
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Re: Does "international" offer any diversification?

Post by Laurizas »

Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am The issue is the magnitude of out-performance, not the number of years.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks.
Want to know how much of that outperformance has come since 2009? All of it
https://twitter.com/MebFaber/status/109 ... 53184?s=20
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Re: Does "international" offer any diversification?

Post by vineviz »

vanbogle59 wrote: Fri Jan 14, 2022 2:33 pm
Bluemnatra wrote: Fri Jan 14, 2022 2:28 pm With all due respect you are displaying superiority. Undoubtedly Jack Bogle has done more for individual investors than anyone. Undoubtedly he was privy to the exact research and information you had available and he came to the answer "no" to the OP's question. So please do by all means point out where Jack Bogle made an analytical error. Because since he made the call in '94 you'd be wrong and he'd be right.
Are you sure you are comparing apples to apples?
It's one thing to say xUS is not necessary for the average investor's personal portfolio.
It's quite another to say xUS does not "offer any diversification".
For sure.

Bogle was of the opinion that investors didn't "need" international stocks. I have a tremendous amount of respect for Bogle, but this is one of the few topics where I (obviously) disagree with him. I'm not alone, though, since the people he hired to run Vanguard also seem to disagree with him.
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Re: Does "international" offer any diversification?

Post by GaryA505 »

A lot of people are going to be really upset in 20 or 30 or 40 or 50 years if ex-US didn't do anything for their Target Date or LifeStrategy funds except to reduce gains. That isn't really possible, is it?
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Re: Does "international" offer any diversification?

Post by jason2459 »

GaryA505 wrote: Fri Jan 14, 2022 4:39 pm A lot of people are going to be really upset in 20 or 30 or 40 or 50 years if ex-US didn't do anything for their Target Date or LifeStrategy funds except to reduce gains. That isn't really possible, is it?
Why not? I'll let you know in 2072.
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Re: Does "international" offer any diversification?

Post by visualguy »

Laurizas wrote: Fri Jan 14, 2022 2:37 pm
Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am The issue is the magnitude of out-performance, not the number of years.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks.
Want to know how much of that outperformance has come since 2009? All of it
https://twitter.com/MebFaber/status/109 ... 53184?s=20
Ok, so how was investing in indexing ex-US a good thing? Seems either horrible, or neither here nor there depending on your endpoints. 1950-2009 - neither here nor there. 1900-2009 (move the starting year to 1900) - US outperformed by 1.2%/yr which is huge when compounded over that long period. Want some distance from the world wars? US outperformed by 4%/yr over the last 35 years, which no one can argue is anything but long term.

Now, we think Europe and Japan are about to have a comeback and make ex-US indexing shine after so many years of stagnation. Seriously? Based on what? CAPE? The only major non-US market which seemed promising was China, but there are numerous serious and persistent issues there, including actions by the Chinese and US governments.
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Re: Does "international" offer any diversification?

Post by visualguy »

GaryA505 wrote: Fri Jan 14, 2022 4:39 pm A lot of people are going to be really upset in 20 or 30 or 40 or 50 years if ex-US didn't do anything for their Target Date or LifeStrategy funds except to reduce gains. That isn't really possible, is it?
I'm sure many are really upset already - I know I would be.
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Re: Does "international" offer any diversification?

Post by Nathan Drake »

visualguy wrote: Fri Jan 14, 2022 4:51 pm
Laurizas wrote: Fri Jan 14, 2022 2:37 pm
Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am The issue is the magnitude of out-performance, not the number of years.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks.
Want to know how much of that outperformance has come since 2009? All of it
https://twitter.com/MebFaber/status/109 ... 53184?s=20
Ok, so how was investing in indexing ex-US a good thing? Seems either horrible, or neither here nor there depending on your endpoints. 1950-2009 - neither here nor there. 1900-2009 (move the starting year to 1900) - US outperformed by 1.2%/yr which is huge when compounded over that long period. Want some distance from the world wars? US outperformed by 4%/yr over the last 35 years, which no one can argue is anything but long term.

Now, we think Europe and Japan are about to have a comeback and make ex-US indexing shine after so many years of stagnation. Seriously? Based on what? CAPE? The only major non-US market which seemed promising was China, but there are numerous serious and persistent issues there, including actions by the Chinese and US governments.
Certainly we can. Most of the outperformance the past thirty years was valuation change, not fundamentals. Valuations as the context are hugely important in explaining 30 years, which is not a long time or something we should expect to exactly repeat.

ExUS went high to low.

US went low to high.

Now that we are starting with exUS at low valuations and US at high valuations, the market has priced in more risk for exUS so over the long term that should be compensated with higher upside
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Re: Does "international" offer any diversification?

Post by km91 »

visualguy wrote: Fri Jan 14, 2022 4:51 pm
Laurizas wrote: Fri Jan 14, 2022 2:37 pm
Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am The issue is the magnitude of out-performance, not the number of years.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks.
Want to know how much of that outperformance has come since 2009? All of it
https://twitter.com/MebFaber/status/109 ... 53184?s=20
Now, we think Europe and Japan are about to have a comeback and make ex-US indexing shine after so many years of stagnation. Seriously? Based on what? CAPE? The only major non-US market which seemed promising was China, but there are numerous serious and persistent issues there, including actions by the Chinese and US governments.
I tend to agree with this even though I still have an allocation to ex-US developed and EM in my portfolio. Anyone looking at relative valuations and thinking it's ex-US time to shine for no other reason than US has done so well over the last 20 or 30 years and a reversal is due is setting themselves up to be disappointed. There's very real structural/societal reasons US has performed so well over this timeframe and that's not about to change simply because its about time it did
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Re: Does "international" offer any diversification?

