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Old 03-29-2016, 01:37 PM   #21
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Overall, I am 100% stock, 45% int.


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Old 03-29-2016, 02:07 PM   #22
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Vanguard VT vs. VXUS explains alot.

P/E: 20.2 vs. 16.5
P/B: 2.5 vs. 1.5
ROE: 17.7% vs. 14.9%
Earnings growth: 8.4% vs. 9.9%
Dividend yield: 2.4% vs. 2.9% (excludes buybacks, more prevalent in US)

All these together seem to imply a relative valuation difference of at least 20%, as in VXUS has upside vs. VT (or conversely, VT has downside).

That is, if current trends continue (specifically earnings growth). That said, I'll keep on using VT as my main index tracker, which is about 55% US, 45% other currently.

I see no reason to allocate otherwise.
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International has been a real disappointment
Old 03-29-2016, 02:13 PM   #23
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International has been a real disappointment

I can't buy fully the argument that "If you just buy the S&P 500, you will be internationally-diversified" because of the way that major corporations actively attempt to hedge away their international earnings' exchange rate risks on the currency markets. For example, see http://www.wsj.com/articles/SB100014...45680094212132

This practice of corporations monkeying with their international earnings seems akin to active portfolio management to me and so I believe I can only obtain true international exposure by owning an international stock index, in my case about 30% of my portfolio, currently.
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Old 03-29-2016, 03:36 PM   #24
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So the mad money I rescued from the remodeling spend it in retirement stash. I added some VT to my 'few good stocks' since football is months away.

Total mad money less than 5%.

heh heh heh - real money is full auto Target Retirement. Like a good investor if it keeps going down I shall keep silent.
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Old 03-29-2016, 04:20 PM   #25
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Like the value and small-cap "premiums," international returns will underperform for long periods, then mean revert.
With US market fully or fairly valued (imo), I pretty much stick to about 35% international, including a small position in emerging markets. Given how they were smacked, I may put a little more to work in emerging, but I didn't think they'd come back as quickly as they have the last two months. I was surprised how quickly foreign bonds (dollar denominated) have recovered.


International has outperformed in the past, and will again sometime in the future. I don't know when, so I just stay fully invested.

I believe diversification improves long term risk-adjusted performance, so I'm sticking with my allocation.
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Old 03-29-2016, 04:35 PM   #26
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I gave up guessing. My entire equity portfolio is in VT.
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International has been a real disappointment
Old 03-29-2016, 06:20 PM   #27
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International has been a real disappointment

I continue to hold VXUS as core holding and the ratio is about 15-16 percent of portfolio (was as much as 20 percent but has pretty much sucked the last two years).

I do believe international will have a golden age during the next decade with China and India driving momentum along with a recovering eurozone.

A value investor would be accumulating more at this stage but I'm ok where I am.
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Old 03-29-2016, 06:32 PM   #28
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In 15 of 20 years in the returns chart, Orange is either first or last. I'd say some might be better off with less Orange in their Port.
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Old 03-29-2016, 06:44 PM   #29
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In 15 of 20 years in the returns chart, Orange is either first or last. I'd say some might be better off with less Orange in their Port.
Well, orange is emerging markets which is an extremely volatile asset class, so seeing it at the top or bottom isn't surprising.

The gray - msci eafe - is international, more developed countries. That's not nearly as volatile.

If you rebalance, volatility between asset classes is a good thing.
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Old 03-29-2016, 07:04 PM   #30
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Yes - I see things differently. International has outperformed in the past, and will again sometime in the future. I don't know when, so I just stay fully invested.

I believe diversification improves long term risk-adjusted performance, so I'm sticking with my allocation.

International can go through long periods of underperforming, but also long periods of outperforming, and you never know when. This table gives a good historical perspective on asset classes and relative performance.



And, actually, the international funds I added to after 2014 (pretty much MSCI EAFE class - I don't mess with emerging markets), because they were down, outperformed the rest of my portfolio in 2015.
Thank you very much for the chart Audrey. It looks like 13/20 years would have been tops with just S&P 500 Growth and MSCI Emerging Market Shares, add a dollop of Russell 2000 Value and one is set. Too bad no guarantees the future will look like the past...
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Old 03-30-2016, 05:46 AM   #31
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Some think the dollar is set for a decline, which might bode well for international equities.

Is the sun setting on the dollar rally?
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Old 03-30-2016, 05:56 AM   #32
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It's been brutal -- recently international (especially emerging markets) have been a boat anchor. But unless you believe trees grow to the sky, the rally in the dollar can't last forever, and when the rally ends and the dollar mean-reverts, it will be a different story.
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Old 03-30-2016, 06:01 AM   #33
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Capital flows to emerging markets surge to 21-month high http://www.cnbc.com/id/103505079
http://www.cnbc.com/id/103505079

Global emerging markets (EMs) cinched foreign portfolio inflows of $36.8 billion in March, the strongest month since June 2014, with Asia leading the way, according to the Institute of International Finance (IIF).


But March's strong EM performance may just be a one-off, the IIF warned.
"Going forward, the going could get a bit rougher, as markets have taken a breather in recent days, in part because Fed officials have struck a less dovish tone in recent speeches, and as valuations are no longer so attractive."

The International Monetary Fund (IMF) issued a bleak outlook ahead for EMs in a new research paper this month, warning that some EM economies may face significant financing gaps in times of crisis.
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Old 03-30-2016, 07:33 AM   #34
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It's been brutal -- recently international (especially emerging markets) have been a boat anchor. But unless you believe trees grow to the sky, the rally in the dollar can't last forever, and when the rally ends and the dollar mean-reverts, it will be a different story.
And if you take a longer view, the secular trend for the dollar is lower. The most recent dollar rally isn't nearly as strong as the one in the early 80's or late 90's. And each successive low after those rallies bottomed out lower than the one before.

With the U.S. continuing to run structural trade deficits, there's good reason to think that long-term downward trend for the Dollar will continue as well.

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Old 03-30-2016, 09:01 AM   #35
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Recently (say since late January), emerging markets have gone up more than 20%. Maybe when the gains go above 30%, it might be time to start taking some money off of that table.
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Old 03-30-2016, 09:21 AM   #36
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Recently (say since late January), emerging markets have gone up more than 20%. Maybe when the gains go above 30%, it might be time to start taking some money off of that table.
If you were lucky enough to buy at those Jan lows that would be a good trade. But the EM index is only now back to where it was last Dec, and it's still 20% below where it was last April. Plenty of bottom fishers are still underwater.
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Old 03-30-2016, 09:25 AM   #37
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Cost of diversification and a good buying opportunity.
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Old 03-30-2016, 09:40 AM   #38
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Here is a very easy to read article by Ben Carlson (A Wealth of Common Sense) about European Markets Are European Stocks Cheap or is the U.S. Expensive?
His summary
Quote:
To recap:
  • European equities trade at a huge valuation discount to the U.S.
  • European equities have underperformed at a historical rate over the past five years.
  • European equities currently sport a 1.2% advantage in terms of dividend yields.
  • This information won't matter until it matters as fundamentals in the stock market require patience and don't work on a set schedule.
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Old 03-30-2016, 09:45 AM   #39
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If you were lucky enough to buy at those Jan lows that would be a good trade. But the EM index is only now back to where it was last Dec, and it's still 20% below where it was last April. Plenty of bottom fishers are still underwater.
Somebody has to get lucky, so it might as well be me.
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Old 03-30-2016, 11:29 AM   #40
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"There should always be at least one part of your portfolio that you hate". It means you have diversified correctly.
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