Author Topic: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy  (Read 2103 times)

Full-Life

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Hello everyone,
my background is 1 month of reading financial books and financial blogs like this wonderful one. After 36 years of living a decent, easy life I have currently the feeling that I just took the red pill. The knowledge of all this sources changed completly my view on life. But now to my question:

To achieve a life of financial freedom almost everyone is saying the same. Get dept free, adjust to a frugal life style, keep it simple and put your monthly savings in 1 broad Indexfonds and don't sell, especially when stocks go down. Heard, understood and acknowledge.

The difference comes in the definition of this 1 broad index fonds. While for US investors (e.g JL Collins, MMM) investing solely in their local economy with the Vanguard VTSAX is enough, everybody else recommends a World ETF that covers industrial countries and emerging markets like the Vanguard VTWSX.

I have understood the arguments from US Side that international fonds have higher costs (VTSAX 0,04% VTWSX 0,21%) and internationality is covered anyway (50% of sales is made outside the US) http://www.marketwatch.com/story/sp-500-companies-generate-barely-over-half-their-revenue-at-home-2015-08-19?link=MW_home_latest_news

But do these arguments only count for US citizens? What does this mean for me as an European investor? As an european would it make sense to invest in an S&P 500 fonds (TER 0,12%) to rock bottom cost, instead of going internationally with a World ETF (TER 0,40%)? Why is almost nobody in Europe recommending to invest solely in US market and instead saying to invest in a World ETF? Are their rational reasons behind this strategy or is more like I don't want to support the US economy to much? Is the extra price of a World ETF really a benefit?

Is there any way to see how an S&P 500 including costs would have developed compared to an World ETF including costs, if you had invested 30 years ago 10000€?

Who's the winner: VTSAX vs. VTWSX over 30 years?

« Last Edit: October 06, 2017, 12:46:31 PM by Full-Life »

sokoloff

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #1 on: October 06, 2017, 03:09:27 PM »
VTWSX hasn't been around even 10 years, let alone 30, so you'll need to look towards a proxy tracking index. MSCI ACWI IMI is probably a decent proxy: https://www.msci.com/documents/10199/4211cc4b-453d-4b0a-a6a7-51d36472a703

Note how closely it tracks VTWSX: https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0628#tab=1

Because the US markets have been on fire the last 5+ years, it's hard to say that a global fund would have beaten them over the last 30.

Now the real question for me is one of correlation risk. For US investors, if there's a US recession, our investments go down, but our expenses might as well. For EU investors, a raging EU market and US recession would spell a hard time for EU investors invested in the US. Now, how likely that is, who's to say?

Bicycle_B

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #2 on: October 07, 2017, 08:58:53 PM »


What does this mean for me as an European investor? As an european would it make sense to invest in an S&P 500 fonds (TER 0,12%) to rock bottom cost, instead of going internationally with a World ETF (TER 0,40%)?


I wouldn't go all US investments if I lived in Europe.  I'd want some investments in my home currency (euro) because my expenses are there.  Also, for diversification, no one area is always perfect, so having more than one area in my portfolio might bring greater returns and stability over time.

Remember also that future results might be different from past ones. If I were beginning my investments, I would emphasize ones that have low costs and can be changed easily. 

Congratulations on what you have learned so far.  Keep learning!

Full-Life

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #3 on: October 08, 2017, 03:32:26 PM »
Now the real question for me is one of correlation risk. For US investors, if there's a US recession, our investments go down, but our expenses might as well. For EU investors, a raging EU market and US recession would spell a hard time for EU investors invested in the US. Now, how likely that is, who's to say?
So this is the explanation why US investors can effort to solely invest in the US economy and Europeans should invest globally? What happens if we have a recession in Europe and the US a raging market. Wouldn't it be the same?

VTWSX hasn't been around even 10 years, let alone 30, so you'll need to look towards a proxy tracking index. MSCI ACWI IMI is probably a decent proxy: https://www.msci.com/documents/10199/4211cc4b-453d-4b0a-a6a7-51d36472a703
Note how closely it tracks VTWSX: https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0628#tab=1
Thanks for the links to the charts. Honestly I am not able to read something out of it, especially when trying to compare both charts. :-)

Do you know where I can find 1 chart that shows simultaneously 3 charts of a hypothetical invest of 10.000$ in S&P500 and MSCI and MSCI ACWI over the last 30 or 20 years?
Something like the charts of nisiprus here in this thread https://www.bogleheads.org/forum/viewtopic.php?f=1&t=114954&p=1671962

but with these indices:

1. S&P500 (US)
2. MSCI (US + Industrial countries)
3. MSCI ACWI (US + Industrial countries + Emerging markets)

I only find charts of ETFs of the last 5 year which I don't think is enough to see if there is a difference

Congratulations on what you have learned so far.  Keep learning!
Thank you for the warm welcome.

