When I was a kid I used to get pretty excited to watch both the winter and summer Olympic Games. While my enthusiasm for all competitive athletics has waned as I got older, I’m sure I’ll glance at a medal count, news article or perhaps an event or two on the TV.
Having read The Simple Path to Wealth, it was mid 2018 when I pulled the trigger on selling my international holdings. Olympic boycott or failed drug test and forced to stay home? The rationale and inspiration for this bold move is articulated here. The added cost and we’ve got it covered due to international sales of US companies resonated with me. I was also growing suspicious of my overall returns being held back by a number of poorly performing funds. See the theory is that international stocks might zig when US stocks zag and vice versa but there seems to be a growing correlation between all things world economy.
I would look at tables of investment fund returns (YTD, 1 year, 3 year, 5 year, 10 year) and try to confirm my hunch but I think it was more a gamble on my part that simplification and low cost will win in the end. That said I didn’t stop second guessing my choices and there’s no shortage of personal finance tools that constantly warn me that my asset allocation is seriously out of whack and missing 30-40% international equity exposure. Danger! You are missing out on 50% of the world economy.
Lately I’ve been using Google Finance (click here to play along) to compare returns over time and validate my home country bias. Here is our dear friend VTI (ETF version of VTSAX) compared to a number of Vanguard international ETFs and VOO (S&P 500):
- VTI US Total Stock Market ETF dark blue +16.13% Jan 1 – Jun 30
- VXUS Total International Stock Market ETF yellow +8.53% Jan 1 – Jun 30
- VEA FTSE Developed Markets ETF teal +8.51% Jan 1 – Jun 30
- VWO FTSE Emerging Markets ETF orange +7.89% Jan 1 – Jun 30
- VOO S&P 500 ETF purple +16.07% Jan 1 – Jun 30
VWO emerging markets actually led most of 1Q2021 before giving up the ghost and then some. Here are the same players over 5 years:
The data doesn’t lie. Dumb luck that I got out of international stocks in 2018. And the plot thickens if you graph the mutual fund versions which have a longer history than the ETFs:
Over 21.5 years, VTSAX has returned 249% or 11.58% per year. That’s the entirety of my investing career and I’ll keep taking that simple performance to the bank. I will continue to look over my shoulder periodically and if the story changes, I’m not opposed to buying a larger slice of the international equity pie. I’m also not opposed to any of you owning 10-40% international stocks although I think 30-40% is pushing it. They are riskier, more expensive and we’ve got some portion of it covered.
Addendum 1: Counterpoints from a Go Curry Cracker post found at the bottom of the Jim Collins stock series link above. “Between 1970 and 2007, holding any amount of International stock resulted in a greater return. Between 2007 and 2018 2021, holding any amount of International stocks resulted in a worse return.” Count me in the Bogle/Buffet/Collins camp. Dump my 15-20% US bonds for international stocks? Intriguing but might land me in a conservatorship. 😜
