International investing, or not?

[OldShooter]

I use VTWAX for intl. diversity beyond that in my US-centric indexes. YMMV

@Koolau I'm sure you know this, but just for others: VTWAX is a whole world stock fund. Currently the US market is about 55% of the world market cap, so it is also 55% OF VTWAX. Someone interested strictly in diversifying an existing US portfolio might be better served with an exclusively international fund like VGTSX.

(FWIW, there's nothing wrong with VTWAX. It is our "one fund" equity solution. We like it a lot.)

 

[Koolau]

@Koolau I'm sure you know this, but just for others: VTWAX is a whole world stock fund. Currently the US market is about 55% of the world market cap, so it is also 55% OF VTWAX. Someone interested strictly in diversifying an existing US portfolio might be better served with an exclusively international fund like VGTSX.

(FWIW, there's nothing wrong with VTWAX. It is our "one fund" equity solution. We like it a lot.)

You are, of course, correct. But VTWAX is as diversified internationally as I want. YMMV

 

[Markola]

This made me say “hmmmmm.” I noticed that my Vanguard International Stock Fund Index VTIAX has outperformed my (domestic) Vanguard Total Stock Fund Index VTSAX a tad over the last 30 days, which made me wonder, “How long has that been going on?” Turns out, for 228 days since June. It’s no major separation but something to keep an eye on, given years of underperformance by international securities, as well as the concept of reversion to the mean. Historically, leadership has flipped flopped between the two every five years on average. Note that VTSAX’s returns are identical to “US Stock” below.

 

[foxfirev5]

This made me say “hmmmmm.” I noticed that my Vanguard International Stock Fund Index VTIAX has outperformed my (domestic) Vanguard Total Stock Fund Index VTSAX a tad over the last 30 days, which made me wonder, “How long has that been going on?” Turns out, for 228 days since June. It’s no major separation but something to keep an eye on, given years of underperformance by international securities, as well as the concept of reversion to the mean. Historically, leadership has flipped flopped between the two every five years on average. Note that VTSAX’s returns are identical to “US Stock” below.

View attachment 37395

My VTIAX allocation is finally approaching VG's suggested minimum 30%. Let her ride. Maybe falling dollar or reversion to the mean, I don't care/

 

[steelyman]

I moved some money from VTIAX to VWILX (int’l growth) this week. I’ll see how it goes.

 

[RobLJ]

This made me say “hmmmmm.” I noticed that my Vanguard International Stock Fund Index VTIAX has outperformed my (domestic) Vanguard Total Stock Fund Index VTSAX a tad over the last 30 days, which made me wonder, “How long has that been going on?” Turns out, for 228 days since June. It’s no major separation but something to keep an eye on, given years of underperformance by international securities, as well as the concept of reversion to the mean. Historically, leadership has flipped flopped between the two every five years on average. Note that VTSAX’s returns are identical to “US Stock” below.

View attachment 37395

I posted something similar in the wrong place (2021 Returns) a week or two back after looking at the 3 month return column in Quicken.

18.7% Fidelity International Small Cap (FIASX)
15.8 Matthews Asian Growth and Income (MACSX)
14.2 Pimco Stocksplus International (PIPAX)
22.3% Vanguard International Value (VTRAX)
20.7 Ishares Core MSCX Emerging Markets (IEMG)

For comparison

8.73% Fidelity 500 Index (i.e. S&P FXAIX)

Also small cap seems to be breaking out
20.13 Fidelity Small Cap Discovery (FSCRX)



This is only a small period as Marcola notes, but a significant outperformance. I have always kept 20-25% of stockfunds in international, which has underperformed, but I remember strong 3-5 years of outperformance in the last two decades; most obvious was the decade of S&P tech bust after 2001. Will be interesting to watch to see if the dogs of the last 5 years have their day in the sun. I bought a little of IEMG and the International SmallCap at the beginning of last week to decrease my embarrassing cash stash.

 

[GTFan]

Given current events in the US I'd say it's a prudent move to diversify some of a portfolio offshore. Mine has stayed around 25-30% for years now and yeah it's underperformed, but I'm not changing it. It's been cyclical over the long term and I think int'l may be on the up.

