Author Topic: Chat about international. VTIAX  (Read 8155 times)

TheAnonOne

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Chat about international. VTIAX
« on: April 07, 2017, 07:49:56 AM »
Hello,

I am getting ready to add some international.

I've seen VTIAX tossed around as the international 'go-to' much like VTSAX is for US stocks.

My reservations come from it's past performance. Am I missing something, it seems like the fund has gone no where in 10 to 15 years.

I am not going to pretend to judge future performance from past but I wonder if I am missing something.

Right from google...


tarheeldan

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Re: Chat about international. VTIAX
« Reply #1 on: April 07, 2017, 08:02:33 AM »
VTIAX is pretty new, but
« Last Edit: April 07, 2017, 08:08:49 AM by tarheeldan »

PizzaSteve

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Re: Chat about international. VTIAX
« Reply #2 on: April 07, 2017, 08:04:42 AM »
International has underperformed recently.   Yep.  That's how markets work.  They dont always go up.  Also, price is just one part of returns.  Might want to consider yield during that period and total returns. Yield is 2.5% due to heavy large cap industrials that pay out earnings.

I have held this in my 401k more or less since inception.  It has underperformed US shares.  Still hold it.
« Last Edit: April 07, 2017, 08:09:47 AM by PizzaSteve »

RWD

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Re: Chat about international. VTIAX
« Reply #3 on: April 07, 2017, 08:07:04 AM »
Not terrible since the fund was created in 1996. About 4.5% per year plus dividends.

skeeder

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Re: Chat about international. VTIAX
« Reply #4 on: April 07, 2017, 08:13:21 AM »
http://www.marketwatch.com/investing/fund/VTIAX
https://personal.vanguard.com/us/funds/snapshot?FundId=0569&FundIntExt=INT
http://portfolios.morningstar.com/fund/summary?t=VTIAX

You may also want to consider the distribution of dividends to stockholders.  Google doesn't tend to take much stock (meh...hehe) in distributions or anything else.  It literally is "at this date, price was X, it is now Y." Therefore ROR is Z.  Their calculation method is too simplistic.  The market...isn't quite that simplistic.  Unfortunately, there is no legal or industry 'standard' between IRR and DTWR. 

But overall,  I'm not really surprised.  46% in Europe and 42% in Asia.  Asia has been growing but the EU has definitely had its hicups these past few years.

Honestly, I love international funds, but the truth is you should NOT expect them to act as a steady grower.  Personally, I put my money on the Pacific Rim and other BRICK countries, but that is a small part of my portfolio. 

« Last Edit: April 07, 2017, 08:15:29 AM by skeeder »

PathtoFIRE

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Re: Chat about international. VTIAX
« Reply #5 on: April 07, 2017, 08:22:35 AM »
An oldie but a goodie, recommend you review the chart below, MSCI EAFE and MSCI Emerging are international stock indices, VTIAX would heavily tilt toward EAFE. It has indeed been near the bottom the past few years, but go back a few more, and it's one of the better performers. This chart helps explain one of the reasons to add a little diversity to your allocation, although few here including myself would recommend holding each category separately. VTSAX, VTIAX, and VBMFX together dips your toes in at least a little of each of those.

https://www.callan.com/wp-content/uploads/2017/01/Callan-PeriodicTbl_KeyInd_2017.pdf

TheAnonOne

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Re: Chat about international. VTIAX
« Reply #6 on: April 07, 2017, 08:31:31 AM »
So, do some people here NOT own VTIAX and instead invest in international WITHOUT Europe?

It seems like to me EU is a drag on returns and has little to no future, no population growth, no large industry, ect

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PizzaSteve

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Re: Chat about international. VTIAX
« Reply #7 on: April 07, 2017, 08:40:53 AM »
So, do some people here NOT own VTIAX and instead invest in international WITHOUT Europe?

It seems like to me EU is a drag on returns and has little to no future, no population growth, no large industry, ect

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The problem with this thinking is that some of the best international companies trade on the european exchange.  Its important to understand that, for instance, Daimler-Benz, a Germany based company is selling cars in China.  It is like understanding that when you buy S&P500 US stocks you are actually fairly globally diverse because most large US companies work globally.

Cycling Stache

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Re: Chat about international. VTIAX
« Reply #8 on: April 07, 2017, 08:43:38 AM »
So, do some people here NOT own VTIAX and instead invest in international WITHOUT Europe?

It seems like to me EU is a drag on returns and has little to no future, no population growth, no large industry, ect

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Another example of . . . but maybe I know more than the market?

