Should You Invest in International Stocks?
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- Опубликовано: 30 июл 2024
- Is it a mistake to invest in international stocks? US stocks have outperformed and many investors are questioning their international diversification. I share the strong argument for investing in only US stocks, and why I think it's a mistake to not diversify with international stocks.
#assetallocation #internationalstocks
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Vanguard Total World Index Explained [VTWAX | VT ETF]: • Vanguard Total World I...
Best International Index Funds: • Best International Ind...
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--- Outline
00:00 Intro
00:28 Arguments for only US Stocks
04:28 Arguments for International Diversification
10:36 Risk of Not Having International Diversification
11:30 How Much International (Ex-US)?
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Disclaimer: I am not a financial advisor. My videos are for educational purposes and are my opinions. You should seek advice from a professional advisor or perform your own research. There is no guarantee you will be successful following my opinions.
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Thanks for watching! Here are some follow-up videos:
Asset Allocation Explained [Modern Portfolio Theory]: ruclips.net/video/QTgvWPAihIc/видео.html
Vanguard Total World Index Explained [VTWAX | VT ETF]: ruclips.net/video/OTpPNdUR2g4/видео.html
Best International Index Funds: ruclips.net/video/YijQ0lUPZ7M/видео.html
Nick, I like your videos but have to disagree. International equities are currently so highly correlated with the US that if the US stock market crashes, the rest of the world will fall with it. You don't get much of a diversification benefit from int'l stocks. The Japan example doesn't apply because even at Japan's height, it did not dominate global market capitalization the way the US does now.
The only smart way to invest internationally is to currency hedge. Compare DXJ with EWJ since 2020 and you'll see what I mean.
Awesome video! Definitely agree diversifying globally is the right thing to be doing. I currently do 70% of my portfolio in VT for simplicity. I have 10% in VWO for some extra emerging markets exposure. 10% in AVUV for a US small cap value tilt. And 10% in NTSX for what I hope will be a less bumpy ride for the S&P500 (although not recently lol) and also gives me some exposure to treasuries while still having most of my capital go into equities. It's a process I can stick too with an international exposure that I am comfortable with!
Thanks, glad you liked it. That's a good portfolio. Avantis has some good funds for factors. I've thought about using something like NTSX or PSLDX for some leveraged exposure, but figured my mortgage is good enough :) Unlucky timing in these funds lately with both equities & bonds going down! Hopefully, it turns around soon.
I like this format 👍🏼 Thanks for the this video.. I am new and learning a lot.
Glad to hear it! Thanks for you feedback & support!
I like the format a lot!! Imt diversification is essential. Thx for the prudent advice
Glad you liked it! Thanks for your support!
I just subscribed, great info brother. It has definitely helped me decide choosing the best investments for my portfolio.
Thanks Aaron, glad it helped!
Man I just love your passion here. Keep doing what you do!
Thanks for your support!
Great video, I prefer the new format better, keep up the great content
Thanks for your feedback & support Kevin!
Just stumbled upon your channel, that's for the great video. I am also curious about investing in small vs mid and if it's worth it. Maybe you can consider making a video in this format in the future! Great work!
Thanks Sylvan, glad you enjoyed it. That's a good idea for a video, thanks for the suggestion!
This is one of the best videos I’ve seen on the argument for ex-us investing. Nice job 👍
Glad you enjoyed it! Thanks Tom.
Fantastic approach, excelent video, awesome analysis. Thanks for your effort! / BTW: It's always like this: I go round and round, set up a nice portfolio, and there comes a VT analysis hitting me back again, like saying "I'm all you need, stop trying to create the wheel or foresee the future!". And there I go rethink my factor tilted portfolio. One more time. Haha.
Hey nick, a lot smoother and streamlined with this video. I like the sharing the screen element. I currently have 3 different investment vehicles, hsa, tsp and roth ira vanguard. Tsp is 100% usa stocks, vanguard is 70% us stocks, 30% international, hsa is 90% us stocks and 10% bonds. Still a noob in this market, 32 years old, 33 this year. Im following the merriman buy and hold portfolio, it tilts towards value stocks, i like it so far. Hopefully, I'm doing well. Keep up the good work 👍
Hi Keith, thanks for the feedback! That's good you're taking advantage of the tax-advantaged accounts. The merriman portfolio looks pretty good. I think you'll do well if you continue to buy, hold, and don't tinker too much 😀
Excellent content. More succinct and actionable than many channels. Consider a better background. Just your living room or even outside.
Thanks again Joe. I have been lazy, but finally working on improving the background in the room where I record. My next videos will have something & will continue to work on it 😀
Im at 10% international but I want out at this point. It's just been a money sink for my whole investing career. Probably selling soon and reinvesting it into s&p.
Going back to 1997, total international has delivered almost 5% compounded annual return with dividends reinvested: www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=wLd8jjzWeS6ITdnIQS5Ti. I'm not sure I would call it a money sink. Very few can pick the winners ahead of time.
