Gearhead Jim
Full time employment: Posting here.
Lots of very interesting replies, thanks.
Equities- Intl vs US?
- Thread starter Gearhead Jim
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Well I hope that's true. But then the 'so many people' consists of a tiny slice of this one board. So hard to say how representative that would be of the investing public at large.
Vanguard has done a great deal of research into this topic and those interested can find much more detailed papers on their site providing more detail. Truly neutral portfolios reflecting worldwide market realities (the complex slice-and-dice world of DFA and other MPT advocates) would have a long-term investor at a bit more than 50% in international - and not just in stocks but in bonds.
Have a look at Vanguard's own shifting allocations in their Target Retirement and Lifestyle Strategy funds over the past few years. In general they're now at about 30% of total bond allocation in hedged international and 40% of stocks in international index even in their most conservative funds (such as the Target Retirement Income Fund, which is 30% bonds: 70% stocks).
As others have pointed out outperformance in international vs. domestic tends to by cyclical. Schwab had a good recent piece on this:
Three Reasons Why Now is Not the Time to Retreat from Global Diversification
Have a look at Vanguard's own shifting allocations in their Target Retirement and Lifestyle Strategy funds over the past few years. In general they're now at about 30% of total bond allocation in hedged international and 40% of stocks in international index even in their most conservative funds (such as the Target Retirement Income Fund, which is 30% bonds: 70% stocks).
As others have pointed out outperformance in international vs. domestic tends to by cyclical. Schwab had a good recent piece on this:
Three Reasons Why Now is Not the Time to Retreat from Global Diversification
Focus
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Persuasive. Thanks for that.
In preparation for DW's anticipated long retirement (and my own of less predictable length), I've done a lot of research on this--partially sparked by Pfau's analysis of how few countries would have supported a 4, or even 3, percent withdrawal rate over the past 100 years. Have been moving more into international and greater diversification over the past couple of years as a result. Ultimate goal is 40-50% international for our equities.
This short article/post by Paul Merriman does a good job of summing up where I'm at while remaining approachable on one read. Six reasons you should invest internationally – Paul Merriman There are, of course, seemingly endless debates at bogleheads on this topic (and Merriman), if you want to waste a day or two!
This short article/post by Paul Merriman does a good job of summing up where I'm at while remaining approachable on one read. Six reasons you should invest internationally – Paul Merriman There are, of course, seemingly endless debates at bogleheads on this topic (and Merriman), if you want to waste a day or two!
Great article. Valuations matter. That's why I'm keeping my (high) international allocation. No way I would allocate more to US equities right now. Sounds like recency bias to me.
GTFan
Thinks s/he gets paid by the post
I'm at 30% of equities and 20% of bonds international, don't see any reason to switch with all the articles linked here. But I get most of my research from Vanguard and they are moving to higher percentages as posted above.
I'm similar but 1/3 of allocation for each in international. I have overallocation in Asia and Emerging Markets but added to Europe a year ago and may add again. This is on the basis of a much higher valuation to US stocks; we'll see whether US delivers on that faith. Non-correlation holds up recently--international stocks have largely underperformed!
OverThinkMuch
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U.S. vs international stock performance depends on the decade...
1980s international
1990s U.S.
2000s international
2010-2015 U.S.
My goal is some stock performance in each decade (avoiding lost decades), so I keep a mix of both U.S. and international stock indexes.
1980s international
1990s U.S.
2000s international
2010-2015 U.S.
My goal is some stock performance in each decade (avoiding lost decades), so I keep a mix of both U.S. and international stock indexes.
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
+1 Bingo!
In order to get the return one needs to pay for a descent retirement one must buy at prices that allow a healthy return over the years.
Markola
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Seriously +1. This is all making me salivate.
I am thinking about increasing my international allocation. The foreign markets look somewhat cheaper than the US market and the dollar has rallied quite a bit since 2009. I think it is time for us to divest away from the US. I will be slowly bumping my international allocation from 20% of equities to 40%, and from 0% of bonds to 20%.
DrRoy
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I don't know about others, but I got out several years ago. Int'l will still underperform unless their economic prospects are better than ours. That is what it is about.
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nash031
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I have increased intl weight in equities from in the teens to near 30% even against the gains in the US. I've tilted my purchases the last year or so toward international due to valuations. While they're underperforming now, I don't expect that to continue in perpetuity and like the value in EAFE and VTIAX more than the S&P 500 or VTSAX at this point.
Markola
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For comparison in case interested, we are currently allocated 82/16/2 and, within that, we're 25% international stock and 4% international bonds, all indexed. I'm 50 and still w*rking 5 more long years, so am comfortable with the AA. YMMV.
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GTFan
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Completely ignoring current valuations, market history, and a wealth of research/recommendations to stay diversified of course. If for some insane reason this country goes off the rails in November, for example.
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CaliforniaMan
Full time employment: Posting here.
If for whatever reason this country goes off the rails, it is most certainly going to drag the internationals along for the ride, and many will be more vulnerable than the U.S. I doubt that internationals will be a safe haven should the U.S. go into a long recession or depression.