It's tempting to think like that, but the short answer is that you do not know more than the market.  Indexing is based on that premise.  Adding international makes sense because it's indexing over a broader base.  Presumably whatever concerns people have about the EU, etc., is priced in right now.  Adding international gives greater diversity, reduces risk, and reduces volatility (precisely for the reason that US and international are not always closely correlated). 

When I started looking at this last summer, Interest Compound had a lot of great charts.  Yes, international has underperformed the last 10-20 years, but it overperformed before that.  True of individual US stocks as well, but you don't notice because you own the US market, and the US market has gone up over time.

TheAnonOne

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Re: Chat about international. VTIAX
« Reply #9 on: April 07, 2017, 08:51:01 AM »
So when I look at the google chart "underperforming" looks a lot like losses against inflation.

Are the real returns actually 3% higher due to lack of including the distribution?

What if someone wanted a tilt to emerging market? Asian markets? Is this a bad idea, similar to market timing?

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the_gastropod

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Re: Chat about international. VTIAX
« Reply #10 on: April 07, 2017, 09:28:43 AM »
Are the real returns actually 3% higher due to lack of including the distribution?
Yep! The TTM yield is ~2.75%. So reality is a little brighter than that google graph is painting things. http://beta.morningstar.com/funds/XNAS/VTIAX/quote.html

Quote from: TheAnonOne
What if someone wanted a tilt to emerging market? Asian markets? Is this a bad idea, similar to market timing?

It depends on your reasoning and your asset allocation plan. If you're tilting because Total International is underperforming US, then yes, that's the asme as market timing. But if emerging markets is part of your asset allocation, and you intend to hold it for 30+ years, it's perfectly reasonable.

TheAnonOne

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Re: Chat about international. VTIAX
« Reply #11 on: April 07, 2017, 09:38:45 AM »
Are the real returns actually 3% higher due to lack of including the distribution?
Yep! The TTM yield is ~2.75%. So reality is a little brighter than that google graph is painting things. http://beta.morningstar.com/funds/XNAS/VTIAX/quote.html

Quote from: TheAnonOne
What if someone wanted a tilt to emerging market? Asian markets? Is this a bad idea, similar to market timing?

It depends on your reasoning and your asset allocation plan. If you're tilting because Total International is underperforming US, then yes, that's the asme as market timing. But if emerging markets is part of your asset allocation, and you intend to hold it for 30+ years, it's perfectly reasonable.
Presumably, my reasoning is that they are less mature economically and have higher upsides. I wouldn't probably ever sell them other than after FIRE in chunks to live on.

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Heckler

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Re: Chat about international. VTIAX
« Reply #12 on: April 07, 2017, 10:23:26 PM »


Right from google...

That graph assumes you bought and held at the start of time.  In reality,, you will buy regularily during the high and low points and then later on sell during the high points.

My XEF:CA EAFE is +16.62 since 2014. Not as good as my US Total Market, but a lot better than my CDN All-cap.  Diversification works to smooth the ride.

Radagast

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Re: Chat about international. VTIAX
« Reply #13 on: April 08, 2017, 09:36:03 AM »
Are the real returns actually 3% higher due to lack of including the distribution?
Yep! The TTM yield is ~2.75%. So reality is a little brighter than that google graph is painting things. http://beta.morningstar.com/funds/XNAS/VTIAX/quote.html

Quote from: TheAnonOne
What if someone wanted a tilt to emerging market? Asian markets? Is this a bad idea, similar to market timing?

It depends on your reasoning and your asset allocation plan. If you're tilting because Total International is underperforming US, then yes, that's the asme as market timing. But if emerging markets is part of your asset allocation, and you intend to hold it for 30+ years, it's perfectly reasonable.
Presumably, my reasoning is that they are less mature economically and have higher upsides. I wouldn't probably ever sell them other than after FIRE in chunks to live on.

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I overweight small foreign companies and emerging markets. In fact in tax sheltered accounts that is all my foreign stock. I don't see any thing wrong with that.

tsukuba

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Re: Chat about international. VTIAX
« Reply #14 on: April 08, 2017, 04:20:56 PM »



I suppose you recall the thread "Conundrum" I started just a few weeks ago.
This chart does not make me optimistic.
The rally up to 1989 was driven by the Japan bubble, the runnup to 2007 was a China bubble.

https://app2.msci.com/products/indexes/performance/regional_chart.html?chart=regional&priceLevel=41&scope=R&style=C&currency=15&size=36&indexId=108#

Unless you have a 25 y time span, this almost makes me want to look country specific, as to which country is coming on the scene.

DavidAnnArbor

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Re: Chat about international. VTIAX
« Reply #15 on: April 09, 2017, 11:33:39 AM »
The rally up to 1989 was driven by the Japan bubble, the runnup to 2007 was a China bubble.


