I never claimed that everyone should do exactly as I do, or have the same financial goals as I do. And it's not like I ever stated explicitly that different financial goals would have different financial strategies...

It's not like this isn't just a complete non-sequitur to the thing that is being discussed. Yup. Shrugged them off completely.

You just want to win the argument that doesn't even exist. So go ahead and give the advice for those with a 3-10 year horizon to "greedily hoover up every dollar you can." It's their time and their money. They can do with it how they see fit.

But if they have a 3-10 year horizon, I'd be encouraging them to clam up and get out of the market if they have sufficient money for whatever it is that they're saving for, or if this is money that needs to be protected more than it needs to grow. The volatility in that time frame is going to be nuts. It's probably not worth it unless it's non-essential money that you can afford to lose.

Just saying that the balance of foreign funds being 0% isn't crazy. OK, you say there is one data point, though not all foreign funds, just emerging markets. I'm not that convinced that you need foreign exposure to make your portfolio "good". I have foreign funds in the mix. They've always under-performed for me, and looking at the entire timeline of those funds vs. S&P500 they've never over-performed.

My argument isn't about tax consequences. It is about 1) the whole reason to do this is to have uncorrelated investments for risk reasons 2) they've never really done that (with potentially 1 exception), while under-performing the market as a whole. If somebody told me I was silly for keeping my international funds or said that they weren't doing any themselves, I'd just say "That's fair. It isn't the conventional advice, but hard to argue passionately against". Even Random Walk was half-hearted in pushing foreign exposure.

It's also worth noting that a reasonabe chunk of S&P500 funds consist of multinational companies. Here's Vanguard's:

https://investor.vanguard.com/mutual.../profile/VFINX

The top 5 holdings are Apple, Microsoft, Amazon, Alphabet (Google), and Facebook. It's certainly not the same as specifically investing in international funds, but these multinational companies automatically give you some of that international exposure.

I don't know whether you specifically "need" foreign market funds, either. But there are definitely opportunities.

I believe the hope is that you get a negative (or non) correlation to your US stock portfolio, which helps with risk management. Beyond that, you get additional diversification. (It has been a while since I read Random Walk, so maybe + other stuff.) Sort of recall a mathy explanation that went along the lines of "what if the US versus rest of world went really badly for you, and you only owned US stocks.."


Maybe you've nailed it, and we all already have RoW exposure through multinational megacorps listed in the S&P?

Have you ever wondered how your life would be different if you didn't interpret everything as a personal attack?

Like, for example, answering "don't you have anything shorter term you're investing for" with "no" instead of a self-righteous monologue about how you have all the money you want?

Well you get exactly what you said, you get some exposure through American megacorporations.

Not all of them end up repatriating the money they make overseas so I don't know if thwir full ROW profits are reflected in the US stock price. Plus you miss companies that are big elsewhere but not in the US, like WeChat or Weibo (ones I happen to know because of extended family in China).

Limiting your exposure to megacorps is analogous to investing in the DJIA vs S&P 500 vs Wilshire 5000. You can get a taste of what the market is like with just a handful of stocks, you get a fuller flavor with 500, and you get the broadest indicator of overall health with the 5000.

Buying an international fund specifically is like extending that 5000 to 50000 or something.

So I just looked up VFINX vs VEIEX (two tickers I happened to remember from my portfolio) and unless there's a compelling reason why these aren't representative, I'd submit them as decent examples. Late 90s to late 00s, there was a huge runup in international stocks. VEIEX underperformed in the past 10 years and especially past 8 but it's exactly what you want in diversification - sometimes it runs better, sometimes it runs worse.

Have you ever wondered how your life would be different if you were connected to reality instead of the bizarro world that exists only in your head? I mean, this is how you see reality:

I'll also point out that you were quite literally going nuts from the very start of the conversation, when I merely pointed out that being in "financial services" is not automatically a qualification for giving good information about how to improve your credit score. And you're wondering why *I* am so defensive and have a chip on my shoulder (quoting one of your deleted posts)?

I stated I was invested for the long term. You asked a follow-up question as if you weren't clear on what I had stated. So I explained my financial perspective in more detail, quoting something I had already said earlier. And now you think I'm self-righteous and defensive. So... *shrug*... Along with spending your money how to choose, and doing whatever you want with your credit cards, I guess I should also say that you're free to think whatever you want as well. It's your brain.

