USA 2020 election year, diversify with VTIAX?

[magnet18]

Howdy y'all
Been a bit since I've been active, I searched for a similar thread to this but didn't find one, sorry if I missed it.


It looks like the US 2020 election is shaping up to be another doozy

I'm still accumulating (should hit 6 figures this year!) and currently 100% in VTSAX or equivalent funds

I love simplicity but I'm thinking it might be time to switch to a 2 fund portfolio and diversify into VTIAX/equivalent. 


So what percentage of non-american exposure are you guys currently holding/planning on holding this year? (0%? 50%? 100%?)

[dandarc]

Should I time the market? No.

I hold 55% VTSAX, 25% VTIAX, 20% VBTLX and have for many years. I will not be changing that because of something as trivial as a presidential election.

[magnet18]

Should I time the market? No.

I hold 55% VTSAX, 25% VTIAX, 20% VBTLX and have for many years. I will not be changing that because of something as trivial as a presidential election.

Not trying to time the market, wondering if I should broaden to a wider index as holding 100% US feels, relatively speaking, like holding just a California index or something.

Relatively new to investing and I hadn't worried about it until now

Thanks for sharing your allocation!

[dandarc]

Why frame the question with regards to an upcoming event?

Periodically reviewing your investing policy statement and possibly changing your allocation is good practice, but I'd suggest the reasons to change your allocation are more about changing life goals, learning new things, changes to your family, maybe even significant tax law changes. But a US election? Not even close.

The most compelling argument for adding an international component, to me, is "Why would you want to hold Ford but not Toyota?". So, if you find that you want that in your portfolio, figure out how much and make the change. I personally went with approximately the US to international ratio that you find in Vanguard's Life Strategy Growth fund - my 3 fund portfolio is slightly cheaper and I get enjoyment out of annually re-balancing the account.

[HPstache]

Should I time the market? No.

I hold 55% VTSAX, 25% VTIAX, 20% VBTLX and have for many years. I will not be changing that because of something as trivial as a presidential election.

We are almost twinning.  60% VTSAX, 20% VTIAX, 20% VBTLX is my allocation.

[terran]

Why do you think international stocks will outperform US stocks in response to the election? I could see it just as easily going the other way, and I have no special knowledge that makes me think I can predict that outcome any better than the market is already doing.

That said, I think it's wise to hold an international index equal to 20-40% of your stocks, so you might consider doing that, once you've settled on an allocation don't go adjusting it based on your predictions of the effect current events will have on the market because you'll probably be wrong.

While you're at it you should consider the rest of your asset allocation.

[JetBlast]

As others said, figuring out the effects of this election on the market is a fool’s errand. Whether to add international is really all about whether you want the diversification of international companies.

Personally I’m 70% VTSAX, 20% VTIAX, 10% VTBLX or the equivalents available in my 401k. Small play portfolio (about 5% of invested assets) excepted.

[EliteZags]

I've missed out on tens of thousands of gains in the past several years by having so much international exposure in target date funds, and started shifting those back to US indexes. I feel like actually leaving them in Targets/Intl would be trying to time the market(pullback) as heavier US exposure will most likely outperform long term

[wienerdog]

I've missed out on tens of thousands of gains in the past several years by having so much international exposure in target date funds, and started shifting those back to US indexes. I feel like actually leaving them in Targets/Intl would be trying to time the market(pullback) as heavier US exposure will most likely outperform long term

If you're only looking at the past several years that is your problem.



If anything mix in some small cap value with your target date fund to diversify if you want to move more towards US indexes.   See Paul Merriman's Two Funds for Life.

[PDXTabs]

FWIW I'm 100% VT, or a basket of Fidelity funds that approximate VT (I've done both, the latter is lower fee in my 401k).

[HPstache]

I've missed out on tens of thousands of gains in the past several years by having so much international exposure in target date funds, and started shifting those back to US indexes. I feel like actually leaving them in Targets/Intl would be trying to time the market(pullback) as heavier US exposure will most likely outperform long term

If you're only looking at the past several years that is your problem.



If anything mix in some small cap value with your target date fund to diversify if you want to move more towards US indexes.   See Paul Merriman's Two Funds for Life.

Excellent demonstration, but not sure why they call it a periodic table.  Similarities end at it 'looking' vaguely like a periodic table...

[Telecaster]

Should I time the market? No.

I hold 55% VTSAX, 25% VTIAX, 20% VBTLX and have for many years. I will not be changing that because of something as trivial as a presidential election.

Not trying to time the market, wondering if I should broaden to a wider index as holding 100% US feels, relatively speaking, like holding just a California index or something.

Relatively new to investing and I hadn't worried about it until now

Thanks for sharing your allocation!

Portfolio construction is a rabbit hole you can follow as far down as you want.    In general, yes it is a probably a good idea to have at least some international exposure.   There are some who say (very possibly correctly) that the big American companies that make up most of VTSAX (which is cap-weighted so you own more of the big companies) are actually international companies and you get international exposure that way.

On the flip side, as you point out VTSAX is heavily tech weighted, and VTIAX is more weighted towards industrial/consumer products companies.   So besides the international component, you get a bit of diversification among sectors as well. 

