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Thread: Why invest internationally?

  1. #11
    Senior Member humble_pie's Avatar
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    Quote Originally Posted by GreatLaker View Post
    From 2003 to 2006 EAFE significantly outperformed S&P500. Emerging and TSX also did well. Yes I cherry picked the time period, but to prove a point.

    See this link for the periodic table in CAD: http://www.stingyinvestor.com/cgi-bi...&StopYear=2007


    alas this is cherry picking that is so far out of any reasonable time frame that i don't see how investors can accept it.

    2003 was 14 very long years ago. Dubya was in power. It was a whole generation ago.

    moreover a cherry selection of only 3 years out of the entire past 72 - since the end of WW II - could not be reliable. If one were to go back to the introduction of the original "country funds" to the NY stock exchange - it's my understanding they were pubic spinoffs from world bank private investment funds - one might have some comparative figures for emerging market exposure.

    .

    ego borago gaudia semper ago

  2. #12
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    Quote Originally Posted by AltaRed View Post
    Yes, but that's just an active decision by the company which runs the index.

    A couple of years ago EM made up 17% and I doubt they make up a smaller fraction today: https://blog.wealthfront.com/emerging-markets/

    EM would be worth 25% if you were to count "Control holdings" (mostly Chinese state holdings).

    Too large to be ignored. Yes, they are risky but risk = higher expected return.

  3. #13
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    Is there any decade in which international stocks outperformed both Canadian and US stocks?

    (For example, there are decades during which bonds and gold outperformed -- which is why they are justifiable investments IMO. But I'm not sure that international stocks ever have).

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  5. #14
    Senior Member GreatLaker's Avatar
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    Quote Originally Posted by humble_pie View Post
    alas this is cherry picking that is so far out of any reasonable time frame that i don't see how investors can accept it.

    2003 was 14 very long years ago. Dubya was in power. It was a whole generation ago.

    moreover a cherry selection of only 3 years out of the entire past 72 - since the end of WW II - could not be reliable. If one were to go back to the introduction of the original "country funds" to the NY stock exchange - it's my understanding they were pubic spinoffs from world bank private investment funds - one might have some comparative figures for emerging market exposure.

    .
    A typical investor's lifecycle is from age 25 to 85 - 60 years. In that context, 14 years is a sliver. Investment trends move in long term cycles. Regions, countries, growth, value, tech, commodities. Gold hit a peak in 1980, investors that bought then had to wait until 2006 for it to go back up to 1980 levels, then hit another peak in 2011 and is now 1/3 below 2011 levels. In 1979, Business Week magazine had a cover story "The Death of Equities", since they had been in a bear market since the mid-1960s. Not too long after that cover story, the equity market went on about a 17 year bull market. Jim Rogers, in his book Adventure Capitalist, talked about how people in the oil industry told him not to invest in it because it had been in the doldrums for so long it was impossible to make money, at a time that just preceded the commodity super-cycle in which he made a lot of money.

    So when people ask "why invest in {whatever} because it has not performed well for at least {however long}" my spidey sense tells me to watch out for common investor errors like recency bias, new paradigms, and the four most dangerous words in investing: "it's different this time".
    Eschew obfuscation. Espouse elucidation

  6. #15
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    Quote Originally Posted by GreatLaker View Post
    So when people ask "why invest in {whatever} because it has not performed well for at least {however long}" my spidey sense tells me to watch out for common investor errors like recency bias, new paradigms, and the four most dangerous words in investing: "it's different this time".
    OK, fair enough. But in history, when DID international actually outperform US/Canada for a prolonged period? When I use
    https://www.portfoliovisualizer.com/...ass-allocation

    And plug in US vs International, the most I see - historically - is about a 5 year stretch where international outperforms.

    Are you saying that even though International has never outperformed for a prolonged period, it might start doing so now? Almost sounds like you're saying "it's different this time".

  7. #16
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    Quote Originally Posted by tygrus View Post
    Investing in canada is the same as investing internationally except safer and without the corruption. We are mostly export based so if other countries are doing good so are we. I wouldnt have a dime outside Canada or US.
    I agree with this. Not saying you can't invest internationally and if the opportunity is there and you know what you want and what you are doing then that is also fine.

  8. #17
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    Quote Originally Posted by mordko View Post
    This is a typical example of "recency".

    In reality international shares outperformed N America, for example, in the 70s. In fact, holding international stock was the only way to get any growth.

    And in any case past isn't the same as the future.
    Fair Mordko but that only matters if I was an investor in the 70s.
    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

  9. #18
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    Almost everything worked and didn't work in the 70's.

  10. #19
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    Some reasons to use international markets: EAFE and emerging markets are not 100% correlated with the S&P 500. Diversification will provide lower volatility, and rebalancing can make up for some of the lower long term returns (S&P 500 is hard to beat in the long run). You can also reduce currency fluctuations. All together, lower risk adjusted returns with less volatility can keep people more invested, especially at market lows. Selling low is one of the biggest long term destroyers of wealth and long term gains out there and international strategies can help.

    All that being said, I use EAFE/EE in my registered portfolios, but at lower weightings. It gives me something with equity characteristics to rebalance into. They are also weighted to the biggest international companies, which tend not to be sketchy local outfits, but fairly major players with plenty of first world market connections. S&P 500 and TSX are at all time highs, which is great, but doesn't suggest value. Neither EAFE nor EE are at all time highs. It's easy to be wary, especially with S&P 500 / TSX at all time highs. Recency bias has been mentioned here, do not forget it applies to North American markets too.

  11. #20
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    The thing is you can get international exposure via owning VTI; indirect exposure to 100s of huge U.S. multinationals that derive lots of their revenue (in some cases up to half of it) from around the world.

    I'm not saying you should avoid international stocks or ETFs; just that I question the value when the returns over the last 20 years have barely beaten fixed income.

    Every investment and every asset in a particular allocation has pros and cons.

    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

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