 

[UnrealizedPotential]

I have a little under 20% of invested assets in international , but it is all in a bond fund which I have been very happy with. I let the global bond fund manager figure all that out.

 

[Markola]

Given current events in the US I'd say it's a prudent move to diversify some of a portfolio offshore. Mine has stayed around 25-30% for years now and yeah it's underperformed, but I'm not changing it. It's been cyclical over the long term and I think int'l may be on the up.

Shout out from a snowbird in beautiful Savannah, GTFan. Yeah, we’re also in that range. I’m not a timer but it is satisfying to see a long-suppressed asset class in one’s portfolio exhibit a pulse for a change.

 

[OldShooter]

... it is satisfying to see a long-suppressed asset class in one’s portfolio exhibit a pulse for a change.

Yes. When I have a sector that is doing well I watch and smile. When I have a sector that is not doing so well, I am a long term investor. Since we hold all sectors, there is ample opportunity for both behaviors.

 

[Markola]

Yes. When I have a sector that is doing well I watch and smile. When I have a sector that is not doing so well, I am a long term investor. Since we hold all sectors, there is ample opportunity for both behaviors.

Exactly. I always want some popcorn popping somewhere in the bag.

I just counted and our global, 50/50 index portfolio has exposure to 27,379 securities. If we owned only Vanguard’s domestic total stock and bond index funds, the figure would be 13,591 and we’d be missing a lot of sectors.

 

[Koolau]

Yes. When I have a sector that is doing well I watch and smile. When I have a sector that is not doing so well, I am a long term investor. Since we hold all sectors, there is ample opportunity for both behaviors.

Words to live by. I'm sure somebody has the chart of market sectors and how they change places year-by-year. I don't even look at such things anymore 'cause I've become convinced that what's up this year will likely be down next year and back on top in 5 years (or whatever.) Own 'em all and try to relax. YMMV

 

[sengsational]

Yesterday or the day before, I happened to notice that in one brokerage site that I've had open a long, long time, my net dollar gain since inception on international equities was higher than on domestic equities. Lots of money in and out of each, so I did an XIRR, just out of curiosity, and the domestic did quite a bit better when measured on rate of return, which is in alignment with what I suspected. But being diversified means always having something to complain about.

 

[flintnational]

For 20+ years our stock allocation has been 70% US and 30% Intl. In the fall of 2019 I changed our allocation to 55% US and 45% Intl. Well at least I can't be accused of only talking about our winners.

 

[OldShooter]

... I just counted and our global, 50/50 index portfolio has exposure to 27,379 securities. If we owned only Vanguard’s domestic total stock and bond index funds, the figure would be 13,591 and we’d be missing a lot of sectors.

Those big numbers surprise me. VG says their total world market fund holds 9,000 stocks +/- and the nose count I have seen for US domestic stocks is 3,600. So when you say "securities" are the majority individual bond issues? I just have never seen numbers like that before. Not criticizing. Just curious.

 

[Markola]

I’ve noticed that before, too, and wondered how the World funds would have fewer securities (stocks and bonds) in their portfolios than the four index funds I thought comprised them. Nevertheless, the Vanguard site lists:

US Total Stock Index Fund VTSAX: 3,586 stocks

International Total Stock Index Fund VTIAX: 7,455 stocks

US Total Bond Index Fund VBTLX: 10,005 bonds (!)

International Bond Index Fund VTABX: 6,333


I never thought much about this diversification metric until I read Taylor Larrimore’s “Three Fund Portfolio” but it seems relevant. Usually, “securities” mean stocks to me but that’s the term he uses.

 

[Markola]

Old Shooter, I checked and the VG World Bond Index plus the World Stock Index (ETFs) total about 25,000, so close enough to the 27,000 in the four equivalent index funds. If we didn’t have a Vanguard CFP, for all the reasons particular to us that I’ve listed elsewhere, I’d probably be migrating to a portfolio of just those two World ETFs but that’s just me.

