Markola
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Oh bloody heck. This app I used didn’t account for expense ratios or something, so not quite yet. Pardon the misfire.?
International investing, or not?
- Thread starter VanWinkle
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flintnational
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We are sitting at 45% international. I'm just glad international is finally in the ballpark of US. Out performance is asking for to much. 
pb4uski
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Per Portfolio Visualizer from Jan 2020 to May 2021 VTSAX was 24.22% and VTIAX was 15.50%.... that is with dividends and CG distributions reinvested.
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I have a diversified portfolio including emerging mkts for the last 25 years. It has done well lately.
Markola
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Yes. I noticed that VTIAX started perking up last May, 2020 and have been checking in each month since then. I looked at Personal Capital incorrectly when I posted the misfire today but double checked the Vanguard site, which says 1 year returns are:
VTSAX: +43.97%. ER is .05
VTIAX: +43.05%. ER is .11
Close but no cigar. Yet?
Lsbcal
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I am not sure this is the right comparison. VTIAX (33B median market cap) is basically a midcap fund. VTSAX is large cap (121B median).
Last summer along with Markola, I started to notice some out-performance by international and posted (somewhere), curious whether it would continue.
I have international spread across about 7 funds, split between my and DW's accounts, but Quicken tells me the 1 year performance is
51.1% FIASX (Fidelity International Small Cap)
50% IEMG (Emerging Growth Core)
Fidelity International Discovery and Vanguard International Value are both at 42% and pretty mucha push with the S&P (I think). The Europe and Asia funds have trailed in the mid 30s.
67% FCRX Fidelity Small Cap Discovery wins the award, however (and perhaps should be the comparison for FIASX)
I have international spread across about 7 funds, split between my and DW's accounts, but Quicken tells me the 1 year performance is
51.1% FIASX (Fidelity International Small Cap)
50% IEMG (Emerging Growth Core)
Fidelity International Discovery and Vanguard International Value are both at 42% and pretty mucha push with the S&P (I think). The Europe and Asia funds have trailed in the mid 30s.
67% FCRX Fidelity Small Cap Discovery wins the award, however (and perhaps should be the comparison for FIASX)
Markola
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Interesting point, thanks. Vanguard categorizes both as “Large Blend” but VTIAX’s median market cap is $33 billion while VTSAX’s is nearly quadruple that at $121 billion. Those do indeed seem like different tiers.
did you mean
FISMX(Fidelity International Small Cap)
and FSCRX Fidelity Small Cap Discovery?
I used to believe the pundits and had some international funds in my AA. I have removed all international funds since last 5 years mainly because:
1. Some of the heavy weight US companies give you enough exposure to international "market" aka "consumers"
2. Never bet against America
3. Low transparency
4. High expense ratio
1. Some of the heavy weight US companies give you enough exposure to international "market" aka "consumers"
2. Never bet against America
3. Low transparency
4. High expense ratio
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Markola
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^^^^^ That sounds good and patriotic and has been a lucky bet for the last several years. However, Vanguard is pretty smart and research-based and they advise 40% of a stock portfolio and 30% of a bond portfolio be exposed internationally, which is exactly what we have. For those interested, here’s their several good reasons:
https://investor.vanguard.com/investing/investment/international-investing
https://investor.vanguard.com/investing/investment/international-investing
OldShooter
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Yeah. I think that underweighting International is a sector bet that's no different that underweighting consumer durables. If we believe the data that says sector bets increase risk, then IMO we have to include International in our portfolios on a cap weighted basis. The easiest way to do this is to buy everything; VT or VTWAX.
IMO this is a very jingoistic argument. It precludes investments in companies like Toyota, Volkswagen, Nestlé, Shell, etc. It also limits exposure to the world's two biggest markets, India and China, both of which have strong protectionist biases. On a revenue basis or on a market cap basis, to ignore International is to ignore half the world,
As you like.
"Low" is probably an over the top generalization considering the EU, Australia, Japan, etc. Also, transparency issues don't respect borders; consider Enron, Lehman Brothers, PG&E, AIG, etc. I have a completely unproven and unproveable theory that the less people have traveled the more distrusting they are of foreigners.
VTWAX is 10bps. VT is 9bps. "High" is in the eye of the beholder, I guess. I'm happy with those numbers.
It's a waste of time to type this, of course.
Each of their own. I tried to find the oldest international index fund (quick google search pointed VGTSX) and compare that with VTSMX. I know that the past performance is not a guarantee of the future returns but the difference is noticeable. VGTSX has a higher standard deviation (or "risk" as pundits call it) AND lower returns compared to VTSMX.
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Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
During the "recent" golden years for international (2002 to 2007), small and midcap US equities performed very well too. Much better in the case of US midcap value and US smallcap value then either international large (actually midcaps) and international small.
Was this coincidental or is there a connection? One guess is that US growth suffered from a tech mania in the late 1990's and value was then the place to be especially after the 2001 recession. The combo of value and growth (SP500) thus under performed international. In internationals there were the BRIC's (haven't noticed that term being used recently) with the thesis that these were rising stars. Emerging markets were the rage.
Was this coincidental or is there a connection? One guess is that US growth suffered from a tech mania in the late 1990's and value was then the place to be especially after the 2001 recession. The combo of value and growth (SP500) thus under performed international. In internationals there were the BRIC's (haven't noticed that term being used recently) with the thesis that these were rising stars. Emerging markets were the rage.
