Dirty Market-TIming Vanguard

[target2019]

https://finance.yahoo.com/news/vanguard-recommends-investors-increase-non-013404803.html

Vanguard has increased their recommended allocation in foreign stocks to 40%, up from 30%.

Bogle just got in his car and is on his way to corporate headquarters...

 

[sengsational]

40% includes the international bond component too, it looks like:

Investors should put about 40 percent of their portfolios in non-U.S. stocks and bonds to diversify their holdings, according to top executives at Vanguard Group, the fund giant that manages $4.9 trillion.
Global stock markets are likely to outperform the U.S., which the firm expects to return roughly 4 percent to 6 percent annually over the coming decade, Chief Executive Officer Tim Buckley and Chief Investment Officer Greg Davis said Thursday during a webcast.
Vanguard formerly recommended allocating about 30 percent of portfolios to non-U.S. assets, the executives said. One reason for the increase: Fees have fallen on international funds, improving net returns.

 

[Chuckanut]

40% includes the international bond component too, it looks like:

Interesting. I was wondering if the 40% was 40% of one's stock allocation or 40% of one's total allocation..

 

[pb4uski]

It looks looks like the answer is yes.

 

[steelyman]

Vanguard seems pretty slow to update the portfolio composition of their target date funds on the website. Most recent I’ve seen is 11/30/18 (today is 1/11/19).

I’ll be interested to see upcoming changes. I don’t plan to make changes any time soon based on this advisory.

 

[OldShooter]

40% isn't wildly out of line from what they recommended in their 2012 international investing paper, though it is the high side. https://personal.vanguard.com/pdf/icriecr.pdf

"For many investors, an allocation between 20% and 40% should be considered reasonable, given the historical benefits of diversification. Allocations closer to 40% may be suitable for those investors seeking to be closer to a market proportional weighting or for those who are hoping to obtain potentially greater diversification benefits and are less concerned with the potential risks and higher costs."
​

Believing in reversion to the mean is the first baby step towards betting on sectors, but that may be part of Vanguard's thinking here too.

 

[Onward]

Two or three years ago Vanguard increased their recommended % of int'l stocks from 30% to 40%. I remember reading an article from them about it.

That is, they advised that 40% of your stock portion be in int'l stocks.

 

[HI Bill]

I heard them say it on a Webcast yesterday. Maybe they're right, and maybe they're wrong, but for sure, my international ETFs haven't performed well over the past several years.

My theory (baseless) contravenes theirs: When the US markets decline significantly, the world's will follow (ever watch after hours tickers?).

 

[24601NoMore]

Boy, let's hope International starts to finally do well. My International funds (of which I'm probably over-allocated as a % of my portfolio) have absolutely been abysmal the last few years - especially OAKIX.

 

[target2019]

If one eliminates Non-US and Emerging Markets from the portfolio, the ride will be smoother.
https://www.callan.com/wp-content/uploads/2019/01/Classic-Periodic-Table-2019.pdf

It seems to me like Vanguard is picking next year's Super Bowl winner!

 

[pb4uski]

If one eliminates Non-US and Emerging Markets from the portfolio, the ride will be smoother.
https://www.callan.com/wp-content/uploads/2019/01/Classic-Periodic-Table-2019.pdf

It seems to me like Vanguard is picking next year's Super Bowl winner!

Interesting thing.... if you look at the last 20 years, International equities were in the top 4 asset classes 10 times.... Large-Cap US equities only 9 times and Small Cap US equities 12 times.

Looks to me like Vanguard is just playing the long term averages.

 

[OldShooter]

... for sure, my international ETFs haven't performed well over the past several years. ...

Gee. My internationals have been great ... not great ... great ... not great, etc. Of course I have held Vanguard International (VGTSX) since April of 1996. This is why, if we are long term investors, we diversify. @pb4uski has a great chart on this.

Re Vanguard, I have no idea, but there are a couple of factors that, if one were trying to pick sectors, might make internationals attractive. First, simple reversion to the mean. Second, strong prospects that the dollar will come down from its current high perch.

IMO picking sectors is no different than picking stocks, though. Statistically doomed.