 

[OldShooter]

Old Shooter, I checked and the VG World Bond Index plus the World Stock Index (ETFs) total about 25,000, so close enough to the 27,000 in the four equivalent index funds. If we didn’t have a Vanguard CFP, for all the reasons particular to us that I’ve listed elsewhere, I’d probably be migrating to a portfolio of just those two World ETFs but that’s just me.

Yeah. I guessed the big number might be a nose-count of bonds. Here is some speculation on why equity counts might be goofy:

I think the term "world fund" has been used to mean "non-US fund." So an equity nose count equation might be:
Total US + Total World = Total International.

Also, in years past I remember reading several times that World and International funds didn't actually own every stock, just because of logistical complexity. Instead, they modeled some of the small stocks as an aggregate and invested in a way that had high correlation to what those stocks did. Negligible tracking error, IOW. So their stock nose count would be lower than "everything." I have not heard this lately, though, so the increasing popularity of index funds may have made the approximation unnecessary.

Nose counting bonds raises an interesting (to nerds anyway) question: Most corporate and sovereign borrowers have many issues in the marketplace. If each issue is counted separately, does that result in a false sense of diversification? After all, looking at the default probabilities of a specific issue misses the point that if one issue goes down, some or all of the other ones have increased probability of default too. Argentina is probably the poster child here with nine defaults since independence. (https://en.wikipedia.org/wiki/Economic_history_of_Argentina)

Still, diversification has to be good and more is better, absent a desire to hit home runs.

 

[ownyourfuture]

I own Vanguard International Growth Fund Admiral Shares (VWILX) in my 401-k
Until last week, I hadn't logged in to Vanguard to check on that account for over 2 years.

I was shocked when I saw how well the fund has performed over the past 4 years.

It's still slightly lagging the S&P 500 over 10 years, but the outperformance over the past 5 years is significant. Will it continue.......I have no idea ?

 

[Lsbcal]

I own Vanguard International Growth Fund Admiral Shares (VWILX) in my 401-k
Until last week, I hadn't logged in to Vanguard to check on that account for over 2 years.

I was shocked when I saw how well the fund has performed over the past 4 years.

It's still slightly lagging the S&P 500 over 10 years, but the outperformance over the past 5 years is significant. Will it continue.......I have no idea ? ...

I looked at it out of curiosity. VWILX's largest holding is Tesla. And it has ~15% in the US. Includes Amazon stock too which seems not so international to me.

 

[OldShooter]

I looked at it out of curiosity. VWILX's largest holding is Tesla. And it has ~15% in the US. Includes Amazon stock too which seems not so international to me.

I think the nomenclature has evolved. I used to see "world" funds that excluded the US. Now when I see "International" I interpret that to mean that the whole world is fair game. That's probably what you're seeing. The Vanguard page will tell.

It's a little hard to know what funds hold due to quarter-end window dressing but if this fund has/had a lot of Tesla that may not a good basis for evaluating it as a long-term investment. It's a sector fund, after all, and sectors wax and wane.

 

[ownyourfuture]

I looked at it out of curiosity. VWILX's largest holding is Tesla. And it has ~15% in the US. Includes Amazon stock too which seems not so international to me.

Went to Vanguard directly, & you were right, Tesla is the top holding.
But I'm not seeing where it has 15.00% in US ?

*My mistake. Somehow managed to miss that it showed 15.60% for North America

 

[Lsbcal]

Went to Vanguard directly, & you were right, Tesla is the top holding.
But I'm not seeing where it has 15.00% in US ?
...

See the countries holding part of the Portfolio & Management tab.

 

[ownyourfuture]

See the countries holding part of the Portfolio & Management tab.

I somehow managed to overlook that
The gain of almost 60.00% in 2020, might be an indicator that he should take some profits in Tesla

 

[Markola]

Reviving this string from January to note that I just compared my international and domestic stock index funds from June 1, 2020 to today:

VTSAX Total Stock Market Index: +44%

VTIAX Total International Stock Market Index: +44.5%

We’re at 40% VTIAX in our equity side and it’s been a long while since I’ve seen a one year period where it came out ahead of domestic.