Full Answer
Are You comfortable with the volatility of international stocks?
Of course, we've been saying this for years and international stocks still, other than in 2017, have underperformed U.S. stocks over the last five years or so. I would say you have to be comfortable with the volatility of international stocks. I have about 20-25% of my 401 (k) in international stocks, but you don't have to have it.
What is the optimal percentage of international stocks in a portfolio?
The optimal portfolio in the 1970s was 70% domestic / 30% international, while in the 2000s, it was 100% domestic / 0% international. International stocks have slightly higher expense ratios than U.S. index funds, but the difference is typically only a few basis points (a basis point is equal to 0.01%, or $1 per $10,000 invested).
Should you allocate to international stocks?
The worst-case scenario is to increase your international allocation when international stocks are doing well (e.g. in 2017), and reduce your overseas exposure when the U.S. is outperforming. Because there are so many good arguments for any international allocation, it’s easy to cherry-pick your allocation based on what’s popular at the time.
Do International stocks outperform US stocks?
They believe that international stocks will outperform U.S. stocks in the future and a portfolio overweight in international stocks would outperform a more balanced portfolio. These people also might argue that you should not put 50% or more of your portfolio in a single economy, even if it is the largest, greatest economy in the world.
How much should I allocate to international stocks?
In general, Vanguard recommends that at least 20% of your overall portfolio should be invested in international stocks and bonds. However, to get the full diversification benefits, consider investing about 40% of your stock allocation in international stocks and about 30% of your bond allocation in international bonds.
What percentage of stock market is international?
Since foreign stocks currently represent roughly 57% of all stocks worldwide, this would suggest that roughly 57% of your stock investments should be foreign stocks.
Is 40% international stock too much?
Vanguard recommends that to "get the full diversification benefits," 40% of your equity be international and 30% of your bonds be international.
How much should I invest in international funds?
How much should I invest in international funds? Ideally, as per financial advisors investors can invest up to 5%-10% of their portfolio in international mutual funds.
Is it worth investing in international stocks?
The answer is Yes. Now is not the time to give up on international investing. If anything, it is time to increase allocation to international stocks and international funds. International stocks are due to provide superior returns compared to U. S. stocks.
How much of the stock market is US?
Countries with largest stock markets globally 2022 In 2022 stock markets in the United States accounted for nearly 60 percent of world stocks. The next largest country by stock market share was Japan, followed by the United Kingdom.
Is 20% international enough?
The report states that, “Common advice recommended by most financial institutions is to allocate 80% into U.S. (domestic) stocks versus 20% into foreign stocks.”
Should I be 100 percent in stocks?
Every so often, a well-meaning "expert" will say long-term investors should invest 100% of their portfolios in equities. Not surprisingly, this idea is most widely promulgated near the end of a long bull trend in the U.S. stock market.
What should my portfolio look like at 55?
The point is that you should remain diversified in both stocks and bonds, but in an age-appropriate manner. A conservative portfolio, for example, might consist of 70% to 75% bonds, 15% to 20% stocks, and 5% to 15% in cash or cash equivalents, such as a money-market fund.
Does Warren Buffett invest in international stocks?
Buffett's mandated portfolio notably excludes assets such as U.S. small cap stocks, international stocks, corporate bonds, municipal bonds and other investments commonly held in contemporary institutional and individual investors' portfolios.
Does money double every 7 years?
According to Standard and Poor's, the average annualized return of the S&P index, which later became the S&P 500, from 1926 to 2020 was 10%. At 10%, you could double your initial investment every seven years (72 divided by 10).
Should I have international stocks in my 401k?
Most financial advisers recommend putting 15% to 25% of your money in foreign stocks, making 20% a good place to start. It's meaningful enough to make a difference to your portfolio, but not too much to hurt you if foreign markets temporarily fall out of favor.
How can an idiot argue from history?
Any idiot can argue from history by looking backwards for numbers to support a thesis. The impressive part is that Bogle made that argument decades ago, and the financial markets haven’t offered even a whiff of a suggestion that he might have been wrong. In chess terminology, the opponent has had no counterplay.
Did Jack Bogle own foreign stocks?
Infamously, Vanguard Founder Jack Bogle saw no reason to own foreign stocks. That stance made him an outlier at best and a crank at worst. What’s more, Vanguard offered several international-equity funds, which put Bogle in the awkward position of contending that because he didn’t believe in such funds didn’t mean that Vanguard shouldn’t offer ...
What does Bogle believe about portfolios?
Bogle believes that if you make the ‘simple’ portfolio choices, you’ll spend a lot less time worrying. The genius of Bogle’s portfolio, for him, is its simplicity. It’s easy for him to track and understand, and therefore stick to.
When did Bogle start Vanguard?
Research has borne out what looked controversial in 1974, when Bogle founded Vanguard. “When you step back and look in aggregate, passive funds are winning by the cost of the fees,” said John Rekenthaler, Chicago-based Morningstar’s director of research. “This is Bogle’s promise delivered.”.
