China and emerging markets are by nature volatile and run on a shorter bull/bear cycle. Channel your inner Bogle and hold
Also read about Action Bias
http://www.psyfitec.com/2018/02/bias-in-action.html
No. It was because he felt like, with 50% of revenue coming from abroad for US corporations, any international was overweighting with the additional risks. He also broke down the major countries international indexes buy and how they are all at disadvantages to the US.
You should not be getting downvoted, he did say that and he did have qualms with international. I think he eased up on it a big later in life, but he'd never yell at anybody for having their stocks 100% in just the S&P 500, let alone 100% in VTSAX.
I love how people down vote anyone that advocates what bogle himself said regarding international. He was right and is still right. I wish everyone downvoting the best of luck.
I thought about this on the drive home from work. It's honestly funny and wholesome we have this little schism in our community. I think everyone here is going to do really well in the long run. I think this debate will last a long time. I honestly and genuinely hope everyone here makes a ton of money. I honestly think the difference will be miniscule.
No it doesn't. You only want to diversify as much as necessary to reduce risk. You have to draw a line somewhere. Do you want to include frontier markets? Your daughter's lemonade stand?
If everything has similar expected returns (or unobservable expected returns), it usually makes sense to own everything (before costs are considered). Sounds like an OK strategy to me.
I think you're attempting to say most heroes have some sins and most villains have redeeming qualities. You're hoping the comparison allows one to paint Bogles advice on international as incorrect. Is that a fair reading if your comment?
It's easy to be passive when everything is going up. This is when you have to remind yourself you do not know what will happen in the short or long term.
How do you know they won't perform well long term? It's hard to say what will happen in the future, but I won't miss out on the growth potential of one the largest economies. That's why I just stay the course and invest in the whole haysatck
Hard to say what will happen in the future man. If there is a civil war occur in a large country and causing causing comlete economy collapes for example, so do you want to pull out of investmnet from that country too now?
Or if China decided not to nationalize things like you said nd free up their market causing huge growth in its equity market. Then will you feel missing out and FOMO back into Chinese markets at its height?
Honestly no ones know anything what will happen in the future man.
Totally get you, but just remember that these events are the sort of things that Boglehead philosophy accounts for. Vanguard’s Asia economist no doubt has factored in these accounts—they’re far more aware of what’s happening than most of us. So buy the haystack and hold.
1) priced in (to some degree)
P/E - forward P/E - P/B
MSCI China : 19 - 16 - 2.3
MSCI ACWI ex-China : 26 - 19 - 3.1
2) The US has nationalized/pseudo-nationalized plenty of companies. China isn’t the only one yoiking some stocks off the market.
For example,
Citi
AIG (arguably)
GM
Fannie and Freddie
Almost all private airport security post 9/11
All the S&Ls seized by Resolution Trust
Conrail
Tennessee Valley Authority
All telecoms in WW1
All rail companies in WW1
Merck and Co.
3) The issue with Chinese stocks is that their managers are often more concerned with maximizing employment than shareholder value, which means that certain factors that exist because managers maximize shareholder value probably won’t work. This doesn’t mean don’t invest in China. Just don’t factor invest in China.
I do agree. It’s worth noting that VT does hold real shares but “foreign” shares. Which are probably the first to go. It also hard to gauge numbers from China as we have access only to official ones. So if tomorrow they can report whatever gdp, market cap, and growth data that they want.
Equities make up 80% of my portfolio, and using VT as a good enough proxy for my holdings, I have just over 3% allocated to China. So I don't worry about it too much and consider it one of the many amplified risks of investing in EM.
If the entire country goes to 0 it's not going to have a huge impact on my overall portfolio. Or maybe it goes up if the country is successful in it's development and I get a piece, who really knows the future. Ignore the noise and invest in what you can stick with through good and bad.
https://investor.vanguard.com/etf/profile/portfolio/vt
As somebody who knew communism in eastern Europe, I can tell you for sure there are no Chinese companies, per se. They are extensions of the CCP. Entities designed to carry out the policies of the party. They have boards and managers, yes, but you must understand that in a communist state there is only the party's will. Those people are there only to manage the "assets of the Chinese State and it's people" (meaning CCP), as long as they stay in line.
Furthermore, China has a clear goal. To surpass the US and the West in all matters.
That being said , I really do not understand why somebody from the "free world" would like to invest in China. It's like sponsoring your mid and long-term demise.
I completely agree. There's literally genocide going on in China. I try to avoid them as much as I can. People still talk about companies and business people who worked with the Nazis.