It's these kinds of bubbles that confirmed for me why I should be in international, in case we have the 2018 US bubble.

PizzaSteve

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Re: Chat about international. VTIAX
« Reply #16 on: April 09, 2017, 12:19:59 PM »
The rally up to 1989 was driven by the Japan bubble, the runnup to 2007 was a China bubble.


It's these kinds of bubbles that confirmed for me why I should be in international, in case we have the 2018 US bubble.
The nature of markets.  Growth leads to enthusiasm, then exuberance, at some point disappointment, losses cause some misery, eventually fundamentals claw back to a recovery.  Tends to take decades.  A good educational exercise to remember that.

Solid growth and value exists in Japan, China, US.  Own it, but dont put too much faith in what it is selling for.  Japan got ahead of itself, but values are back where they were.

chuffly

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Re: Chat about international. VTIAX
« Reply #17 on: April 09, 2017, 03:12:08 PM »



I suppose you recall the thread "Conundrum" I started just a few weeks ago.
This chart does not make me optimistic.
The rally up to 1989 was driven by the Japan bubble, the runnup to 2007 was a China bubble.

https://app2.msci.com/products/indexes/performance/regional_chart.html?chart=regional&priceLevel=41&scope=R&style=C&currency=15&size=36&indexId=108#

Unless you have a 25 y time span, this almost makes me want to look country specific, as to which country is coming on the scene.

Yes, but this goes both ways.  Japan at the height of its 1989 had the largest market cap in the world, surpassing even the US.  As a result of the Japanese equity bubble popping, international stock returns were weighed down for years.

As to the 2003 - 07 period being driven solely by the China bubble ... not quite sure how correct that is, as I don't think they made up a large enough share of global equities at the time to have single-handedly have driven and then weighed down VTIAX's returns (even today, Chinese equities only constitute about 5% of VXUS assets).  That said, there's no doubt that EM's in general (and especially the BRIC's, which would include China) had entered a bubble phase by 2007.

With all that said, it's hard to look at current valuations and see any foreign market in danger of entering bubble territory (See Here).   But if you specifically are concerned about avoiding the most expensive foreign markets, you can always look into Meb Faber's GVAL ETF, which only invests in the lowest quartile countries according to valuation (full disclosure - I have about 10% of my investment money invested in GVAL).

Interest Compound

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Re: Chat about international. VTIAX
« Reply #18 on: April 09, 2017, 03:24:32 PM »
A 10 year timeframe is nothing. Sometimes International wins, and sometimes Domestic wins. It all depends on when you're looking. Had you sat down in January 2014 and ran the numbers, you'd see International ahead since 1971! 43 years of International outperformance!



Instead you're looking at it today, just when Domestic crossed over and started winning:



It all depends on your timeline - when you're looking. You can't predict which country will outperform in the future, just like you can't predict which stock will outperform in the future. Heck, you can't even predict your own personal timeline! The only way to win this game, is to not play. Market-weight, currently 54/46 USA/International, is the only thing that makes sense.

Looking at some 30+ year time periods for International:

The money you invested in Jan 1971 - has made 10% a year
The money you invested in Jan 1972 - has made 9% a year
The money you invested in Jan 1973 - has made 10% a year
The money you invested in Jan 1974 - has made 11% a year
The money you invested in Jan 1975 - has made 10% a year
The money you invested in Jan 1976 - has made 10% a year
The money you invested in Jan 1977 - has made 10% a year
The money you invested in Jan 1978 - has made 9% a year
The money you invested in Jan 1979 - has made 10% a year
The money you invested in Jan 1980 - has made 9% a year
The money you invested in Jan 1981 - has made 10% a year
The money you invested in Jan 1982 - has made 10% a year
The money you invested in Jan 1983 - has made 9% a year
The money you invested in Jan 1984 - has made 10% a year
The money you invested in Jan 1985 - has made 8% a year

I'm not sure what you're expecting out of the stock market. Those are some pretty good numbers.

DavidAnnArbor

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Re: Chat about international. VTIAX
« Reply #19 on: April 10, 2017, 07:22:03 PM »
So far for this year international is ahead of US.

VTIAX +7.94%

VTSAX +5.50%

tsukuba

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Re: Chat about international. VTIAX
« Reply #20 on: April 10, 2017, 08:15:55 PM »
The rally up to 1989 was driven by the Japan bubble, the runnup to 2007 was a China bubble.


It's these kinds of bubbles that confirmed for me why I should be in international, in case we have the 2018 US bubble.

Good point.