Does Bogle do his own portfolio?
But if you’re really in your investments for the long term, even this level of tinkering may be more trouble than it’s worth: You may end up with taxable gains, and you certainly will end up incurring trading costs. Bogle doesn’t do it for his own portfolio.
Does Bogle invest overseas?
Bogle doesn’t invest overseas — at least, not directly. Bogle famously keeps his portfolio entirely in U.S. markets. This isn’t because he’s U.S.-centric: In fact, he pointed out the inconsistency of even calling the rest of the world “international.”.
What is the FTSE index?
According to a mutual fund tracking the FTSE Global All-Cap Index, a market-capitalization-weighted index designed to measure the market performance of large-, mid-, and small-capitalization stocks of companies located around the world, as of mid-2013 about 51% of the world's stock investment opportunities, as measured by market capitalization, are outside of the United States. See Figure 1 .
Has the US underperformed the global market?
No matter how strong and developed a single market may seem, there are cases (like Japan) in which the market has underperformed for decades. So far in the 2000s, the United States has underperformed the global market, for instance, as well.
Who said "It's not necessary to invest in Bogleheads"?
Robert Brokamp: First of all let's start, because this was playing off the Bogleheads Forum, with what Jack Bogle says. I just recently heard an interview. The Bogleheads conference happened recently and he made some comments about international investing. He's one of those people that says it's not really necessary.
Who said it's tough to ignore international stocks?
Jason Zweig in The Wall Street Journal wrote an article saying, "It's pretty tough, now, from a valuation standpoint, to ignore international stocks. They're about half the valuation of U.S. stocks.".
Does Jack Bogle still have international funds?
stocks. That said, when he was running Vanguard and he has since retired, they had international funds and they still have international funds.
Is international investing a disaster?
One thing I will say is the way that was phrased on the Bogleheads is that international investing has been a disaster. It's not really been a disaster. Over the long term international stocks have underperformed U.S. stocks a little bit, but it really depends on what time period you're looking at.
What is Bogle's rationale?
His rationale is a global macroeconomics argument. He has a firm belief that the U.S. economy will continue to outperform the global economy in the future. For example, in an interview with Morningstar’s Christine Benz, Bogle argued that each of the major countries in the EAFE international index have significant economic headwinds.
What factors influence the movements of international stocks?
Many of the factors that influence the movements of international stocks — currency markets, European macroeconomics , and global unrest — affect the prices of his U.S. based holdings as well. Jack Bogle also recommends against international stocks in his portfolio. His rationale is a global macroeconomics argument.
What was the optimal portfolio in the 1970s?
The optimal portfolio in the 1970s was 70% domestic / 30% international, while in the 2000s, it was 100% domestic / 0% international.
Do international stocks have tax benefits?
Of course, you do get some tax benefits with international stock funds, such as the foreign tax credit. And by placing international stocks in a tax-deferred or retirement account, you are not hurt by international’s relative tax inefficiency.
Does Warren Buffett recommend international stocks?
No International Stocks. Warren Buffett does not recommend international stocks to ordinary investors. He has previously recommended us to “ Buy American. ” In his 2013 annual letter to shareholders, he suggested a portfolio of 90% S&P 500 and 10% short-term government bonds to investors.
Is international stock market tax efficient?
International stock funds are less tax-efficient that U.S. stock funds. Some of this has to do with the higher dividend yield of international index funds, and some has to do with the inefficiencies of managing a portfolio invested in the less-liquid international stock markets. For example, over the past 5 years, the potential amount of returns lost to taxes (before even selling the index fund) for the Vanguard International Index Fund VTIAX was 0.91%, versus 0.63% for VTSAX (Vanguard Total Stock Market Index Fund), according to Morningstar’s Tax Analysis tool for ETFs and mutual funds.
Why invest in foreign stocks?
Investing in foreign stocks is a way to have a direct stake in growth outside the U.S. and to benefit from a broader range of market trends and opportunities. From growth stocks to large-cap stocks and beyond, there are many types of stocks to choose from.
Why are foreign companies more likely to fail?
Foreign companies are more likely to fail to meet the communications and reliability expectations of most U.S. investors.
Why aren't investors familiar with international markets?
Another big factor is that most investors simply aren’t as familiar with opportunities in international markets because they have limited personal experience with nondomestic companies -- and because these businesses tend to receive less coverage from U.S. analysts and media outlets.
Just arrived. I already have VTWAX and some other funds, but working on streamlining
Just arrived. I already have VTWAX and some other funds, but working on streamlining.
Been Doing This for 20 Years. It Works, Whipper Snappers
Glad to have found this group. I have been rotating accounts for a long time, and have followed Personal Finance, Financial Independence, fat FIRE and Investing groups on Reddit, Facebook and pre-2015, Forums and IRC/BB groups.
