Author Topic: Now is time to buy more International Index Fund?  (Read 2005 times)

andysandp

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Now is time to buy more International Index Fund?
« on: August 13, 2018, 08:29:08 AM »
Total International Index Fund has way under performed Total US Fund the past year, 5 years, and 10 years.

Vanguard suggests a ratio of 60 Total US Fund and 40 Total International.

So if you're not at these ratios, it seems like now is the time to by a lot of Total International? 

Perhaps only buy Total International each month for the rest of the year?

OR sell a lot of Total US Fund and buy Total International in your 401K/IRA accounts?

« Last Edit: August 13, 2018, 08:37:24 AM by andysandp »

The frugal geographer

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Re: Now is time to buy more International Index Fund?
« Reply #1 on: August 14, 2018, 02:32:57 PM »
I'm 60/40 domestic/int and plan to stay that way. Sometimes it's tough sticking with international and its underperformance... but I do certainly feel it's "on sale" compared to domestic!

haflander

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Re: Now is time to buy more International Index Fund?
« Reply #2 on: August 14, 2018, 03:41:21 PM »
I've wondered about this myself. I'm not investing yet, still in saving for EF and paying off debt mode, but on schedule to finish those around the end of this year.

Is it smart to buy 100% international (VGTSX) during a domestic bull market and then buy 100% domestic (VTSMX) during the few years following a correction and/or recession?

Or, is this the folly of market timing?

ILikeDividends

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Re: Now is time to buy more International Index Fund?
« Reply #3 on: August 14, 2018, 05:37:34 PM »
I've wondered about this myself. I'm not investing yet, still in saving for EF and paying off debt mode, but on schedule to finish those around the end of this year.

Is it smart to buy 100% international (VGTSX) during a domestic bull market and then buy 100% domestic (VTSMX) during the few years following a correction and/or recession?

Or, is this the folly of market timing?
If your plan is to fully exit a rising bull market, regardless of whether foreign or domestic, then it's likely worse than mere market timing.  Doing that repeatedly, over a series of market cycles, is arguably bordering on intentional sabotage.

To paraphrase a well-worn trading axiom, let your winners run, and cut your losers early.  Your proposal appears to do the opposite; chop the flowers and fertilize the weeds, so to speak.

I move money into or out of domestic equities purely based on when my asset allocation gets out of balance. And I only move enough money to get back into balance.  I don't overthink it much more beyond that.
« Last Edit: August 14, 2018, 06:17:12 PM by ILikeDividends »

Retire-Canada

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Re: Now is time to buy more International Index Fund?
« Reply #4 on: August 14, 2018, 06:07:52 PM »
Now is a good time to buy international stocks if:

1. you drafted an investment plan that says you should buy and hold international stocks for the next several decades
2. you are just implementing the plan and don't have sufficient international stocks to match your planned AA


Otherwise it's just market timing and you are likely to fail at it like most people do.

talltexan

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Re: Now is time to buy more International Index Fund?
« Reply #5 on: August 15, 2018, 06:20:18 AM »
I rebalance on my birthday and every multiple of three months after that, which included last week. My IRA had drifted a little from my target allocation of 50% US and 50% international, so...I moved enough from US to International to come back to my target allocation.

I suspect your total returns will not differ substantially whether you're 50% international or 30%.

ender

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Re: Now is time to buy more International Index Fund?
« Reply #6 on: August 15, 2018, 06:22:14 AM »
What does your IPS say?

haflander

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Re: Now is time to buy more International Index Fund?
« Reply #7 on: August 15, 2018, 07:31:42 AM »
ILD, sorry, I don't think I was clear or communicated the idea well. I wasn't proposing exiting a bull market. My plan is to buy and hold for decades, as is the gospel here. I meant buying only...no selling involved. For example, now I'd buy international until a US correction. Then, holding on to the international, switch to buying domestic during the length of the correction. Does that change your answer or is it still dubious market timing?

