International Investing....why?

[Al18]

Reported last month, Warren Buffet is pouring money into Japan and plans to increase stake up to 9.9% of holdings https://www.cnn.com/2023/06/19/investing/warren-buffett-japan-stock-market/index.html

 

[wolf]

OK, I've been investing over 35 years both with an advisor and on my own I've been told to keep a percentage of my equities in International funds, around 25%. I have.

Looking back these funds haven't kept even close to US funds, let alone the SP 500. 10 year average is 5.05% for Vanguard International, others I hold are worse.

These International funds have been a boat anchor in my overall portfolio. Hindsight is clear, I should have stayed all US.

How long of a time frame do you give a sector to catch up ?

I no longer believe in diversification for the sake of being diversified. Heck, its darn hard to beat a portfolio that is 100% SP index over any period of time. 1 year, 10 years or 30 years. I don't see the need for International funds, other than the fact you can buy them cheap. You can buy them cheap because the don't increase in value much over time. You can buy them cheap next year too if you want.

Am I missing something? I tell everyone younger than me to pass on International or anything fancy, just buy the SP 500 index and go back to work.


Rant over.

100% Agree. Many years ago. Father passed away. International Fund
performed like yours, I think less than 6%. Other US Low cost funds performed like yours.

I stopped buying international funds, I think over 30 years ago. All the
"expert" advice, "diversify" a big lie.

Just a way to sell more "funds" and make money for themselves.

Forget who told me. But if you invest in funds, that contain large US corporations, You are "investing" in foreign country's. Indirectly.

 

[mpeirce]

Never bet against the US.

Yeah, that's the conclusions I came to a few years back.

We (the United States) has our problems, but so does the rest of the world. Mostly worse problems.

 

[athena53]

I'm one more who has been out of international stocks for over 20 years agreeing with others that US companies have plenty of exposure to international business. Bogle and Buffet say they're not needed, that's good enough for me.

If "international" means companies domiciled outside of the US but listed on the US exchanges, yeah, you can avoid those, but most blue chip companies domiciled in the US sell their goods and services all over the world and thus are subject to changes in the economies of other countries and fluctuations in exchange rates. So, I figure I've got international exposure even if I don't make direct investments in companies domiciled outside of the US. Similarly, there are many companies domiciled outside of the US that have such a big exposure to the US market (think Pharma and Big Food) they'll pretty much correlate with conditions in the US.

I gave up on emerging markets years ago. Too volatile and the occasional banner year never makes up for all the years with losses.

 

[target2019]

Bogle was not a big proponent of international. It's interesting that Vanguard and some discussion boards have always pushed international.

I was looking at our portfolio AA change over time. The evolution to less international came about because new money was going mostly to US investments and fixed income as I got closer to pulling the work plug. So it wasn't a brilliant timing move. Just instinct, I suppose.

	Int'l Stock
2007	22.5%
2008	14.5%
2009	20.7%
2010	19.9%
2011	18.9%
2012	21.1%
2013	20.3%
2014	17.9%
2015	17.0%
2016	17.7%
2017	17.8%
2018	16.2%
2019	13.4%
2020	10.8%
2021	5.0%
2022	8.9%

 

[DayDreaming]

FYI, I posted a similar question a few years ago, wondering if I should have VFWAX - All-World ex-US in my portfolio:

https://www.early-retirement.org/forums/f28/international-in-a-3-fund-portfolio-99718.html

 

[sengsational]

The reason for diversity is not to maximize return, but risk adjusted return. I don't know if that's BS or not, but I bought into the idea early-on, and will probably die with the same asset allocation targets I started with, age adjusted, which includes international.

A lot of my internal is in emerging markets, so I consider lackluster returns a donation from the lucky US guy, who just happened to be born in an amazingly affluent country to other, less lucky people in countries that are trying to catch up

 

[street]

Should or shouldn't is just another personal preference route to long term investing. Through the years it has been very beneficial to be invested internationally and at times not so good.

I can also say that for US funds also. Good or bad we all got to where we needed to be with it or without it.

target2019, chart says a lot about some history on global investing.

 

[HawkeyeNFO]

I got ou of the international funds several years ago. No regrets at all! Most of the S&P 500 entities include a great deal of international business, so you can't avoid being internationally invested that way anyhow. Given everything else, the US is still one of the most favorable places for a worldwide company to maintain a headquarters.

 

[Al18]

Owning a market cap SP500 fund (nearly all SP500 funds are market cap) is not diversified at all. The Top 10 companies comprise 34% of the fund, or slightly more than the bottom 400 companies in the fund. An equal weight fund such as RSP is truly diversified.

 

[Route246]

I have some international solely for the purpose of global diversification, nothing more, nothing less. I also have a very small position in gold (real gold).

 

[target2019]

Here is a comparison of three portfolios, with 0%, 10% and 20% international in combination iwth US Total Stock and 40% Total Bond.

https://www.portfoliovisualizer.com...ation3_1=40&allocation3_2=40&allocation3_3=40

How meaningful was a Sharpe Ratio of 0.51 vs. 0.55 (no int'l)? I must be mis-understanding the risk-reward benefit of adding international to a portfolio.