Running_Man
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Selected S&P500 companies and percent of their revenues generated in China:
Company China % of Revenue (Last Year) Revenue from China ($ Millions)
Wynn Resorts 69.8 4,613.7
Texas Instruments 50.1 7,200.0
Qualcomm 47.8 11,610.0
IPG Photonics 37.4 491.9
Broadcom 35.7 8,056.0
Qorvo 34.2 1,106.7
Applied Materials 29.3 4,277.0
Xilinx 28.9 912.7
Amphenol 28.0 2,306.4
Intel 27.8 20,026.0
Apple* 16.8 43,678.0
10% of Toyota's annual revenue is used to buy parts from North American Suppliers:
About Toyota
Toyota (NYSE:TM) established operations in North America in 1957 and currently operates 14 manufacturing plants, including one under construction. There are more than 1,800 Toyota, Lexus and Scion dealerships in North America which sold more than 2 million vehicles in 2010. Toyota directly employs more than 35,000 in North America and its investment here is currently valued at more than $23 billion, including sales and manufacturing operations, research and development, financial services and design. Toyota’s annual purchasing of parts, materials, goods and services from North American suppliers totals nearly $25 billion.
Finally VT was created and only investable as an idea from 6/24/2008 Since that time it has earned 170% versus the 310% for the SPY. Not only that but since it was founded there has not been a single full year that VT has surpassed the SPY in annual performance. NOT ONE, so the empirical evidence that SPY will cause a portfolio underperform has no basis in fact, only on a theoretical never has occured but intellectually it must be better basis. And this massive underperformance is coming despite over 50% of the assets are US stock market assets. SInce the vanguard total world less US index was made available in 2012 to the sophisticated stock investors it has returned 80% versus SPY 300% (VT is 170%). Sometimes people that travel too much may develop a grass is greener on the other side mentality.
Large companies with increasing regulation worldwide gives advantages to large companies which has been seen to reward the shareholders. And it ignores the fact that perhaps countries that have strong protectioinist basis might be a very bad place to invest in, as the governments are determining who gets business instead of the market. I think that rationally explains the continual underperformance of the world versus the S&P500.
The markets have priced in much better future growth in the US than the rest of the world. It takes a mix of technology leadership, entrepreneurial culture, favorable policies, good demographics and I'm sure many other factors to maintain that.
Will that happen? I don't know, so I hold about 30% of equities as international. It used to be more, I haven't sold any but international has been so tepid while the US zoomed that it affected the allocation and I don't have enough conviction to go buy more.
Will that happen? I don't know, so I hold about 30% of equities as international. It used to be more, I haven't sold any but international has been so tepid while the US zoomed that it affected the allocation and I don't have enough conviction to go buy more.
Koolau
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Or in my case, reluctance to rebalance between the two. Maybe it's just my typical analysis paralysis but YMMV.
Markola
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You might be glad you have the 30% someday vs. the folks who think they can time when to allocate to international or want to wait until after the long-awaited reversion to the mean finally happens. We’ve all seen those tables showing how one’s stock market returns over a decade or more can quickly become mediocre if just one or two key trading days were missed.
Lsbcal
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I think this overstates the case. My data shows that one can move between US and international successfully and I've done this over the last 12 years. But you really need to have a decent plan and not just do this ad hoc.
I only mention this for completeness and not to suggest everyone should move between US and international. FWIW, I currently have 30% international small caps.
Markola
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YMMV. The burden would seem to be on the timers to prove with data how dancing in and out of various stock sectors successfully is replicable vs. just plain luck. Here is one of the tables I mentioned and I see no reason to think that a few missed trading days in international stocks is any less devastating to long term performance than domestic ones.
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Lsbcal
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Markola, we are talking about different things. I am referring to moving between US and International equities on (in my case) a monthly basis. International is somewhat correlated to US stocks so a big up day in US can be somewhat echoed in international and vice versa. Similarly on a monthly basis.
I think you are referring to being totally out of the market on certain days i.e. in bonds or money market. In that case missing bullish moves can be painful.
I think you are referring to being totally out of the market on certain days i.e. in bonds or money market. In that case missing bullish moves can be painful.
Markola
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^^^^ As Taylor Larrimore, the wise Boglehead says, “There are many paths to Rome.” Best wishes for your chosen one.
Jack Bogle claims that the S&P 500 stocks have plenty of international stock already built in ,so an international fund is uneeded overlap according to Mr. Bogle and that is good enough for me. Still his company Vanguard offers international funds for those who wish to invest in them. Numerous books and sites about the Vanguard 3 fund which is Total stock market, total bond fund and total international stock fund and some investers do that or invest in a balance fund that does it for them. I have vanguard balanced VBIAX and Wellington which have some international stock built in.
OP
OP
VanWinkle
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I agree that the difference over a lifetime is likely miniscule but people sure like to tout their own flavors. I'm ok with whatever flavor you favor, but I tend to gravitate to the simplest form for me. I had 25-30% of International Index for 35 years. In general, I think it likely cost me a little return, but I did feel well diversified. 5 years retired and I eliminated International when I tax loss harvested it again as the low spot of Covid 19 market dive. I might miss it for loss harvesting, but that's hardly a reason to invest there now. I'm currently VTSAX and VTBLX.