RyanAtTanagra

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Re: Now is time to buy more International Index Fund?
« Reply #8 on: August 15, 2018, 09:45:31 AM »
I've been trying to figure out what I want my international allocation to be.  Is there a calculator that shows portfolio success rates based on different equity types?  cfiresim lets you do percentages of equities/bonds, but not domestic/intl, etc.

Retire-Canada

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Re: Now is time to buy more International Index Fund?
« Reply #9 on: August 15, 2018, 09:49:49 AM »
I've been trying to figure out what I want my international allocation to be.  Is there a calculator that shows portfolio success rates based on different equity types?  cfiresim lets you do percentages of equities/bonds, but not domestic/intl, etc.

Not as much historical data as cFIREsim, but these calculators give you lots of different ways to analyse various AA options: https://portfoliocharts.com/calculators/

RyanAtTanagra

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Re: Now is time to buy more International Index Fund?
« Reply #10 on: August 15, 2018, 12:27:38 PM »
I've been trying to figure out what I want my international allocation to be.  Is there a calculator that shows portfolio success rates based on different equity types?  cfiresim lets you do percentages of equities/bonds, but not domestic/intl, etc.

Not as much historical data as cFIREsim, but these calculators give you lots of different ways to analyse various AA options: https://portfoliocharts.com/calculators/

Hmm thanks, the retirement spending chart kind of lets me do that, but it's all visual and hard to compare.  It is giving me a good idea of how international allocations effect things.

Telecaster

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Re: Now is time to buy more International Index Fund?
« Reply #11 on: August 15, 2018, 12:47:29 PM »
ILD, sorry, I don't think I was clear or communicated the idea well. I wasn't proposing exiting a bull market. My plan is to buy and hold for decades, as is the gospel here. I meant buying only...no selling involved. For example, now I'd buy international until a US correction. Then, holding on to the international, switch to buying domestic during the length of the correction. Does that change your answer or is it still dubious market timing?

It is market timing.  Since you are still in accumulation phase, just buy however much you need to keep your portfolio in balance at your normal investment intervals.    That will do almost what you are describing but without any guess work. 

tarheeldan

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Re: Now is time to buy more International Index Fund?
« Reply #12 on: August 15, 2018, 01:01:52 PM »
I have my US/Int'l asset allocation based on the same principle behind market cap-weighted index funds.

VTSAX holdings are done by weight in US market cap
VTIAX holdings are done by weight in Int'l market cap

I re-balance in order to keep the VTSAX:VTIAX ratio the same as the US:Int'l ratio in VTWSX (Vanguard Total World Stock Index Fund)

ILikeDividends

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Re: Now is time to buy more International Index Fund?
« Reply #13 on: August 15, 2018, 01:50:43 PM »
ILD, sorry, I don't think I was clear or communicated the idea well. I wasn't proposing exiting a bull market. My plan is to buy and hold for decades, as is the gospel here. I meant buying only...no selling involved. For example, now I'd buy international until a US correction. Then, holding on to the international, switch to buying domestic during the length of the correction. Does that change your answer or is it still dubious market timing?
It does change my answer.  It doesn't seem nearly as bad as I first imagined.  Still pretty bad, though I'm not sure I'd call it market timing.  It does seem like an arbitrary way to form an asset allocation without a plan, and with no particular goal in mind.

The approach still suffers, albeit in smaller increments, by avoiding putting new money to work in a rising market.  So while you're not bleeding performance in gushes, you are still leaking performance in drips and drops that could add up to some pretty big numbers, in terms of lost opportunity, over time.

When your stache grows to a certain size, your periodic contributions will have less and less of a meaningful impact on your asset allocation as time goes by.