Remember also that future results might be different from past ones. If I were beginning my investments, I would emphasize ones that have low costs and can be changed easily. 
This is exactly my challenge. Here in Germany I have the choice between 3 ETFs, The broader the ETF the higher the costs.

1. iShares Core S&P 500, TER 0,09%, http://www.morningstar.com/etfs/xswx/csspx/quote.html
2. ishares MSCI world, TER 0,2%, http://quotes.morningstar.com/chart/etf/chart.action?t=EUNL&region=usa&culture=en_US
3. SPDR MSCI ACWI, TER 0,4%, http://www.morningstar.com/etfs/XFRA/SPYY/quote.html

Which one would you recommend and why?

sokoloff

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #4 on: October 08, 2017, 04:39:14 PM »
Do you know where I can find 1 chart that shows simultaneously 3 charts of a hypothetical invest of 10.000$ in S&P500 and MSCI and MSCI ACWI over the last 30 or 20 years?
Here's good instructions on how to use the Morningstar site to generate comparison graphs for traded securities: https://www.bogleheads.org/wiki/How_to_use_Morningstar_growth_charts

EDIT: Ignore these two graphs. I erroneously charted against the MSCI research corporation, not the MSCI index.
Leaving them here for continuity, but future readers, please ignore them. Full-Life posted an Excel later down the thread that should be relied upon.

Using that, I quickly whipped up these two graphs, but since the MSCI instruments have only traded for about 10 years, there's not 30 years of data on morningstar (even though the underlying index concept is valid for longer).

10 year first attachment, then max avail as second attachment.
« Last Edit: October 12, 2017, 03:34:34 PM by sokoloff »

sokoloff

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #5 on: October 08, 2017, 04:46:23 PM »
Now the real question for me is one of correlation risk. For US investors, if there's a US recession, our investments go down, but our expenses might as well. For EU investors, a raging EU market and US recession would spell a hard time for EU investors invested in the US. Now, how likely that is, who's to say?
So this is the explanation why US investors can effort to solely invest in the US economy and Europeans should invest globally? What happens if we have a recession in Europe and the US a raging market. Wouldn't it be the same?
There's correlation and currency risk in investing in a market tied to economies and denominated in a currency other than the one you expect to have most of your expenses in.

The US-listed securities have substantial built-in substantial exposure to the EU economies. (I suspect the EU-listed securities likewise have substantial US exposure.) If the EUR crashes, as a US citizen, resident, and investor, I'd prefer to have my market and currency exposure in USD.

IMO, you want to choose an appropriate amount of global exposure, but not to go overboard. For me, buying US-listed equities and then also buying EU-listed companies at market cap weighting is more aggregate EU exposure than I want (and I'm pretty "risk on" when it comes to investing). For an EU resident, I think buying US-listed equities at market-cap weighting is also probably more risk than is warranted.

Bicycle_B

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #6 on: October 08, 2017, 10:29:29 PM »
Remember also that future results might be different from past ones. If I were beginning my investments, I would emphasize ones that have low costs and can be changed easily. 
This is exactly my challenge. Here in Germany I have the choice between 3 ETFs, The broader the ETF the higher the costs.

1. iShares Core S&P 500, TER 0,09%, http://www.morningstar.com/etfs/xswx/csspx/quote.html
2. ishares MSCI world, TER 0,2%, http://quotes.morningstar.com/chart/etf/chart.action?t=EUNL&region=usa&culture=en_US
3. SPDR MSCI ACWI, TER 0,4%, http://www.morningstar.com/etfs/XFRA/SPYY/quote.html

Which one would you recommend and why?

