Author Topic: Waiting for the international sale?  (Read 6217 times)

dilinger

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Waiting for the international sale?
« on: July 08, 2015, 04:48:10 AM »
I have so far ignored international stocks.  I'm 90% VTSAX, 10% VBTLX.  I have no real interest in investing internationally simply for the sake of diversification.

That said, I'm seeing news like the following and wondering - will international stocks soon be on sale?

http://money.cnn.com/2015/07/08/investing/china-stocks-suspended/index.html
http://www.bloomberg.com/news/articles/2015-07-08/europe-index-futures-rise-with-stocks-near-correction-on-greece

I'm keeping an eye on VPADX and VEMAX for now; what other (admiral) shares should I be looking at for deals in the near future?

forummm

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Re: Waiting for the international sale?
« Reply #1 on: July 08, 2015, 05:53:04 AM »
They're "on sale" now. Don't try to market time. Stick with your AA.

johnny847

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Re: Waiting for the international sale?
« Reply #2 on: July 08, 2015, 06:08:35 AM »
The only reason to include international stocks in your stock allocation is to get diversification. If you don't want that then don't buy international stocks. It doesn't matter how much of a "sale" there is.

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dungoofed

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Re: Waiting for the international sale?
« Reply #3 on: July 08, 2015, 07:19:52 AM »
They're "on sale" now. Don't try to market time. Stick with your AA.

Agree. For an American with American dollars the rest of the world may not be this cheap again for a while.

johnny847

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Re: Waiting for the international sale?
« Reply #4 on: July 08, 2015, 07:25:21 AM »
They're "on sale" now. Don't try to market time. Stick with your AA.

Agree. For an American with American dollars the rest of the world may not be this cheap again for a while.

I'm a little puzzled by this. You're agreeing that they are on sale...implying that OP should buy some of these international stocks? But that would contradict forummm's advice of "don't try to market time"?

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Re: Waiting for the international sale?
« Reply #5 on: July 08, 2015, 07:26:49 AM »

I'm a little puzzled by this. You're agreeing that they are on sale...implying that OP should buy some of these international stocks? But that would contradict forummm's advice of "don't try to market time"?

Buy now isn't timing the market. "Wait and see" is timing the market.  They could go down further, or they might go up.

dungoofed

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Re: Waiting for the international sale?
« Reply #6 on: July 08, 2015, 07:34:41 AM »
Agree that they're on sale now. I didn't intend to comment on market timing but wanted to drive home that I think it's a preposterous statement to imply that they're not on sale now. If this makes me a filthy market timer then so be it. 

I agree "stick with your AA" is a nice simple way to help you buy low.

johnny847

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Re: Waiting for the international sale?
« Reply #7 on: July 08, 2015, 07:35:38 AM »

I'm a little puzzled by this. You're agreeing that they are on sale...implying that OP should buy some of these international stocks? But that would contradict forummm's advice of "don't try to market time"?

Buy now isn't timing the market. "Wait and see" is timing the market.  They could go down further, or they might go up.

But take it in context. The OP specifically said that he/she doesn't want to invest internationally simply for the sake of diversification. The only reason the OP is considering this is because international stocks are "on sale."

Market timing:
After seeing news of international stocks being "on sale," one decides to change his or her AA to include international stocks.
This is an attempt to chase returns.
Let this attitude go on, and it can lead to things like oh Canada's dollar just crashed, let's buy some Canadian stock index funds. Oh Italy left the Euro zone, let's buy some European stock index funds. Etc.

Not market timing:
One decides to change his or her AA to include international stocks whilst unaware of what's happening internationally. He or she happens to buy international stocks when they are "on sale."
This is an attempt to increase diversification.

johnny847

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Re: Waiting for the international sale?
« Reply #8 on: July 08, 2015, 07:44:18 AM »
Agree that they're on sale now. I didn't intend to comment on market timing but wanted to drive home that I think it's a preposterous statement to imply that they're not on sale now. If this makes me a filthy market timer then so be it. 

I agree "stick with your AA" is a nice simple way to help you buy low.

So your beef is with the use of "" implying that we don't actually believe they're on sale?