At some point you will retire and stop accumulating.  At that point you will have to decide whether the asset allocation you ended up with is what you want to retire with, and what to do about it, if it isn't.
« Last Edit: August 15, 2018, 02:56:33 PM by ILikeDividends »

RyanAtTanagra

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Re: Now is time to buy more International Index Fund?
« Reply #14 on: August 15, 2018, 02:01:04 PM »
ILD, sorry, I don't think I was clear or communicated the idea well. I wasn't proposing exiting a bull market. My plan is to buy and hold for decades, as is the gospel here. I meant buying only...no selling involved. For example, now I'd buy international until a US correction. Then, holding on to the international, switch to buying domestic during the length of the correction. Does that change your answer or is it still dubious market timing?
It does change my answer.  It doesn't seem nearly as bad as I first imagined.  I'm not sure I'd call it market timing.

I'd call it exactly market timing, albeit MAYBE a less harmful method than actively selling.  You're still changing your desired asset allocation base on what the markets are doing at the time, or what you think they're going to be doing in the near future.

maizeman

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Re: Now is time to buy more International Index Fund?
« Reply #15 on: August 15, 2018, 02:10:26 PM »
I've been trying to figure out what I want my international allocation to be.  Is there a calculator that shows portfolio success rates based on different equity types?  cfiresim lets you do percentages of equities/bonds, but not domestic/intl, etc.

The problem is that we've got 150 years of US domestic stock and bond data in the public domain, but don't have nearly as much data for most other asset classes, particularly for international. More data means more accurate estimates of the distribution of outcomes, and better estimates of what a reasonable "worst case" might look like, short of a major world war fought on your home country's soil. (The 1940s were not a good time for early retirees or anyone else living in France, the Netherlands, Belgium, Germany, Italy, Japan, etc).

Portfoliocharts lets you test a much wider range of asset types, but only have about 50 years worth of return data so you can test may more permutations of portfolio composition at the expense of the resolution provided by 3x as long a time series.
https://portfoliocharts.com/portfolio/withdrawal-rates/
(Just stay away from portfolios with gold in them, as that 50 year interval includes a huge spike in gold prices when the USA finally came off the gold standard which coincide with stagflation: bad returns for both bonds and stocks).

RyanAtTanagra

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Re: Now is time to buy more International Index Fund?
« Reply #16 on: August 15, 2018, 03:17:10 PM »
I've been trying to figure out what I want my international allocation to be.  Is there a calculator that shows portfolio success rates based on different equity types?  cfiresim lets you do percentages of equities/bonds, but not domestic/intl, etc.
Portfoliocharts lets you test a much wider range of asset types, but only have about 50 years worth of return data so you can test may more permutations of portfolio composition at the expense of the resolution provided by 3x as long a time series.
https://portfoliocharts.com/portfolio/withdrawal-rates/

It's hard to tell for sure without real numbers, as it's just eyeballing the line on the chart, but I can't really get SWR to go up by adding in any amount of international.  Although, what's WLDx vs WLD?

maizeman

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Re: Now is time to buy more International Index Fund?
« Reply #17 on: August 15, 2018, 03:32:56 PM »
Huh, that acronym doesn't seem to be documented here: https://portfoliocharts.com/assets/

My guess would be world excluding USA.

RyanAtTanagra

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Re: Now is time to buy more International Index Fund?
« Reply #18 on: August 15, 2018, 03:42:48 PM »
Huh, that acronym doesn't seem to be documented here: https://portfoliocharts.com/assets/

My guess would be world excluding USA.

Yea that was my assumption as well

Tyler

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Re: Now is time to buy more International Index Fund?
« Reply #19 on: August 15, 2018, 03:44:47 PM »
Huh, that acronym doesn't seem to be documented here: https://portfoliocharts.com/assets/

My guess would be world excluding USA.

Yeah, with recent updates to the calculators the asset descriptions are a little out of date.  I'm working on it.

WLD stands for "World" and includes every developed market.  WLDx stands for "World ex-US" and is the same as WLD but excludes the United States.  When investors living in the US talk about "International" they normally mean "World ex-US".

