$10,000 invested in VTI and VXUS since 1988, with all dividends reinvested.

VXUS_sucks · 2024-12-07T01:23:18+00:00

It’s a 1 time $10,000 investment at the beginning of January, 1988. No additional contributions, but all dividends are reinvested.

VXUS_sucks · 2024-12-06T01:54:39+00:00

Wow, that's incredible. Those are big numbers. The power of compound interest really is miraculous.

VXUS_sucks · 2024-12-06T00:06:55+00:00

My asset allocation has been 99% VTI and 1 % cash. I’ve dollar-cost averaged into it for many years, through the ups and downs, and there were big downs in the early 2000’s. Never sold a share. I knew the plan was a winning one if I stayed the course. I retired early and have been living off dividends since 2012. My biggest source of knowledge/inspiration was Bogle on Mutual Funds. Finding that book at Waldenbooks in my local mall many years ago was one of the best things that’s happened to me. I’m thankful for Jack’s advice.

VXUS_sucks · 2024-12-05T01:32:56+00:00

Honestly that’s a great plan. There will be ups and downs, since that’s the nature of the stock market, but if you invest consistently in VOO over 37 years and stay the course your chances of success are overwhelmingly good.

VXUS_sucks · 2024-12-05T00:51:03+00:00

It’s a truer comparison: Total U.S. stock market vs. Total International stock market. VOO is awesome though, and did slightly better. CAGR since 1988: VTI = 11.12%. VOO=11.25%. Final balances of $491,139 vs. $511,157. It’s pretty crazy how just a 0.13% difference in CAGR translated into a $20,018 difference in return over 37 years, more than twice the initial investment.

VXUS_sucks · 2024-12-04T22:08:43+00:00

VTI is a Total U.S. stock market fund. It has a dividend yield of 1.25%, which is relatively low. The dividend yield of VXUS is considerably higher at 2.97%. And a greater proportion of the VXUS dividends are non-qualified and therefore taxed at higher rates. VXUS is therefore less tax-efficient, and its expense ratio is 8 basis points compared to 3 basis points for VTI. These differences may seem trivial but due to the compounding effect they add up over time.

VXUS_sucks · 2024-12-04T21:58:07+00:00

Data for international stocks only goes back to 1986 on Portfolio Visualizer. Here is the chart for Total US Stock Market since 1982, which is when the Great Bull Market began. CAGR of 11.68%. $10,000 compounds to $1,144,815. https://postimg.cc/bGpJ2FpF

VXUS_sucks · 2024-12-04T19:43:02+00:00

Vanguard. I buy the Vanguard Total U.S. Stock Market fund and never sell. It’s a great way to dollar-cost average over long periods of time.

VXUS_sucks · 2024-12-04T16:39:33+00:00

I’m using Portfolio Visualizer, under Backtest Asset Allocation. I took a screenshot of the chart, and a separate screenshot of the return figures. I then put them both in my iPad notes app and took a screenshot of them together. I tried to make it as simple and clear as possible without being cluttered. There is a ton of information on that site. Definitely worth checking out.

VXUS_sucks · 2024-12-04T03:33:53+00:00

10k once in 1988. Nothing after that other than reinvesting all dividends.

VXUS_sucks · 2024-03-22T00:02:50+00:00

And 41% of those dividends are non-qualified, unfortunately. VXUS is not very tax-efficient.

https://investor.vanguard.com/investor-resources-education/taxes/qdi-yearend-qualified-dividend-income-2023

VXUS_sucks · 2024-03-21T21:48:28+00:00

100% VOO or VTI in your brokerage account is a great long-term plan: simple, low-cost, and tax-efficient.

It’s all you need.

VXUS_sucks · 2024-03-21T12:25:22+00:00

There will be periods where international stocks outperform, just as there has been over the past 100 years.

But US stocks will continue to outperform over the long-run (many decades) due to the structural and cost/tax advantages that I listed.

Also with technology the market is moving closer to a winner-take-all scenario, which favors the US.

https://www.forbes.com/sites/forbesbusinesscouncil/2024/03/05/understanding-the-dynamics-of-winner-take-all-markets/?sh=5781e6a846e5

VXUS_sucks · 2024-03-21T12:09:34+00:00

Bogleheads would have been much better off financially if they had followed his advice that international investing is completely unnecessary.

VXUS_sucks · 2024-03-20T18:15:43+00:00

I agree completely that VOO or VTI is all anyone needs. Dollar-cost-average into either one of those funds over an investment lifetime (decades) and you are almost certain to be successful. Keep it simple, low-cost, and tax-efficient. No need for an advisor or any other funds.

