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International investing, or not?
Old 09-12-2020, 05:47 AM   #1
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International investing, or not?

I read 2 good articles this morning concerning the reasons to invest in foreign markets, or to invest only in the US. Compelling arguments for both are included in the linked articles below.

https://humbledollar.com/2020/09/hap...her-ses-test_7


https://humbledollar.com/2020/09/ven...her-ses-test_7

The academics mostly promote International investing. I don't think it will make a big difference either way.

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Old 09-12-2020, 06:18 AM   #2
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Could just be a cycle, but international investing hasn't beaten US investing for quite awhile now.
Many up and coming tech companies still on the US side.
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Old 09-12-2020, 08:51 AM   #3
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I think the articles do a reasonable job of laying out the "what ifs." It would be interesting to know what the author's portfolio looks like. In terms of forecasting the future, I find the regression to the mean and the probable decline of the dollar to be reasons for optimism. But nobody can predict.

So, at its basics, our equity strategy is diversification and I can see no reason that diversification should stop at the seashore. There are a lot of great companies in the 45% of the world market cap that international represents. So we're there. VTWAX. 8734 stocks per VG.
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Old 09-12-2020, 09:03 AM   #4
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I have been out of nearly all international for 15 years or so, to my benefit. Just a lucky move, but I'm still pleased.
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Old 09-12-2020, 10:11 AM   #5
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I think the articles do a reasonable job of laying out the "what ifs." It would be interesting to know what the author's portfolio looks like. In terms of forecasting the future, I find the regression to the mean and the probable decline of the dollar to be reasons for optimism. But nobody can predict.

So, at its basics, our equity strategy is diversification and I can see no reason that diversification should stop at the seashore. There are a lot of great companies in the 45% of the world market cap that international represents. So we're there. VTWAX. 8734 stocks per VG.


+1. As a very long term, buy and hold investor, this point from the second article is one of the reasons I have significant international exposure:

ďReversion to the mean. Since 1970, U.S. and foreign stocks have seesawed back and forth, with each delivering better returns for a decade or longer. Foreign stocks beat U.S. stocks in the 1970s, 1980s and 2000s. U.S. stocks won out in the 1990s and 2010s. Given the great run that U.S. stocks have had of late, foreign stocks may be primed to outperform.Ē
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Old 09-12-2020, 10:52 AM   #6
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I have been out of nearly all international for 15 years or so, to my benefit. Just a lucky move, but I'm still pleased.


I think US large cap and tech stocks have sufficient exposure to global economy that I donít need a dedicated international allocation in my portfolio. I wish I had figured that out 15 yrs ago, lucky or not.
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Old 09-12-2020, 11:31 AM   #7
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I think US large cap and tech stocks have sufficient exposure to global economy that I donít need a dedicated international allocation in my portfolio. I wish I had figured that out 15 yrs ago, lucky or not.
Well, determining "sufficient" is your call alone.

Among the stocks you are missing are: Nestle, BP, Toyota, Volkswagen, Cemex, AB Inbev, ArcelorMittal, etc. Not to say these are good or bad investments today, but they are typical of the many companies of worldwide imporance that are not domiciled in the US. And that is without looking at Chinese companies at all.
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Old 09-12-2020, 07:36 PM   #8
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Well Iím not missing them since I do currently hold 1/3 of my equity position in international stocks. I just donít see where it has given me any benefit. I also have BP as an individual holding and Iíd be better off without it.
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Old 09-12-2020, 07:50 PM   #9
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This is what I had in mind wrt sufficient exposure....
In 2018, the percentage of S&P 500 sales from foreign countries decreased, after slightly increasing last year, and declining the prior two years. The overall rate for 2018 was 42.90%, down from 2017's 43.62% and 2016's 43.16%. The recent high mark was 2014's 47.82%, and the recent low mark was 2003's 41.84%.
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Old 09-13-2020, 03:29 AM   #10
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I've diversified for many years with index emerging market funds in my portfolio. It's a no brainer and I have done well.
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Old 09-13-2020, 03:02 PM   #11
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I have added some international exposure with weakening dollar. International outperformance is usually tied to dollar cycles.