You don't like bonds eh?
Oh I'm diversified you say, I've got VTSAX, I've got VTWAX, I've got the whole goddamn alphabet on my side. What's a bond to me? I'm the Colossus of Rhodes, standing tall over the market, my equities sloshing around in the gas tank to early retirement.
Finally converting everything to VTI
I’ve done well with individual stocks over the past few years and I’ve outperformed the market by a decent amount. But after doing the research and watching Ben Felix videos, I’ve decided index investing is the way to go. Starting tomorrow, I’m converting my whole portfolio to VTI and all new money will go into VTI. See you guys in 30 years.
Charlie Munger gives the street hell
"Mr. Munger is taking questions live. Among the things he said; when asked about Bitcoin he said people who buy Bitcoin are the same as those on a fox hunt; "Fox hunting is the unspeakable in pursuit of the inedible." --Oscar Wilde
Why, When and How to Rebalance: lessons from Vanguard, Bogle, and mathematics
This post is cross-listed on r/Bogleheads and r/CanadianInvestor to see if it can generate a wider discussion and perspectives.
What is your opinion on Dave Ramsey?
His advice to "keep investing" fits the boglehead philosophy, but for the love of god, I cannot understand why he recommends actively managed mutual funds instead of index funds?
What Is the Bogleheads Four-Fund Portfolio?
As its name suggests, the Bogleheads Four-Fund Portfolio was developed by John C. Bogle, also known as Jack Bogle, the founder of the Bogleheads forum at bogleheads.org. The portfolio is incredibly simple to create and manage due to its limited need for multiple assets.
The Investment Thesis Behind the Portfolio
Sure, the portfolio only includes four investment-grade funds, but the investment thesis behind the portfolio is multifold:
Pros and Cons of the Bogleheads Four-Fund Portfolio
As with any other financial decision, it’s important to consider the pros and cons when deciding whether to invest using Bogle’s Four-Fund strategy. After all, when you’re talking about making, losing, or spending money, there’s never a one-size-fits-all approach.
Who Should Use the Bogleheads Four-Fund Portfolio?
As with most portfolio strategies, the Four-Fund strategy was designed for a specific group of investors. Again, there’s no one-size-fits-all approach to finances. Those who would benefit most from this investment strategy include:
How to Duplicate the Bogleheads Four-Fund Portfolio
Because the portfolio only calls for allocation in four different low-cost index funds, it’s a very simple one to recreate. However, you may want to consider small tweaks to the allocation to fit your specific investing style.
Keep Your Portfolio Balanced
Any prebuilt investment portfolio is going to be built with a specific balance in mind. This balance is extremely important because it helps to ensure your portfolio isn’t overexposed to risk or underexposed to opportunity.
Final Word
Sure, the Bogleheads Four-Fund Portfolio is a risky one when you consider the heavy allocation to stocks. However, along with risk often comes reward in the stock market, and that has historically been the case with this strategy — it’s one of few with a consistent history of outperforming the S&P 500 index.
Domestic/International Allocation
Main Types of International Funds
- Some international funds select stocks from many countries, while others focus on a particular region or country. Still others select investments from countries with similar economic conditions, including the two major distinctive types of either developed markets or emerging markets. 1. A developed market exists in a country that is a fully modern industrial nation with a well-establish…
Risks of International Investing
- Currency risk. Investments denominated in foreign currencies decline in value for U.S. investors when the U.S. dollar rises in value against those currencies. Conversely, the investments rise in value when the U.S. dollar weakens. There have been prolonged periods when the dollar has weakened against foreign currencies and others when it has strengthened. Country risk. Events i…
Risks of Home Country Investing
- Currency risk. Currency risk can cut both ways. While we earn and spend most of our money in home-country currency, we also have many assets in that currency not accounted for within investing portfolios - future earnings (human capital), homes and other goods - thus, the need to minimize foreign-currency exposure may not be as great as it first appears from a portfolio-only …
Suggested Allocations
- Determining an appropriate domestic/international allocation is a subject of much debate. See: Combining domestic and international stocks.
External Links
- Considerations for investing in non-U.S. equities (March 2012 Vanguard Research, original link now dead but available via wayback machine)
- International Equity: Considerations and Recommendations (January 2009 Vanguard Investment Counseling & Research, original link now dead but available via wayback machine)
- International Equity: Considerations and Recommendations(April 2008 Vanguard Investment …
- Considerations for investing in non-U.S. equities (March 2012 Vanguard Research, original link now dead but available via wayback machine)
- International Equity: Considerations and Recommendations (January 2009 Vanguard Investment Counseling & Research, original link now dead but available via wayback machine)
- International Equity: Considerations and Recommendations(April 2008 Vanguard Investment Counseling & Research, this is an earlier version of the above two links)
- International Equity Investing: Investing in Emerging Markets (Vanguard Investment Counseling & Research, original link now dead but available via wayback machine)
