International Fund

H

harllee

Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Oct 11, 2017
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I finally looked at my investments today (had not looked at them in 2 months). I am age 68, retired and have a conservative allocation (40% equities (primarily the Vanguard Total Stock Index Fund)/60% bonds-mm-cds). My investments were "only" down about 7%, I had expected it to be worse. My worse performing assets is my Vanguard International Index Fund which makes up less than 5% of my portfolio. I have never really liked that Fund- it seems like too much risk for the reward but my Vanguard advisor had always said that I needed some international exposure.

What are folks doing about international funds? I am considering moving what I have in the Vanguard International Index Fund to the Vanguard Total Stock Index Fund. Any advice?
 
I tax-loss harvested an international ETF, watched it drop some more, then bought bought a slightly different international ETF, so that I would avoid the wash sale. I just try to maintain the same asset allocation to international that I always have by rebalancing out and rebalancing in as needed. Boring.
 
Sectors wax and wane. A decade ago, International beat US. Last decade was the opposite.

The virus' impact is of course a crap shoot but:

Regression to the mean would reverse the performance; international would beat US.

Very recently/this year, the dollar has strengthened. This has the effect of making international investments decline in dollar-denominated value. Over the long term, I believe that the dollar will decline and probably significantly. Virtually the whole world would like to see the dollar lose its lofty position as the world's reserve currency. One day this desire will be at least partially fulfilled, and the dollar will decline in value. Nobody knows when, but it will have the effect of making international investments look like genius moves for US investors. If the dollar goes down 20%, the dollar value of international investments will rise by 25%.

Edit: VG's most recent paper on the subject: www.vanguard.com/pdf/ISGGEB.pdf

Us? We hold VTWAX; basically all the investable stocks in the world. In recent years the S&P has beat it. Do we care? No. Sectors wax and wane. Life goes on.
 
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harllee said:
I finally looked at my investments today (had not looked at them in 2 months). I am age 68, retired and have a conservative allocation (40% equities (primarily the Vanguard Total Stock Index Fund)/60% bonds-mm-cds). My investments were "only" down about 7%, I had expected it to be worse. My worse performing assets is my Vanguard International Index Fund which makes up less than 5% of my portfolio. I have never really liked that Fund- it seems like too much risk for the reward but my Vanguard advisor had always said that I needed some international exposure.

What are folks doing about international funds? I am considering moving what I have in the Vanguard International Index Fund to the Vanguard Total Stock Index Fund. Any advice?
Click to expand...
I’m sticking with my international allocation. Both it and small caps were hit hard.
 
@harlee, sorry I didn't read carefully and didn't notice that international was only 5% of your portfolio. At that level, assuming everything else is US, it's almost a waste of time. With VTWAX we are in the neighborhood of 50%. IIRC the Vanguard studies recommend 30-40% of equities in international to minimize volatility. Personally I don't think volatility is a big deal but YMMV.

Around 30% seems to be a popular number around here. Of the people that have posted "stay the course" so far, I would be surprised if anyone is as low as 5%.
 
I have found over time, the less international I have the happier I am. I currently have 1% in my international bucket and that is the result of a balanced fund.
I see little value in today’s world of having this type of allocation. I think a worldwide fund would be of benefit allowing the manager to go where they see fit, but for me to have a purely non US fund or ETF is of little value.
 
I go along with John B's early suggestion that International equities were not necessary. (of course this statement was made before the VG board got to him & he changed the suggestion.) Consider that US companies have large positions around the world.
 
After having had international equities for many years for "diversification", my experience was it was just a drag. I'm out until I see some light at the end of the dark tunnel for international equities.
 
Bflotomny said:
... Consider that US companies have large positions around the world.
Click to expand...
Nothing wrong with avoiding internationals if that's your strategy but to believe that you have significant international exposure via US companies is IMO factually wrong.

US companies don't really show up until the low teens/below the top 10 in a list of the largest companies in the world. From personal observation in 40+ countries, US companies do not play a big role in consumer products. US is only 5% of the world's population.

By avoiding international, one avoids Volkswagen, SAB Inbev, Shell, BP, Toyota, Unilever, Nestlé, Siemens, ... the list goes on. Only two of the top ten auto manufacturers (by market share) are US.
 