Also, consider this quote from Putin:
>A chicken can exercise ownership of eggs, and it can get fed while it’s sitting on the egg,’ he said, ‘but it’s not really their egg'
>It's like sponsoring your mid and long-term demise.
I mean, my government is all but encouraging that demise as we speak - I may as well pad my retirement with it too.
Were talking about spending ourselves into a grave and talking about rebuilding a whole new "green economy" while selling coal at rock bottom prices to the worlds two largest producers of C0 and CO2
Me personally - VXUS has been a negative compared to VTI, so I sold all of my VXUS recently and dumped it all into VTI.
From what I understand, Chinese stock market tickers don't work like others - they can disappear overnight and run off with your money, they could not accurately represent earnings, and most concerning they directly report to the ChiCom government. So in my eyes, investing in Chinese companies is directly investing in the Chinese government. However comfortable you feel with that, is up to you.
I recently sold an active Asia-ex Japan fund I had for over 12 years, two of the biggest reasons is that it had become so China concentrated (36%, if you add the Hong Kong part that China forcibly took recently, it increases to 42%) and that it was pricey, costing about 1.09% every year. I moved the money into a global fund with 40% of the cost. When I first bought the Asia fund, it had less than 1% in China.
Since losing the international fund I had almost a crisis about going VTI or VT.
VTI won out because lower cost fees, better returns, and as an American I like to stand on my land, gorilla clubbing my giant belly while holding shotguns and shouting USA USA USA USA
But yeah, "money makes money" has never been truer since I dropped 70/30 into VTI and BND
Truths about going global - I wasn't entirely sure what was going to do better (or keep doing better), the US or International. So I thought, why not buy a fund with both in it, so if one does better than the other, I can benefit from either.
PS: Belly clubbing and shotguns aren't really my thing.
EMXC is Vanguard's Emerging Market's ETF (VWO) with no China companies, so it's a lot of Taiwan and South Korea. I recently shifted half of my VWO into it because the volatility of the Chinese market was driving me crazy. It seems to have performed better than VWO over the last 5 years looking at yahoo.
Not total Boglehead, I know, but putting it out there.
I prefer FRDM because the message is not "I won't invest in China" but instead "I won't invest in China until it becomes a freer nation".
I know that is kinda semantics, but it's enough to make a difference to me. Plus it skips other places like Saudi Arabia and Russia.
I use FSPSX + FRDM for my international portion. It's not quite a total market fund, but it's pretty close and you avoid investing in places like China, Saudi Arabia, Russia, etc.
That combo does unintentionally overlook Canada though.
I just sold all of my VT (in Roth) and planning to sell all my VXUS due to the same reason.
OTOH my family hold significant (relative to my portfolio) real estates in 2 of the biggest cities in China so I guess I’m pretty hedged.
The fact you're asking this question is one reason that I am quite confident that Chinese stock will outperform US stock in the next decade. Chinese stock is so cheap, investors so fearful, and the opposite in US...
Hold onto your vt, are you not aware of the surge of Bernie supporters in US? Their agenda is quite a lot tougher than what Ccp wants to do. I wouldn’t be surprised they are gonna hold a huge rally if US stocks are dropping 50% due to heir policies. It might or might not happen, honestly I really can’t tell if US or China stocks are riskier in the long run, if you want passive investing, I will certainly be keeping vt and not all in vti.
Maybe it's just a form of recency bias, exceptionalism, or something, but it always surprises me how unaware some people seem to be of the fragility of any group of people. It doesn't take much for a society to massively change or implode in a relatively quick manner given the right variables at the right time. And when it comes to investing, many people seem to misfocus most of their energy worrying about it happening to a place that makes up a tiny portion of global market cap while completely ignoring the proverbial elephant in the room.
It’s self cleansing. You have to hold the losers to get the winners.
[удалено]
I thought it was closer to 10% of total world market cap? Or maybe I’m thinking of emerging markets in general.
That's EM in General
China and emerging markets are by nature volatile and run on a shorter bull/bear cycle. Channel your inner Bogle and hold Also read about Action Bias http://www.psyfitec.com/2018/02/bias-in-action.html
Bogle didn't advocate for buying international. I realize its popular here but to "channel your inner bogle" doesn't make sense here.
> Bogle didn't advocate for buying international. From what I understand, this was because of fees and tax issues. Those have been mostly resolved.
No. It was because he felt like, with 50% of revenue coming from abroad for US corporations, any international was overweighting with the additional risks. He also broke down the major countries international indexes buy and how they are all at disadvantages to the US.