And other markets cheaper so that helps.
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Old 09-13-2020, 03:04 PM   #12
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I think US large cap and tech stocks have sufficient exposure to global economy that I donít need a dedicated international allocation in my portfolio. I wish I had figured that out 15 yrs ago, lucky or not.
They do and it is helpful in a weak dollar environment, but you are paying US multiples for those sales.
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Old 09-14-2020, 04:23 AM   #13
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I have been out of nearly all international for 15 years or so, to my benefit. Just a lucky move, but I'm still pleased.

Reminds me of Bill Miller who beat the S&P index for 15 straight years in his Legg Mason Value Trust Fund only to give back most of the cumulative advantage in the 3 subsequent years. Most agree that it was luck and not skill. I prefer diversification over concentration myself.....I do have a very small tilt to small stocks due to one legacy fund that I'm liquidating slowly. Nirvana for me is only having to re-balance when I get outside my percentage bands.
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Old 09-14-2020, 08:42 AM   #14
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+1. ďBuy the casinoĒ (and the parking lot, utilities, roads, billboards, hotels, gas stations, restaurants and everything else in sight.)
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Old 09-14-2020, 09:03 AM   #15
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They do and it is helpful in a weak dollar environment, but you are paying US multiples for those sales.
No one can argue with you if you judge 100% US-only exposure to provide "sufficient" international exposure for your portfolio. That's a judgment call. I don't know of any academic or investment company resources that believe that though. Buffett used to, but has now branched out internationally. Bogle believed it, but IMO he is from a different era when the US economy was far more dominant.

Personally, I believe the idea that diversification ends at the seashore to be illogical. I think it's the investment equivalent of the famous New Yorker magazine's "View of the World from 9th Avenue" cover. (https://brilliantmaps.com/new-yorkers-world/) YMMV, of course.
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43% S&P 500 sales are ex-USA. US Equity has Int. Exposure
Old 09-14-2020, 09:18 AM   #16
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43% S&P 500 sales are ex-USA. US Equity has Int. Exposure

US equity investors investing in S&P 500 companies get significant international exposure from the US companies selling overseas.


In 2018, 42.90% S&P 500 sales was from foreign countries
2017ís = 43.62%
2016ís = 43.16%.

https://us.spindices.com/indexology/...0-global-sales

The high degree of international sales reduces the need for US investors to diversify internationally by investing in companies domiciled abroad. International investing makes far more sense for investors in small countries with small equity markets.
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Old 09-14-2020, 09:33 AM   #17
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... The high degree of international sales reduces the need for US investors to diversify internationally by investing in companies domiciled abroad. ...
I have seen that said in multiple forum posts but I have not seen it said by any authoritative sources. For example, Vanguard: "Global equity investing:The benefits of diversification and sizing your allocation" https://www.vanguard.com/pdf/ISGGEB.pdf

Perhaps I have led a sheltered life. Do you have anything serious like the Vanguard analysis to support your statement? I would be interested to read. (not interested in noise generators like SeekingAlpha or Jim Cramer.)
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Old 09-14-2020, 09:36 AM   #18
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No one can argue with you if you judge 100% US-only exposure to provide "sufficient" international exposure for your portfolio. That's a judgment call. I don't know of any academic or investment company resources that believe that though. ... YMMV, of course.
Most traditional academic and investment company analysis and recommendations is based on the unsophisticated Capital Asset Pricing Model. Very outdated and simplistic model.

Newer asset allocation analysis, post 2010 or so, is "factor-based" not geographically-based.

Example:

Investing in a Canadian company that sells 100% to the US would not increase the US investors portfolio diversification.

Investing in a US-based company that sells 100% to Japan would increase the US investors portfolio diversification.

This shows that physical borders are a poor proxy for economic exposure in an integrated global economy.

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Old 09-14-2020, 09:38 AM   #19
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I have a relatively small exposure to foreign equities - about 20% of equities. I've had this allocation since the beginning, and will stick with it. It's far less than some experts had advised - especially many years ago. Yet it is far more than 0. I'm comfortable with that level and see no reason to change.
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Old 09-14-2020, 09:42 AM   #20
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I keep a small amount, around 2%, in an international index fund just to track it's growth against the domestic equity funds I am heavy with. By percentage of growth, I can tell if that's been a good decision or if I should get more involved with them. So far, I'm way ahead staying out of the international funds.
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