For me, it's a tough call between 2 and 3.  I'd pick one of those because their allocation is more closely related to the expenses in Europe where you live.  You've already figured out that the ACWI is a broader index (includes some non-developed economies), which presumably is the cause of its higher fee.  Tough to know whether the possible extra performance will be worth the couple of tenths of a percent fee.  I guess 2, on the principles that lower fees are better, and that 2 has a more safe-simple-generic approach. 

chasesfish

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #7 on: October 09, 2017, 09:18:32 AM »
There's a lot written about this - VTSAX serves as a solid "One and done" mutual fund for a lot of people.  You can always do more if you want.

Most of the research you'll find all goes back to the Efficient Frontier and Modern Portfolio Theory.   Over an infinite time horizon and with diversification, you'll be rewarded with higher returns for higher risk.  The capital stack usually looks like:

Bonds
REITS
Large Cap Stocks
Mid Cap Stocks
Small Cap Stocks

Each of the categories going from lower risk to higher risk, yielding higher returns but with more volatility.

You can also say the same about markets, going from developed markets to emerging markets, provided you have enough diversity in the markets.

It ultimately comes down to accepting your own risk tolerance and picking the right asset allocation for you.  VTSAX is weighted heavily in Large Cap Stocks, with some mid cap and small cap stocks.
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acroy

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #8 on: October 09, 2017, 10:08:52 AM »
Note 48% of SP500 revenue is ex-US.

Pretty strong argument to dump it all into SPX index or VTSAX and let it ride. KISS, avoid higher management fees, etc...
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Full-Life

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #9 on: October 11, 2017, 09:34:19 AM »
Here's good instructions on how to use the Morningstar site to generate comparison graphs for traded securities: https://www.bogleheads.org/wiki/How_to_use_Morningstar_growth_charts
Using that, I quickly whipped up these two graphs, but since the MSCI instruments have only traded for about 10 years, there's not 30 years of data on morningstar (even though the underlying index concept is valid for longer).
10 year first attachment, then max avail as second attachment.
Thank you very much for your work sokoloff. This is what I was looking for and is pretty interesting for me. Especially that I can directly compare Indices and/or ETFs in one chart, is something that I did not know before.

So the "winner" in the last 10 years was the MSCI world ETF? I thought the US economy were better

But I have problem to compare e.g. this 3 ETFs with each other like you did
1. ishares MSCI world, http://quotes.morningstar.com/chart/etf/chart.action?t=EUNL&region=usa&culture=en_US
2. SPDR MSCI ACWI, http://www.morningstar.com/etfs/XFRA/SPYY/quote.html
3. Vanguard FTSE All-World ETF, http://www.morningstar.com/etfs/XAMS/VWRL/quote.html

Morningstar shows me each of this ETFs but doesn't let me compare them in one chart. Any idea what I did wrong?




sokoloff

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #10 on: October 11, 2017, 10:40:57 AM »
Morningstar shows me each of this ETFs but doesn't let me compare them in one chart. Any idea what I did wrong?
I don't know. I also tried (prior to my last post) and I couldn't make their charting thing "find" the instruments we were discussing either.

frugaliknowit

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #11 on: October 11, 2017, 01:51:46 PM »
I don't think you want to compare ONE fund to ONE OTHER fund, knowing what I now know.

I think you should read this book (I got it in the library, btw):  http://paulmerriman.com/financial-fitness-forever/

Paul advocates a portfolio of funds based on very deep academic research.  Optimally this would be 10 equity funds, 5 of which are international.  The reason he and the research advocate 50% U.S/50% elsewhere is that this is representative of the current capitalization of the total stock market.

Here's a link to his recommended fund mixes:  http://paulmerriman.com/recommendations/

His website is a course in investing and risk management.

Josh Collins is a wise dude, but Paul Merrimen, an educator with 50 years of experience, is the real sauce!

Full-Life

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #12 on: October 11, 2017, 02:14:29 PM »
First of all thank you to all the participants of my thread. It is wonderful to get so many information as a newbie on this forum. I really appreciate.

I don't think you want to compare ONE fund to ONE OTHER fund, knowing what I now know.

I think you should read this book (I got it in the library, btw):  http://paulmerriman.com/financial-fitness-forever/

Paul advocates a portfolio of funds based on very deep academic research.  Optimally this would be 10 equity funds, 5 of which are international.  The reason he and the research advocate 50% U.S/50% elsewhere is that this is representative of the current capitalization of the total stock market.

