Author Topic: Talk me into VTIAX  (Read 7170 times)

RedmondStash

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Talk me into VTIAX
« on: April 30, 2018, 08:34:55 PM »
I've got my stock/bond/cash AA where I want it (72/22/6), but now I'm researching more about international index funds and feeling like I'm missing the boat. VTSAX has me nicely diversified in the U.S. market, and I sort of thought that since so many companies are basically multinational, that had me covered globally. But the more I read, the more VTIAX seems important too.

I've already moved about 10% of my investments to VTIAX, but I keep reading about people having and recommending 25-50%. But I'm having trouble persuading myself to invest more in an index fund that hasn't performed that well over the last 5-10 years overall, despite having higher dividends than VTSAX. I'm recently FIREd, so I can't just invest new funds in VTIAX; I'd have to sell VTSAX to do it.

So why should I up my VTIAX percentage? And by how much?

Thanks.

Radagast

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Re: Talk me into VTIAX
« Reply #1 on: April 30, 2018, 09:36:43 PM »
I think I see a pattern!

Developed markets only. Source: https://www.ifa.com/pdf/matrix%20book%202017.pdf

My opinion, you should not have more than 50% targeted towards US stocks if you have enough money to be worth preserving. If your bonds and cash are fine, then that puts you at 50:22:22:6. It doesn't have to be VTIAX. You can split between VWO and SCHC if it makes you happy.

RedmondStash

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Re: Talk me into VTIAX
« Reply #2 on: April 30, 2018, 10:33:13 PM »
I think I see a pattern!

<snip>

My opinion, you should not have more than 50% targeted towards US stocks if you have enough money to be worth preserving. If your bonds and cash are fine, then that puts you at 50:22:22:6. It doesn't have to be VTIAX. You can split between VWO and SCHC if it makes you happy.

Interesting and persuasive graphic. It's almost like there's a successful world outside the U.S.

Thank you.

MustacheAndaHalf

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Re: Talk me into VTIAX
« Reply #3 on: May 01, 2018, 07:03:00 AM »
While I agree with diversification, a graph that assumes the world consists of 21 countries probably suffers from cherry picking which countries were included.  In general it helps to think about what assumptions are built into data you're seeing, so you don't make the same assumptions when you use that same data to make decisions.

But for those deciding international v.s. U.S. allocation, Vanguard put out a white paper that suggests 20-40% international.  The low end is for those seeking the highest chance of benefiting from diversification, and the 40% number for those who can tolerate longer periods where international under performs.
https://www.vanguard.com/pdf/ISGGEB.pdf

frugal_c

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Re: Talk me into VTIAX
« Reply #4 on: May 01, 2018, 04:27:51 PM »
I would buy it and I have bought it.

I realize people don't like to talk about valuations here but VTIAX seems really cheap on a PE basis.  I don't have the CAPE numbers but for the few countries looked up they tend to be lower.  International seems like a decent bet right now as you don't have the overvaluations present in US markets.

mjb

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Re: Talk me into VTIAX
« Reply #5 on: May 01, 2018, 04:50:40 PM »
JL Collins' arguments against International/VTIAX basically boil down to, "it's more expensive than VTSAX and there's a little extra risk." Considering his approach is focused on simplicity, that makes sense, but he admits it's not a bad thing to hold International stocks and that he might do it in the future. (Jack Bogle, on the other hand, is explicitly negative on International equities.)

I'm 60% VTSAX/40% VTIAX, because that's the split Vanguard uses for their Target Retirement and LifeStrategy funds. They're smarter than me and it's best if I don't think about it too much.

(I would personally just go 100% Vanguard Total World Stock (VT), but I hold both VTSAX and VTIAX in a taxable account and don't want to realize the capital gains just yet.)

Assuming you're recently FIREd and want an International allocation, why don't you:

  • Sell shares of VTSAX as needed to fund your lifestyle
  • Stop automatically reinvesting dividends into VTSAX
  • Purchase new shares of VTIAX with your dividends until you reach your equity allocation target
« Last Edit: May 01, 2018, 04:55:27 PM by mjb »

boarder42

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Re: Talk me into VTIAX
« Reply #6 on: May 01, 2018, 04:59:35 PM »
I plan to be 50 40 10 us int maybe bonds. When I retire. Right now I hold all us heavy small cap. Depending on market conditions when I retire I may decide to be heavier small cap.

RedmondStash

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Re: Talk me into VTIAX
« Reply #7 on: May 01, 2018, 06:14:43 PM »
Thanks, everyone.

calpolyjohn

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Re: Talk me into VTIAX
« Reply #8 on: May 04, 2018, 03:08:11 PM »
JL Collins' arguments against International/VTIAX basically boil down to, "it's more expensive than VTSAX and there's a little extra risk." Considering his approach is focused on simplicity, that makes sense, but he admits it's not a bad thing to hold International stocks and that he might do it in the future. (Jack Bogle, on the other hand, is explicitly negative on International equities.)

I'm 60% VTSAX/40% VTIAX, because that's the split Vanguard uses for their Target Retirement and LifeStrategy funds. They're smarter than me and it's best if I don't think about it too much.

(I would personally just go 100% Vanguard Total World Stock (VT), but I hold both VTSAX and VTIAX in a taxable account and don't want to realize the capital gains just yet.)

Assuming you're recently FIREd and want an International allocation, why don't you:

  • Sell shares of VTSAX as needed to fund your lifestyle
  • Stop automatically reinvesting dividends into VTSAX
  • Purchase new shares of VTIAX with your dividends until you reach your equity allocation target

I think another part of the argument against International stocks by JL Collins was that the S&P 500 gives you a lot of exposure to international already.  For example, about 40% of their revenue from America with the rest coming from Europe, China, Japan, and a bunch of other countries.