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Should a retiree own International funds?
Old 07-02-2011, 09:49 AM   #1
 
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Should a retiree own International funds?

Some people on another web site feel that a retiree should not own international or emerging market funds due to the risk. What do you think?

Also do you think that multi-sectior bond funds belong in a retiree's portfolio?
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Old 07-02-2011, 09:55 AM   #2
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Right now, I think a person would be very unwise NOT to own international securities.
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Old 07-02-2011, 10:50 AM   #3
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Some people on another web site feel that a retiree should not own international or emerging market funds due to the risk. What do you think?
I think the benefit of owning international/EM outways the risk of concentrating all your equities in domestic.

Quote:
Also do you think that multi-sectior bond funds belong in a retiree's portfolio?
Take your risk on the equity side. Stick to quality bonds for fixed income. See how gov't short and int bonds did during the meltdown.

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Old 07-02-2011, 10:55 AM   #4
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Originally Posted by Tiger View Post
Some people on another web site feel that a retiree should not own international or emerging market funds due to the risk. What do you think?
I own both, though I own more domestic than either of these. I am retired, so that demonstrates what I think.
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Old 07-02-2011, 10:57 AM   #5
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I would think that holding corporate bonds in emerging economies would carry less risk beause those economies are growing like we used to. Brazil, China, India.
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Old 07-02-2011, 11:57 AM   #6
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FWIW, I'm retired (DW soon will be), and we hold 15% foreign equities between us.

We would never hold just one stock/fund, so why would we only invest in one country - retired or not?

Disregarding the rest of the world, and the various markets make little sense, IMHO.
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Old 07-02-2011, 01:15 PM   #7
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For many, I would say international/EM equities and multi-sector bonds makes sense. From my perspective, diversification is a good thing.
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Old 07-02-2011, 01:36 PM   #8
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Less risk for now, maybe. Will they tell you when it is time to make that investment?

As part of a diversified portfolio, I believe you are reducing your total portfolio risk by including those international funds in your portfolio. They have about the same average annual returns and will behave somewhat differently over longer periods of time. Ideally, you would like portfolio components that really varied like crazy (one definition of risk) so that you could rebalance and increase your return significantly. You just don't want them to do the same thing all the time. Which is exactly what more U.S. equities added to a U.S. equity portfolio are guaranteed to do.

Also, imagine doing that in Japan, Japanese equities only, where returns have been crummy for a long time. We may be heading in that direction in the future, while EM's may look more like the U.S. of the past. You don't know who's going to do best. Spread your bets.
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Old 07-02-2011, 01:40 PM   #9
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In the last year or so even stodgy old Vanguard has upped their recommended international holdings and upped the holdings in their target funds accordingly. Used to be 20% of equity holding, now 20-40% (average 30%). Fyi we have 30% of our "pure" equity fund holdings in international.
1/3 Vanguard Stock Indices (10% Total International)
1/3 Wellesley
1/3 Bond
Total portfolio 45/55 so international is a little over 22% of stock holdings when including Wellesley stock portion.
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Old 07-02-2011, 01:51 PM   #10
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Quote:
Originally Posted by Tiger View Post
Some people on another web site feel that a retiree should not own international or emerging market funds due to the risk. What do you think?

Also do you think that multi-sectior bond funds belong in a retiree's portfolio?
It all depends on what your IPS says about international investing (I assume you are refering to equities tho OP does not say). I'm in for 20% of equities in my AA, which has served me well so far. To each his own, tho.

As for multi-sector bond fund? What sectors are we talking about? My FI are situated in the old, boring Vanguard Itermediate-Term Bond Index fund and TIPS fund. Not a big fan of getting fancy with my FI stuff.
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Old 07-02-2011, 02:21 PM   #11
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40% of my equities portion is in international. To make it simple, I go with a total international funds.
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Old 07-02-2011, 02:31 PM   #12
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If one does NOT invest in international equities (via an index mutual fund), then one is missing out on a large part of the US economy since international companies do quite a lot of their business here in the US.

The argument that some folks make that many US companies have lots of overseas exposure so you don't need international exposure by owning foreign companies is simply false.

Half of our equities are in mutual funds that invest in foreign countries. That's means we slightly overweight US stocks and slightly underweight foreign stocks with respect to world stock markets weights.

And while I like emerging markets, one must always be aware that just because there is growth does not mean that there are gains for stock market investors. And that's especially true in countries where the rule of law can be iffy.
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Old 07-02-2011, 02:37 PM   #13
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Still smarting from the '08-'09 crash, I made the mistake (likely) of selling a considerable amount of my holdings in Fidelity's total international stock and emerging markets funds back in Spring '10 when the European issue first flared up. I have been waiting since then for an opportunity to get back in (still haven't, so my international percentage is currently quite small). Shame on me, but I think that international belongs in a retirement portfolio in a percentage one is comfortable with.
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Old 07-02-2011, 04:28 PM   #14
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Shame on me, but I think that international belongs in a retirement portfolio in a percentage one is comfortable with.
That should apply for all investments at all times should it not?
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Old 07-02-2011, 04:46 PM   #15
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That should apply for all investments at all times should it not?
For sure. It was time to rebalance, not to bail. Lesson learned!
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Old 07-02-2011, 06:54 PM   #16
 
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I asked the question to see if anyone here agreed with what I read on the other site. 30% of my equities (15% of total portfolio) is in VTIAX.
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Old 07-02-2011, 08:04 PM   #17
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You want non correlated holdings for diversification. Domestic and foreign used to be more non correlated in the past but foreign holdings are still important. That "other site" has some odd ideas IMO. I have 35% in equity mutual funds and of that 75% is domestic in Vanguard TSMI and 25% is foreign in Vanguard TISMI.
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Old 07-02-2011, 08:28 PM   #18
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Please could you kindly explain why ?
Quote:
Originally Posted by braumeister View Post
Right now, I think a person would be very unwise NOT to own international securities.
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Old 07-03-2011, 01:04 AM   #19
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I own both, though I own more domestic than either of these. I am retired, so that demonstrates what I think.
Same here, about 13% of my portfolio is comprised of Vanguard International Funds: 1. Emerging Markets; 2.Europe and 3. Pacific.
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Old 07-03-2011, 07:03 AM   #20
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Originally Posted by LOL! View Post
If one does NOT invest in international equities (via an index mutual fund), then one is missing out on a large part of the US economy since international companies do quite a lot of their business here in the US.

The argument that some folks make that many US companies have lots of overseas exposure so you don't need international exposure by owning foreign companies is simply false.
Could you expand on these two points? They seem contradictory.

For the record, I'm about 35-40% international.
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