FrugalZony

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Re: Chat about international. VTIAX
« Reply #21 on: April 10, 2017, 11:04:48 PM »
I had started putting my international allocation into VTIAX, but then last year, when I was moving into my FIRE allocation,
and reviewing things, I decided to hold VFWAX instead, so I used some TLH opportunity to rebalance.
Future contributions if any (currently not contributing) would also go into VFWAX which is pretty much all world EX US.
I figured it would be a better complement to VTSAX, where I have most of my money.

TheAnonOne

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Re: Chat about international. VTIAX
« Reply #22 on: April 11, 2017, 01:40:06 PM »
Thanks everyone, this has been super helpful.

So my plan is to hold basically vtiax and vtsax. (100% stocks)

Should VTIAX go into my taxable account? I've already maxed all of my tax advantaged space for 2017.



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DavidAnnArbor

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Re: Chat about international. VTIAX
« Reply #23 on: April 11, 2017, 04:07:39 PM »
Thanks everyone, this has been super helpful.

So my plan is to hold basically vtiax and vtsax. (100% stocks)

Should VTIAX go into my taxable account? I've already maxed all of my tax advantaged space for 2017.



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Yes you can. You'll eventually end up with a foreign tax credit.

TheAnonOne

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Re: Chat about international. VTIAX
« Reply #24 on: April 11, 2017, 04:52:51 PM »
Thanks everyone, this has been super helpful.

So my plan is to hold basically vtiax and vtsax. (100% stocks)

Should VTIAX go into my taxable account? I've already maxed all of my tax advantaged space for 2017.



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Yes you can. You'll eventually end up with a foreign tax credit.
Right, I know I can, but I am unsure where the best optimal spot is.

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Eric

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Re: Chat about international. VTIAX
« Reply #25 on: April 11, 2017, 06:51:47 PM »
Since no one has mentioned it yet, another reason for the (relatively) poor performance of VTIAX lately is that the USD is ridiculously strong compared to past valuations.  So when your VTIAX gains are in foreign currencies, when they get converted back to USD, they seem weaker than they would be if everything was using the same currency. 

I view this as another reason why VTIAX is a good buy, as if/when the USD reverts to it's mean, the gains will increase through currency exchange alone.

bassman2003

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Re: Chat about international. VTIAX
« Reply #26 on: April 11, 2017, 07:05:24 PM »
Since no one has mentioned it yet, another reason for the (relatively) poor performance of VTIAX lately is that the USD is ridiculously strong compared to past valuations.  So when your VTIAX gains are in foreign currencies, when they get converted back to USD, they seem weaker than they would be if everything was using the same currency. 

I view this as another reason why VTIAX is a good buy, as if/when the USD reverts to it's mean, the gains will increase through currency exchange alone.

+1.  When the USD is strong, they'll occasionally mention on the news that it's a good time for Americans to do international travel.....I always think about it being a great time to buy international funds.... 😀

johnny847

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Re: Chat about international. VTIAX
« Reply #27 on: April 11, 2017, 11:02:55 PM »
Thanks everyone, this has been super helpful.

So my plan is to hold basically vtiax and vtsax. (100% stocks)

Should VTIAX go into my taxable account? I've already maxed all of my tax advantaged space for 2017.



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Yes you can. You'll eventually end up with a foreign tax credit.
Right, I know I can, but I am unsure where the best optimal spot is.

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https://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/msg721598/#msg721598

MustacheAndaHalf

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Re: Chat about international. VTIAX
« Reply #28 on: April 12, 2017, 04:37:12 AM »
Thanks everyone, this has been super helpful.

So my plan is to hold basically vtiax and vtsax. (100% stocks)

Should VTIAX go into my taxable account? I've already maxed all of my tax advantaged space for 2017.



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Yes you can. You'll eventually end up with a foreign tax credit.

Just as a counter-point to this, I think international has about 3% in dividends while U.S. Total market has about 2%.  Even at qualified dividend tax rates (0.15 x 1%), I think the foreign tax credit gets lost in the higher dividends.

You could also break VTIAX into two of it's component parts, Vanguard Developed Markets and Vanguard Emerging Markets, and buy those separately in an 80% developed and 20% emerging proportion.  See the contents of VTIAX if you want the exact percentages.

johnny847

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Re: Chat about international. VTIAX
« Reply #29 on: April 12, 2017, 04:11:20 PM »
Thanks everyone, this has been super helpful.

So my plan is to hold basically vtiax and vtsax. (100% stocks)

Should VTIAX go into my taxable account? I've already maxed all of my tax advantaged space for 2017.



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Yes you can. You'll eventually end up with a foreign tax credit.

Just as a counter-point to this, I think international has about 3% in dividends while U.S. Total market has about 2%.  Even at qualified dividend tax rates (0.15 x 1%), I think the foreign tax credit gets lost in the higher dividends.

That is exactly what I broke down in detali in my previous post