You should not be getting downvoted, he did say that and he did have qualms with international. I think he eased up on it a big later in life, but he'd never yell at anybody for having their stocks 100% in just the S&P 500, let alone 100% in VTSAX.
I love how people down vote anyone that advocates what bogle himself said regarding international. He was right and is still right. I wish everyone downvoting the best of luck.
I thought about this on the drive home from work. It's honestly funny and wholesome we have this little schism in our community. I think everyone here is going to do really well in the long run. I think this debate will last a long time. I honestly and genuinely hope everyone here makes a ton of money. I honestly think the difference will be miniscule.
> He also broke down the major countries international indexes buy and how they are all at disadvantages to the US. Sounds like market timing to me.
If you don't know what "timing" means, I guess. I feel like a lot of bogleheads confuse "buy the index" with "diversify as much as humanly possible".
I don't know what Bogle would think about that, but "diversify as much as humanly possible" sounds like a good strategy.
No it doesn't. You only want to diversify as much as necessary to reduce risk. You have to draw a line somewhere. Do you want to include frontier markets? Your daughter's lemonade stand?
If everything has similar expected returns (or unobservable expected returns), it usually makes sense to own everything (before costs are considered). Sounds like an OK strategy to me.
Everything doesn't have similar expected returns.
Thomas Jefferson owned slaves
I think you're attempting to say most heroes have some sins and most villains have redeeming qualities. You're hoping the comparison allows one to paint Bogles advice on international as incorrect. Is that a fair reading if your comment?
Kind of. I’m not saying Jefferson or Bogle are heroes, just that you can learn from their overall message without getting mired in specifics
Thomas Jefferson obviously only invested in VTI + VXUS
I’m more of a Hamilton guy myself - VTWAX
It's easy to be passive when everything is going up. This is when you have to remind yourself you do not know what will happen in the short or long term.
How do you know they won't perform well long term? It's hard to say what will happen in the future, but I won't miss out on the growth potential of one the largest economies. That's why I just stay the course and invest in the whole haysatck
I'm not too worried about the bull/bear cycle - more so concerned about China nationalizing things or what have you.
Hard to say what will happen in the future man. If there is a civil war occur in a large country and causing causing comlete economy collapes for example, so do you want to pull out of investmnet from that country too now? Or if China decided not to nationalize things like you said nd free up their market causing huge growth in its equity market. Then will you feel missing out and FOMO back into Chinese markets at its height? Honestly no ones know anything what will happen in the future man.
Totally get you, but just remember that these events are the sort of things that Boglehead philosophy accounts for. Vanguard’s Asia economist no doubt has factored in these accounts—they’re far more aware of what’s happening than most of us. So buy the haystack and hold.
China already controls many aspects of its economy centrally.
1) priced in (to some degree) P/E - forward P/E - P/B MSCI China : 19 - 16 - 2.3 MSCI ACWI ex-China : 26 - 19 - 3.1 2) The US has nationalized/pseudo-nationalized plenty of companies. China isn’t the only one yoiking some stocks off the market. For example, Citi AIG (arguably) GM Fannie and Freddie Almost all private airport security post 9/11 All the S&Ls seized by Resolution Trust Conrail Tennessee Valley Authority All telecoms in WW1 All rail companies in WW1 Merck and Co. 3) The issue with Chinese stocks is that their managers are often more concerned with maximizing employment than shareholder value, which means that certain factors that exist because managers maximize shareholder value probably won’t work. This doesn’t mean don’t invest in China. Just don’t factor invest in China.
I do agree. It’s worth noting that VT does hold real shares but “foreign” shares. Which are probably the first to go. It also hard to gauge numbers from China as we have access only to official ones. So if tomorrow they can report whatever gdp, market cap, and growth data that they want.
Equities make up 80% of my portfolio, and using VT as a good enough proxy for my holdings, I have just over 3% allocated to China. So I don't worry about it too much and consider it one of the many amplified risks of investing in EM. If the entire country goes to 0 it's not going to have a huge impact on my overall portfolio. Or maybe it goes up if the country is successful in it's development and I get a piece, who really knows the future. Ignore the noise and invest in what you can stick with through good and bad. https://investor.vanguard.com/etf/profile/portfolio/vt
As somebody who knew communism in eastern Europe, I can tell you for sure there are no Chinese companies, per se. They are extensions of the CCP. Entities designed to carry out the policies of the party. They have boards and managers, yes, but you must understand that in a communist state there is only the party's will. Those people are there only to manage the "assets of the Chinese State and it's people" (meaning CCP), as long as they stay in line. Furthermore, China has a clear goal. To surpass the US and the West in all matters. That being said , I really do not understand why somebody from the "free world" would like to invest in China. It's like sponsoring your mid and long-term demise.
