Author Topic: International Exposure check up  (Read 641 times)

Travis

  • Magnum Stache
  • ******
  • Posts: 2594
  • Location: South Korea
International Exposure check up
« on: September 28, 2019, 09:41:35 PM »
When I first set up my portfolio several years ago I decided that 25% would be in international stocks.  I'm 75/25 US stocks/International stocks. No bonds.  I've been going through my past transactions and saw that nearly all the contributions for the last year have been to my international fund because it consistently lags behind my US stock index.  I want to say "it's the allocation you chose, stick with it," but the devil on my other shoulder has been saying "it's a drag on your portfolio with debatable benefits." 

I know investing in international indexes is a hot subject and encompasses hundreds of pages of discussion at Bogleheads (to no conclusion).  Stick to the plan, or am I betting on the wrong horse?

Buffalo Chip

  • Pencil Stache
  • ****
  • Posts: 629
  • Location: Tidewater Virginia
Re: International Exposure check up
« Reply #1 on: September 29, 2019, 05:19:08 AM »
When I first set up my portfolio several years ago I decided that 25% would be in international stocks.  I'm 75/25 US stocks/International stocks. No bonds.  I've been going through my past transactions and saw that nearly all the contributions for the last year have been to my international fund because it consistently lags behind my US stock index.  I want to say "it's the allocation you chose, stick with it," but the devil on my other shoulder has been saying "it's a drag on your portfolio with debatable benefits." 

I know investing in international indexes is a hot subject and encompasses hundreds of pages of discussion at Bogleheads (to no conclusion).  Stick to the plan, or am I betting on the wrong horse?

International is a big place.  I realize that many US based index funds lump the rest of the world together and sell it as an "international" fund. But is that the best approach?  Some national markets are long term dogs that have never provided much for investors. Other markets are doing relatively well at this time, while others aren't but probably will later. I like to at least be able to pick the country. 

I'm not a fan of the US market overall right now. Its at the tail end of a bull market with extremely high PE ratios both from a historic point of view and as compared to other countries. Buy very high and sell still higher?  Sure.  Why not?  It's just not to my taste and I'll take a pass.

I'm not an investment advisor and I don't play one on TV.  So this is just my opinion:  I think we're on the cusp of a lot of developed countries going into a recession.  The US notsomuch, but still some interesting signs. Most of my stock exposure is international right now because that's relatively speaking where I see the upside potential.  But I'm not all that excited about stocks in general right now.  A lot of money chasing not much opportunity.

NorCal

  • Pencil Stache
  • ****
  • Posts: 757
Re: International Exposure check up
« Reply #2 on: September 29, 2019, 07:11:30 AM »
All of the discussion over international vs. not will never be resolved, because it's a topic that can only be proven with the value of hindsight.

I lean towards including it.  Of the stock portion of my portfolio (60%), 2/3 is domestic, 1/3 is international.  I agree that international hasn't performed as well over the last few years.  But International stocks are much cheaper than US stocks. 

The perpetual question is whether US companies deserve such a premium to the rest-of-world. 

The one guarantee in investing over time is that a diversified portfolio will outperform a non-diversified portfolio on a risk-adjusted basis.

Wintergreen78

  • Stubble
  • **
  • Posts: 135
Re: International Exposure check up
« Reply #3 on: September 29, 2019, 10:47:14 AM »
Iím in a similar boat as you. Iím at about 20% bonds (sort of - long story for another day), 25% international equity, 55% domestic equity. Looking back over the last few years, domestic has been much better.

Every so often I have moments where I think I should change things to reduce the international percentage. Then I decide to do nothing, ignore it, and think about it again in six months.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5014
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: International Exposure check up
« Reply #4 on: September 29, 2019, 11:09:45 AM »


International (developed market) equities have outperformed US large cap equities in 10 of the past 20 years. Emerging market equities have outperformed US large caps in 11 of the past 18 years. You've been dumping money into international recently because the past couple years have seen the US markets perform better. It's all cyclical though. When you stick with your pre-determined asset allocation that generally means you're buying lower and selling higher, for whatever asset classes you happen to be buying or selling.

flipboard

  • Bristles
  • ***
  • Posts: 280
Re: International Exposure check up
« Reply #5 on: September 29, 2019, 12:31:53 PM »
I think anyone who exhibits home-bias and underweights the rest of the world needs a checkup indeed.

vand

  • Bristles
  • ***
  • Posts: 358
  • Location: UK
Re: International Exposure check up
« Reply #6 on: September 29, 2019, 01:33:57 PM »
If that is your desired AA then I wouldn't lose sleep over it, as I'm willing to bet that a 75/25 portfolio of US/Non-US equities only portfolio is going to have perhaps 0.97-0.99 correlation to a 100% US portfolio.

Scortius

  • Bristles
  • ***
  • Posts: 463
Re: International Exposure check up
« Reply #7 on: September 30, 2019, 05:24:48 PM »
From a contrarian point of view, isn't that a good thing? You decided a while ago that your ideal allocation included some international for diversification. If the point is to buy low and sell high, then by that rule you are doing great. Wouldn't the opposing view that you're espousing result in continually "de-balancing" your portfolio by continuing to purchase only those categories that have become more expensive?

shinn497

  • Bristles
  • ***
  • Posts: 353
Re: International Exposure check up
« Reply #8 on: September 30, 2019, 11:05:57 PM »
Diversification, especially international diversification, increases the likelihood of your return, not necessarily the amount of your return.