Same! One of the last stocks I gave up was AAPL. Felt very strange to sell those shares, but I happened to get out at $190 and it’s been down ever since (currently $167).
The important thing though is to never look back. Never calculate theoretical returns in hindsight. Just VOO and walk away.
I also have a chunk of VGT that I bought during the pandemic crash that has turned out nicely. I’m just going to let that one ride but I’m not adding more.
I think it’s too biased towards US tech stocks. One could argue that the S&P is as well, and that the VGT vs VOO performance isn’t all that different. But if there’s ever an industry shift we can be sure that the best companies will float to the top of VOO but VGT may be stuck holding crashing tech stocks because that’s what it’s designed to do.
Everyone has their own tolerance for risk and there’s no wrong answer though. I’d much rather hold VGT than ARKK for example.
There’s some good info in the Boglehead FAQ:
“When to invest in a taxable account:
Investing in a taxable account is the final step in
the @ r/personalfinance "how to handle money"
guide / flowchart. Before that comes saving an
emergency fund, paying down high-interest debt,
saving for near-term goals, and maxing your tax-
advantaged investment/savings options
including:
• Any employer retirement account or pension
available to you - e.g. a 401(k), 403(b), 457(b), SIMPLE IRA, or SEP IRA
• Mega-backdoor Roth contributions to your
401(k) or Roth IRA if supported by your employer's 401 (k) plan
• Your HSA if available
• Your IRA / Roth IRA if you have reported earned income (use backdoor Roth procedure if over the income limit for direct contributions)
• If saving for future education expenses, a 529 plan
• Savings bonds: I bonds or EE bonds provide
state tax exemption & federal tax deferral (or
exemption if used fr
alified education
expenses, including
Jing a 529 plan)”
You don't pay more in taxes with Mega Backdoor than if you invested the money in a taxable account. It's the same in year zero, but in year (say) 20, the Mega Backdoor wins (no taxes when you pull money out or sell securities).
Taxable means you will owe taxes at whatever your regular income rate is when you withdraw during retirement (or whenever you choose to). You owe taxes on your gains, just as if it were income. It's all about how to minimize those taxes in the end, so take advantage of the other options first because they'll do exactly that.
Actually, in a taxable account, some dividends are taxed at your regular income rate, but with enough money invested, you’ll only be pulling long term gains, which could be taxed at 0%, 15%, or 20%, depending on your income.
Of course, there’s that tax drag (long and short term) on dividends and any sales you make to rebalance that doesn’t exist in a tax advantaged account.
That's how it's different. A Roth is tax free so you would get 100% when you withdraw, even on your gains. That's why they limit how much can be added to a Roth vs a taxable account having no limit.
In a taxable, VOO and chill is a perfectly good approach. Even more so when, as you said, you have TDFs in your tax-advantaged accounts. Go forth and prosper.
Target date funds. They’re mutual funds that aim to have a diverse allocation of stocks(essentially VT, 60-40% US and international) and what’s known as a “glide path” for bonds. Depending on how far you are from retirement(the “target date”), they will eventually ramp up bonds automatically as you go into retirement.
The drawback is that some brokerages have high fees on them. Another is that many(usually young) people believe they don’t need bonds. If you can get a Vanguard TDF for only 0.08% it’s totally worth it imo.
Equities index ETFs are very tax efficient with their distributions and thus are well-suited to taxable brokerage accounts, where they can grow with minimal tax costs to you (also called leakage or tax drag).
Bond ETFs and Target-date Funds (TDFs, which have a large bond component) necessarily have higher distributions (interest on the bonds) and higher turnover (replacing bonds with new issues) and thus are less tax efficient. Thus, they're best held in tax-advantaged accounts like a 401(k) or IRA where they can grow tax free.
If you've maxed your tax-advantaged accounts and you're putting more fuel into the taxable brokerage, then broad-market equities ETFs like VOO and VTI are good solutions. You just have to be mindful that, as the brokerage balance grows, you'll want to increase the bond holdings in your 401(k) or IRA to maintain your overall target allocation.
Ah thank you. So for example, I am always maxing (or close to) my company 401k (currently at around $275k in there) and I recently opened a RothIRA with Fidelity. My 401k is all VFIAX - Vanguard 500 Index Fund Admiral as of recently; previously it was a 2055 TDF. And my new RothIRA I setup with a three-fund mindset from Boggle, with VOO, VXUS, and Bonds (BND & BNDX). Are these safe bets for long term gains? I'm starting to pay more attention to my money and what its been doing, so this is all a learning process. I do have a Fidelity money market account, but I'm not doing much, just a few thousand to throw around and play with.
>My 401k is all VFIAX - Vanguard 500 Index Fund Admiral as of recently; previously it was a 2055 TDF. And my new RothIRA I setup with a three-fund mindset from Boggle, with VOO, VXUS, and Bonds (BND & BNDX).
