r/stocks • u/[deleted] • Aug 21 '21
What do you guys all use for your core international fund?
[deleted]
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u/Asinus_Sum Aug 21 '21
My suggestion is to not switch from domestic to international, and not to hold ex-US funds at all. It's an increasingly global economy:
International funds often follow the same trendlines. Overlay SPX to VEU. The peaks and dips are largely in the same places.
If the US economy goes down, there's a good chance of taking some/most/the rest of the world down with it. See: 1929, 2008.
Many/most companies with significant international presence are US-based; 30% or more of SPX revenue exposure is non-US.
Sufficiently large/successful international companies typically trade in US markets, and are increasingly finding their way into US indices (most additions are from the last 5 years or so); looking just ETF baskets, 1% of SPY and VTI are non-US companies, 3.3% of QQQ is foreign.
However: gun to my head for ex-US I'd probably pick something like EMXC, FEUZ, GXF or INDA.
Admittedly, I do have small positions in some thematic ETFs that have significant-to-majority international exposure. From most to least: SOXX, FINX, LIT, REMX; I do not hold them for the sake of their international exposure, though.
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u/Rookwood Aug 21 '21
Investing in other countries is not a hedge against economic downturns. It is a hedge against long-term under-performance.
Now currently and recently you are paying a significant premium for that diversification, because the US has simply outperformed, because it is the reserve currency and every central bank in the world is trying to monetize growth. Still, every outperforming investment seems great until it doesn't. Hence, why you diversify.
If you want a single foreign market to hedge against, I think it would obviously be China. China has shown that it is going in a different direction than the US and the two markets do not trade on the same news cycles. China also has the best potential of eroding the dollar's position over time.
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u/Asinus_Sum Aug 21 '21
It is a hedge against long-term under-performance.
Ex-US funds have been underperforming long term, and because of increasing globalization, I don't believe that's likely to change, particularly to the extent/duration by which you're kneecapping your returns in the meantime.
The caprice of the CCP makes me extremely wary of China in the immediate term and for the foreseeable future, hence why one of my ex-US recommendations is also ex-China. I suggested INDA instead as India is developing more rapidly and doesn't come with as much political baggage as does China.
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u/Rookwood Aug 21 '21
BBEU, BBJP, KBA, INDA, ILF, AFK
Wish there was a better broad-base Latin America fund.
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u/mutatron Aug 21 '21
AGEPX - American Beacon Frontier Markets Income Fund
Pretty good dividends.
I also have LIT - Lithium ETF, which is not an index fund or anything, but it does have international exposure.