International Investing Percent Allocation

[nwsteve]

Just finished a very helpful portfolio review with a Fido Private Client Rep. He commented on what he felt was a low (7%) allocation to Intl. I had previously (2015) been at 15% but had cut back as Euro markets continued to go South and Asia got "messy". We just got back from 3 weeks in Italy and Germany and really did not get any sense of great "vigor". Euro-Zone regulations seem to be increasing and immigration driven issues creating a lot of conflict.
Searched the ER forum for any discussions on foreign allocation and the most recent I can find was Jan, 2014.
Frankly, I am not sure non US markets offering any better outlook than the US and, in fact, see a lot more uncertainty risk offshore--think Brexit, negative interest rates in Europe, China struggling to keep the growth they have and continued Jap QE pumping up a no growth domestic market.
I am thinking any move by the international market will first see the reversal of negative interest rates. So am considering deferring any reallocation until that indicator gets to a positive number.
What say the "wizards of the forum"?
Nwsteve

 

[Free To Canoe]

I have 22% allocated to international equities. The last few years haven't been cause for a bragging fest. With the markets, one never knows.

 

[COcheesehead]

14% which has returned about 7% YTD. Better than the S&P. Will hold at this level.

 

[gcgang]

Foreign markets are about half of total stock market value. I'm neutral with my equity allocation, about 50-50 US/Foreign.

 

[Sunset]

I had none until the last few years, then added some, but it's very low percentage perhaps 5% at best.

You are doing better than me at allocations.

 

[Sittinginthesun]

Of my equity holdings 1/3 international developed, 1/3 USA, 1/3 Canada.

 

[garyt]

Very small for me, 5%? I still believe the USA is the place to be.

 

[big-papa]

There's an interesting thread going on over on bogleheads about this subject. Warning, though, the signal-to-noise ratio of this particular thread isn't very high. It concerns future expected returns for major asset classes and whether changing one's AA to reflect that is considered "market timing" or not. I'm not suggesting we pick up that debate here, but it's an interesting read.

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=201736&newpost=3102774

Big-papa

 

[pb4uski]

Just finished a very helpful portfolio review with a Fido Private Client Rep. He commented on what he felt was a low (7%) allocation to Intl. I had previously (2015) been at 15% but had cut back as Euro markets continued to go South and Asia got "messy". We just got back from 3 weeks in Italy and Germany and really did not get any sense of great "vigor". Euro-Zone regulations seem to be increasing and immigration driven issues creating a lot of conflict.
Searched the ER forum for any discussions on foreign allocation and the most recent I can find was Jan, 2014.
Frankly, I am not sure non US markets offering any better outlook than the US and, in fact, see a lot more uncertainty risk offshore--think Brexit, negative interest rates in Europe, China struggling to keep the growth they have and continued Jap QE pumping up a no growth domestic market.
I am thinking any move by the international market will first see the reversal of negative interest rates. So am considering deferring any reallocation until that indicator gets to a positive number.
What say the "wizards of the forum"?
Nwsteve

Sounds like you are market timing to me.

I have held 30% of my equities in international (3% in emerging markets and the rest in developed markets) for many years. The 30% is consistent with what Vanguard recommends.

I also hold 20% of my fixed income portfolio in international bonds (3% in emerging market bonds and the rest in developed markets.

Performance has been mediocre overall, but very good so far this year... in fact, international are the YTD stars of my portfolio. I did some "strategic rebalancing" in January when stocks were in a funk and then again in June when Brexit hit, so I've had some nice gains on those positions.

 

[Senator]

I have ~5% total. That is more than enough for me.

One reason. Just as many people do not invest in sin (cigarettes, booze, oil, etc.) stocks, I choose not to invest in international stocks.

Second reason. I think the old paradigm of international allocation is outdated. The S&P is now more international than ever before. Being in the S&P give me plenty of exposure. What is an international company anyway? Medtronic is an Irish company. DaimlerChrysler is a German company. Budweiser is a Belgium company.

Third reason. If you want stability, spread your money around. Or buy an annuity. If you want higher returns overall, stick with the USA. Historically, a global market does not beat the S&P.

Fourth reason. What is international? Emerging markets? World wide stocks? Only specific countries? There are many flavors, and since I do not follow which country may be better, I stick with what I know.

That's my .02...

 

[pb4uski]

.....The S&P is now more international than ever before. Being in the S&P give me plenty of exposure. What is an international company anyway? Medtronic is an Irish company. DaimlerChrysler is a German company. Budweiser is a Belgium company....

While I agree that the S&P is a lot of international exposure because its companies are multi-national, only one of the three companies you mention above are included in the Vanguard Total Stock Index fund (Medtronic). Daimler AG, Fiat Chrysler Automobiles and Anheuser-Busch InBev are not included so if you care to invest in them your strategy isn't working.

In fact, those three are probably great examples of why you would want developed international equities, because of globalization many non-domestic multi-nationals have substantial sales/profits/presence in the US.

 

[LOL!]

We have about 50% of our equities in international funds. That's our asset allocation and that's about where we keep it.

International has done quite well for us this year. Emerging markets funds are up more than 20% while our broad market international funds are up more than US funds. Some of this is from market timing ... buying low when these funds dip as they have a few times this year. Brexit was wonderful for our portfolio.

We will continue to have international funds. We realize they will fluctuate in value ... just like US equity funds do.

 

[exnavynuke]

I currently have 20.1% of my portfolio in international investments.

