Author Topic: VTWAX and international allocation  (Read 1241 times)

FireLane

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VTWAX and international allocation
« on: June 07, 2019, 03:44:33 PM »
I recently found out about Vanguard's Total World Stock Index Fund, a cap-weighted index of the whole world's stock markets. I like this a lot, it's an appealingly simple way to get the maximum possible diversification.

The only thing I hesitate over is that it's about a 60/40 ratio of US to international. Until now, I've been holding VTSAX/VTIAX at more like 75/25.

Based on this Bogleheads thread, investors have historically fared best with a larger tilt to U.S. stocks. But past performance is no guarantee of future results, and if you asked me whether the U.S. was headed down a path of long-term decline, well... given the political situation, I couldn't say no with any confidence. Plus, U.S. stocks are pretty expensive right now, so maybe buying more international stocks is a relative bargain.

What are the rest of you clever Mustachians doing? Do you hold VTWAX? If so, how much?

Travis

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Re: VTWAX and international allocation
« Reply #1 on: June 07, 2019, 03:57:28 PM »
There are hundreds of pages of discussion on Bogleheads about international exposure recommending anywhere from 20-50% of your total portfolio in non-US indexes.  There is no right answer and I've seen good reasons for any and all asset allocations for international because while the international indexes appear to be underperforming right now, they might go up considerably in a decade when you need to sell.

Side note: I wouldn't call US stocks "expensive" because everything is relative and the US stock market goes up more than it goes down.  This is generally a good thing.  If US stock prices were to fall to the point you don't consider them "expensive" anymore, the rest of the world would consider that a bad thing.

Start with the main discussions on the 3-Fund Portfolio, then jump to this one to discuss only international funds.

https://www.bogleheads.org/forum/viewtopic.php?t=196956
« Last Edit: June 07, 2019, 04:02:16 PM by Travis »

neonlight

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Re: VTWAX and international allocation
« Reply #2 on: June 08, 2019, 11:06:36 PM »
I do not hold VTWAX, I am a fan of international exposure tilted to APAC/China hence I am going for 2800.HK directly into HKEX, that way my international exposure mirrors that of Hong Kong, which in turn mirrors China.
« Last Edit: June 11, 2019, 07:50:02 PM by neonlight »

flipboard

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Re: VTWAX and international allocation
« Reply #3 on: June 09, 2019, 12:38:46 AM »
Based on this Bogleheads thread, investors have historically fared best with a larger tilt to U.S. stocks. But past performance is no guarantee of future results, and if you asked me whether the U.S. was headed down a path of long-term decline, well... given the political situation, I couldn't say no with any confidence. Plus, U.S. stocks are pretty expensive right now, so maybe buying more international stocks is a relative bargain.
With cherry-picked data, and specific historical patterns, indeed.

But if you listen to Bogleheads enough they'll tell you don't search for the needle, pick the haystack. The haystack is the world, and you've decided to ignore half of it. (Most Bogleheads don't follow their own wisdom, but that's a separate topic.)


ardrum

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Re: VTWAX and international allocation
« Reply #4 on: June 11, 2019, 01:48:03 PM »
Correct me if I'm wrong, but I think it may be cheaper to hold VTSAX/VTIAX in the same proportion of US/ex-US (in a total world index) than to hold the total world index itself.  It might be a negligible difference though, and the simplicity of always having a globally weighted index (rather than rebalancing periodically) might make it worth the small difference.
« Last Edit: June 11, 2019, 01:51:50 PM by ardrum »

effigy98

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Re: VTWAX and international allocation
« Reply #5 on: June 11, 2019, 09:52:21 PM »
20% based on lots of research by vanguard as the optimal allocation and discussed to death on boggleheads. They also believe international will outperform the US by a 2-3 percent over the next decade. I also sleep better at night with more diversification. I use IXUS and IEMG.

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Re: VTWAX and international allocation
« Reply #6 on: June 11, 2019, 11:24:53 PM »
20% based on lots of research by vanguard as the optimal allocation and discussed to death on boggleheads. They also believe international will outperform the US by a 2-3 percent over the next decade. I also sleep better at night with more diversification. I use IXUS and IEMG.
Ummwot:
>> To get the full diversification benefits, we recommend that you consider investing about 40% of your stock allocation in international stocks
https://investor.vanguard.com/investing/investment/international-investing

(And that's just because non-US happens to be about 40% right now.)

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Re: VTWAX and international allocation
« Reply #7 on: June 11, 2019, 11:26:58 PM »
Correct me if I'm wrong, but I think it may be cheaper to hold VTSAX/VTIAX in the same proportion of US/ex-US (in a total world index) than to hold the total world index itself.  It might be a negligible difference though, and the simplicity of always having a globally weighted index (rather than rebalancing periodically) might make it worth the small difference.
Indeed - but it's also cheaper to hold ETF's instead of mutual funds, and many people get hung up on reasons for not doing that either. (And yes: it's cheaper to hold VTI+VXUS than VT.)

CorpRaider

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Re: VTWAX and international allocation
« Reply #8 on: June 12, 2019, 12:37:39 PM »
20% based on lots of research by vanguard as the optimal allocation and discussed to death on boggleheads. They also believe international will outperform the US by a 2-3 percent over the next decade. I also sleep better at night with more diversification. I use IXUS and IEMG.
Ummwot:
>> To get the full diversification benefits, we recommend that you consider investing about 40% of your stock allocation in international stocks
https://investor.vanguard.com/investing/investment/international-investing

(And that's just because non-US happens to be about 40% right now.)

Yeah, anything other than the 1/n global market cap weighted index of assets is an active/choice bet to many.

neonlight

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Re: VTWAX and international allocation
« Reply #9 on: June 15, 2019, 05:03:42 PM »
20% based on lots of research by vanguard as the optimal allocation and discussed to death on boggleheads. They also believe international will outperform the US by a 2-3 percent over the next decade. I also sleep better at night with more diversification. I use IXUS and IEMG.

And 50% if you r non American;)