Percentages you have in International/ EM stocks?

[win1177]

Curious what percentage of their total stock allocation other investors are keeping in International and Emerging Markets stocks? Vanguard keeps telling me I should have “30-50%” of my total stock allocation in international and EM stocks. I have an “aggressive” portfolio, especially for a 62 year old approaching retirement, but have done very well over the years with it. We (wife and I) have 12 % of our total stock portfolio in international/ EM, rest is domestic. Part of this is due to the fact that our domestic stock allocation has appreciated at a much better rate than foreign/ EM has over past ten years.

What percentages do you have in International and EM stocks, and why?
Thanks!

Win

[gman57]

I don't think you need anything in international.  Many/most large US companies already do over 50% of their business overseas so you have international exposure. Every time I've looked at international it always goes down more (and at the same time) than the US market and rarely ever goes up more. I have all mine in US (i.e. VTSAX/VTI) -- Just my .03

[javajoe]

I am a mid-40's accumulator but tend to have around 40-45% of equities in International/EM. Increasingly I am moving to vehicles with more and more unhedged currency exposure as well, based on my longer-term view of the dollar.

-JavaJoe

[acksurf]

I have 18% in foreign. Not much in emerging at the moment. I view emerging and foreign as trading situations at the present time. I had MATFX and did really well with that and may buy again. Aside from that I have Fidelity Int'l Small Cap and Fidelity Canada. I also have a target fund that has a lot allocated to foreign.

[Deleted]

I have 22% in International. ~70% of that in EM. I will not increase my intl allocation till i notice a clear outperformance over US equities.

[Chahta]

I have about 8% directly, which is more than enough. It just seems to lag the US market most of the time.

[jongaltiii]

I average 18% in International, including EM. I would never have more than 25 in both. That’s just me. History supports domestic outperformance. Many domestic have international exposure. I’m a big believer in USA equities - like Buffett and others. I must admit that I’m very surprised that your brokerage would be recommending 30-50 percent in International for 62. That just doesn’t sound right to me. Just IMHO.

[jcserc]

I only have about 10% direct exposure and I am not convinced it is really needed when you consider that most domestic companies in my other funds do business globally.

[xray]

Interesting thread on EM %'s. With that said....

 Many of us have different methodologies on "investing" in the markets. Currently, it is my belief [sole opinion of course] that "oil" is the sector that we should be heavily invested in. Many of us started to invest in oil securities when they were totally out of favor and the dividends that they were paying were too good to pass up. Oil has had the best 2nd Qtr ever and the demand for oil will be increasing as people get back to work [and take their holidays & vacations]. Currently, 30% of my portfolio is in five different "OIL" related securities. Because some of us started buying the oil sector last year, we currently have a 9.82% dividend attachment [and continuing to build CapGains] which gives us a lot of breathing room when markets correct....

 "EM" is ok to invest in but I haven't found any dividend bargains [against their "value"] and most of my investments in EM are buried in the security that I have invested in. Thus, I can't see the % without a extensive extension analysis. Some of us invest [or sell for Dividends & CapGain] to "analysis numb3rs" that we see [basically on a weekly basis if required]. Many investors [like some of us] buy undervalued securities for the longer term [especially the penny stocks (1... for dividends income first) that take much longer to materialize (2...CapGains second)]....

 Since many of us are retiree's, we try to invest [and follow our securities] carefully [like many of you do] but we are "VERY" careful when measuring "RISK" [amount of shares being either bought/held/sold going forward]. Many investors [like currently when the market prices are "always" climbing and is currently "unreal" and ignoring the book values and NAV's] were initially investors but have now become "traders" [and don't follow the known "history" of 1928, 1929, and the "DEPRESSION" years that followed]. Currently they will make a lot more money than many of us but we sleep better [IMHO]....

One single opinion of the many I am sure....

Live Long and Prosper....

[Deleted]

INTL and EM has lagged US for a decade now. And they have more risk. So high risk low return investment?

Only reasons I have heard so far for investing in INTL/EM is 1) INTL/EM has lagged US for very long so they are cheaper though people have been saying that for 5 years now 2) There are companies outside of US that are good as well.

[paulr888]

See Table 4b which is what I use.  This is data from DFA that is presented on Paul Merriman website.  
 
paulmerriman.com/wp-content/uploads/2021/02/Fine-Tuning-Tables-70-30-2020.pdf


Toward bottom of Table 4b you see the Annualized Return line.  Go all the way to the right, last 2 columns.  A 100% equity portfolio globally diversified with 70%US and 30% Int'l did 12.1%.  The S&P 500 Index did 10.7%.  That is an average of 15% better return per year.  