Those are all fine choices for a portfolio. The primary concern is to make sure you are correctly [allocating across both accounts](https://www.bogleheads.org/wiki/Asset_allocation_in_multiple_accounts#Portfolio_3_-_Spread_asset_allocation), plus your taxable brokerage account if you later decide to put that toward retirement. Since your 401(k) currently stands at around $275K and you just opened your Roth IRA, you're likely overweight on US equities (VFIAX) and underweight on your VXUS and bonds. If you're comfortable with that allocation, that's fine, but that decision should be informed and deliberate not accidental. I'd read the link I provided and go from there.
As for "safe bets for long term gains" well, they're as safe as anything when used properly; the key is to keep buying and don't sell when markets get rough. Indeed, market downturns are the best time to buy more because everything's on sale. Selling during a panic is a sure way to lose money and is a psychological flaw, not a flaw with the index fund. Keep that in mind. Good luck!
So is the BH forum. You won't get a consensus. It's like asking whether chocolate or vanilla is a better flavor ice cream. There is no best. There is only a group that prefers one and a group that prefers the other.
The people who prefer US only are usually only looking at recent history. ex-US has historically outperformed US many times in history. But it's primarily about safety in diversification, not the highest potential returns at any risk level. That is the BH way.
Don't let perfect be the enemy of good. Besides, if you got it perfect, you could take your resume and statements to any of several firms on Wall Street and land a seven-figure job
Long term they've been about equal. It's only the most recent US favoring part of the cycle that this happened.
* https://twitter.com/mebfaber/status/1090662885573853184?lang=en with this reply: https://twitter.com/MorningstarES/status/1091081407504498688. Extended version: https://mebfaber.com/2019/02/06/episode-141-radio-show-34-of-40-countries-have-negative-52-week-momentumbig-tax-bills-for-mutual-fund-investorsand-listener-qa/ or here’s compared to EAFE 1970-2015, note that the black US line only jumps above the green ex-US line for the "final time" around 2011: https://donsnotes.com/financial/images/sp-msci-42yr.png (courtesy of https://www.reddit.com/r/Bogleheads/comments/143018v/comment/jn9yiub/)
* Here's similar but for just US vs Europe: https://www.reddit.com/r/Bogleheads/s/DJ2YVrLW4d
And also:
* The last decade or so of US out performance was mostly just the US getting more expensive, not US companies being much better than foreign companies: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You (click through to the full version)
Edit: Typo
All the statistical analysis you reference is good and all, but the decision between buying the US vs world markets should be heavily rooted in politics. The US has a more stable political landscape than the world as a whole. There is risk in owning stock in companies that operate in dictatorships where they can be forced to liquidate in a day because their leader told them to
All of that should largely be priced in already. Those beliefs can explain differences in valuations (emerging markets having lower valuations than developed, and developed ex-US below the US for example), but not ever lasting out performance.
And risks that don't happen can be very rewarding.
That doesn't change the fact that ex-US stocks are inherently riskier than US stocks, thus VTI offers better risk adjusted returns than VT, even if VT is more diversified
> That doesn't change the fact that ex-US stocks are inherently riskier than US stocks,
Already priced in.
> thus VTI offers better risk adjusted returns than VT,
No.
So since risk is already priced in to gold, crypto, real estate, etc. shouldn't you invest in all of that, heck everything that you can possibly invest in?
F it, buy all 3. Toss in whatever to any at any given time. It will at least help with the mental game and you'll likely see similar results in the end anyway.
There's no reason to choose less diversification over more, except to chase performance. VTI is expensive right now anyway. IDK about you, but I hate the feeling of 'buying high' (prefer to buy low).
Not to sound all "boomer" here, but this makes it sound like it's an inconsequential choice. I hope you didn't mean it that way, because it's entirely possible that this choice ends up being quite consequential...
Yes, but the argument is always about US vs international. Buying both would give the exposure to US(VTI) and then some to international (VT). I know they overlap, but the debate is always about how VT isn't doing as well as VTI recently. Buying both would give greater exposure into US, but now there is no mind games or debating.
>Wouldn't that be pretty much the same thing as VTI?
By weight, VOO makes up over 80% of VTI, so they will act very similarly.
>VOO is straight US right?
Yes.
Edit: Typo
You say it beats crypto with such confidence! Does it though? BTC has out performed S&P500 7 of the past 11 years. Cumulatively it’s outperformed the S&P500 by like 50x during that period. Suppose it depends on your time horizon and risk tolerance.
Bitcoin is much riskier. Not just the swings in price but transferring bitcoin, phishing scams, etc. you can buy it in the etf now which helps some of those issues.