I reached back for the maximum history of the Vanguard Total International Stock Index (VGTSX), which launched 24 years ago in 1996. That is Portfolio 1. Portfolio 2 is the S&P 500 Index Fund (VFINX).

One would have had to wait through 16 years of quite close correlation until 2012 to begin to have any evidence that international equities inherently underperform domestic equities. I don’t agree with that conclusion. We have 30% international equity index exposure in our stock portfolio, because I, for one, still believe in the principle of “reversion to mean.”

The dollar is indeed strong against other currencies right now, dampening international stock returns. That can change, especially with the glut of cash the U.S. is printing right now.

IMG_0344.jpg
 
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OP here, wow this is a lot of good info, thanks everyone. While I am only 5% international it is quite a bit of $$ (six figures). I probably will let it ride for now but I will not add any more to it.
 
harllee said:
OP here, wow this is a lot of good info, thanks everyone. While I am only 5% international it is quite a bit of $$ (six figures). I probably will let it ride for now but I will not add any more to it.
Click to expand...



It’s a long running debate here with committed partisans on each side. Don’t you want to ask us when to take Social Security or whether to pay off your mortgage? [emoji857]
 
Markola said:
It’s a long running debate here with committed partisans on each side. Don’t you want to ask us when to take Social Security or whether to pay off your mortgage? [emoji857]
Click to expand...

Op here, no I don't need to ask those questions--I am taking SS at 70 (receiving spousal now) and I have no mortgage. :)
 
OldShooter said:
.... US companies don't really show up until the low teens/below the top 10 in a list of the largest companies in the world. ...
Click to expand...

Not according to this list... 7 of 11-20 are US companies.

11. Johnson & Johnson
12. Walmart
13. Nestle
14. Exxon Mobil Corporation
15. The Bank of America Corporation
16. Samsung Electronics
17. Procter & Gamble Company
18. AT&T
19. Commercial Bank of China (ICBC)
20. Mastercard Incorporated
Click to expand...

https://spendmenot.com/largest-public-companies/
 
harllee said:
What are folks doing about international funds? I am considering moving what I have in the Vanguard International Index Fund to the Vanguard Total Stock Index Fund. Any advice?
Click to expand...

I was 50% foreign stocks but now I am 100% US. The reason why is that its been impossible to find a foreign ETF that pays out consistent dividend income. I was in VYMI and it cut the dividend by 45% so far this year.

I will eventually add in foreign stocks again for the diversification, but IMHO you can't count on the dividend income from them and they also do worse at capital appreciation.

Foreign stocks pretty much suck.
 
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I too am keeping my international exposure. It has been a drag in the portfolio for several years but so be it. As old shooter mentioned, when king dollar starts to move down off it's lofty perch those holding international equities will be rewarded.
 
harllee said:
I finally looked at my investments today (had not looked at them in 2 months). I am age 68, retired and have a conservative allocation (40% equities (primarily the Vanguard Total Stock Index Fund)/60% bonds-mm-cds). My investments were "only" down about 7%, I had expected it to be worse. My worse performing assets is my Vanguard International Index Fund which makes up less than 5% of my portfolio. I have never really liked that Fund- it seems like too much risk for the reward but my Vanguard advisor had always said that I needed some international exposure.

What are folks doing about international funds? I am considering moving what I have in the Vanguard International Index Fund to the Vanguard Total Stock Index Fund. Any advice?
Click to expand...

Many over on Bogleheads forums note that companies in the Total Stock Index Fund already have plenty of exposure internationally so why bother with the International Index Fund?
 
Markola said:
The contrarian investor in me welcomes your sentiment. Everyone, please dump your international equities! They’re toxic! ☠️☠️☠️
Click to expand...

Where were you ten years ago?

All I've ever made on international has been tax loss harvesting.
 
pb4uski said:
Yup... definite recency bias.... consistent underperformance for the last decade! :facepalm:

2.1% vs 10.4%
Click to expand...
And the decade before that? And next decade with a possible reversion to the mean and/or a devaluation of the US$?

It's really only possible to identify winning sectors in the rear view mirror. That's why I just buy everything.
 
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