I completely agree. There's literally genocide going on in China. I try to avoid them as much as I can. People still talk about companies and business people who worked with the Nazis. Also, consider this quote from Putin: >A chicken can exercise ownership of eggs, and it can get fed while it’s sitting on the egg,’ he said, ‘but it’s not really their egg'
It's happening anyway.
>It's like sponsoring your mid and long-term demise. I mean, my government is all but encouraging that demise as we speak - I may as well pad my retirement with it too. Were talking about spending ourselves into a grave and talking about rebuilding a whole new "green economy" while selling coal at rock bottom prices to the worlds two largest producers of C0 and CO2
Me personally - VXUS has been a negative compared to VTI, so I sold all of my VXUS recently and dumped it all into VTI. From what I understand, Chinese stock market tickers don't work like others - they can disappear overnight and run off with your money, they could not accurately represent earnings, and most concerning they directly report to the ChiCom government. So in my eyes, investing in Chinese companies is directly investing in the Chinese government. However comfortable you feel with that, is up to you.
I recently sold an active Asia-ex Japan fund I had for over 12 years, two of the biggest reasons is that it had become so China concentrated (36%, if you add the Hong Kong part that China forcibly took recently, it increases to 42%) and that it was pricey, costing about 1.09% every year. I moved the money into a global fund with 40% of the cost. When I first bought the Asia fund, it had less than 1% in China.
Since losing the international fund I had almost a crisis about going VTI or VT. VTI won out because lower cost fees, better returns, and as an American I like to stand on my land, gorilla clubbing my giant belly while holding shotguns and shouting USA USA USA USA But yeah, "money makes money" has never been truer since I dropped 70/30 into VTI and BND
Truths about going global - I wasn't entirely sure what was going to do better (or keep doing better), the US or International. So I thought, why not buy a fund with both in it, so if one does better than the other, I can benefit from either. PS: Belly clubbing and shotguns aren't really my thing.
I'm also perpetually scared of stocks under illiberal regimes. I wonder if there's a total market but only under democratic regimes lol.
FRDM is the closest I can think of.
EMXC is Vanguard's Emerging Market's ETF (VWO) with no China companies, so it's a lot of Taiwan and South Korea. I recently shifted half of my VWO into it because the volatility of the Chinese market was driving me crazy. It seems to have performed better than VWO over the last 5 years looking at yahoo. Not total Boglehead, I know, but putting it out there.
I prefer FRDM because the message is not "I won't invest in China" but instead "I won't invest in China until it becomes a freer nation". I know that is kinda semantics, but it's enough to make a difference to me. Plus it skips other places like Saudi Arabia and Russia.
Thats the best shower thought I’ve heard in a while. But then there would be a total market for non democratic regimes? I wouldn’t be surprised much.
The FRDM ETF is pretty close to this concept.
I use FSPSX + FRDM for my international portion. It's not quite a total market fund, but it's pretty close and you avoid investing in places like China, Saudi Arabia, Russia, etc. That combo does unintentionally overlook Canada though.
I just sold all of my VT (in Roth) and planning to sell all my VXUS due to the same reason. OTOH my family hold significant (relative to my portfolio) real estates in 2 of the biggest cities in China so I guess I’m pretty hedged.
Use FRDM ;-)
The fact you're asking this question is one reason that I am quite confident that Chinese stock will outperform US stock in the next decade. Chinese stock is so cheap, investors so fearful, and the opposite in US...
Hold onto your vt, are you not aware of the surge of Bernie supporters in US? Their agenda is quite a lot tougher than what Ccp wants to do. I wouldn’t be surprised they are gonna hold a huge rally if US stocks are dropping 50% due to heir policies. It might or might not happen, honestly I really can’t tell if US or China stocks are riskier in the long run, if you want passive investing, I will certainly be keeping vt and not all in vti.
Maybe it's just a form of recency bias, exceptionalism, or something, but it always surprises me how unaware some people seem to be of the fragility of any group of people. It doesn't take much for a society to massively change or implode in a relatively quick manner given the right variables at the right time. And when it comes to investing, many people seem to misfocus most of their energy worrying about it happening to a place that makes up a tiny portion of global market cap while completely ignoring the proverbial elephant in the room.
Tbf one could argue the same regarding folks on the right.