Author Topic: Increase International exposure?  (Read 661 times)

retireatbirth

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Increase International exposure?
« on: March 08, 2019, 05:58:46 AM »
Currently, my mix between domestic equity index funds and international equity index funds is 78% to 22%. I was surprised to find out recently that Vanguard uses a mix of about 63% to 37% in their total market funds. They are smarter than I am so that makes me think I should adjust. It seems like I have had a home bias (although it has worked out in recent years). What are the pros/cons of upping my international exposure to this level?

SeattleCPA

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Re: Increase International exposure?
« Reply #1 on: March 08, 2019, 06:14:35 AM »
Currently, my mix between domestic equity index funds and international equity index funds is 78% to 22%. I was surprised to find out recently that Vanguard uses a mix of about 63% to 37% in their total market funds. They are smarter than I am so that makes me think I should adjust. It seems like I have had a home bias (although it has worked out in recent years). What are the pros/cons of upping my international exposure to this level?

I use David Swensen asset allocation formula in my traditional asset class investing. That means 70% to equities with 15% of that in developed markets and 10% in emerging markets.

Phrased in terms of the percentage of equities in international that puts me at about 36%... and truthfully I actually have let the international component "drift" up from the Swensen formula's percentages.

To me, two big benefits. First, I feel like I've got a portfolio with less risk than if I was, say, 100% US stocks. Second, US valuations seem high to me and so US stocks seem unlikely to produce good returns over next couple of decades.

P.S. To save someone else the trouble of pointing this out, international or more international exposure hasn't worked in the recent past. All international stocks have done is drag down my portfolio's performance. I guess my thought on that, though, is not investing in international because the class has performed poorly recently is like buying more of whatever's recently performed well.

Geographer

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Re: Increase International exposure?
« Reply #2 on: March 08, 2019, 10:14:51 AM »
Up until recently I was 60% US / 40% international. With Vanguard's release of VTWAX (Total world admiral shares) I decided I was close enough, and went with the simplicity of VTWAX and it's 54% US / 46% INT equivalents. I feel more comfortable holding global market weight -- and that's what really matters, sticking to a plan where you won't be tempted to change or tinker.

MustacheAndaHalf

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Re: Increase International exposure?
« Reply #3 on: March 08, 2019, 10:28:01 AM »
Speaking specifically of Vanguard and the right level of global diversification, Vanguard has a white paper on that:
https://www.vanguard.com/pdf/ISGGEB.pdf

The main idea I take from that paper is a range of 20-40%, depending on comfort level with international and how much risk you'll accept of international not helping over the long term.

Vanguard target date funds allocate 56% US / 36% international, but you need to take "percent international" as a percentage of equities (and ignore bonds).  So ignoring 10% bonds in most target date funds, international is about 40% of equities in Vanguard target date funds.

FIRE@50

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Re: Increase International exposure?
« Reply #4 on: March 08, 2019, 10:32:17 AM »
Currently, my mix between domestic equity index funds and international equity index funds is 78% to 22%. I was surprised to find out recently that Vanguard uses a mix of about 63% to 37% in their total market funds. They are smarter than I am so that makes me think I should adjust. It seems like I have had a home bias (although it has worked out in recent years). What are the pros/cons of upping my international exposure to this level?
The below says foreign holdings are 0.1%. What was your source for the bolded section above?

https://investor.vanguard.com/mutual-funds/profile/VTSAX

PDXTabs

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Re: Increase International exposure?
« Reply #5 on: March 08, 2019, 10:41:56 AM »
I try to stay global market cap weighted, which right now according to VT is 54% / 46% US/non-US.

markbike528CBX

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Re: Increase International exposure?
« Reply #6 on: March 08, 2019, 11:23:41 AM »
Currently, my mix between domestic equity index funds and international equity index funds is 78% to 22%. I was surprised to find out recently that Vanguard uses a mix of about 63% to 37% in their total market funds. They are smarter than I am so that makes me think I should adjust. It seems like I have had a home bias (although it has worked out in recent years). What are the pros/cons of upping my international exposure to this level?
The below says foreign holdings are 0.1%. What was your source for the bolded section above?

https://investor.vanguard.com/mutual-funds/profile/VTSAX

VTSAX is total US, retireatbirth was speaking of total (US and ex-Us) funds.

EvenSteven

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Re: Increase International exposure?
« Reply #7 on: March 08, 2019, 11:24:24 AM »
I have a very strong belief that people should hold exactly anywhere from 0% to 50% of their equities as international. If you are anywhere in that range, focus on other areas of your spending or saving to optimize. Or enjoy a bike ride.

dougules

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Re: Increase International exposure?
« Reply #8 on: March 08, 2019, 11:36:39 AM »
Up until recently I was 60% US / 40% international. With Vanguard's release of VTWAX (Total world admiral shares) I decided I was close enough, and went with the simplicity of VTWAX and it's 54% US / 46% INT equivalents. I feel more comfortable holding global market weight -- and that's what really matters, sticking to a plan where you won't be tempted to change or tinker.

Thanks!  When did that come out?

I wanted to invest in VTWSX, but the expense ratio was higher.  We've been investing in VTSAX and VTIAX and mimicking the weights.  This should make life simpler. 

Geographer

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Re: Increase International exposure?
« Reply #9 on: March 08, 2019, 01:46:58 PM »
Up until recently I was 60% US / 40% international. With Vanguard's release of VTWAX (Total world admiral shares) I decided I was close enough, and went with the simplicity of VTWAX and it's 54% US / 46% INT equivalents. I feel more comfortable holding global market weight -- and that's what really matters, sticking to a plan where you won't be tempted to change or tinker.

Thanks!  When did that come out?

I wanted to invest in VTWSX, but the expense ratio was higher.  We've been investing in VTSAX and VTIAX and mimicking the weights.  This should make life simpler.

Just last month. At only 0.10% ER, it's become the core holding in my portfolio. Now I just they'd come out with an admiral fund equivalent of BNDW! (Total world bond)