Here's a link to his recommended fund mixes:  http://paulmerriman.com/recommendations/

His website is a course in investing and risk management.
Josh Collins is a wise dude, but Paul Merrimen, an educator with 50 years of experience, is the real sauce!

Thank you for the link frugaliknowit. But Managing 10 funds doesn't sound easy to me. My objective is to keep it as simple as possible and not to gain the last 10% of maximum performance out of the market. Despite my concerns I'll read it anyway to get insights into a different perspective. Thank you.


frugaliknowit

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #13 on: October 11, 2017, 02:24:24 PM »
The only management involved is re balancing once per year.  Maybe 1 or 2 hours more work per year...

Heroes821

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #14 on: October 11, 2017, 02:28:43 PM »
I don't think you want to compare ONE fund to ONE OTHER fund, knowing what I now know.

I think you should read this book (I got it in the library, btw):  http://paulmerriman.com/financial-fitness-forever/

Paul advocates a portfolio of funds based on very deep academic research.  Optimally this would be 10 equity funds, 5 of which are international.  The reason he and the research advocate 50% U.S/50% elsewhere is that this is representative of the current capitalization of the total stock market.

Here's a link to his recommended fund mixes:  http://paulmerriman.com/recommendations/

His website is a course in investing and risk management.

Josh Collins is a wise dude, but Paul Merrimen, an educator with 50 years of experience, is the real sauce!

I'm not quite as new as the OP, but I can't imagine at any point in my life wanting to have to rebalance across 10 funds.  Fees and expense ratios aside that's a ton of work when you also are accounting for the vehicles you keep your AA in.  Not sure about Germany, but for US if you have an HSA, 401k, tIRA, roth IRA and taxable account... keeping balanced on 10 funds would be a crazy chore. 

Full-Life

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #15 on: October 12, 2017, 05:30:13 AM »
I'm not quite as new as the OP, but I can't imagine at any point in my life wanting to have to rebalance across 10 funds.  Fees and expense ratios aside that's a ton of work when you also are accounting for the vehicles you keep your AA in.  Not sure about Germany, but for US if you have an HSA, 401k, tIRA, roth IRA and taxable account... keeping balanced on 10 funds would be a crazy chore.

This is what I was thinking too. Rebalancing 10 different ETFs is a challenge itself. In addition to that there is a not unimportant cost factor.
In Germany I need for every ETF a broker who charges a transaction fee each.  The average transaction fee ist 10,-€. Even if I could effort to buy ETFs in total for 1.000,-€ in a month I would have to pay 100,-€ transaction fees per month. Which is 10% of my investment. Not to mention the paper work of taxation

Full-Life

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #16 on: October 12, 2017, 06:04:29 AM »

Using that, I quickly whipped up these two graphs, but since the MSCI instruments have only traded for about 10 years, there's not 30 years of data on morningstar (even though the underlying index concept is valid for longer).

10 year first attachment, then max avail as second attachment.

While the chart of sokoloff already gave me a good indicator of the performance of S&P 500 and MSCI I wanted to compare them over longer period of time. Because Morningstar doesn''t provide any data before 2007, I created my own chart. I collected data from Wikipedia starting 1970 and put it into Excel.
https://en.wikipedia.org/wiki/S%26P_500_Index
https://en.wikipedia.org/wiki/MSCI_World

First thing that I noticed that the S&P500 and the MSCI are closely the same since 1970. But since 2008 the S&P outperforms the MSCI.

To my surprise I'm getting different results like Morningstar. With my data The S&P500 outperformed the MSCI in the last 10 years, not vice versa!
Did I do something wrong? Attached my Excel spreadsheat.

https://1drv.ms/x/s!Ah5jPwAkvFfxuSWRV2vz2uDE143F
« Last Edit: October 12, 2017, 06:09:47 AM by Full-Life »

sokoloff

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #17 on: October 12, 2017, 08:54:26 AM »
To my surprise I'm getting different results like Morningstar. With my data The S&P500 outperformed the MSCI in the last 10 years, not vice versa!
Did I do something wrong? Attached my Excel spreadsheat.
I added columns F & G, which represent the CAGR on each index from the year in question through 2016.
That's the quick way to check "which index performed better, on a cumulative basis, through 2016?"

It shows the indexes as close, but with the S&P the clear winner, driven largely by recent performance.