[Deleted]

Jul 2, 2021 17:59:56 GMT paulr888 said:

See Table 4b which is what I use.  This is data from DFA that is presented on Paul Merriman website.  
 
paulmerriman.com/wp-content/uploads/2021/02/Fine-Tuning-Tables-70-30-2020.pdf


Toward bottom of Table 4b you see the Annualized Return line.  Go all the way to the right, last 2 columns.  A 100% equity portfolio globally diversified with 70%US and 30% Int'l did 12.1%.  The S&P 500 Index did 10.7%.  That is an average of 15% better return per year.  

What is the composition of  UB & H 70%US and 30% int'l portfolio?

Is it just mix of  70% S&P500 and 30% Int'l stock index or an active strategy?

[paulr888]

It uses 10 asset classes and S&P is only 1 of the asset classes.  I don't know much more than this except that DFA is a reputable company and I have no reason to doubt their data.


paulmerriman.com/wp-content/uploads/2021/03/UBH-Tables-70-30-2020-1.pdf

See Table 1b.

[Deleted]

I see, so

from 1970 - 2010

Merriman's UB&H 10 assets strategy with 70% US and 30% Int'l had 12.1% annual returns

beating

SP 500 with 10.7% annual returns during same period.

on Merriman's UB&H: I found this on one site: It has 40% bonds and not 100% stocks. But gives a fair idea of what 100% stock UB&H strategy would look like.
6% U.S. Total Stock Market
6% U.S. Large Cap Value
6% U.S. Small Cap Stocks
6% U.S. Small Cap Value
6% U.S. REITs
6% International Developed Markets Stocks
6% International Value
6% International Small Cap Stocks
6% International Small Cap Value
6% Emerging Markets Stocks
12% Short-Term Treasury Bonds
20% Intermediate-Term Treasury Bonds
8% TIPS

[ignatz]

Jul 2, 2021 17:59:56 GMT paulr888 said:

See Table 4b which is what I use.  This is data from DFA that is presented on Paul Merriman website.  
 
paulmerriman.com/wp-content/uploads/2021/02/Fine-Tuning-Tables-70-30-2020.pdf


Toward bottom of Table 4b you see the Annualized Return line.  Go all the way to the right, last 2 columns.  A 100% equity portfolio globally diversified with 70%US and 30% Int'l did 12.1%.  The S&P 500 Index did 10.7%.  That is an average of 15% better return per year.  

Accepting those figures, I used them for just the last 10 years...2011 through 2020.

For the 70/30 US/international split, 10k becomes 22251. That's an 8.33% CAGR.

For the SP 500, 10k becomes 30929. That's an 11.95% CAGR.  Curiously (?), the CAGR for Fidelity's SP 500 index over the same 10 years is 13.82% (10k becomes 36427), which makes me wonder a bit about Merriman's numbers.

That's always the rub with historical performance. At what point has the "trend" changed to the extent you should act on it?

[paulr888]

waffle ... I don't follow.  Can you post link to where you got this information so I can understand.  Thanks.

[retiredat48]

Below is a link to performance returns by asset class, for at least a decade...see table  2

May I remind people that for five of the six years, 2004 to 2009, Emerging Markets was either the number one or number two in returns...by a wide margin.  Yes, then last decade not good....EM at bottom of returns.

  Future decade??  Standby...history has a way of repeating.





www.mutualfundobserver.com/discuss/discussion/43246/periodic-table-performance-returns-2007-1st-half-2018#latest

--------------------------------------------------

BTW REITs also did great almost the entire decade.  Investing with momentum in 2004 and on, in EM and REITs, resulted in very outsize, positive performance returns...into the bear market.  Bear markets often result in changes in leadership...and momentum.

R48

[liftlock]

Gary Antonacci, developer of the Dual Momentum strategy, suggests a dynamic allocation to International equities.  His research indicates that the performance of international equities relative to US equities is correlated with the relative strength or weakness of the US dollar.  International Equities tend to outperform US Equities when the US dollar is weak / trending down. US Equites tend to outperform International Equities when the dollar is strong / trending up.  Antonacci uses a simple 12 month relative momentum calculation at month end to determine whether to allocate to US or International Equities.  Invest in US Equities when the 12 month return / momentum of the US stock market exceeds the 12 month return / momentum of the International stock market.  Invest in International Equities when the 12 month return of International stock market exceeds the 12 month return of US stock market.  These calculations are performed at each month end to determine the asset allocation for the following month. 

Antonacci also uses a 12 month absolute momentum calculation to determine whether to be allocated to cash or stocks.  Invest in Equities (US or International) when the 12 month return / momentum of the US stock market exceeds the 12 month return of a risk free investment in cash / short term bonds.