Great video, nice job as always, I agree with you. I think if you think about Japan in the 80's it reminds us how important diversification is. Personally I would do 25% to 30% of my stocks in international, there is something to be said for the US being a strong country and the length of time it has been so successful, but definitely some international makes a lot of sense. I would not do more than 30% in international.
Thanks, glad you enjoyed it! It definitely seems the US markets have an advantage, and overweighting it some is reasonable in my opinion. I'm sticking with global market cap (40% international), but wouldn't argue with doing 25-30% :)
Is 35% Ok? That's where I'm at atm, increasingly tilted lower as my 401k slowly increases. I'll probably be closer to 30% in another year or so.
Vanguard has me in about 28% VXUS and about 37% VTI, 25% in BND and 10% in BNDW. This is what Vanguard has recommended to me at the moment. Not crazy about international and bonds but they say that’s how I need to be as far as diversification is concerned. Again thank you Nick for sharing your knowledge with us.
That sounds like a good portfolio! I am also not crazy about international bonds, but they are probably a good idea from a diversification standpoint. I do think it's fine to exclude them, but definitely support international stock investing :)
I'm japanese and I've thought the same thing to you, I buy VT(The world market)😊
Great choice! :)
I look at international stocks as cheap insurance 🤷♂️
That's a good way to look at it!
Exactly this. I'm starting seriously aged 36 and am going 100% stocks for next two decades. By having 60% VTI and 40% VXUS, or market cap, I see it as allowing me a 100% stock portfolio with more hedging. Schwab and fidelity think international may dominate US (by about a percent lol) for the next ten or even twenty years.
Nick, all great points here. But as an American, 1) introducing international equity will increase volatility due to risks. So whether itll result in higher returns, it will be accompanied with more risks 2) Japan is not a good comparison to the US. We are a lot more globalized economy these days than those big Japanese banks. In fact, Toyota as a stock does just fine coming out of 1990. 3) the US is more than just 15% of world economy. The graph you showed was clearly wrong as China was 21%. 4) if exceptionalism is already priced in, why even invest then? If all factors/all growth are already reflected in today’s stock’s price, then I think we should stop investing. 5) by buying ETFs like VT, you’re still exposed to a concentration risk on the US.
The point in my opinion is to not have 100% concentration in US stocks. The market cap weighting in VT is a littler over 60% currently, so there is still larger concentration but significantly less than 100%. VTI PE 23.9x is and VXUS PE is 14.9x. The difference is ~60.4%. $60.4 in VXUS yielded the same earnings as $100 in US in the past year, but US growth is expected to be higher, etc. The market pricing in this "exceptionalism" doesn't mean we should stop investing. It's just accounting for different expectations and risks.
👏👏👏👏👏
I do 63% large , 25% international , 7% mid and 5% small
That's a good allocation James! Cheers!
International as a hedge for dollar weakness and value vs growth
That's a good reason to invest in international :)
I thought of investing in INDA etf but the price is high. I am bullish on India's economy. But something is holding me back. Maybe I'll bite the bullet and go for it.
I am also very bullish on India's economy. My wife is from Pune and we visit every couple years. We were thinking of buying property in Pune and possibly investing in an India index fund in an OCI account. It also feels quite expensive to me at the 26 PE ratio! It's priced for a lot of growth! For now, we decided we will just get the allocation from the VTIAX or FTIHX. These funds are ~40% of our portfolio, putting overall India allocation at 1.8% of our portfolio.
I find international ETF very expensive to own, the performance has been bad, and there is no compelling reason that they will do any better going forward. And the dividends are extremely unstable.
To each their own. I would argue there is no compelling reason US stocks will always outperform.
Weekly uploads ftw
Do you know the average overall market cap weight and relative performance of US Vs International? Because if it was say 55 % US and 45% international I wonder if it would be valid to invest at that weight Vs the current market weight.
I occasionally think about going 50/50 but it seems the US does perform that little bit above 50% over time compared to international, even though they flip round every few years
I don't know the relative weights of the performance. It's an interesting idea to allocate your portfolio that way. I just follow market cap which is ~59% US 41% ex-US now.
@@nickdoyle-achievefinancial2464 yeh I doubt it makes too much difference to anyone but theoretically it would be a potential 'correct' way to weight the split permanently via huge back testing over a century
What are your thoughts on currency exposure w/ regards to a US-based investor holding international?
I am personally not concerned by it, especially considering that exposure is 40% of my equity position and is diversified across 40+ countries and likely 20+ currencies. If it is a larger concern for you, maybe reducing the allocation to international makes sense.
30% international (15 large, 10 small, 5 emerging)
That's a good allocation. You hold the three separately? Which funds are you using?
VWIGX, VYMI, AVDV, VEMAX (Sorry 4 funds, but considers reducing to 3 or 2. Keep VWIGX (growth) and AVDV (value)
Warren Buffett disagrees