Thanks, it's good to know I have your permission.

So how much do you have allocated to international funds? What's your rationale for the percentage?

AFAIK most target date funds gradually move to a higher allocation in bonds as the target date nears. This makes sense intuitively since you should be less risky as you approach retirement and when you are have the most money tied to funds.

This is generally the accepted approach to retirement investing. https://www.bogleheads.org/wiki/Bogl...ent_philosophy

I don't adhere to it. I also don't doubt people can take riskier strategies to consistently beat the market (trading vs investing). I think arguing over percentages is futile though. Your ROI is unlikely to increase significantly unless you know what you're doing and you can beat the luck of the market.

If you do have strategies I'm all ears.

That I don't have a personal strategy is the exact point I'm trying to make.

I think/read/accept that international stocks further diversify a portfolio. I have no means of calculating diversification myself, but I accept it can be done. Most importantly, as a complex and opaque subject, I am willing to pay someone or phone a friend and accept the answer they give.

My point is an epistemological one, not a financial advice one. I have something like 10% in international stocks. It may be 5%. It may be 20% (that sounds high, I doubt it's 20%). I don't remember exactly what it is, but it's a target, and every year or so I recalculate what our distribution is between US/Intl/Large Cap/Small Cap/Fixef Income and make sure we haven't drifted too far from the magical numbers someone handed me.

How do I know those numbers were correct? I don't. But I also know I don't know. I didn't pay someone to come in, or ask a friend to come over, only to turn around and **** on their advice or accuse them of being self-serving. I chose them with the foreknowledge that I would accept their answer.

I am relatively agnostic in terms of percentages. I advocate that people either find a friend, or pay a professional, to look stuff over and give a baseline on a one-time consulting basis. No friend and few professionals are interested in active management, anyway, unless you've got a **** ton of money.

Same with credit scores. Or car repairs. Or house remodels. Or any other complex, opaque subject matter of low frequency, especially where your situation may be special. If one of my life goals were to remodel my San Francisco house in the next 10 years, I definitely should not be getting my portfolio distribution from the Internet.

Explicitly in international funds? Right now, none. I've been pretty content to have most of my investments in an S&P500 index and a large cap index fund. In the last decade, I've felt pretty good about my level of exposure through the multinational corporations.

If I remember right, I set up my initial monthly recurring investment pattern as 50-50 between the two. I'm of the mindset that retirement money is something you don't really look at too often, and don't spend a lot of time trying to fine-tune. It's basically the opposite of high frequency trading. You simply put the money away and let the long run take over to smooth out the variance. (HFT is all about playing around in the variance.) I seem to be on a pattern of re-evaluating things every 3-5 years or so, which gives you a sense of how quickly I'm making changes. Up to this point, I've basically held to what I did when I got my first "real job" out of graduate school.

Towards the beginning of the year, I think I changed the investment pattern to 45-45-10 and introduced bond funds. I didn't rebalance the whole account. But that was more just playing around with the website to make sure I knew how it all worked and that everything behaved the way I expected it to, and 10% is a small enough amount that I wasn't really making any "big" moves. I will might be doing something bigger soon-ish, which means something in the next year or so. I'm looking at starting to put money into bond funds (especially as the key interest rate is going up) and opening the door to some international funds.

The thing that I'm looking at are the target date retirement accounts. It's a starting point to get ideas. (It's something that I think I would have done when I first started if I knew more, but the index funds were a pretty safe starting point where I wouldn't go far wrong.)

For example, here's the Vanguard 2050 fund.

https://personal.vanguard.com/us/fun...ect=true#tab=2

You can see that this is about 54% US market, 36% international markets, and 10% bonds. The 2040 fund has a similar ratio:

https://personal.vanguard.com/us/fun...ect=true#tab=2

This one is about 51% US market, 34% international markets, and 15% bonds. In both cases, they're about 3:2 US:International.

So that's a starting point to look at if you're looking for a ratio of US/international funds. I'm not going to say that these are golden ratios, and some people are negative on target date funds because they're just a fund of funds and are more heavily invested in large cap. It also doesn't phase out of the market early enough for some people (still too aggro in stocks and not enough about protecting money as you approach retirement).

