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Old 02-05-2019, 01:03 PM
 
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What I decided after selling many of my mutual funds in the recent down market is to not buy international or even global fund any more, as least for now. I understand sometimes they do better than domestic funds, but the risk and cost don't seem to worth it. There are always more good performing domestic funds at lower expense than foreign/global ones. Besides, much more and better choices in ETFs for domestic than international. Anyone shares such thought?
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Old 02-05-2019, 05:20 PM
 
Location: Unlike most on CD, I'm not afraid to give my location: Milwaukee, WI.
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I won't touch international, and don't care if they are "cheap" compared to domestic funds/equities. They have mostly under-performed for years. Emerging markets (incl. the highly touted China and India) are risky and volatile, and the developed markets (mainly Europe and Japan) don't impress me and have various demographic and other problems on the horizon.


My portfolio is 2% foreign only because I have a couple of funds that have a little bit in international. I won't even consider foreign bonds, for the same reason as equities: the developed countries under-perform, and the emerging markets are risky and volatile, and I can get the same high yields with US HY bond funds.


I think the "diversification" benefit of foreign holdings is quite over-rated.
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Old 02-05-2019, 05:45 PM
 
Location: moved
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This has been a simmering debate for a long time. Undoubtedly, the US market has been trouncing nearly all foreign markets since 2007. Why? Is this a structural property of the US economy, or a fluke - albeit a long one? Can this trend perpetuate for decades more? Forever?

Somehow it seems silly that one particular nation would so convincingly dominate, even if said nation is dominant culturally and financially. Dominant, sure... but not the majority... not by itself. Most business activity on earth occurs outside of the US. To focus exclusively on the US seems to be a bit... selective. Why ought we to make that selection? Because most of us, as members of this Forum, are based in America? Is that sufficient reason?

I don't have a huge international allocation, but it is considerable, and always was. Like the OP, I wonder if such allocation is stubborn and unyielding hubris, or if more of the patient and steadfast sort, which would eventually get rewarded. It might take many years to settle that.

Good luck to all!
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Old 02-05-2019, 06:07 PM
 
Location: Sputnik Planitia
7,826 posts, read 11,742,788 times
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CAGR from various decades as reported by a backtest in PV, PV goes only as far back as 1986:

1986-89 -

US: 15.3%
International (ex-US) : 31.86%


1990-99 -

US: 17.27%
International (ex-US) : 4.96%

2000-09 -

US: -0.27%
International (ex-US) : 2.29%

2010 - current

US: 12.42%
International (ex-US) : 4.18%


TOTAL 1986 through current -

US: 10.15%
International (ex-US) : 6.84%

The recent data does not strongly support International but proponents cite recency bias and to look at data prior in the 80s and prior to it. I hold 20% International and i'm ambivalent about it, the majority consensus among expert from Fidelity, Schwab and Vanguard is that International is going to beat out domestic in the next decade. All their Target date funds are significantly overweight International so i'm a bit hesitant to go against the grain here.

Ultimately I am OK with taking a risk with 20% of my portfolio if it does not perform as well, I still have 60% in domestic equities. Ultimately I think a diversified allocation is better than to try to speculate on which asset class is going to do well simply based on recent history.
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Old 02-05-2019, 06:32 PM
 
Location: moved
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[quote=k374;54354317]... the majority consensus among expert from Fidelity, Schwab and Vanguard is that International is going to beat out domestic in the next decade.

This has been the "conventional wisdom" for quite some time... but thus far, has been wrong. I've had lively discussions with Vanguard employees over the late John Bogle's exhortation to completely avoid international equities, vs. Vanguard's own recommendation of 40% (yes, 40%) allocation.

Quote:
Originally Posted by k374 View Post
Ultimately I am OK with taking a risk with 20% of my portfolio if it does not perform as well, I still have 60% in domestic equities.
And this - ultimately - a reasonable position. 20% is enough participation to benefit from outperformance by foreign equity, if such period ever comes. But it's small enough to minimize cringing, whenever the Dow/S&P/Nasdaq rise handsomely, while the DAX/FTSE/Nikkei fall.

Sadly, near-term politics doesn't favor optimism on foreign stocks. Europe has been incredibly creative in finding ways to stymie itself. Japan can't get past (or even near) to 1989. The "emerging" world has been emerging (from what?) for 30+ years. And the current, uh, reconsideration on trade bodes ill for export-dominated economies.
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Old 02-05-2019, 06:50 PM
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
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I would tend to agree. US firms are global enough. I do have a couple of foreign ADRs; They are going very well.
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Old 02-05-2019, 07:25 PM
 
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Almost half the revenue of the S&P comes from overseas.

If you want international and want to gamble pick a specific country like Singapore or something for your 10%.
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Old 02-05-2019, 07:32 PM
 
Location: moved
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Quote:
Originally Posted by wheelsup View Post
Almost half the revenue of the S&P comes from overseas.

If you want international and want to gamble pick a specific country like Singapore or something for your 10%.
The main point of international investing is foreign companies, with foreign workers, foreign management, foreign accounting practices, foreign resources, foreign taxes, foreign laws, foreign currencies, and foreign stock markets. That Coke or Boeing or McDonalds or Ford makes a substantial portion of its revenue from foreign markets, is perhaps a form of diversification, in the sense of revenue stream. But it's not diversification in business-practices, culture and society. Foreign diversification means a bet on Samsung in favor of Apple (or as complement to Apple), in favor of Volkswagen or Toyota over (or in complement to) Ford, and so forth. Foreign investing means that the Korean or Israeli or Swiss or Polish model of employment, pensions, healthcare, environmental regulation, transportation, taxation, central-banking, R&D investment, education and so forth, is in some meaningful way superior to the American model.

If we believe that the American way of doing things is simply superior, then foreign investing is "diworsification". If on the contrary we believe that the American way of doing business is suboptimal and merits an alternative, then foreign investing is apt way to diversify.
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Old 02-05-2019, 09:27 PM
 
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Thanks for the helpful comments. I may occasionally trade a foreign stock such as TCEHY, but don't plan to own an international fund for diversification purpose.
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Old 02-05-2019, 11:29 PM
 
3,614 posts, read 3,867,578 times
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Quote:
Originally Posted by mrkool View Post
I won't touch international, and don't care if they are "cheap" compared to domestic funds/equities. They have mostly under-performed for years. Emerging markets (incl. the highly touted China and India) are risky and volatile, and the developed markets (mainly Europe and Japan) don't impress me and have various demographic and other problems on the horizon.


My portfolio is 2% foreign only because I have a couple of funds that have a little bit in international. I won't even consider foreign bonds, for the same reason as equities: the developed countries under-perform, and the emerging markets are risky and volatile, and I can get the same high yields with US HY bond funds.


I think the "diversification" benefit of foreign holdings is quite over-rated.
I bought some international exposure because it was cheap. It underperformed. I still have international exposure but it's a bet on companies with good cashflow and dividends to return a good chunk of that cash to me, not expansion of muted multiples like one could do for an overly beaten down US stock. If I never sell the stuff at a profit and just sit on it and collect dividends I'm okay with that.
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