I use quotes because we don't know if this truly is a price drop worth acting on (and hence, in my book, not really a sale). A sale is always relative. Maybe international funds are due for a 50% drop tomorrow. Who knows. The current discount of international funds of a few percent relative to before this whole Greek business is technically a sale, sure. But I don't really consider it a sale. I just see it as all part of the random market movements that happen every single day. Some days it experiences greater movements than others. This is to be expected.

Furthermore, I question if a mere drop in price, even if it is a large one, is a true sale (even though I myself have referred to stocks post market crash as being on sale). In my opinion a true sale on stocks is when buying them when the market is behaving inefficiently.

dungoofed

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Re: Waiting for the international sale?
« Reply #9 on: July 08, 2015, 09:06:45 AM »
No beef. And "preposterous statement" was in reference to the OP.

USD has strengthened against several currencies including the Euro for about nine months now, pretty much since The Fed indicated to markets that it was approaching time to hike rates. Combine this with (Shiller) PE, Market Cap to GDP, etc all the usual indicators pointing to the fact that there are no bargains to be had at home for US investors, PLUS the fact that if you were just rebalancing by putting a fixed amount into a 50/50 domestic/international portfolio over the last 12 months almost all of it would have gone into international*, and I'd say that "international markets are on sale, and have been for a while, but won't be forever" is a fair statement. That's all I'm saying.



*assuming say a 100K portfolio, adding $1000/month

dilinger

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Re: Waiting for the international sale?
« Reply #10 on: July 11, 2015, 04:24:55 PM »
Thanks for all the input.  After doing https://personal.vanguard.com/us/funds/tools/recommendation , I realized that I probably should just make international index funds part of my portfolio.  You're definitely correct that I shouldn't be trying to time the market.

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Re: Waiting for the international sale?
« Reply #11 on: July 11, 2015, 05:32:53 PM »
Canada will be in recession soon, Greece....well their problems won't disappear soon and China is a curious case....Just invest now in the international market. They are on sale and I have a feeling it will last for a little while.

Ohio Teacher

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Re: Waiting for the international sale?
« Reply #12 on: July 11, 2015, 06:10:53 PM »
My target AA is 57% domestic stocks / 28% intl stocks / 15% bonds.  If this fluctuates too much, such as a dip in intl stocks leading to them only being 26%, I buy more intl than domestic that month.  That is the only time I would consider changing buying habits based on stock prices to be appropriate, since it is helping me return to my target AA.

dilinger

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Re: Waiting for the international sale?
« Reply #13 on: July 11, 2015, 08:05:13 PM »
I'll probably do 30% international stocks, that seems about right for my risk desires right now.

That vanguard site recommended some international bonds.  I'm failing to see the point of investing in those.  I'm guessing it's more stable than VTSAX, but less stable than VBTLX?  I'm failing to see the attraction, unless it provides a lot of dividends or something.


forummm

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Re: Waiting for the international sale?
« Reply #14 on: July 12, 2015, 06:41:43 AM »
I'll probably do 30% international stocks, that seems about right for my risk desires right now.

That vanguard site recommended some international bonds.  I'm failing to see the point of investing in those.  I'm guessing it's more stable than VTSAX, but less stable than VBTLX?  I'm failing to see the attraction, unless it provides a lot of dividends or something.

Historically, over the long run diversifying internationally decreases volatility but does not decrease returns. International stocks do payout higher dividends. But that is of no matter.

a1smith

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Re: Waiting for the international sale?
« Reply #15 on: July 12, 2015, 10:07:17 AM »
I'll probably do 30% international stocks, that seems about right for my risk desires right now.

That vanguard site recommended some international bonds.  I'm failing to see the point of investing in those.  I'm guessing it's more stable than VTSAX, but less stable than VBTLX?  I'm failing to see the attraction, unless it provides a lot of dividends or something.

I'm using Vanguard's recommendation - 60/40 US/Intl for stocks, 70/30 US/Intl for bonds.  They just recently increased international exposure by 10% in both categories.  The reason for international exposure is diversification, search on "efficient frontier" for plenty of discussion.  Ideally, you want uncorrelated assets so that one 'zigs' when the other 'zags' but with the global economy becoming more intertwined the correlation coefficients are increasing.

dilinger

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Re: Waiting for the international sale?
« Reply #16 on: July 16, 2015, 07:20:27 PM »

Historically, over the long run diversifying internationally decreases volatility but does not decrease returns. International stocks do payout higher dividends. But that is of no matter.

