International Stock Index %

[lem1955]

My target is 60/40. Equity is currently at 59.1% and International is 17.2% of total portfolio. (That's 29.1% of equities.) I've entered my non-Vanguard holdings into my portfolio at Vanguard so Vanguard calculates my Asset Allocation in detail on my total portfolio for me. Very slick.

 

[Running_Man]

I just try to use world market cap percentages, so US varies around 50% and international around 50% of equities. So I have about half my equities in foreign ETFs and funds.

I only see good things going up in China and Europe now. Am I missing something?

The idea of investing in market cap by total world would make sense to me if there was proper information to obtain on the companies and 50% is the percentage of recommendations from "index" gurus lately such as Larry Swedroe but there is a vast difference in investor information and protections in the United States and overseas.

Having a European parent buy out a US company and to see how they were allowed to value assets to use as depreciation for Europe accounting rules as a method to minimize goodwill and reduce taxes over the long term and yet string out the useful lives of equipment and buildings on new capital projects many years ahead of our US policy and how relaxed rules are for liability recording in Europe using IFRS rules versus the stringent US rules I can see why PE's are lower in Europe because there is less certainty surrounding the way earnings are recorded. It is virtually impossible to buy out a German company, in order to buy a company in Germany the government must approve and there can be no adverse effect for German workers, yet they can utilize US rules to buy out our companies, close or combine US facilities and get tax advantages on the new combinations without any government interference as long as they are not establishing a monopoly. It is a very interesting dynamic.

In China valuations are affected by direct government intervention in the markets in massive loans to private companies and to direct manipulation of the economy.

 

[Totoro]

It is virtually impossible to buy out a German company, in order to buy a company in Germany the government must approve and there can be no adverse effect for German workers

Might you have a link for that? First time I heard about this.

There is the regulatory approval to prevent monopolies (like the FTC) and you can get (non-binding) workers council input if you want, but that's about it I thought.

In Europe you still have plenty of companies that are partially state owned though (especially France), preventing a lot of takeover activity (especially in the energy and telco sectors).

 

[audreyh1]

I'd also be interested in how many people slice and dice their international among regions vs. say Total International.

Not by region - I let the fund manager pick those. But I have large-cap and small-cap international funds.

I don't know of studies that have shown benefit to diversifying by region, just by capitalization.

 

[slazenger]

My target is 60/40. Equity is currently at 59.1% and International is 17.2% of total portfolio. (That's 29.1% of equities.) I've entered my non-Vanguard holdings into my portfolio at Vanguard so Vanguard calculates my Asset Allocation in detail on my total portfolio for me. Very slick.

Have you ever tried Morningstar's x-ray via T. Rowe price (they (TRowe) let you use it for free)? I find it's portfolio analysis to be a bit more detailed than Vanguard's tool, and worth the time loading it into X-ray.

 

[madsquopper]

Overall portfolio is nominally 60/40, with 1/3 of the 60 equity in foreign. Equally split between VGK, VPL, VSS, and VWO.

 

[modhatter]

Here is one such article supporting my original post. However, it seems as of late that financial pundits are trying to make arguments to increase our exposure to international (though I have not read any actual data supporting this recommendation), other than the US is now producing less than 1/2 of the global gdp.

Foreign Stocks For The Long Run

 

[Animorph]

30.2% U.S. diversified (4 slices: large/small, value/growth)
27.8% Foreign developed (4 slices: large/small, value/growth)
16% Emerging markets (4 slices: large/small, value/growth)
4% Frontier markets
5% U.S. real estate
5% Foreign real estate
10% Energy (domestic and foreign)
2% Cash

So 52.8% directly foreign, plus whatever foreign the active U.S. and Energy slices hold.
Minus whatever U.S. the foreign funds own.

 

[eytonxav]

For me International represents 28% of equities and 12% of total port.

 

[erkevin]

I have 20% of my total portfolio in foreign index funds (Vanguard), which is 33% of my balance in equities.

 

[trixs]

In 2008 I finally figured out that investing in individual securities is not the way to go. I put together a portfolio based upon what I read here and the bogleheads forum. Anyway, apparently I am heavy international compared to most here. Everything is held at Fidelity in Vanguard ETF's (I dislike the VG website).

Total Bond Market 20%
Emerging Markets 12%
Europe 12%
Pacific 12%
REIT 8%
Small Cap Value 12%
Large Cap Blend 12%
Large Cap Value 12%

Here is the returns over the last few years.
Year My Return Target Allocation Return
2008 -25.27% -30.39%
2009 30.69% 28.21%
2010 16.24% 14.77%
2011 -2.60% -3.33%
2012 14.19% 14.73%
2013 16.06% 16.33%
2014 6.18% 6.68%

 

[jazz4cash]

Here is one such article supporting my original post. However, it seems as of late that financial pundits are trying to make arguments to increase our exposure to international (though I have not read any actual data supporting this recommendation), other than the US is now producing less than 1/2 of the global gdp.

Foreign Stocks For The Long Run

Thanks...this contains the chart I was searching for!

 

[big-papa]

It begins to get a little complex when so many US companies have significant foreign operations already. Additionally, some indices already have some non-US stock holdings.

 

[slazenger]

It begins to get a little complex when so many US companies have significant foreign operations already. Additionally, some indices already have some non-US stock holdings.

That actually tends to null out. The same is essentially true in the reverse. Just a quick example, more Hondas and Toyotas are built here in the US than in Japan.


I think Global GDP has to be the starting point. If one is going to overweight a country, including their own, there should be a good reason behind it. In the old days, investing in foreign securities was either very difficult or too expensive. Now you can get an international index fund from Vanguard in the 10 basis points range. And if its in a taxable fund, they even make it convenient to get a foreign tax credit for foreign taxes paid.


Heck, I can't help but wonder if heavily overweighting your own country with stock holdings, and working in that same country, is somewhat akin to working at Microsoft, and also owning mostly Microsoft stock as an employee. It's doubling-down on your financial position, and if things go south, you could take a double-whammy hit.

 

[slazenger]

Here is one such article supporting my original post. However, it seems as of late that financial pundits are trying to make arguments to increase our exposure to international (though I have not read any actual data supporting this recommendation), other than the US is now producing less than 1/2 of the global gdp.

Foreign Stocks For The Long Run

Truth be told, the latest is Ferri is looking to go even higher than 30% now. His latest position can be found here: My Expected Investment Changes in 2015

I guess, more to your point, right? Per my comments already made, I agree with him.

 

[modhatter]

Truth be told, the latest is Ferri is looking to go even higher than 30% now. His latest position can be found here: My Expected Investment Changes in 2015

I guess, more to your point, right? Per my comments already made, I agree with him.

Thanks for the link. It sounds logical as a possible turning point to justify an increased position. Of course like all financial pundits, it is speculation on his part into the future defaults of these emerging markets, which may or may not come to pass in the next year. But sounds reasonable.

 

[audreyh1]

It begins to get a little complex when so many US companies have significant foreign operations already. Additionally, some indices already have some non-US stock holdings.

That's why I don't worry about having "only" 20% of equities in foreign companies. What I have is enough that I usually rebalance between the two each year - i.e. there is enough difference in performance that one is trimmed to add to the other and which outperforms switches most years.

 

[GTFan]

And also why VG says that as long as you have at least 20% exposure you're good to go, volatility-wise. Much less incremental benefit once you go past that point.