The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: kukrik on May 10, 2019, 07:56:55 AM
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Just wondering what people's opinions are. Trying to figure out how to diversify my portfolio.
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VTIAX is the mutual fund version and VXUS is the ETF version of total international. It is kind of like the international version of VTSAX (or VTI). Start with that.
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Cool, that is sort of what I was thinking, good to get confirmation.
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A global index fund contains roughly 50% US equities as the US stock market is roughly 50% of the world's total. The VITAX is foreign-only as far as I can tell. By investing in an international fund you are also adding FX risk to the cocktail unless its a fund managed on an FX hedged basis. This will be mainly EUR and JPY FX risk.
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A global index fund contains roughly 50% US equities as the US stock market is roughly 50% of the world's total. The VITAX is foreign-only as far as I can tell. By investing in an international fund you are also adding FX risk to the cocktail unless its a fund managed on an FX hedged basis. This will be mainly EUR and JPY FX risk.
Closer to 60% right now.
By not using "international" you're massively increasing risk due to lack of diversification. Two sides of the same coin.
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Yeah - the main point was to actually diversify. For a us investor that does not mean buy global equities. For me in a tiny European country it does. But don’t forget the fx risk. You make usd, all your bills are in usd but part of your wealth will now be denominated in a foreign currency. It’s not a problem, just know it’s there if the fund is unhedged in fx space. And fx can move. A lot.
EUR is the biggest foreign market. In the last 20 years the cost of 1 EUR has been between 0.8 and 1.6 USD roughly.
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Yeah - the main point was to actually diversify. For a us investor that does not mean buy global equities. For me in a tiny European country it does. But don’t forget the fx risk. You make usd, all your bills are in usd but part of your wealth will now be denominated in a foreign currency. It’s not a problem, just know it’s there if the fund is unhedged in fx space. And fx can move. A lot.
EUR is the biggest foreign market. In the last 20 years the cost of 1 EUR has been between 0.8 and 1.6 USD roughly.
Everyone needs to diversify, being in a big country doesn't change that.
Valuations can move just as much as FX does, foreign currencies are just a tiny part of the story. What a stock is denominated in doesn't affect the underlying value.
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If you want just one holding, you can buy VXUS and hold all non-US stocks in one ETF. VXUS consists of ~20% emerging markets and ~80% developed markets, costing 0.09%/year (expense ratio).
You could split that into VEA and VWO: 80% in VEA (0.05% expense ratio), 20% in VWO (0.12% expense ratio) for an average expense ratio of 0.064%. But it's probably not worth doing for the savings alone, since the savings compounded over 40% years adds up to 1% of assets.
There's also non-Vanguard ETFs (which are $0/trade at Vanguard) like IXUS (iShares).
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VTWAX is a global stock market index fund (US and Int'l) I like the simplicity of one stock holding even if the expense ratio is slightly higher (0.10%)
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VTWAX is a global stock market index fund (US and Int'l) I like the simplicity of one stock holding even if the expense ratio is slightly higher (0.10%)
I just don't understand this logic. Holding two funds - a US market index and a global ex-US index is pretty simple and opens up a whole world* of rebalancing opportunities over the long-term.
*Puns always intended.