And so I tend to think that's a little too much. I'd probably target something like 15-20% international funds. It seems to be a happy medium of the various numbers and random bits of advice I've seen. I think Warren Buffet is anti-international investment for average investors, and that's worth consideration, too.

But I'm not playing aggressively. There's increased volatility because of changes in the relative values of currencies, and there are extra expenses for international funds (and tax implications, though I couldn't tell you anything about that).

Here's an article from MorningStar:

http://www.morningstar.com/articles/...do-you-ne.html

You can see that it's just kind of all over the place because you can't know the future.

If I were to pull the trigger today, I'd probably be something like 10% bonds, 15% international, 75% US.

If you're trying to invest money in the stock market to remodel your house in the next 10 years, you're probably just doing the whole thing wrong. You should just be slowly packing away money in a safe place. You would hate to have saved up $250,000 (or however much for your remodel -- I know SF is expensive) and then discover you only have $200,000 because of market volatility. If the economy is going down, your cash will go further. If the economy is going up, you may not have maximized your possibilities, but you'll have your $250,000 that you were intending to spend on the remodel.

This is more about money basics than money specifics. It's not as opaque and complicated as you seem to think it is. And public, verifiable information isn't nearly as bad as you seem to think it is.

I think it's very good but very general, that is, it is accurate but often not very helpful.

I'll straight up admit I didn't follow your links but let's just say that the spread of information is something like 0-35% international, and where you fall on that spectrum depends on various factors. And there's little footnotes and explanations. But ultimately, 0-35% is a big spread, and knowing where you are on that spectrum and what your utility function is ends up being more of an art than a science.

Take home remodeling. There is a probability that I save $250k and it becomes $200k at the last minute. There is also the probability I save $250k and construction gets hot and suddenly it costs $300k. Maybe I am baller and I shrug and write a $50k check on the spot; maybe I will have enough equity so I just get a loan for $50k. On the other hand maybe I am disappointed by that surprise and I put my dreams on hold for 5 years but that's fine. Or devastated by the surprise and this is a life-wrecking development. My risk tolerance is a complex question.

Without knowing specifics like that, it's really difficult to give a number. And that's ultimately what is required, a number. 10%. 21.34%. No less than 43% but no more than 47%.

And of course nobody hits that number exactly, they do as you do, one month bump up Fund A (and overexpose to Fund A for a month), the next month bump up Fund B.

As you get closer to your target date, your allocations shift. And you can pay a little extra to those time-based funds like the 2050 fund, or you can plagiarize their percentages and do it yourself. If you have multiple target dates ($50k in 2020 to start my own erotic bakery, $250k in 2025 for a remodel, $500k in 2030 for kids' college, $5.3 M in 2050 for retirement) it gets awkward. When each of those carries different utility - pushing back my erotic bakery dream is fine but the remodel has to happen and my kids are basketball superstars so college fund may not even be necessary and my job will be obsolete by 2045 so I have to retire by 2050 - at some point it becomes a huge, life-draining burden to manage it all yourself.

I don't know why I didn't think of this before, but taxes may be the best analogy. All the forms are publicly available and at some level of simplicity, paying someone to do it for you is real dumb. But at some level of complexity, it's not only fine but advisable to reach out to experienced friends or pay experts to just do it for you.

Home remodel is also different than kid's college or some other time dependent expense. You could put it off 2-5 years if the market tanks.

0-35% is a big spread indeed. But it doesn't mean what you seem to think it means. All it means is that there is a wide spread of viable options, and it's not as if someone is going to tell you something specific to you that will make one significantly better than another. And that's all you need to know. You don't need to overpay someone to tell you that. Nor do you need to pay someone to give you some made up number. Unless you've got money in the tens of millions of dollars, you're just a small fish and there's probably nothing special that you should be doing that will be significantly better than other things, as long as you're in the general ranges of reasonable advice.

Indeed. And it's not something you're going to be able to quantify in a useful way. So overpaying someone to tell you a number doesn't actually address anything in a helpful manner.

My position has been that knowledge is better than ignorance. Taking your credit advice, it would have taken you 5 minutes to Google "Should I close credit cards to raise my credit score" and you would have discovered that basically nobody says this is a good idea. That should *at least* give you pause before taking your friend's advice, no matter how much of an insider this guy happens to be. And it should drive you to more knowledge (ask him what's special about your situation) instead of doubling down on ignorance (I'm going to ignore the available information and just do this anyway because my friend said so). At least go back and ask the "why" question.

