International Investing....why?

[Ian S]

I've been a longtime shareholder of a couple of Canadian bank stocks, BCE, and the Brookfield family of stocks, LP's and spinoffs. It's worked for me.

 

[Lorenzo]

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.

I have been reading the forum every day since joining a couple of weeks ago, and I started noticing that few of the portfolio AAs people posted included international. I was curious why international was apparently out of favor, and a search turned up this thread.

For 30+ years my various 401ks have included an international component, and I have long noticed that it lagged behind the US components. But this was the conventional wisdom--for diversification--wasn't it? Now, I think "was" may be the operative word. Emerging markets, etc., may have been all the rage in the early 2000s, but globalization has benefited most large US-based companies, even those not historically known for doing much business outside the US. Moreover, with the wars in Ukraine and the middle east, while there may be some sectors able to take advantage of the situation, the broader impact on international business may be negative.

I'm thinking it's time I ditch the international component. Looks like others here came to that conclusion at some point in recent years.

 

[freedomatlast]

Schwab “experts” are projecting that international stocks will outperform US stocks in the near future. Different valuation levels and different headwinds.

I've been hearing the same thing from the 'experts' for 30 years and have ignored it every year. I never got into international stocks and my portfolio is in much better shape because of it.

Same thing with bonds. The 'experts' said I needed more bonds, but again I didn't listen and am in a much better position now.

 

[Al18]

I continue to own international stocks for diversification. I also own value/dividend stocks for diversification. Being retired, I am not concerned about getting the highest yield but being broadly diversified. You only have to look at the SP500 performance between 1/1/2000 and 12/31/09, where the SP500 was 10% lower after 10 years to understand why I’m diversified.

 

[RunningBum]

I got out of the VG International index fund for 3 reasons, in order of importance to me:

1) It was throwing more dividends than my US Intl index fund, endangering my ACA subsidy. This was back when there was a cliff at 400%.

2) Foreign taxes were paid out of the fund, and as I was keeping my income low for the ACA I was barely able to claim any Foreign Tax Credit. Of course I could keep carrying it forward for up to 10 years, but I didn't see my future tax situation helping much.

3) It was under-performing. No idea what the future holds, so this is a minor factor.

Because reason #2 took away the incentive to hold foreign funds in my taxable account, I do have a small amount in my Roth.

 

[Onda]

I continue to own international stocks for diversification. I also own value/dividend stocks for diversification. Being retired, I am not concerned about getting the highest yield but being broadly diversified. You only have to look at the SP500 performance between 1/1/2000 and 12/31/09, where the SP500 was 10% lower after 10 years to understand why I’m diversified.

+1

 

[Lorenzo]

I continue to own international stocks for diversification. I also own value/dividend stocks for diversification. Being retired, I am not concerned about getting the highest yield but being broadly diversified. You only have to look at the SP500 performance between 1/1/2000 and 12/31/09, where the SP500 was 10% lower after 10 years to understand why I’m diversified.

Playing devil's advocate here, but that was one 10-year period, with a financial crisis starting in the US in 2007 before spreading globally. How often is that going to happen (I ask rhetorically)? Maybe some international exposure is a good idea for an investor with a 35-year horizon, but for those of us in retirement or near to it, does it makes sense anymore?

 

[Al18]

I don’t understand about the need to finish first with the highest risk. I’m happy to be in the 80th percentile in term of returns.

 

[Onda]

Playing devil's advocate here, but that was one 10-year period, with a financial crisis starting in the US in 2007 before spreading globally. How often is that going to happen (I ask rhetorically)? Maybe some international exposure is a good idea for an investor with a 35-year horizon, but for those of us in retirement or near to it, does it makes sense anymore?

Do you know how many people here are piled up into bonds? BND vastly underperformed VXUS over the last 13 years. That makes no sense to me.

 

[Lorenzo]

Do you know how many people here are piled up into bonds? BND vastly underperformed VXUS over the last 13 years. That makes no sense to me.

I have a US bond fund, too. The diversification logic that bonds generally move in the opposite direction from stocks (even if in a period like there was in 2022 they didn't) makes more sense to me. But international?

 

[Onda]

I have a US bond fund, too. The diversification logic that bonds generally move in the opposite direction from stocks (even if in a period like there was in 2022 they didn't) makes more sense to me. But international?

I think from 2000 to 2010, S&P was not going anywhere while Mid Caps, Small Caps, and International were making money.

I would rather own internationals for diversification than bonds.

 

[jazz4cash]

I have been reading the forum every day since joining a couple of weeks ago, and I started noticing that few of the portfolio AAs people posted included international. I was curious why international was apparently out of favor, and a search turned up this thread.

Most of us post AA as xx/xx or xx/xx/xx withe the first figure being equity allocation. You can’t tell how much is international. That said I always ho by the theory that most US large caps are multi -national so little need to designate non US specifically.

 

[audreyh1]

I have been reading the forum every day since joining a couple of weeks ago, and I started noticing that few of the portfolio AAs people posted included international. I was curious why international was apparently out of favor, and a search turned up this thread.

For 30+ years my various 401ks have included an international component, and I have long noticed that it lagged behind the US components. But this was the conventional wisdom--for diversification--wasn't it? Now, I think "was" may be the operative word. Emerging markets, etc., may have been all the rage in the early 2000s, but globalization has benefited most large US-based companies, even those not historically known for doing much business outside the US. Moreover, with the wars in Ukraine and the middle east, while there may be some sectors able to take advantage of the situation, the broader impact on international business may be negative.

