When Global Stocks Go On Sale

[audreyh1]

Anyone holding DODFX? I've been disappointed at how poorly this fund has performed relative to some other international funds. Active management not helping much, but I suppose its too big for them to easily make changes.

It's simply international investments in general. They will turn around eventually.

 

[Markola]

Our portfolio has 28% Vanguard International Stock Index and 3.5% Vanguard International Bond Index exposure. Supposedly, the positive correlation between US and International developed market stocks is growing. However, I can't get over the mental humps regarding how poorly the once-stellar Japanese stock market has done for decades now, what China's slowdown might still do to developing markets dependent on commodity exports to China, and that the International Stock Index just hasn't fared that well historically against US stocks. On the other hand, I can't go 100% US stocks because I want to avoid home market bias, US debt is scary, this bull market is getting long in the tooth, and our political leadership seems incapable of agreeing on what day of the week it is. Therefore, I am studying VT, the Vanguard Total World Stock Index ETF. It was created in 2008 and I want it to have a 10 year track record before I really move into it. VT is currently 56% North America and 44% everything else. It adjusts that ratio as countries' relative market caps adjust, which appeals to my index fund, "buy the whole racetrack, not particular horses" proclivity. Yet, it would greatly increase our international exposure if we went whole-hog. What do others think of VT, and VT versus VTSAX (Total US Stock Index) investing tradeoffs?

 

[pb4uski]

No particular view on VT but I would note that the 56% NA, 44% everything else would seem to be more than Vanguard's target retirement funds that hold 60% domestic/40% international equities, but not much different.

 

[papadad111]

One must realize that international vs domestic is hard to distinguish.

With the recent number of historically USA based companies going for a tax inversion and merging with international entities, it's very hard to say what is domestic and what is international these days. Add to that the global exposure that many multinationals have in terms of revenue, R&D and manufacturing that is global and the whole idea of non-correlated markets goes out the window.

I hold about 20 percent VXUS... But many argue that just holding the SP500 exposes one to more than 20 percent "international" exposure in one form or another. At the large cap level, Markets are very tied together and correlates. Mid and small cap is less so but not by a whole lot...

Some examples below. ... Excluding Pfizer which was a big inversion.

How's your Gaeilge coming along??

 

[dallas27]

Target allocation is 20% VEU, 20 VSS, and a fee more VWO. So yeah, my contributions have mostly all been supporting those allocations as international has waned. Can't wait for the eventual ride back up, just hope it doesn't take more than a decade or so.


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[kramer]

One must realize that international vs domestic is hard to distinguish.

With the recent number of historically USA based companies going for a tax inversion and merging with international entities, it's very hard to say what is domestic and what is international these days. Add to that the global exposure that many multinationals have in terms of revenue, R&D and manufacturing that is global and the whole idea of non-correlated markets goes out the window.

I hold about 20 percent VXUS... But many argue that just holding the SP500 exposes one to more than 20 percent "international" exposure in one form or another. At the large cap level, Markets are very tied together and correlates. Mid and small cap is less so but not by a whole lot...

Some examples below. ... Excluding Pfizer which was a big inversion.

How's your Gaeilge coming along??

View attachment 23229

Yes, this is one reason I own almost no large cap based in the USA (the other reason is that value tilting is cheaper in the USA). My USA allocation is almost entirely in small cap value (VBR). For foreign stocks, over 40% is small (especially VSS). It's more of a barbell approach. Small stocks are more local in nature. And I prefer my large cap exposure abroad.

 

[papadad111]

Hi Kramer. What funds or ETF's do you use for large caps non USA? Thanks !

 

[kramer]

Hi Kramer. What funds or ETF's do you use for large caps non USA? Thanks !

For large caps non-USA I mostly use VEA and VWO. These indexes were recently changed to also include a few small caps (a good change, IMO), but the small cap part is probably only 10% of the total market exposure of these ETFs.

Then, i own a bit of EPHE (ishares for the Philippines market) and a bit of VPL (asia-pacific part of VEA above). I own these latter 2 to overweight the Philippines and its major trading partners a bit in my allocation (but not by much).

 

[Markola]

No particular view on VT but I would note that the 56% NA, 44% everything else would seem to be more than Vanguard's target retirement funds that hold 60% domestic/40% international equities, but not much different.

This is true, and I tend to trust Vanguard's planners' allocations as prudent. If one wanted a strongly-equities portfolio, one could buy 45% VT, 45% VTSAX, and 10% cash. That would result in approximately 25% international exposure. I'm not saying I will, but I do like equities for the long haul.


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