[EliteZags]

I've missed out on tens of thousands of gains in the past several years by having so much international exposure in target date funds, and started shifting those back to US indexes. I feel like actually leaving them in Targets/Intl would be trying to time the market(pullback) as heavier US exposure will most likely outperform long term

If you're only looking at the past several years that is your problem.



If anything mix in some small cap value with your target date fund to diversify if you want to move more towards US indexes.   See Paul Merriman's Two Funds for Life.

I actually recently started adding VSMAX, any reason to further direct it at small cap value instead?

[Buffaloski Boris]

I don't have VTSAX or VTIAX.  But I think to answer the question, I'm roughly 2/3 international, 1/3 US on equities exposure.  It has little to do with the election, a lot to do with my view that US equities are very pricey right now.

[wienerdog]

I've missed out on tens of thousands of gains in the past several years by having so much international exposure in target date funds, and started shifting those back to US indexes. I feel like actually leaving them in Targets/Intl would be trying to time the market(pullback) as heavier US exposure will most likely outperform long term

If you're only looking at the past several years that is your problem.



If anything mix in some small cap value with your target date fund to diversify if you want to move more towards US indexes.   See Paul Merriman's Two Funds for Life.

I actually recently started adding VSMAX, any reason to further direct it at small cap value instead?

You get value in that it is just weighted a little towards growth.  Academics say that over long periods of time the value side is just going to eek out a little more.  You can probably get the same advantage by making sure you use low cost funds (which it seems you are doing) and have good tax strategy.  Blending in some VSMAX with your target fund in my opinion is a good move.  I personally hold value though.  I also mix in some non US value to help VXUS.  Every little bit all adds up!

Not sure what your time frame is but you might be leaving some on the table using a target date fund.  If you're in your 20s then there really is no reason to be in bonds but I run on the aggressive side.

[magnet18]

>I'm not trying to time the market, I'm just trying buy some VTI during the election cycle in case...



Damn tiny human brain

In my short life, 2/3 party handoffs have coincided with SHTF (2001 & 2008) so I had a preconception that it was reasonable to assume a crash if there is a party handoff.  This is shaping up to be a very controversial election, sooooo...... *sigh*

The attached I found in another thread helped remind me of the bigger picture

Now that I've decided international exposurenis a good idea i get to try to meta-analyze myself and my motivations for adding/not-adding it

[Sanitary Stache]

@magnet18 I visited yardeni.com because I wanted to find an updated version of your graph.  I don't think there is one, but I did realize that his graphs have some kind of logarithmic scale to them, which seems totally unfair.

So I fond this other site and it shows the DJIA without inflation adjustment or logarithmic sacle.  It looks like CO2 in the atmosphere might be a reliable correlation to the DJIA.

[trollwithamustache]

OP's proposed strategy was pretty successful in 2016. Oh wait....

[magnet18]

@magnet18 I visited yardeni.com because I wanted to find an updated version of your graph.  I don't think there is one, but I did realize that his graphs have some kind of logarithmic scale to them, which seems totally unfair.

So I fond this other site and it shows the DJIA without inflation adjustment or logarithmic sacle.  It looks like CO2 in the atmosphere might be a reliable correlation to the DJIA.

On a similar note, I find it fascinating that we can use the DJIA to predict the number of sunspots

[MustacheAndaHalf]

If you look at returns by decade, US and international take turns beating each other in performance.

The percentages mentioned by terran are also backed up by a Vanguard white paper:
https://www.vanguard.com/pdf/ISGGEB.pdf

I would encourage OP to go from 0% international to 20% international, regardless of reasoning.  That helps you diversify in case the US lead gets taken over by international.  The 20% allocation has the highest chance of benefiting your portfolio, with 40% being still likely to benefit - but with less certainty.

[magnet18]

If you look at returns by decade, US and international take turns beating each other in performance.

The percentages mentioned by terran are also backed up by a Vanguard white paper:
https://www.vanguard.com/pdf/ISGGEB.pdf

I would encourage OP to go from 0% international to 20% international, regardless of reasoning.  That helps you diversify in case the US lead gets taken over by international.  The 20% allocation has the highest chance of benefiting your portfolio, with 40% being still likely to benefit - but with less certainty.

Thanks for the advice, and the white paper!

Just read it, very informative.

I do agree 20% seems to make a lot of sense, will do some rebalancing this weekend!

[Sanitary Stache]

@magnet18 I visited yardeni.com because I wanted to find an updated version of your graph.  I don't think there is one, but I did realize that his graphs have some kind of logarithmic scale to them, which seems totally unfair.

So I fond this other site and it shows the DJIA without inflation adjustment or logarithmic sacle.  It looks like CO2 in the atmosphere might be a reliable correlation to the DJIA.

On a similar note, I find it fascinating that we can use the DJIA to predict the number of sunspots

Nice.

[reeshau]

Look for international exposure because you have realized that the US stock markets only represent 50% of global market capitalization, and falling.

If you want to react to events, I see your US election and raise you Brexit trade negotiations, plus a coronavirus.  Event will always be happening.