Post by Da5id »

GaryA505 wrote: Fri Jan 14, 2022 4:39 pm A lot of people are going to be really upset in 20 or 30 or 40 or 50 years if ex-US didn't do anything for their Target Date or LifeStrategy funds except to reduce gains. That isn't really possible, is it?
Of course it is possible. Totally. I own 40% international anyway. It is also totally possible US won't be as good an investment over that time frame. With 60% US/40% international, I won't be "really upset" no matter what happens. I know one of the two will underperform in any given time period, and I'm fine with that.

One of the benefits of using Target Date or LifeStrategy fund is that it diminishes behavioral errors caused by focusing on the underperforming assets. There is a similar benefit to owning a TSM type fund, in that you don't obsess about the losing sectors and losing individual stocks (which TSM has many) because you don't see them. Being diversified means always having an underperforming asset.
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Re: Does "international" offer any diversification?

Post by km91 »

Nathan Drake wrote: Fri Jan 14, 2022 4:53 pm
visualguy wrote: Fri Jan 14, 2022 4:51 pm
Laurizas wrote: Fri Jan 14, 2022 2:37 pm
Bluemnatra wrote: Fri Jan 14, 2022 11:07 am
visualguy wrote: Fri Jan 14, 2022 10:59 am The issue is the magnitude of out-performance, not the number of years.
And this is the reason I do not worry about the years of international outperformance. I do believe it is misleading when simply stating that there are times when one out performs the other. I believe you should do the research yourself and come to your own conclusions. When I see the international "outperformance" It is more "noise" than actual outperformance. The magnitude is the key differentiator for me.
Over the past 70 years the US stock market has been a darling, outperforming foreign stocks by 1% per year. $10k invested in US stocks in 1950 turned into $14 million vs. only $8m in foreign stocks.
Want to know how much of that outperformance has come since 2009? All of it
https://twitter.com/MebFaber/status/109 ... 53184?s=20
Ok, so how was investing in indexing ex-US a good thing? Seems either horrible, or neither here nor there depending on your endpoints. 1950-2009 - neither here nor there. 1900-2009 (move the starting year to 1900) - US outperformed by 1.2%/yr which is huge when compounded over that long period. Want some distance from the world wars? US outperformed by 4%/yr over the last 35 years, which no one can argue is anything but long term.

Now, we think Europe and Japan are about to have a comeback and make ex-US indexing shine after so many years of stagnation. Seriously? Based on what? CAPE? The only major non-US market which seemed promising was China, but there are numerous serious and persistent issues there, including actions by the Chinese and US governments.
Now that we are starting with exUS at low valuations and US at high valuations, the market has priced in more risk for exUS so over the long term that should be compensated with higher upside
Could you explain this more? Isn't one of the risks being taken is that the higher supposed upside may not come to fruition?
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Re: Does "international" offer any diversification?

Post by Thesaints »

GaryA505 wrote: Fri Jan 14, 2022 4:39 pm A lot of people are going to be really upset in 20 or 30 or 40 or 50 years if ex-US didn't do anything for their Target Date or LifeStrategy funds except to reduce gains. That isn't really possible, is it?
Are you upset when your home didn't burn down after paying insurance premium for 20 years ?
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Re: Does "international" offer any diversification?

Post by DB2 »

Da5id wrote: Fri Jan 14, 2022 5:08 pm
GaryA505 wrote: Fri Jan 14, 2022 4:39 pm A lot of people are going to be really upset in 20 or 30 or 40 or 50 years if ex-US didn't do anything for their Target Date or LifeStrategy funds except to reduce gains. That isn't really possible, is it?
Of course it is possible. Totally. I own 40% international anyway. It is also totally possible US won't be as good an investment over that time frame. With 60% US/40% international, I won't be "really upset" no matter what happens. I know one of the two will underperform in any given time period, and I'm fine with that.

One of the benefits of using Target Date or LifeStrategy fund is that it diminishes behavioral errors caused by focusing on the underperforming assets. There is a similar benefit to owning a TSM type fund, in that you don't obsess about the losing sectors and losing individual stocks (which TSM has many) because you don't see them. Being diversified means always having an underperforming asset.
Agreed. There is a lot to be said about these type of funds from a behavioral perspective.
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Re: Does "international" offer any diversification?

Post by abuss368 »

vineviz wrote: Fri Jan 14, 2022 3:54 pm
vanbogle59 wrote: Fri Jan 14, 2022 2:33 pm
Bluemnatra wrote: Fri Jan 14, 2022 2:28 pm With all due respect you are displaying superiority. Undoubtedly Jack Bogle has done more for individual investors than anyone. Undoubtedly he was privy to the exact research and information you had available and he came to the answer "no" to the OP's question. So please do by all means point out where Jack Bogle made an analytical error. Because since he made the call in '94 you'd be wrong and he'd be right.
Are you sure you are comparing apples to apples?
It's one thing to say xUS is not necessary for the average investor's personal portfolio.
It's quite another to say xUS does not "offer any diversification".
For sure.

Bogle was of the opinion that investors didn't "need" international stocks. I have a tremendous amount of respect for Bogle, but this is one of the few topics where I (obviously) disagree with him. I'm not alone, though, since the people he hired to run Vanguard also seem to disagree with him.
Hi Vince -

In the forward to Jack Bogle’s “Common Sense on Mutual Funds - 10th Anniversary edition”, David Swensen, Yale Univeristy CIO, offered that he agrees with Mr. Bogle but would offer two “small amendments”: add international stocks and government only bonds.

Hope you are well.
Tony
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