Thanks.  Yeah, I did the math and saw that for the past year, VTIAX paid out similar amounts as VTBLX in dividends.  My plan was to stick (some of the) VTIAX in my IRA so as to avoid taxes for now. 

forummm

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Re: Waiting for the international sale?
« Reply #17 on: July 16, 2015, 07:50:34 PM »

Historically, over the long run diversifying internationally decreases volatility but does not decrease returns. International stocks do payout higher dividends. But that is of no matter.

Thanks.  Yeah, I did the math and saw that for the past year, VTIAX paid out similar amounts as VTBLX in dividends.  My plan was to stick (some of the) VTIAX in my IRA so as to avoid taxes for now. 

Some people do that. But VTIAX also lets you claim the foreign tax credit if you have it in a taxable account. Eventually bond yields will go up a lot. It's really unusual that they are so low--sometimes lower than Intl stocks!

johnny847

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Re: Waiting for the international sale?
« Reply #18 on: July 17, 2015, 10:04:41 AM »

Historically, over the long run diversifying internationally decreases volatility but does not decrease returns. International stocks do payout higher dividends. But that is of no matter.

Thanks.  Yeah, I did the math and saw that for the past year, VTIAX paid out similar amounts as VTBLX in dividends.  My plan was to stick (some of the) VTIAX in my IRA so as to avoid taxes for now. 

Some people do that. But VTIAX also lets you claim the foreign tax credit if you have it in a taxable account. Eventually bond yields will go up a lot. It's really unusual that they are so low--sometimes lower than Intl stocks!
That's true but VTIAX has a lower percentage of dividends that are qualified. I'm assuming that if VTIAX is held in an IRA then a US stock fund such as VTSAX is held in a taxable, which has 100% qualified dividends. So it's not a simple question.

I wrote up an analysis in the tax guide study thread (stupid phone autocorrect)
EDIT: Here's the post http://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/msg721598/#msg721598
« Last Edit: July 17, 2015, 01:21:16 PM by johnny847 »

forummm

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Re: Waiting for the international sale?
« Reply #19 on: July 17, 2015, 10:33:11 AM »

Historically, over the long run diversifying internationally decreases volatility but does not decrease returns. International stocks do payout higher dividends. But that is of no matter.

Thanks.  Yeah, I did the math and saw that for the past year, VTIAX paid out similar amounts as VTBLX in dividends.  My plan was to stick (some of the) VTIAX in my IRA so as to avoid taxes for now. 

Some people do that. But VTIAX also lets you claim the foreign tax credit if you have it in a taxable account. Eventually bond yields will go up a lot. It's really unusual that they are so low--sometimes lower than Intl stocks!
That's true but VTIAX has a lower percentage of dividends that are qualified. I'm assuming that if VTIAX is held in an IRA then a US stock fund such as VTSAX is held in a taxable, which has 100% qualified dividends. So it's not a simple question.

I wrote up an analysis in the tax guide study

Interesting. Thanks for doing that.

dilinger

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Re: Waiting for the international sale?
« Reply #20 on: July 17, 2015, 04:59:00 PM »
That's a really helpful thread, thanks!

Eric

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Re: Waiting for the international sale?
« Reply #21 on: July 17, 2015, 05:42:47 PM »

Historically, over the long run diversifying internationally decreases volatility but does not decrease returns. International stocks do payout higher dividends. But that is of no matter.

Thanks.  Yeah, I did the math and saw that for the past year, VTIAX paid out similar amounts as VTBLX in dividends.  My plan was to stick (some of the) VTIAX in my IRA so as to avoid taxes for now. 

Some people do that. But VTIAX also lets you claim the foreign tax credit if you have it in a taxable account. Eventually bond yields will go up a lot. It's really unusual that they are so low--sometimes lower than Intl stocks!
That's true but VTIAX has a lower percentage of dividends that are qualified. I'm assuming that if VTIAX is held in an IRA then a US stock fund such as VTSAX is held in a taxable, which has 100% qualified dividends. So it's not a simple question.

I wrote up an analysis in the tax guide study thread (stupid phone autocorrect)
EDIT: Here's the post http://forum.mrmoneymustache.com/taxes/the-mustache-tax-guide-(u-s-version)/msg721598/#msg721598

That was a kickass post johnny!