Portfolio Balancing

[savory]

Hi,

For those who have set up their portfolio to have a specified allocation for domestic and international stocks/funds, do you give any consideration for the international business being done by domestic companies, for example? I know many have a significant international business. Should that be recognized in some fashion to make the balancing work?

I am aware that it also works the other way for the international funds.

Fido's analysis tool, classifies all the investments as domestic or international and than provides a suggestion for the best balanced portfolio. In my case based on a 70/30 portfolio, Fido is suggesting 49% domestic and 21% international to reach the 70%.

I would be interested to learn how you approach your domestic and international parts of your portfolio both as it relates to my question and your general thoughts. I am still trying to find my way on this.

Thanks

 

[LOL!]

I do not give any consideration for the international business done by US companies nor do I give any consideration for the US business done by international companies.

The international stock weight in the portfolio of a US person is heavily discussed at Bogleheads.org by some of the many knowledgeable people there. The consensus is anywhere between 0% weight to about global market weight. The Fidelity number is consistent with that consensus.

 

[OldShooter]

Here is a pretty good video on US/International allocation: https://famafrench.dimensional.com/videos/home-bias.aspx Here is a Vanguard paper on the subject: https://www.vanguard.com/pdf/ISGGEB.pdf

As @LOL! says, the range around here is pretty wide. Some say zero, often pointing out that international has lagged in the past decade. We are at the other extreme, holding VTWAX and getting global market weight. My sense is that around 30% international/70% US may be the median.

Re US doing business overseas and vice-versa, too hard and not obviously useful to know IMO. All large cap companies are doing business worldwide. Caterpillar, Nestlé, Toyota, Anheuser-Busch InBev, Ford, etc.

We will only know the right answer in ten or twenty years when we look in the rear view mirror. The windshield is clouded.

 

[audreyh1]

No, I don’t worry about US versus non-US companies and how much of their business is international.

 

[Animorph]

US vs non-US is mainly a diversification, though maybe not a great one. So the key idea is that they be independent from each other. All US-based companies vs all non-US based companies should in principal have no overlap in the component companies. That's a good thing, and makes for a simple index.

Buying only US company stocks does give you exposure to international economies to some extent through global businesses. But then you're ignoring a bunch of other companies, and you can't rebalance.

 

[big-papa]

Hi,

For those who have set up their portfolio to have a specified allocation for domestic and international stocks/funds, do you give any consideration for the international business being done by domestic companies, for example? I know many have a significant international business. Should that be recognized in some fashion to make the balancing work?

I am aware that it also works the other way for the international funds.

Fido's analysis tool, classifies all the investments as domestic or international and than provides a suggestion for the best balanced portfolio. In my case based on a 70/30 portfolio, Fido is suggesting 49% domestic and 21% international to reach the 70%.

I would be interested to learn how you approach your domestic and international parts of your portfolio both as it relates to my question and your general thoughts. I am still trying to find my way on this.

Thanks

I give it no consideration and own both US and International Stock index funds separately at a ratio and index-type of my own choosing.

 

[sengsational]

I've come to believe that it's less important to be super accurate than it is to be consistent.


I have a spreadsheet for AA, and each position is a row, and I have columns for each allocation bucket (I have too many buckets... international is split between several specific countries and emerging, etc). Anyway, each column gets a percentage and across, they add to 100%. I used Morningstar or the prospectus to populate the percentages for each position. But I don't routinely update those splits, and they do drift a bit. But like I said, accuracy is less important than consistency.

 

[savory]

Thanks to all. The feedback is consistent. Oldshooter the links to the information were also very helpful. It's great to know that the people in this forum are so helpful and supportive.

Here is a pretty good video on US/International allocation: https://famafrench.dimensional.com/videos/home-bias.aspx Here is a Vanguard paper on the subject: https://www.vanguard.com/pdf/ISGGEB.pdf

As @LOL! says, the range around here is pretty wide. Some say zero, often pointing out that international has lagged in the past decade. We are at the other extreme, holding VTWAX and getting global market weight. My sense is that around 30% international/70% US may be the median.

Re US doing business overseas and vice-versa, too hard and not obviously useful to know IMO. All large cap companies are doing business worldwide. Caterpillar, Nestlé, Toyota, Anheuser-Busch InBev, Ford, etc.

We will only know the right answer in ten or twenty years when we look in the rear view mirror. The windshield is clouded.