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Old 05-15-2015, 02:53 PM   #21
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Rebalancing tends to correct these problems and take advantage of opportunities. Don't retire without it.
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Old 05-15-2015, 03:31 PM   #22
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Which instruments are people using for foreign exposure?
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Old 05-15-2015, 03:46 PM   #23
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Which instruments are people using for foreign exposure?
Vanguard index funds:
VTIAX
VEU
VSS

Plus some small-cap emerging markets ETFs:
EWX
DGS

Large-cap emerging markets companies are included in VEU and VTIAX.
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Old 05-15-2015, 04:11 PM   #24
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Have broad international in our 401k accounts (not great, but there)

Our taxable accounts hold tilting positions:
VWO (emerging)
DLS (smallish value)
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Old 05-15-2015, 04:17 PM   #25
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My only exposure to foreign equity at this time is through the Vanguard FTSE All-World ex-US index fund (VFWAX). I am thinking about building a position in the Vanguard FTSE All-World ex-US Small-Cap index fund (VFSVX).
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Old 05-15-2015, 04:19 PM   #26
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Hmm, I have VTIAX and VFWAX but no foreign small caps.

US small caps have been underwhelming
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Old 05-15-2015, 04:42 PM   #27
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Hmm, I have VTIAX and VFWAX but no foreign small caps.

US small caps have been underwhelming
Depends upon the time frame. Recently, sure, but not so much over longer periods. I'm slowly putting our long-term passive portfolio together, and see the small tilt (esp. small value) as worthwhile for the next fifty years of DW's planned-for life. (Of course, at some point, one would expect the positive differential performance to disappear, but until then...)
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Old 05-15-2015, 06:43 PM   #28
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Right - it does seem like the horse has left the barn. I bought more international in Jan, due to rebalancing after a tough 2014. Been a sweet reward so far.

But just because they are up YTD doesn't mean they will end the year that way.
Aren't large moves such as a major return shift from domestic to international (or vice versa) generally multi year events reflecting major shifts in economic conditions of one region vs another? It would seem that if that's not the case, then timing of one's move is more like casino gambling. If international over perfomance YTD means the horse already left the barn does that mean it is already too late to shift some equities to international?
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Old 05-15-2015, 08:03 PM   #29
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Aren't large moves such as a major return shift from domestic to international (or vice versa) generally multi year events reflecting major shifts in economic conditions of one region vs another? It would seem that if that's not the case, then timing of one's move is more like casino gambling. If international over perfomance YTD means the horse already left the barn does that mean it is already too late to shift some equities to international?
My personal view is that longer term relative results will depend on future events so cannot be predicted. All one can say is that momentum, which is recognized by even academics as a return factor, favors international right now. Next month things could reverse. Should the Greek situation, for example, bring about an institutional failure (which is not now envisioned by the markets) then international versus US performance could indeed reverse.
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Old 05-16-2015, 07:34 AM   #30
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Living in a small country I have most of my investments in foreign holdings. And USA and (most of) Europe are equally foreign. For me this means putting money into Euro funds each month to rebalance since the US funds have climbed hight thanks to both stocks and dollars going up.

But I'm not selling US funds to buy Euro funds. I do not know enough to time the market.
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Old 05-16-2015, 07:47 AM   #31
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If international over perfomance YTD means the horse already left the barn does that mean it is already too late to shift some equities to international?
Yes, if that is the case, then it is too late to make the shift. However, one may effect a shift simply by not rebalancing, too, until after international equities have increased to become a larger than desired percentage of your portfolio.

For folks who already had the market weights of international in their portfolio, they just need to keep on keeping on. Even Vanguard is not advocating overweighting international equities; they are just advocating having the market weights of international which is really old news. By the same token, Vanguard and others advocate having the market weights of US equities, too.
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Old 05-16-2015, 07:51 AM   #32
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Just a side remark to consider in the "how much of what".

One can also just buy VTI and be done with it.

Or VT + VXUS in the same proportion as in VTI (for a slightly lower cost).
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Old 05-16-2015, 08:03 AM   #33
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Just a side remark to consider in the "how much of what".

One can also just buy VTI and be done with it.

Or VT + VXUS in the same proportion as in VTI (for a slightly lower cost).
And keep that at fixed ratio of 50/50 or 60/40 unless you desire low investor returns instead of getting high fund returns. Shifting ratios in chase of latest greatest is recipe for getting investor returns. So no I will not increase/decrease anything.

BTW I think you wanted to say VTI + VXUS and not VT + VXUS. 50/50 in those 2 ETFs probably outperforms 90% of mom and pop investors who lack discipline in investing.

Why The Average Investor's Investment Return Is So Low - Forbes
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Old 05-16-2015, 10:47 AM   #34
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If I were to do anything, I'd be selling international now. But the international allocation hasn't exceeded the trigger band, so it's a "do nothing" right now. But since I did rebalance to the center of the band last year, international allocation is threatening the upper band.
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Old 05-16-2015, 11:08 AM   #35
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35% of my equity holdings are international. Yes, they have gained roughly 11% YTD, but looking back 1 year and 3 years, their performance still trails the S&P badly. I am not selling yet.
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Old 05-16-2015, 11:30 AM   #36
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DODFX, VTIAX, TBGVX, MACSX, MINDX, and SFGIX for me
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Old 05-16-2015, 01:08 PM   #37
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Rebalancing tends to correct these problems and take advantage of opportunities. Don't retire without it.
+1

The past few years, US equity outpaced my international holdings and all I did was direct a little new money to foreign equities to rebalance.

This year international has done well and I'm almost exactly at my 60-40 target allocation. According to my spreadsheet I'm $408 over target in US.
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Old 05-17-2015, 10:48 PM   #38
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I occasionally use Vanguards Portfolio Watch Tool to analyze my portfolio. Recently, this tool has taken a hard turn to international holdings in that its recommending 30-50% international equity and I just checked it and it's also suggesting 20-50 % in foreign bond holdings.

In the past for many years I followed Bogle's advice that since most large US companies have significant foreign exposure there is little need to explicitly buy a lot of foreign holdings. Vanguard has obviously significantly changed this tune recently. Thoughts?
Vanguard has great funds, but personally I am very cautious of their white papers and recommendations that point an investor to something they just happen to be selling. International is probably a worthwhile investment, but I would not just take VG's word for that rather than doing your own research. I have found it telling the VG is mute on commodities and gold, neither of which they have a fund for.

As to Mr. Bogle's statements - it is quite different to invest in a US domiciled company that has overseas offices and operations, and to invest in a foreign domiciled company. The former is controlled by the SEC and is denominated in US dollars, while the latter is not. These things may be good or may not; you need to do the research and decide for yourself.

Personally I worry about the effect of currency exchange rate and trade imbalances so I am a bit cautious. I am currently at 10% foreign, and will grow that to between 15 and 20%.
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Old 05-18-2015, 02:31 AM   #39
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Is large increase in foreign holdings justified? For the vast majority of US investors, yes.


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Old 05-18-2015, 05:25 AM   #40
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If you own for example 100k of KO which generates 75% international sales do you count that as 75k international exposure?

What about 100k of PM which is 100% international sales a 0% US.

Traveling in Latin America and seeing everybody smoke Marlboros and drink Coke tells owning some KO and PM is probably not too bad idea.... as a part of International exposure. Those two as we all know are 100% US companies though.....
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