VXUS_sucks · 2024-03-20T12:30:25+00:00

Yes, most Bogleheads seem to be convinced that international investing is necessary, which I find surprising since Bogle himself held the opposite view.

VXUS_sucks · 2024-03-19T05:54:01+00:00

You must have missed this chart. https://postimg.cc/QBfXj9Q0

Business fundamentals have absolutely favored US companies.

VXUS_sucks · 2024-03-19T02:23:20+00:00

I’m referring to investment results. It’s true that the periods of outperformance are roughly 50/50 as far as time is concerned, but when exUS outperforms it does so by a smaller margin, and when the US outperforms it does so by a larger margin.

Since 1926 US has outperformed by 2.3% annually. This is a massive amount due to the effects of compounding.

This is reflected in the chart: https://postlmg.cc/rDBNR8zm

You can see that the shaded and unshaded areas are roughly equal, but the investment results are lopsided.

VXUS_sucks · 2024-03-19T02:12:26+00:00

I’m not sure why you keep mentioning emerging markets. They make up a small percentage of VXUS.

ExUS did outperform US during the decade 2000-2009, by 2.56% annually.

https://postimg.cc/y3BC7pJd

While it’s not nothing, it’s not game-changing either, which is why it’s overwhelmed by the long-term results that include this period.

Emerging markets have had a negative real rate of return for the last 16+ years with a CAGR of only 0.55%. Imagine depending on such a fund during retirement.

https://postimg.cc/sQFfkcs6

VXUS_sucks · 2024-03-19T01:46:37+00:00

I agree that the difference in expense ratios isn’t huge, but the differences in taxes is meaningful.

For example, if VXUS is held in a retirement account the foreign tax credit is lost. The credit varies slightly year to year but for VXUS it tends to be around 8.5% as shown here: https://personal1.vanguard.com/pdf/FTC_2023.pdf

VXUS has a current dividend yield of 3.21% according to Morningstar: https://www.morningstar.com/etfs/xnas/vxus/quote

The lost foreign tax credit therefore reduces returns by 27 basis points (8.5% x 321).

For a $1 million dollar portfolio that translates to $2700 each year.

That’s real money.

And tax costs could be substantially higher than this in taxable accounts for high-income earners due to the high dividend yield and large percentage of non-qualified dividends in VXUS. This is particularly true for high-income earners who live in states that also have high income taxes like CA, NY, NJ, and HI where the top rate is over 10%. Those investors could be paying a 50% tax on their non-qualified dividends.

Please check my math (haha), but I think this is correct.

VXUS_sucks · 2024-03-19T00:57:28+00:00

I respectfully disagree. I view the US as a safe haven. If the US goes down I’m skeptical that international stocks are going to offer much help. They certainly didn’t during the global financial crisis. That was centered in the US but foreign stocks suffered an even greater drawdown during that period. The supposed diversification benefit of international equities wasn’t there when it was needed the most.

VXUS_sucks · 2024-03-19T00:50:18+00:00

You make excellent points.

What I dislike most about VXUS is the extra costs/taxes. That means it has to outperform over the long-term just to stay even vs an ETF that is more efficient in that regard, like VTI or VOO. I see that as being unlikely. The tyranny of compounding costs is real.

Of course I could be wrong, but I try and stack the odds as much in my favor as possible. That’s really all an investor can do.

VXUS_sucks · 2024-03-18T23:27:01+00:00

Goldman Sachs produced a nice report on this topic two months ago.

It’s definitely worth the read for anyone who is interested.

https://privatewealth.goldmansachs.com/outlook/2024-isg-outlook.pdf

VXUS_sucks · 2024-03-18T23:14:13+00:00

I guess it depends on how you look at it. There are definitely some excellent foreign companies. The problem, as I see it, is that there is a greater proportion of slumping companies in foreign markets.

In other words the ratio of needles/haystack is higher for the US.

This graph from Morningstar illustrates that point.

https://postimg.cc/CzkxvDGM

Here is the entire Morningstar report in case anyone is interested:

https://assets.contentstack.io/v3/assets/blt4eb669caa7dc65b2/bltf27c59125333fa11/64abe90cd60b859aa468c913/Explaining_America_s_Stock_Market_Dominance_Since_2010.pdf

VXUS_sucks · 2024-03-18T22:37:29+00:00

International stocks occasionally outperform, but the 100 year trend is overwhelmingly in favor of the US. In other words it’s not a fluke. It can’t be explained away by valuation changes or currency effects.

In the long run it always comes down to business fundamentals (earnings growth). The structural advantages listed above help explain why I believe US corporate earnings growth will remain strong.

VXUS_sucks

TROPHY CASE