Now I could use either a total US stock fund that mirrors the Wilshire 5000, but this would be double dipping on my current 401k. Or I could use a small cap index fund that mirrors the index of stocks outside the S&P500. But either of these two options would be looking at a U.S. solution as opposed to an international investment solution.
With a 20-year time horizon, I'm leaning towards diversifying our retirement dollars with an international fund.
What are the opinions of long-term growth of U.S. equities versus international equities over the next 20 years? With China, India & Eastern Europe coming on strong as preferred sites of new manufacturing, I just can't see how these wouldn't be the growth areas of this century in terms of appreciation upside potential. The U.S., while still a good market, is very mature.
Now I could use either a total US stock fund that mirrors the Wilshire 5000, but this would be double dipping on my current 401k. Or I could use a small cap index fund that mirrors the index of stocks outside the S&P500. But either of these two options would be looking at a U.S. solution as opposed to an international investment solution.
With a 20-year time horizon, I'm leaning towards diversifying our retirement dollars with an international fund.
What are the opinions of long-term growth of U.S. equities versus international equities over the next 20 years? With China, India & Eastern Europe coming on strong as preferred sites of new manufacturing, I just can't see how these wouldn't be the growth areas of this century in terms of appreciation upside potential. The U.S., while still a good market, is very mature.
Finance theory says that US and Foreign developed equities will have approximately the same return over long periods. So your diversifying into foreign is not likely to have any benefit over 20 years. I go 60/40 S&P 500/Europacific in my 401k (rebalance once a year) because the foreign seems to smooth out the overall volatility in the short term.
catanpirate
Senior Member
posted: Dec. 6, 2008 @ 4:26p
I tend to think that this is a better forum for portfolio/diversification questions.
I wasn't asking about portfolio diversification recommendations...I was asking about opinions on long-term growth of U.S. equities versus foreign equities...which is very valid for this forum.
Bogleheads is a good site...I just don't want to be bothered with registered for yet another forum...thanks for posting the link, though.
BTW, this site has less groupthink that Bogleheads does. I like that.
catanpirate
Senior Member
posted: Dec. 6, 2008 @ 4:37p
Oh, I wasn't saying you shouldn't ask here. It's just that you might get a way smarter answer over there. Those guys are smart.
catanpirate said: Oh, I wasn't saying you shouldn't ask here. It's just that you might get a way smarter answer over there. Those guys are smart. That they are
catanpirate
Senior Member
posted: Dec. 6, 2008 @ 4:56p
I do think that, essentially, you are asking a diversification question. Diversification is about the potential returns and risks of different parts of the world-wide market.
With a 20 year time horizon, I would make sure to be moving money towards bonds. I really don't know too much at all about the potential difference in returns of domestic/international equities.
The guys on Bogleheads are also a lot nicer. You can go in there, not read anything, not search anything, ask a question that has been posted 100 times over the last month and people will still answer you.
NewToFatWalletUser
Dismembered Member
posted: Dec. 6, 2008 @ 7:51p
My 401k is invested in the stock market index type stocks.
In my Roth IRA I invest in alcohol & tobacco stocks.
infecto
Member
posted: Dec. 6, 2008 @ 7:55p
You are actually getting a pretty good deal of foreign diversification with domestic companies. To add if you look at the world funds that do not exclude the US most of it will be made up of US companies. For example the Vanguard Total World top 10 holdings.
1 ExxonMobil Corp. 2 General Electric Co. 3 Microsoft Corp. 4 The Procter & Gamble Co. 5 Johnson & Johnson 6 Wal-Mart Stores, Inc. 7 AT&T Inc. 8 Chevron Corp. 9 BP PLC 10 Nestle SA (Registered)
With your "upside" comment on you should know that by investing in any total world or international fund you are not going to really see the growth/return in BRIC. If you really want to capture those nations invest in a fund that only has securities in BRIC. Look at any international index and it will closely follow the Russell 5000.
S&P 500 companies get more than 40% of their income outside the U.S.
Personally, I believe the future will invest in the international equivalent of the S&P500. I like the international index more right now because it appears to be more oversold and is trading at a lower PE ratio.
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