I'd argue that you're talking about a completely different beast than anything you've brought up before, and it undermines a lot of the arguments you were making.

1) Taxes are a science, not an art. This goes against your most recent argument about the complexity of your risk tolerance. The complexity there is in the art-ness of it.

2) Taxes are not opaque. They're absolutely transparent in that absolutely ALL of the information is publicly available. There's no insider information. If you have a certain type of business, you need to fill out form X. How do you know whether you have that type of business? Read form Y.

3) One of the reason you pay people to do your taxes for you have more to do with time investment than incapacity to do it yourself. You were arguing earlier that the reason for overpaying an insider is because they have information you don't have access to. You're not paying for insider knowledge as much as you're just paying someone to do the work for you.

Doing taxes is nothing like credit scores or investing. It's a lot more like plumbing or electrical work.

But I would agree that a lot of people should pay someone to do their taxes for them (or buy a program to help), especially if you are self-employed or have other financial situations that are unique to you. Unless you're a 1040-EZ person, in which case it's stupid to pay someone.

Then the life goal is "remodel the house" not "remodel the house in the next 10 years." And I'd still say that saving money in a low risk environment is much better than being in the market for something like this.

Thanks for this.

I still disagree on the Target Date Funds but that Morningstar article about the Target Date Funds with Foreign Bonds is interesting.

What I don't like about Target Date Funds is that there really aren't enough transparency in regards to what the actual mix of securities is composed of. Whereas most Large Cap funds do have enough transparency in regards to what the mix of securities are composed of if you do even a brief amount of research based on available free data or paid data like Bloomberg Terminal, CapIQ S&P500, Morningstar, etc.

I truly appreciate conflicting viewpoints because I think what callipygian argues about how a portfolio should be diversified to include International Funds definitely has merits.

However, my portfolio is closer to the one AaronW. just noted earlier comprised of mostly S&P500 type Large Cap funds. Looking a little deeper into the prospectus and reviewing the drawdowns of the International Funds and how it has performed during the Great Recession was depressing enough for me to get out of it.

As Aaron W. noted earlier somewhere, those Large Cap Funds often contain exposure to foreign securities as well, in my case about 5% which I think is definitely better than 0%.

However, I'm too dumb/young to have the investment in Bond Funds yet since I'd rather just take the risk

Would love to one day learn to be a bond trader though since the tax loopholes are astounding based on your strategy with domestic corporate bonds and I imagine even with the foreign bonds.

Here's my financial advice: all the well-funded poker pros I know married/dated someone who makes a ton of money.

You can figure it out, but it's a little tedious. You start with the distribution of funds:

https://personal.vanguard.com/us/fun...ect=true#tab=2

Then you can look up each fund individually. For example, here's the Vanguard Total Stock Market Index Fund:

https://investor.vanguard.com/mutual...ortfolio/vtsmx

You can look at the equity sector diversification to see what areas are covered. And if you really wanted, there's a link to the portfolio holdings a little further down and you can see all 3603 individual stocks and how many shares that are held (and the 7 bonds, all US Treasury).

But what exactly you intend to do with that information... I don't know.

Thank you very much for this as well as the prompt reply.

Too lazy to research this at the moment but goes to show I should maybe open a Vanguard account over Fidelity or discount self-managed Roth IRA account at a discount brokerage firm, in addition to the Roth 401k account I have through Fidelity via work for employee match.

What I intend to do with that data from Vanguard is to rebuild the excel correlation model. Should be able to plug in all 3603 individual stocks, 7 bonds, then run the correlation on it, then analyze it further now that I have more industry experience and knowledge.

1st source was via former VP/Portfolio Manager at Morgan Stanley as a CTA.
2nd source was via former FX / Commodity Option (Oil, Nat Gas, Gold, etc) / Bond Trader on Wall Street who learned how to trade from George Soros prior to going to college.

Both sources, I learned to calculate the correlation in great emphasis as well as how it impacts the potential future gain as a result utilizing 3-5 years worth of data.

What I learned from both was strictly straight excel but my main mentor who I learned how to trade FX from was a big advocate of Python and VBA to which I learned the basic but was too dumb to implement it in the FX models I had or even on the backtesting models.