 

[imbatman]

So that is 1972-2023, and clearly the financial benefit wasn't there over long term

that isn't really the question, the question is the next 10-50 years...........I don't believe we are going to see the same intensity of US-centric growth but I have no qualifications or data for making that opinion........none of us know, so this allocation choice is all about diversification, economic projection, and risk tolerance

 

[pjigar]

I agree that international has lagged for many years. I got out of international probably 10 years ago if not longer. No regrets. Because I hold S&P and market index funds, by nature it has passive international exposure due to global companies. That is sufficient international exposure for me and my diversification.

I have been out of international funds for about 12 years now. My reasoning at the time and I believe those reasons will hold true in the future:
1. Local market returns typically track local inflation and local economic factors. The local inflation/economic factors may never fully materialize in the exchange rate. I live in US so I need to beat US inflation.
2. Exchange rate fluctuations are also because of trade imbalance or currency manipulation. I should not expose myself to unnecessary currency risk.
3. A large chunk of revenues for US listed companies come from the international markets. So I am already participating in the international markets as a proxy. I don't need to add more international holdings.
4. US business ethics and transparency are better than other countries so no need to expose myself to potential frauds/insider milking from the foreign companies.
5. International funds have higher fees which I don't believe brings any excess returns.

YMMV.

 

[sengsational]

One reason I got into international investing was the idea to reward countries with economic freedom. https://www.heritage.org/index/

 

[audreyh1]

I never had a large exposure to foreign only funds - generally no more than 20% of equities. However I’m really getting fed up with the tax complications - namely dealing with the foreign tax credit. Both in terms extra tax forms and the unpredictability of it plus carry over sometimes. I also notice the foreign funds even index tend to pay higher dividends compared to other index funds.

So my long term plan is to let my foreign allocation shrink.

 

[Phroig]

I don't believe we are going to see the same intensity of US-centric growth

+1
My reason as well for sticking with my international allocation.

 

[mpeirce]

I was helping a relative with some financial things and was looking at some "Managed Retirement Funds" at Fidelity (FMRTX, FMRAX, etc).

I noticed the Fidelity Managed Retirement 2035 Fund (FMRTX) is 20% in non-US equity. Way too much for her liking. The 0.5% expense ratio didn't help either...

 

[indiajust]

I currently hold sweden, uk etfs. In the past I did the same with mexico, russia, south africa, chile, austria, japan and indonesia. I do tradeoffs of what i feel is like for like substitutions... so I own mexico coke and turkish coke, rather than KO.

I have lots of Canada and Mexico ADRs. Stuff like Shopify and Constellation and CNI. Mexico airports, private caribbean banks, Shimano, israeil firms, Singapore and UK reits, Porsche, Kone, Australian commodity processors like Rio Tinto or BHP. Taiwan has all the semiconductor stocks. Plus international Architect/Engineer firms.

Started with a Vietnam fund in the 90's.

I just follow the action. Austria is almost all banking and finance. Australia is commodities. Stone Co/MELI is retail south america. US and israel is IT, I shop fintech wherever it is cheaper.

 

[Coach Shoe]

I’m not selling…. certainly not advising but, I just attended a round table of Schwab “experts” and they’re projecting that international stocks will outperform US stocks in the near future. Different valuation levels and different headwinds.

 

[FREE866]

I’m not selling…. certainly not advising but, I just attended a round table of Schwab “experts” and they’re projecting that international stocks will outperform US stocks in the near future. Different valuation levels and different headwinds.

I feel the "valuation" argument for international stocks has been in force for a decade. It's been frustrating for sure, but fortunately international doesn't make up a big percentage of my holdings. As tempted as I am to just get out of them, like you, I'm gonna hold on.

 

[padlock]

One thing to consider is that the actual total returns of some international funds is not properly represented simply by looking at the growth in etf prices as many of them tend to have larger dividends, which can make a large difference over time.

 

[street]

One thing to consider is that the actual total returns of some international funds is not properly represented simply by looking at the growth in etf prices as many of them tend to have larger dividends, which can make a large difference over time.

I have heard that before also. I have always invested in some and will continue too. I believe over time Int. has done me okay.

 

[imbatman]

Yes any traded investment (stock, mutual fund, ETF) will not accurately represent total return if just looking at price change. I usually use Morningstar for performance and they show Total Returns % and their definition indicates they DO incorporate and assume distributions are reinvested (with no indication that ETFs are handled uniquely).

https://admainnew.morningstar.com/directhelp/Glossary/Performance/Total_Return.htm

 

[Dash man]

I avoided international investing up until a year ago when I saw a Schwab presentation convincing me to put some money into developed countries, partly because the dollar was strong at the time. I put 5% of my investments into two Schwab ETFs and they have done quite well. I still avoid emerging markets because they typically include China for up to 50% of the stocks in the fund.