Why Jack Bogle Doesn't Own Non-U.S. Stocks

Hmmm . . . . .

Youtube: Why Jack Bogle Doesn't Own Non-U.S. Stocks



John Bogle says investors don't need to own international stocks - InvestmentNews

Bogle Had a Point on International Stocks - Morningstar

 

These articles are all written in terms of a US investor consuming USD

 

As opposed to a World Investor consuming World Dollars?

 

What currency do you spend?

Even most Bogleheads don’t agree with Jack Bogle’s position.

I expect you have already seen other perspectives like these



Why not just invest everything in the US market? — Passive Investing Australia

Swedroe: Benefits Of Int’l Diversification

There is a good example of buying 1/3 each of domestic, US and ex-US outperforming all of the individual holdings as you naturally end up buying low to keep the portfolio in balance.

 

Mr. Bogle was quick to note that since “Bogle on Investing” was published in 1993, the S&P 500 has gained 779% cumulative vs. 309% for the Europe, Australasia and Far East index. “I’ve been right,” Mr. Bogle said.

“Does that mean I’ll be right in the future? I could be wrong,” he said. But, he added, when you buy the S&P 500, you buy a portfolio where roughly half the earnings and revenue comes from abroad.

“What are you buying in non-US-stocks?” said Mr. Bogle. “The largest country in EAFE is Britain; the second-highest, Japan; and the third is that soul of hard work, France. I can’t see that I’d make more money in Britain, with Brexit; or Japan, a very structured, aging economy — or France, where they couldn’t pass a law saying you had to work 35 hours a week.”

And, he noted, international investing hasn’t provided much diversification. “If you look at the last 10 years, the correlation between EAFE and the U.S. has been something like 92,” Mr. Bogle said. “That doesn’t seem to change your risk.”

What about the argument that overseas stocks are cheaper than U.S. stocks? “One reason could be they are underpriced,” Mr. Bogle said. “The other could be that they have higher risk. PE ratios don’t come out of nowhere.”

Think of it this way: Suppose you constructed a portfolio that mirrors the composition of the global stock market: 45% U.S., 55% overseas. If non-U.S. stocks were to outperform by two percentage points a year, that leaves only a one percentage point difference. “You could find that by investing in cheaper funds,” Mr. Bogle said.​

 

Nah I've see those "counter-arguments" before.

It's for people who claim to "know nothing".

 

why post it if you already know all the answers? Confirmation bias?

How should and Australian investor apply this insight to their portfolio decisions?

 

That’s ok, we can all agree to disagree.

I just like that Mr Bogle is thinking the way I’m thinking hahaha

The common view is to invest internationally to get as much diversification as possible. But is it really necessary?

I’m just saying there are alternative views out there, like Mr Bogle’s (and mine ). #USArules

No one should claim one view is the correct one, because we never know what will happen.

 

All I’m suggesting is to put Mr Bogles views into context as a US citizen living in the US.

I know you are very pro tech, NDQ, US etc which screams recency bias. As a matter of interest, how long have you been investing in equities?

Investing internationally gives you some protection if you are wrong. A global portfolio is still 60-70% US so will also benefit from any continued upside.

Most of the recent US outperformance has been from the US getting more expensive. For the US to continue to outperform it either needs to exceed the high expectations of those valuations or continue to get more expensive,

 

perhaps test this a little more using Vanguard Index Volatility Charts

In AUD since 1993,
10.2% p.a. US
9.3% p.a. Australia

which is good, however US only just pulled ahead since COVID.

Recency bias and certainly not 779% vs 309% which I expect excluded dividends

Surprising quote from Bogle given how cheap Vanguard funds are. Not sure how I can squeeze a 1% fee saving out of VEU

 

Well of course. The things that happened in 2020 are more reliable indicators of the future, than those that happened in 1990. A lot have changed in the world since then. Why would I not use more recent reality to analyse the future?

And if I were to extremely diversify just to eliminate so many risks, maybe I should just stick to a high interest savings account.
Pffft.

I don’t mechanically set allocations to this and that, rebalance this and that blah blah. I take calculated risks.

 

And those things that happened are now reflected in current valuations. Stock returns are forward looking.

You statements above sound a lot like chasing past performance.

Short term results are very noisy with unexpected returns drowning out expected returns.

Investing in FAANG Stocks: Should You Expect Unexpected Returns? | Dimensional

 

So this principle applies only to FANG/Mag7 stocks? That other stocks’ valuations are not forward-looking and therefore they’re more special?

 

Of course not.

Expected returns are lower, the higher price you pay for a stock. This doesn’t mean a high priced stock won’t shoot the lights out as we have seen with Mag7 in 2023. That’s the noisy effect of unexpected returns over the short term.

One final note on authority bias that this article sums up well.
Jack Bogle Was Wrong About These 3 Things

 

Posting any "authoritative" websites like all the ones above is actually a form of "authority bias".

Besides, my opinion was formed even before reading Mr Bogle's view.

That's the author's opinion on international shares. Doesn't mean he's right just because there's a website writing this opinion.

People here like to proclaim their opinion is the only right one, the Gospel Truth.

I think people should stop claiming they have better thoughts and like to dismiss other reasonable thoughts.

Also people like to post stuff from passiveinvestingaustralia.com which has a lot cool stuff, but that doesn't mean I agree to everything written in the website.

But there are alternative opinions out there, and I'm sharing it here. No need to be defensive just because you think you know it all.

 

Opinions are the last thing people should be looking for when making investment decisions.

I’ve tried unsuccessfully to engage on your posts a number of times now across this and the ETF/LIC threads which regularly appear to be following the path of behavioural biases that are closely linked to long term retail investor under performance.

You seem to have a strategy you have chosen and it’s not my place to change that.

 

these are all opinions. the above are all opinions.

just another biased opinion, using outdated graphs from the 1970s

 

In Australia buy the dip works best.
As proven by those boggled trying to disprove buy the dip.

 

This is based on the assumption most human beings are rational creatures. It seems most of us are not (including me many times over the years) when it comes to investing in the sharemarket.