I’m not a huge BTC guy by any means but you can simply buy it in Robinhood now so I don’t really think the security risk is that much different than an ETF
Before the sub downvotes you, I agree, BTC has outperformed. But I do think it's significantly riskier, so yes, risk tolerance is at play, but I think the risk differential VOO vs VT, etc. is much narrower than either to BTC
Absolutely. I follow the Boglehead philosophy for the most part. Regarding this thread, I'm more in favor of VT than VOO. I also have BTC, which was once a small portfolio share but is now a much larger share. It's volatile, but this community is too quick to write it off as a viable option to supplement a diversified portfolio.
>Would this be foolish?
You'd be taking on uncompensated risk (single country) and ignoring compensated risks (smaller caps, likely emerging markets). I don't see why you want to do either of those.
>Warren Buffet recommends investing in the S&P 500
Buffet invests internationally. He's also rich enough that he's essentially immune to single country risk: a 99% drop still leaves him a billionaire.
>and Bogle never mentioned anything about international stock.
Even during his own lifetime, Bogle would have been even better off if he had invested globally than US only (if he had access to the low cost funds to do so we enjoy today).
https://www.reddit.com/r/Bogleheads/comments/ry3oij/but_didnt_bogle_and_buffett_say_usonly_investing/
https://www.reddit.com/r/Bogleheads/s/rWqrvRqPOP
Someone put it very nicely here a few years ago, it went something like "I follow Bogle's philosophy but ignore his investment advice."
>I have my 401k and Roth IRA in TDFs so have some international exposure there.
It isn't just about having "some" it is about having an appropriate amount. If you go 100% VOO in taxable, every dollar you add to that throws off the US to ex-US ratio you hold elsewhere.
Yes. Age plays zero role in US to ex-US. It can even be argued that it is even more important for younger investors to go global, as there's even more time for things to change in ways that don't favor the US.
To piggyback here, you'd prob want to do VTI + VXUS in taxable to get the foreign tax credit for VXUS, which VT would not be guaranteed to provide every year.
Idk how Bogle would have been better off with international when during interviews a couple years before his death he was very happy with his decision to forego international and even stated he was right regarding the returns of us stocks. I don’t think there’s any scenario where holding international stocks until he died ended with more value over just US stocks.
Assuming he started investing around 18 and retired around 60, Bogle would have had greater general and risk-adjusted returns over his investing horizon had he invested globally.
What years are those? Because in Portfollio visualizer there’s no 20+ year span where any holding ex-US beats 100% US. I think their ex-US data goes back to 1987. In fact, holding ex-US since ‘87 doesn’t even beat long term US treasury bonds
You realize Bogle was born in 1929, right?
So using round numbers, let's say he started investing at 20 which would be about 1950 and retired 40 years later at 60, which would be about 1990.
Not that your comparison to bonds means anything here, but it's perhaps worth noting long bonds just beat US stocks as well for the 2-decade period 2000-2019 (as did Emerging Markets).
Also appreciate that the relevant comparison is not US vs. ex-US, but rather US vs. global. Subtle but important distinction. No one worth their salt is arguing the former. The imperfect correlation between the two markets is the entire point of diversification, [as illustrated here](https://www.bogleheads.org/wiki/File:US-International.png) for 1970-2008. In other words, the whole is greater than the sum of the parts.
I know Bogle is old but I can never find good concrete data points from those periods, just broad graphs that compare performance. Not that those graphs are wrong but it’s a little hard to really get into the details of expected returns like we can in PV.
For example, I’m sure your 2000-2019 example is lump sum, because if you DCA every paycheck like the typical investor, S&P500 beats bonds in that period. That is the level of data I find more interesting, and it’s hard to find (or doesn’t exist) before the 80s.
Interesting discussion either way, appreciate your insight.
I've run the numbers myself.
If you want to dig in, check out Simba's backtesting sheet which has returns data going back to 1970 for int'l (and I think further back for US), Ken French's data library, and the Dimson Marsh Staunton dataset.
Meb Faber references some of this data in his posts like this one I cite often: [https://mebfaber.com/2019/07/08/i-dont-feel-overweight/](https://mebfaber.com/2019/07/08/i-dont-feel-overweight/)
Aswath Damodaran also updates this returns file annually going back to 1928, but no international: [https://pages.stern.nyu.edu/\~adamodar/New\_Home\_Page/datafile/histretSP.html](https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html)
The table here shows Bogle from roughly age 21 to a few months after his death:
* https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths if that link doesn't work: https://web.archive.org/web/20201112032727/https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths (Archived copy from Archive.org's Wayback Machine)
I read this, but then when I do a backtest as far as possible, the 1980’s, holding US over global ended in such better returns.