 

[Senator]

While I agree that the S&P is a lot of international exposure because its companies are multi-national, only one of the three companies you mention above are included in the Vanguard Total Stock Index fund (Medtronic). Daimler AG, Fiat Chrysler Automobiles and Anheuser-Busch InBev are not included so if you care to invest in them your strategy isn't working.

In fact, those three are probably great examples of why you would want developed international equities, because of globalization many non-domestic multi-nationals have substantial sales/profits/presence in the US.

No doubt, but the correlation of large US companies compared to a Global market is nearly identical.

 

[2017ish]

...

Third reason. If you want stability, spread your money around. Or buy an annuity. If you want higher returns overall, stick with the USA. Historically, a global market does not beat the S&P.

....

This is what is pushing me to get us closer to 50/50. Diversification. A certain PhD who is the subject of mixed feelings on this forum published an Advisor Perspectives article on SWR and international diversification in 2014, which started me on this path. US has had a great run for over a century. For my kids' sakes, I hope it continues. From our older perspective, however, possibility of a little less return for less home-market exposure is probably worth it since we have essentially won the game. (I think of the person who was retiring in Japan at end of 1989....)

 

[jpjr]

55% Stocks - 75%/25% mix US/Foreign Trending on the larger size stocks
45% Bonds - 70%/30% mix US/Foreign Trending on the shorter term bonds

 

[Lsbcal]

Our equities are split 60/40 US/International. But I allocate the international based on a momentum model so it could be all in international or partially. The model only gradually shifts and is based on monthly returns. No tax consequences as it is all in retirement accounts.

The large caps internationals can be either in VFWAX or the SP500 depending on the recent returns. Currently it is in VFWAX.

The small cap internationals can be either in VINEX or midcap value US. Currently it is in midcap value US.

I don't try to guess at what will be happening in currencies or geopolitical events. It's just numbers and a mechanical methodology. Another mechanical methodology is buy-hold .

 

[Totoro]

Foreign markets are about half of total stock market value. I'm neutral with my equity allocation, about 50-50 US/Foreign.

<= My view also for index trackers. Although I couldn't resist adding Emerging Markets a few months ago.

EMIM 20%, and IWDA 80% (Vanguard VT lookalike).

Mind you, I do live in the Netherlands. Nearly every market is foreign to me

Individual stocks I don't care about nationality. No emerging there right now. Do have European and US, just where I found decent companies for a price I could live with first. Probably because it's easier.

 

[photoguy]

I've been at 40-45% international (relative to all equities) for as long as I can remember. If I were starting over I'd just go with market weights and split it 50-50.

I suppose I have enough space in retirement accounts to go 50-50 but it is a bit of pain trying to juggle allocations due to limited fund selection in 401k accounts. Plus I'm lazy and generally let things slide.

My brother in canada is targeting 1/3 each to Canada, US, and International.

Frankly, I am not sure non US markets offering any better outlook than the US and, in fact, see a lot more uncertainty risk offshore--think Brexit, negative interest rates in Europe, China struggling to keep the growth they have and continued Jap QE pumping up a no growth domestic market.

There's always reasons to convince oneself that a certain strategy is good or bad. I generally stick to mechanical rebalancing and ignore all news events. I will however pay attention to valuation metrics although so far I've only made one change to my AA (that was to reduce REIT allocations by a little more than what rebalancing said I should I do). Was not investing during the dot com era.

 

[samclem]

I generally stick to mechanical rebalancing and ignore all news events.

That's my basic view also, but I also am conscious of the fact that, in some cases, indexing may not be appropriate in some of these overseas markets. If governments have put in place rules which hamper free-choice and free-flow of investment monies into/out of their economy, then their stock and bond valuations can get distorted compared to what a free market would call for and indexing might result in me paying too much for some of these things.
Indexing/passive investment only works when we can count on efficient markets.

 

[nash031]

30% of equities. I think international valuation is lower than domestic right now, so my purchases have been tilted to VTIAX (vs VTSAX) over the course of the last two years in order to get to that 30%. Now, I'm just maintaining that.

 

[photoguy]

That's my basic view also, but I also am conscious of the fact that, in some cases, indexing may not be appropriate in some of these overseas markets.

From a practical perspective, how would you implement this? Short of buying either country specific indexes or individual stocks (both of which I don't want to do), I see no easy way of eliminating a country such as china (for example).

At vanguard, my only option would be to buy a developed markets fund and skip EM which would cause me to miss the other 70% of EM that is not china.

I suppose there must be some derivative that would let me buy total international and cancel out china...

 

[pb4uski]

....I generally stick to mechanical rebalancing and ignore all news events. ...

+1 ... though I do succumb to what I call strategic rebalancing during the year... that is rebalancing when the markets "seem" unusually high or low rather than at specific times of the year or if I get out of balance by some threshold... and then I usually rebalance towards the end of the year when planning my annual Roth conversion, cash raise for the upcoming year, etc.

 

[DrRoy]

Nwsteve, I completely agree with you. For the last 5-6 years, I have had very little international exposure. Around 3-4 years ago, as I watched int'l equities underperform the US, my FA (who I have since fired) wanted me to add int'l, as it was then "undervalued". So what happened? I ditched what I had left, and watched int'l continue to underperform for a good stretch longer. Lately, it has stabilized and rebounded some, but I am far better off for my position. I agree with Senator's arguments, particularly that US equities are now more correlated with int'l than in the past anyway, and there is little need to go there.

Of course there will be a future period where the US underperforms for a while, but I am quite happy with my position.

 

[retire2020]

50% International. Last three years were bad but this year has done better.