Here is a video explaining more about the strategy.

vimeo.com/164047189

Antonacci's website:

www.optimalmomentum.com/

[hondo]

Jun 29, 2021 18:04:24 GMT gman57 said:

I don't think you need anything in international.  Many/most large US companies already do over 50% of their business overseas so you have international exposure. Every time I've looked at international it always goes down more (and at the same time) than the US market and rarely ever goes up more. I have all mine in US (i.e. VTSAX/VTI) -- Just my .03

I agree with gman, the US companies do a large amount of their business overseas, thus I have foreign exposure.  Like win, Vanguard keeps telling me I should have something like 30%-40% in foreign equity. The last time I looked, I think Vanguard showed I had about 8% in foreign equity within the balanced funds I use.  That 8% plus the foreign exposure in the US companies in my balanced funds should give me plenty of foreign exposure.

Hondo

[jongaltiii]

I have to X-ray my holdings again, I don’t want anything near 40-50 percent of port in International. 25 percent max. And if by chance International takes off for the next ten years and outperforms the S&P… I won’t have any regrets.

[chang]

Note that the percentage of S&P500 revenues from abroad is actually at a 10-year low:

www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/s-p-500-companies-non-us-revenue-share-hits-10-year-low-8211-goldman-sachs-59094991

[paulr888]

Chang ....   Don't most international funds hold stock in local currency which would differentiate from domestic funds having international exposure?

[chang]

Jul 4, 2021 3:45:14 GMT paulr888 said:

Chang ....   Don't most international funds hold stock in local currency which would differentiate from domestic funds having international exposure?

Of course that is true: as long as the funds don't hedge currency, their USD returns (which is what you obtain with a US-based fund) will be the product of:

[return in USD] = [return in local currency] × [exchange rate movement]

That's one reason I like unhedged foreign funds (when I believe the dollar will weaken). However, during periods when the dollar was strengthening, currency-hedged funds performed better.

The same is true of bond funds, as well as stock funds.

[yogibearbull]

Another point for international bond funds is that there is also a dollar-denominated foreign debt market. Lot of EM debt is issued as dollar-denominated. This is different from the local currency EM debt that may be currency-hedged.

Likewise, the US companies can issue euro-denominated, yen-denominated, yuan-denominated debt, etc. They have done so to take advantage of low/negative rates in Europe and Japan.

[bb2]

This argues for a 20% allocation to international.
www.forbes.com/sites/nicksargen/2021/03/18/does-international-diversification-still-work/?sh=46a79b575afb

Typical Schwab quote: "Globally diversifying your portfolio can help cushion against wild market swings and give you more consistent performance over time."
(Marching lockstep with the industry.)
(It's like the industry all reads the same playbook so they say they did no worse than anyone else.)

And of course you can read ad nauseam about correlation increasing.

And here's an SA contributor who cracks me up - seekingalpha.com/article/4285428-european-equities-seem-to-offer-relative-value-trap
Loosely quoted: "US develops tech, Europe taxes it".

I'm at about 1%. Anything that's in a portfolio to just drop less doesn't make sense to me. Ballast is a ridiculous concept. IMHO. I'll be wearing lead lined swim trunks in a few minutes.

I'm on a tear here. Happy 4th! Pool party!

[Deleted]

I am also thinking of having upper cap of 20% on INT'L (including EM) till I see a sustained outperformance over US.

[roi2020]

Since large domestic companies derive revenue from foreign countries, I've often heard the argument that investors don't need direct foreign exposure.

Warren Buffett and Jack Bogle (RIP) have long advocated against owning foreign stocks.

I have a different view.

There are great companies headquartered in other countries so why should an investor limit themselves to just the U.S.?

Foreign stocks can also potentially provide insurance against a prolonged slump in the U.S. market.
Having said that, correlations between domestic and foreign equities have increased over the years.
Don't expect foreign equities to save the day during a crisis (GFC, Pandemic, etc.) when correlations go to 1.

I recently X-Rayed my portfolio and foreign stocks comprised 33.7% of my equity holdings.

[jongaltiii]

I subscribe to Nick Maggiulli newsletter. He presents investing ideas and supporting data in a simple and practical way. Here's today's post somewhat related to this thread on International exposure:

"In Defense of Global Stocks" ... ofdollarsanddata.com/in-defense-of-global-stocks/

[shipwreckedandalone]

 I respect Vanguard's work and research.

In their TDF's they use a 40% international equity exposure of the total equity allocation.  Including the popular VTINX, VSCGX, VASIX. 

Diversifying with International exposure can affect other important fund performance metrics other than just CAGR.

International stocks have been out of favor in recent history so not much popularity but they normally see their day in the sun eventually and investors run back to them.

I personally try to target around 30% international of the total equity allocation. 70% US. Remainder fixed income.

Vanguard also believes in an international bond allocation.