Vanguard Recommends Investors Increase Non-U.S. Holdings to 40%


#1

Investors should put about 40 percent of their portfolios in non-U.S. stocks and bonds to diversify their holdings, according to top executives at Vanguard Group, the fund giant that manages $4.9 trillion.

Global stock markets are likely to outperform the U.S., which the firm expects to return roughly 4 percent to 6 percent annually over the coming decade, Chief Executive Officer Tim Buckley and Chief Investment Officer Greg Davis said Thursday during a webcast.

Vanguard formerly recommended allocating about 30 percent of portfolios to non-U.S. assets, the executives said. One reason for the increase: Fees have fallen on international funds, improving net returns.

More @
https://www.bloomberg.com/news/articles/2019-01-11/vanguard-recommends-investors-increase-non-u-s-holdings-to-40

What do you guys think?


#2

I think they’re right. Therefore I invest in VT ETF.


#3

I don’t know …
Where is the growth supposed to come from?

Certainly not from China or Europe


#4

Maybe Pacific and India or other parts of the world?

Correlation between GDP and stock market is somewhat ambiguous. @hedgehog once post here a link to MSCI paper that showed that it can be even inversely correlated. I think one has to look at how much space companies have to expend their operations instead of macroeconomic oulook of a given country where they’re located.


#5

I think that Bloomberg is right but their advise comes a bit too late.
Growth is not the only important matter, price to book value (p/b) or price to earn ratio (p/e) show what for return you can expect.
Two examples:

S&P500: p/e~20 p/b~3.0
DAX30: p/e~12 p/b~1.5

The German index seems to be a real bargain compared to the US index. From the numbers above I can expect 8% return from my German shares but only 5% return from my US positions, if the earning growth rate is 0.


#6

NB: the advice is from Vanguard executives, not from Bloomberg !

I love the 2nd point:

Stay invested. “Going all cash is way too risky,” Buckley said.

If a “fund giant that manages $4.9 trillion” did recommend to go all cash, they would for sure crash the market !

3rd point:

Long-term U.S. Treasury yields are likely to rise as supply grows with an expanding deficit and foreign buyers diminish.

Not mentioned there, on the supply side: the Fed is now unloading its balance sheet, while at the same time hiking interest rates (which expands the deficit even more) - ouch !