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As many firms and advisors are now focusing more on Foreign market emphasis I am curious what others have allocated. We have generally been 47-50% domestic equity, 38-35% foreign equity, including about 5%+ in Emerging Markets and the remaining 15% in bonds for the past 5 years. The higher foreign exposure was a little drag in the past however is boosting returns currently.
Curious of others opinion on international is, we don’t make big swings but stay within a general range. We are moving more toward a 20% bond allocation while reducing large cap domestic equities to 42-45%
thanks everyone.
Robert,
First It appears that your overall allocation is 85% equities/15% bonds, with the equity percentage as a percentage of your TOTAL portfolio.
For clarity sakes I want to explain that for my consideration of the weighting of international vs US stocks I consider what portion of my EQUITY position is international vs US. That being said the US is approximately 2/3 of the world stock market so I have always tried to match that percentage. I know that my international exposure has been an overall
drag on my portfolio I have averaged an 8.6% overall return over the past decade which I am fine with. This is with an overall portfolio allocation of 45/45/10. When we claim Social Security in a few years I will switch to a pure bucket approach and since the majority, if not all, of our expenses will be met with our SS income our equity exposure will increase dramatically.
Fidelity suggests a 15% allocation to international equities. We are at 12%, but may start increasing toward 15%.
63/37 US v International. I basically mirror the cap weighting on a global basis.
I just checked our main Vanguard fund – Vanguard Australia High Growth Index Fund. The Australian allocation is about 35%, remainder international shares (which will obviously has a large US exposure).
Australia is clearly a small market so having a relatively small allocation is sensible. However we do get some good tax benefits from Australian shares, particularly those paying healthy dividends, by way of “franking credits”. So some degree of home bias make sense for Australian investors.
I read something fascinating in the January 8th edition of Adam Grossman’s daily personal finance email. He referenced Vanguard studies indicating that over the long-run, ≈ 35% foreign diversification puts you on the efficient frontier for lowering risk (variability in returns), but does not outperform a 100% US allocation. Nor does it underperform it. Thus it’s entirely a risk reduction play.
You obviously know about risk reduction given your allocation, but it’s news to me that the general sentiment that it’s time for ex-US to outperform may not be a reasonable part of the decision. “It’s time” also smells a bit like the gambler’s fallacy.
I’m going to study this when I get a chance.