Tldr but this seems like a fun experiment to attempt to learn python and improve my technical skill. This really helps a lot and I thank you for this AaronW as I have a rather large phone interview next week with one of the bigger hedge funds in the USA.

Thanks again for this AaronW.

Phil Laak taught us that.

Knowledge is not binary. Viability is not binary. There are not only two options, knowing nothing vs knowing everything. Instead, there's a gradual transition from knowing nothing to knowing a little to thinking you know a lot to actually knowing a lot.

Taxes are actually a much better example than you think exactly because it's super easy to think you know everything. It's all public, how could you not, amirite? Yet, to do your taxes most correctly, you may need to forego a deduction because it's likely to raise your audit risk, e.g., personal home office. Sometimes, there are two correct ways to do things - such as making so much money from poker that you have a legitimate decision whether to file as a poker pro with a lot of side income or as a rec player with a lot of poker income, or whether to take a credit or a deduction for foreign taxes paid.

With taxes, as well as with international stocks or blackjack or the JTs example, I've been trying to find ways to show you how easy it is to think you know everything. And of all of those, I really wish the blackjack example had hit you a little more because it's a great example of how something that seems so obviously stupid at first (taking insurance) can be actually not (CE vs EV), as you move from knowing nothing to knowing a lot, you go from "of course i take insurance" to "of course I don't want insurance" to "I often want insurance." That is, if you were to watch security camera footage of a novice and an expert, they may play the same.

Like I said to dadjoey, my main point is less of a financial advice point than an epistemological one. I think if you sat down with my finances, you'd probably end up agreeing with my friend. More importantly, though, if you didn't, I'd side with him/her over you. You'd cite hyperlinked articles to refute them, and given enough time, ironically, end up citing one that they themselves wrote.

To repeat, that's not my point at all. International stocks will diversify your portfolio but whether you should have them is a complex question.

Small and mid cap US stocks will also diversify your portfolio, and if you're lacking those, they may diversify your portfolio better than international.

I don't know how to quantitate diversity.

But there's increasing knowledge, and there's maintaining ignorance. And that seems to be the functional difference. You promoted ignorance. I'm promoting an increase of knowledge. I'm not saying that you will know everything. And there may be subtle details that are missed. None of this is an excuse for ignorance.

I'm doubtful unless your finances were literally just that awful. And maybe they were. But in that case, doing almost anything besides accumulating more debt and opening more cards would have been a good move.

The real crux here is this:

It's not that you got advice. It's that you proceeded to demonstrate that you didn't even take the time to learn anything about the advice you were given, and then took that advice and extrapolated false information that you then passed off as true information. And then didn't even seem to care that your statements were false because you were more interested in defending the advice giver's honor than you were learning about the subject.

It's the difference between abject ignorance and missing a couple details. As to your blackjack example, I think it perfectly demonstrates what I mean. The overwhelming majority of the time, it's wrong to take insurance. The fact that there are some obscure cases in which it's reasonable (note: and less profitable) doesn't change that.

You're right that I didn't consider risk mitigation as a potential feature of the strategic model. And I reconsidered and learned from it. Notice that I asked questions and learned. (Yes, it was confrontational, but that's irrelevant.) I accepted the information after it was brought up for consideration.

That isn't what you did. You took an entirely different route. What you demonstrated in your statements is that you didn't learn anything and you didn't ask any questions. You didn't even have your basic facts right. And then you proceed for 50 posts to defend the idea that ignorance was better than knowledge.

What you put forward was the equivalent of a recreational blackjack player explanation of taking insurance. Maybe it happened to be informed by an expert leaning over your shoulder and telling you to do it, but you didn't actually demonstrate anything to suggest that there was. For all that could be known from the information available, the guy telling you information was also a recreational player.

(And a lot of people in the "financial industry" are recreational players when it comes to credit. Most of them don't actually deal with credit issues and you can surpass their knowledge with a couple hours of independent reading. The difference is that they tend to assert their knowledge more confidently than is warranted and with more authority on the basis of being "in the financial industry." For all I know, they're just passing along bits and pieces of what they might have picked up, regardless of whether it was critically analyzed to be parsed between "things that the company wants to see their customers do" and "things that are good for individuals to do." And that's why I'm less trustful of their knowledge.)