I added columns J & K to explore the CAGR through 2007, where MSCI World beats S&P for a lot of the time period, due to the relative outperformance of MSCI World in the 2001-2007 timeframe.

So, the outcome is sensitive to start dates because the various markets enter and exit bull/bear phases at slightly different times.

Full-Life

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #18 on: October 12, 2017, 03:06:37 PM »
I added columns F & G, which represent the CAGR on each index from the year in question through 2016.
It shows the indexes as close, but with the S&P the clear winner, driven largely by recent performance.
But why does the data of Morningstar says MSCI is the winner?

I added columns J & K to explore the CAGR through 2007, where MSCI World beats S&P for a lot of the time period, due to the relative outperformance of MSCI World in the 2001-2007 timeframe.

Kindly correct me if I'm wrong, but when comparing both indecis via the CAGR the S&P is the evenclearer winner. There was no year when the MSCI was able to win. Compare the table
« Last Edit: October 12, 2017, 03:08:48 PM by Full-Life »

Bicycle_B

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #19 on: October 12, 2017, 03:15:33 PM »
As a truth fan, I love the attention to facts being invested in these spreadsheets comparing the two funds -
 especially the wise remarks in the post explaining that which fund has better results depends on the starting and ending points of the comparison.  End of year comparisons do not cover all comparison periods.

A bigger point, though, is that it's very hard to use past results to be sure which one is better. They're fairly close, but also the past doesn't prove they'll have similar performance in the future. I don't think that simply comparing past results of two funds is sufficient to decide wisely which one to invest in.  This is especially true in a scenario where OP appears to want One Fund to Cover Everything.  Based on the purpose, I would think the global fund is likely to be better than the US fund because, being more diversified, it covers more bases...but the US fund has even lower costs, which is advantage.  Either way, IMHO (very humble!) the more relevant point is this:

An hour or two per year of rebalancing funds can measurably add some investment performance and stability.  If you're not willing to spend 1 or 2 hours per year rebalancing investments in the future, just pick one of the two funds and leave it alone. The difference between them, at least to the point where comparing past performance can generate reliable prediction, is less than the "last 10%" that you say you don't care about.  Both of them have verifiable low costs and middle-of-the-stock-road approaches.
« Last Edit: October 12, 2017, 03:19:12 PM by Bicycle_B »

sokoloff

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #20 on: October 12, 2017, 03:29:24 PM »
I added columns F & G, which represent the CAGR on each index from the year in question through 2016.
It shows the indexes as close, but with the S&P the clear winner, driven largely by recent performance.
But why does the data of Morningstar says MSCI is the winner?
Because I'm a dumbass.

I inadvertently plotted the share price of the MSCI research company, not the MSCI World Index. The graph is fundamentally flawed. Sorry about that.

I added columns J & K to explore the CAGR through 2007, where MSCI World beats S&P for a lot of the time period, due to the relative outperformance of MSCI World in the 2001-2007 timeframe.

Kindly correct me if I'm wrong, but when comparing both indecis via the CAGR the S&P is the evenclearer winner. There was no year when the MSCI was able to win. Compare the table
Well, that's the effect of the "C" in CAGR. ;)

From 1996 through 2007, MSCI World beat S&P every time on a CAGR basis (see J29:K39).

The strong performance of the S&P over the last decade is what makes us believe that the S&P is always a better investment even going back 30 years. That's not necessarily the case, of course.

YoungInvestor

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #21 on: October 12, 2017, 03:40:36 PM »
I'm not quite as new as the OP, but I can't imagine at any point in my life wanting to have to rebalance across 10 funds.  Fees and expense ratios aside that's a ton of work when you also are accounting for the vehicles you keep your AA in.  Not sure about Germany, but for US if you have an HSA, 401k, tIRA, roth IRA and taxable account... keeping balanced on 10 funds would be a crazy chore.

This is what I was thinking too. Rebalancing 10 different ETFs is a challenge itself. In addition to that there is a not unimportant cost factor.
In Germany I need for every ETF a broker who charges a transaction fee each.  The average transaction fee ist 10,-€. Even if I could effort to buy ETFs in total for 1.000,-€ in a month I would have to pay 100,-€ transaction fees per month. Which is 10% of my investment. Not to mention the paper work of taxation

Or, you know, you could just buy the most underweight one each month compared to your target aa.