I'm thinking it's time I ditch the international component. Looks like others here came to that conclusion at some point in recent years.

When it comes down to it I wish I didn’t have international funds because I’m very tired of dealing with the foreign tax credit on my taxes.

 

[Chuckanut]

When it comes down to it I wish I didn’t have international funds because I’m very tired of dealing with the foreign tax credit on my taxes.

My international funds have consistently underperformed my USA total market index funds. I have cut the international index funds way back.

 

[RunningBum]

I would rather own internationals for diversification than bonds.

Not the same kind of diversification. It's a useful diversification, but not the same as having stock/bond diversification. I actually have mostly fixed income (CDs and treasuries) rather than bonds, but those are similar enough to bonds for me.

 

[HI Bill]

I think back a few years. If I am a Japanese investor in 1989, why in the world would I invest outside of my own country's market? OTOH, if I am a Japanese investor in 2023....

Japan's Fed has been VERY slow to respond to anything, keeping interest rates negative far longer than needed. The country has significant structural and societal problems when it comes to salaries, performance, and w#rk. I think it's fair to consider them an outlier when comparing to the current US economy.

 

[MichaelB]

I’ve always had an allocation to non-US developed and emerging market equities. Over the past couple of years I’ve reduced it, and plan to continue doing so, basically for 2 reasons. Like RunningBum and Audreyh1, for me the foreign taxes and credits have become a real PITA. Second, and more importantly, I’ve concluded neither foreign developed nor emerging equities are meaningful diversifiers. There may be individual countries worth investing in but the broad market passive indexed funds like EFA and VWO are now heavily correlated to the US equities market. If the US market falls meaningfully they will join it and not offset the risk.

 

[Gumby]

I’ve always had an allocation to non-US developed and emerging market equities. Over the past couple of years I’ve reduced it, and plan to continue doing so, basically for 2 reasons. Like RunningBum and Audreyh1, for me the foreign taxes and credits have become a real PITA. Second, and more importantly, I’ve concluded neither foreign developed nor emerging equities are meaningful diversifiers. There may be individual countries worth investing in but the broad market passive indexed funds like EFA and VWO are now heavily correlated to the US equities market. If the US market falls meaningfully they will join it and not offset the risk.

I gave up on international equities about 5 years ago, for the same reason.

 

[Stormy Kromer]

If the fish ain't biting.......change lures. And this is from a guy who hasn't sold a stock in 37 years. I own enough Int'l to have an opinion.

I'll keep my current Int'l exposure that I hold now (under 5% NW) forever but if I was 21 years old today starting new I would not include any International in my portfolio.

I have always been told that I had to diversify and bought a some International over the years (not near as much as Vanguard suggested).

If I was 21 starting out new I would be 100% invested in Vanguard Total Stock Fund with enough cash to carry me through tough spot (and a good job).

I wouldn't diversify for the sake of diversification because we're told to. It hasn't worked for me for 30 years.

I'm the OP.

 

[luckydude]

I had a very small position in VG International Explorer Fund for 10 years and finally got rid of it in January. My initial investment in 2013 was $10k. It was $17k when I finally got rid of it 10+ years later. Just a terrible performer compared to US equities. No more international for me.

 

[WhenIsItTime]

In the S&P 500, ~30% of sales are outside the U.S. Good enough for me.

 

[Bflotomny]

Bogle & International

I always respected John Bogle and his advice. He avoided international for many many years. In the last few years he started to recommend them. Nothing in the markets changed to bring about this new recommendation. I think the change was due to Vanguard told him to knock it off- because they had so many international funds and they were part of so many VG allocation funds.
I still follow his original suggestion I avoid them

 

[target2019]

I always respected John Bogle and his advice. He avoided international for many many years. In the last few years he started to recommend them. Nothing in the markets changed to bring about this new recommendation. I think the change was due to Vanguard told him to knock it off- because they had so many international funds and they were part of so many VG allocation funds.
I still follow his original suggestion I avoid them

I think it's possible you're mis-interpreting. One quote isn't enough, but I don't see what you're saying, at least in this one quote.

“Everyone tells me I’m wrong,” Mr. Bogle said. “In my book, ‘Bogle on Investing,’ I said, for a lot of reasons, you don’t need to own international stock.” His argument: International investing involves extra risk, ranging from currency risk and economic risk to societal instability risk. “The reality is that we do better than the rest of the world. You don’t need currency risk, but if you want, don’t go over 20% in international,” he said.

https://www.investmentnews.com/inve...s-dont-need-to-own-international-stocks-71216
As far as I recall, he was consistent about international. Don't need, but if you decide on it, not more than 20%.

 

[sengsational]

If you believe Peter Zeihan, demographics and the end of the US policing the nautical routes globally means very few winner countries, with the US on top by far. Argentina, France, Australia, Japan are thought to make it ok, but most are heading for rough times. And there's nothing to indicate global finance will move away from the USD.

 

[JBTX]

Japan's Fed has been VERY slow to respond to anything, keeping interest rates negative far longer than needed. The country has significant structural and societal problems when it comes to salaries, performance, and w#rk. I think it's fair to consider them an outlier when comparing to the current US economy.

They are an outlier, until they aren’t.

The point is there is a possibility that something comes along that hits the US markets disproportionately vs other markets. Many can’t envision what that may be, so they assume it can’t happen. I’m not making that assumption.