PDXTabs

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Re: Now is time to buy more International Index Fund?
« Reply #20 on: August 15, 2018, 05:13:03 PM »
I am (essentially, when I rebalance once a year) 100% VTWSX, which is currently 53.6% US with the following breaking down:

Quote
9.60%   Emerging Markets
19.90%   Europe
13.60%   Pacific
0.20%   Middle East
56.60%   North America
0.10%   Other

I'm fine with my exposure as is.
« Last Edit: August 15, 2018, 05:14:43 PM by PDXTabs »

jleo

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Re: Now is time to buy more International Index Fund?
« Reply #21 on: August 15, 2018, 06:28:18 PM »
How do you calculate what the PE is on VXUS vs VTI? I am curious to the difference.

Steeze

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Re: Now is time to buy more International Index Fund?
« Reply #22 on: August 15, 2018, 07:36:11 PM »
Every month when I am buying stocks in my self directed accounts, I look at my total asset allocation across all accounts and purchase which ever funds are needed to move closer to my desired allocation. Once a year I will actively sell shares to rebalance if needed.

Right now emerging markets are lagging, as such I need to prioritize purchasing them each month because they have fallen behind their target % of my portfolio. US shares are above my target %, so I don't buy any of those.

I purchase based on the % my portfolio is off my target asset allocation. It just so happens that this will likely follow the OP logic of buying the poor performers all the time. The difference being that if my portfolio was perfectly matching my target AA, I wouldn't buy more emerging markets right now just because they are down 15%. I wouldn't purposely put my AA out of balance to try to buy the best deal.

Naturally the portfolio will drift out of balance and purchasing the poor performers will attempt to bring it back into balance.


andysandp

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Re: Now is time to buy more International Index Fund?
« Reply #23 on: August 16, 2018, 05:37:28 AM »
Every month when I am buying stocks in my self directed accounts, I look at my total asset allocation across all accounts and purchase which ever funds are needed to move closer to my desired allocation. Once a year I will actively sell shares to rebalance if needed.

Right now emerging markets are lagging, as such I need to prioritize purchasing them each month because they have fallen behind their target % of my portfolio. US shares are above my target %, so I don't buy any of those.

I purchase based on the % my portfolio is off my target asset allocation. It just so happens that this will likely follow the OP logic of buying the poor performers all the time. The difference being that if my portfolio was perfectly matching my target AA, I wouldn't buy more emerging markets right now just because they are down 15%. I wouldn't purposely put my AA out of balance to try to buy the best deal.

Naturally the portfolio will drift out of balance and purchasing the poor performers will attempt to bring it back into balance.




So let's say I have $500,000 in US total Stock index now.  $100,000 of that is in 401k accounts.

Let's say I want a 80-20 split between US and International. 

Should I just convert the entire $100,000 401k into International index right now?
« Last Edit: August 16, 2018, 05:39:16 AM by andysandp »

talltexan

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Re: Now is time to buy more International Index Fund?
« Reply #24 on: August 16, 2018, 08:49:23 AM »
There isn't a major tax advantage to putting your international fund in your 401K (as there is--for example--with a bond stake).

What may happen is you put that money into the 401K, then Int'l surges, but you want to put additional money into the 401K. In that case, it helps to have a decent domestic option within the 401K as well.

GuitarStv

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Re: Now is time to buy more International Index Fund?
« Reply #25 on: August 16, 2018, 08:52:56 AM »
Now is a good time to buy international stocks if:

1. you drafted an investment plan that says you should buy and hold international stocks for the next several decades
2. you are just implementing the plan and don't have sufficient international stocks to match your planned AA


Otherwise it's just market timing and you are likely to fail at it like most people do.

+1

Yep.

These questions shouldn't be answered by random people on the internet, but by your investment plan.

OurTown

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Re: Now is time to buy more International Index Fund?
« Reply #26 on: August 16, 2018, 09:45:59 AM »
It's best practice to just pick a ratio of domestic to international and then rebalance as necessary.  Mine is 2:1, not because of any great expertise or predictive powers, but because the math is easy.