Full-Life

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #22 on: October 12, 2017, 04:05:23 PM »
They're fairly close, but also the past doesn't prove they'll have similar performance in the future. I don't think that simply comparing past results of two funds is sufficient to decide wisely which one to invest in. 
That is true, to make a decision for an index based on 1%  of difference over 30 years is wasting of time and not very efficient. My current purpose is more the understanding and curiosity. I find it quiet interesting to see how the US and the global economy have developed and how close they are.

An hour or two per year of rebalancing funds can measurably add some investment performance and stability. 

Could you give me an example of fonds where rebalancing would give you an advantage. Currently my tendence is to buy just 1 fonds like the MSCI ACWI that does the rebalancing automatically for me. I don't really understand why people in 2017 have more than 1 fonds in stocks.

Because I'm a dumbass. I inadvertently plotted the share price of the MSCI research company, not the MSCI World Index. The graph is fundamentally flawed. Sorry about that.

From 1996 through 2007, MSCI World beat S&P every time on a CAGR basis (see J29:K39).
Ahh, now I got it.

The strong performance of the S&P over the last decade is what makes us believe that the S&P is always a better investment even going back 30 years. That's not necessarily the case, of course.

Why did the US economy developed so well? Apple, Google Facebook? Obama?

Bicycle_B

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #23 on: October 12, 2017, 04:18:16 PM »

An hour or two per year of rebalancing funds can measurably add some investment performance and stability. 

Could you give me an example of fonds where rebalancing would give you an advantage. Currently my tendence is to buy just 1 fonds like the MSCI ACWI that does the rebalancing automatically for me. I don't really understand why people in 2017 have more than 1 fonds in stocks.


One place to see the advantages of rebalancing between funds is portfoliocharts.com.  Rebalancing is part of what makes a diversified portfolio potentially effective.  The portfolios show examples of historically effective combinations.
https://portfoliocharts.com/

Good places to start include:

introductory section about portfolios
https://portfoliocharts.com/about-the-portfolios/

overall introduction to investing from the perspective of the portfoliocharts.com author, who by the way is an MMM member whose retirement project (one among others) is portfoliocharts.com... it's not me, I'm just a reader.  This section includes remarks on rebalancing but not a detailed description.
https://portfoliocharts.com/how-to-manage-your-own-portfolio/

PS. Rebalancing is a tactic than can be part of a strategy.  Best practice is to use the tactic as a result of wisely choosing your overall strategy.  Jim Collins has some good commentary on this.
http://jlcollinsnh.com/2014/06/10/stocks-part-xxiii-selecting-your-asset-allocation/

One final note.  Jim Collins seems to use US-centric statistics in making his portfolio allocations.  Stocks have not worked out as well in the past for people in other countries.  Explore the feature in the portfoliocharts.com Calculators section that lets you see historical results for different countries.  You'll find that in places like Germany, the best percentage for high returns was not 100% stock, but closer to 50%.  I suspect that part of the lesson isn't that different countries are different, it's that predicting which asset class will win is tough, so a smart strategy is to diversify.  Hence 50% to 60% stock, rather than 80% to 90%, might be smarter than it looks.  Knowing for sure, though, requires the ability to predict the future.  Good luck with that.  Anyway, make a decision at some point and roll with it.  As long as you save and invest a large portion of your income with reasonable efficiency, you'll be a winner.
« Last Edit: October 12, 2017, 04:41:59 PM by Bicycle_B »

Tyler

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #24 on: October 12, 2017, 08:20:31 PM »
Well said, Bicycle_B.  I couldn't have explained it better myself!

The one thing I'll add is that most analyses of US stocks do not directly translate to international markets like Germany because they neglect two very important factors: exchange rates and local inflation.  Because of those two things, the exact same fund can have very different inflation-adjusted returns in different countries.  So be very careful about taking US-centric portfolio advice at face value.  That's why I've spent so much time adding features on Portfolio Charts to translate all numbers to foreign markets.  hint, hint. ;)

Is there any way to see how an S&P 500 including costs would have developed compared to an World ETF including costs, if you had invested 30 years ago 10000€?

Try this:



In this calculator, "North America" includes Canada but is a good proxy for the S&P500.  "World" (including the "All" designation in the bottom right) represents all developed markets including the US.  The numbers are adjusted for exchange rates and German inflation.  They also ignore fees, but I'd consider them marginal for the ETFs you're considering.

Since 1970 the S&P500 won, but use the calculator for yourself and you can change the start date.  And even more important than the top chart is the bottom one, as it shows that it's a pretty even split of which index was better in any given year and also how the US stock bubble in the 90's skewed the cumulative totals.  So don't get so caught up in picking the "best", and instead select which one you want based on what is right for you.  Many people in your situation prefer a World fund to not only capture the good US returns but also the important local returns that will reflect your own economic conditions (such as Eurozone inflation).
« Last Edit: October 12, 2017, 10:28:08 PM by Tyler »
Browse portfolios calculated for your own home country at PortfolioCharts.com

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #25 on: October 14, 2017, 03:35:55 AM »
Wow. Thank you Bicycle_B & Tyler for this valuable information. Now I know what I'll do on this sunday. :-)

Coresatinvest

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #26 on: October 20, 2017, 07:29:25 AM »
Hi everyone,
I am also a european investor and I tend to prefer SPDR MSCI ACWI IMI over the Ishares MSCI world and Vanguard FTSE All-World ETF options for the following reasons:
-SPDR MSCI ACWI IMI is exposed to emerging markets which is not the case for the other 2 funds
-SPDR MSCI ACWI IMI is more exposed to mid and small cap stocks.

We all know from finance theory that "small caps" are supposed to yield a pemium, which shall enhance the performance of the SPDR fund vs. a simple MSCI World (developped large caps). We also know that emerging markets present a higher risk (less transparent information, corp governance...) and therefore their higher returns shall compensate this higher risk over the long run.

Last but not least, Paul Merriman is also my financial-reference and someone I highly look-up to.
Paul has always recommended international diversification to all investors and bewared of home country bias.
Here is a selection of his best podcasts on how to do better than the S&P500 and why international diversification is a MUST!
http://paulmerriman.com/10-lessons-80-years-history/
http://paulmerriman.com/chapter-6-how-will-you-diverisfy-your-investment-holdings/
http://paulmerriman.com/12-simple-steps-to-making-12-percent/
http://paulmerriman.com/how-to-beat-the-market-really/
http://paulmerriman.com/myths-realities-sp-500/
http://paulmerriman.com/warren-buffet-recommends-sp-wife/



Bicycle_B

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #27 on: October 22, 2017, 04:47:13 PM »
Hi everyone,
I am also a european investor and I tend to prefer SPDR MSCI ACWI IMI over the Ishares MSCI world and Vanguard FTSE All-World ETF options for the following reasons:
-SPDR MSCI ACWI IMI is exposed to emerging markets which is not the case for the other 2 funds
-SPDR MSCI ACWI IMI is more exposed to mid and small cap stocks.

We all know from finance theory that "small caps" are supposed to yield a pemium, which shall enhance the performance of the SPDR fund vs. a simple MSCI World (developped large caps). We also know that emerging markets present a higher risk (less transparent information, corp governance...) and therefore their higher returns shall compensate this higher risk over the long run.

Last but not least, Paul Merriman is also my financial-reference and someone I highly look-up to.
Paul has always recommended international diversification to all investors and bewared of home country bias.
Here is a selection of his best podcasts on how to do better than the S&P500 and why international diversification is a MUST!
http://paulmerriman.com/10-lessons-80-years-history/
http://paulmerriman.com/chapter-6-how-will-you-diverisfy-your-investment-holdings/
http://paulmerriman.com/12-simple-steps-to-making-12-percent/
http://paulmerriman.com/how-to-beat-the-market-really/
http://paulmerriman.com/myths-realities-sp-500/
http://paulmerriman.com/warren-buffet-recommends-sp-wife/

Paul Merriman is one of the advisors who has a portfolio named after him that is calculated on portfoliocharts.com.   Appears to have returned 6% annually after inflation since 1970, as well as the site can approximate his recommendations during that time.

https://portfoliocharts.com/portfolio/merriman-ultimate/

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #28 on: October 26, 2017, 09:53:01 AM »
Hi everyone,
I am also a european investor and I tend to prefer SPDR MSCI ACWI IMI over the Ishares MSCI world and Vanguard FTSE All-World ETF options for the following reasons:
-SPDR MSCI ACWI IMI is exposed to emerging markets which is not the case for the other 2 funds

Vanguard FTSE All-World includes emerging markets with 9,6%

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #29 on: October 26, 2017, 10:06:42 AM »
The website Portfoliocharts is great. It is exactly what I was looking for and this in a beautiful minimalistic style. It's the perfect way to understand the topic better and to get a mental preparation when your investments gets cut in half. Chapeau Tyler.

I have a question to the Portfolio Growth Chart. How do I read this?

I would like to see what would have happened when invested 10.000 $ each year started 1980

talltexan

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #30 on: October 26, 2017, 12:26:13 PM »
I, too, have benefitted from Paul Merriman's materials, particularly his sound investing podcast. It's important to study his portfolio, you cannot just implement it blindly, but you need to understand why he chooses the investments he indicates. Paul himself is very open that some people may simply wish to use a simpler approach such as a target date fund or just owning VTSAX (as JL Collins recommends).

His international recommendations are intended to exactly mirror the domestic recommendations that he makes, with the goal being to reduce volatility while increase expected returns. In a September podcast, he urged people who are considering their mix of international versus domestic assets to pick an allocation and stay the course. Too much movement up and down can turn into market timing, and it will work against you if you wind up chasing the herd. He openly states that he'd rather have you consistently maintain a 20% international allocation than move up and down between 40% and 70% chasing the smart money.

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #31 on: October 26, 2017, 01:32:43 PM »

Tyler

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #32 on: October 26, 2017, 09:21:26 PM »
I have a question to the Portfolio Growth Chart. How do I read this?

I would like to see what would have happened when invested 10.000 $ each year started 1980

The Portfolio Growth chart shows the growth of your portfolio looking at every start year since 1970 simultaneously.  It lets you see the full range of results and get a feel not only for the end account values but also for the relative uncertainty of a portfolio. 

If you're looking for the specific line starting in 1980, you might try the Benchmark calculator.  The downside is that it doesn't account for adding the $10k a year.  Thanks for letting me know what you're looking for, as maybe I can think of some future improvements to help out. 

https://portfoliocharts.com/portfolio/merriman-ultimate/

Is there actually an ETF who covers this portfolio allocation completly?

You mean a single fund you can buy to track the Merriman portfolio?  I'm not aware of one.  But creating your own version with ETFs for each asset is not too difficult (at least in the US). 
« Last Edit: October 26, 2017, 09:58:01 PM by Tyler »
Browse portfolios calculated for your own home country at PortfolioCharts.com

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #33 on: October 27, 2017, 01:45:08 AM »

If you're looking for the specific line starting in 1980, you might try the Benchmark calculator.  The downside is that it doesn't account for adding the $10k a year.  Thanks for letting me know what you're looking for, as maybe I can think of some future improvements to help out. 

https://portfoliocharts.com/portfolio/merriman-ultimate/


Yes this benchmark calculator is great, it's my favorite calculator, cause I can compare 2 portfolios and set different first years of returns.

It would be nice if it were possible to change the Starting Value and to add a field with the Annual Contribution of your portfolio. I would be now able to see the difference between investing everything at once or in tranches. And I could combine both. Starting with an invest of 10k and adding every year 12.000k.

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Re: Who has won in the last 30 years: US (VTSAX) or World (VTWSX) economy
« Reply #34 on: October 27, 2017, 05:49:49 AM »
This is exactly my challenge. Here in Germany I have the choice between 3 ETFs, The broader the ETF the higher the costs.

1. iShares Core S&P 500, TER 0,09%, http://www.morningstar.com/etfs/xswx/csspx/quote.html
2. ishares MSCI world, TER 0,2%, http://quotes.morningstar.com/chart/etf/chart.action?t=EUNL&region=usa&culture=en_US
3. SPDR MSCI ACWI, TER 0,4%, http://www.morningstar.com/etfs/XFRA/SPYY/quote.html

Which one would you recommend and why?
Hi there. You might also like to read the German thread (Mustachianism applied to German way of life // Deutsche MMM Ratschläge. Lots of information there about different funds available here. I'm pretty bad with all of this stuff but based on information in that thread have finally managed to set up a Sparplan for an MSCI world ETF fund (via ING-DiBa, TER = 0.45%). Anyway, with the level of detail you're discussing in this thread, I think you'll like the other one. :) Lots of stuff about the tax treatment and implications, too.