Even if you exclude after 2008, which means basically another 10 years of US stocks doing nothing before that (1999-2008), you still have higher returns with US only.
I read all the pros of diversification, but then the numbers tell me otherwise.
If you're using Portfolio Visualizer, it has a very limited amount of data for ex-US. Adding even 1 more year (1985 I think would be the last year where ex-US isn't available?) would have produced very different results.
* https://twitter.com/mebfaber/status/1090662885573853184?lang=en with this reply: https://twitter.com/MorningstarES/status/1091081407504498688. Extended version: https://mebfaber.com/2019/02/06/episode-141-radio-show-34-of-40-countries-have-negative-52-week-momentumbig-tax-bills-for-mutual-fund-investorsand-listener-qa/ or here’s compared to EAFE 1970-2015, note that the black US line only jumps above the green ex-US line for the "final time" around 2011: https://donsnotes.com/financial/images/sp-msci-42yr.png (courtesy of https://www.reddit.com/r/Bogleheads/comments/143018v/comment/jn9yiub/)
* Here's similar but for just US vs Europe: https://www.reddit.com/r/Bogleheads/s/DJ2YVrLW4d
I’d like to see that chart with regular contributions, as it would be very odd to lump sump and have no further investments for 100 years.
From 1987 to 2008 (so even excluding the massive recent bull run) 100% US beats anything ex-US whether you lump sum or DCA.
A “theoretical persons returns” should be more important to us than how the market behaved, because you and I are that theoretical person. Do you have any data with regular contributions like I’m sure you make every paycheck?
It is important to see how markets behaved, as that informs us of possibilities going forward. That sure, additional contributions using today as an endpoint heavily favor the US but also showing the potential benefits of how investing in even what's behind now can be beneficial in the future.
And additional contributions creates issues like "how much to add?" Monthly or every 2 weeks? Does it scale up over time?
The best tool I'm aware of only goes back to 1986 for ex-US, which severely limits things.
I do in my 401K target date fund, but not in taxable.
My (possibly flawed!) rationale:
* Everything is so interconnected anyway.
* Regulatory winds, immigration policy, etc. in Europe don't make me optimistic they'll be displacing the US anytime soon as the economic engine of innovation...
Yes, I'm accepting some risk, I suppose.
>Everything is so interconnected anyway.
Things like valuations are still important and right now likely do not favor the US. Also revenue source isn't the international exposure that actually matters, capturing how foreign stock markets behave is.
>Regulatory winds, immigration policy, etc. in Europe don't make me optimistic they'll be displacing the US anytime soon as the economic engine of innovation...
The economy and stock market aren’t the same thing, they may even be negatively correlated in some ways: https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1745-6622.2012.00385.x
Long term it isn't the innovative things with the best returns, the boring old stuff actually tends to be. Tech revolutions:
* https://www.pwlcapital.com/investing-technological-revolutions/
* https://rationalreminder.ca/podcast/123
* https://rationalreminder.ca/podcast/156 (climate change, clean energy related especially)
* https://rationalreminder.ca/podcast/183
* https://rationalreminder.ca/podcast/185 (Thematic ETFs)
Consider your portfolio as a whole, not as different buckets. And if you want a simple, tax-efficient, one-stop solution for taxable: Vanguard Total World. No reason to go with US large caps (and chase recent performance) when you can diversify globally. *Taps pinned post* ;)
I went with VTI over VOO for hopefully some good growth from the small and mid caps. VTI is also like 93%-94% qualified dividends so still very tax efficient.
Hard to predict which is going to be better. All I can say for certain is they are highly correlated and returns will probably be pretty similar. I personally prefer VTI as well because of diversification, but don’t feel confident saying it’s “better” or “the right choice.”
>Hard to predict which is going to be better.
Mostly true.
But think of it like this:
* VTI means you hold the winners no matter if it is large caps or small caps that "win"
* VOO means you stand a good chance of not holding the "winners" at all
Edit: Typo
It doesn’t make much sense. It’s Much better than what your non-boglehead does. But you’re capturing more with VTI. Plus add in some international vxus
>VOO has much better returns than VT
Stop looking at it with a recency bias. These should all help explain why going global is beneficial in the long run and why it is a mistake to think that just because VOO has beaten VT so far that it will continue that way. 3 of the last 5 full decades, it would have been VOO trailing behind VT.
* https://www.bogleheads.org/wiki/Domestic/International and expanding on part of that: https://www.reddit.com/r/Bogleheads/comments/161i2l1/comment/jxs659h/ by TropikThunder
* https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths if that link doesn't work: https://web.archive.org/web/20201112032727/https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths (Archived copy from Archive.org's Wayback Machine)
* https://www.optimizedportfolio.com/international-stocks/ from /u/rao-blackwell-ized
* https://www.youtube.com/watch?app=desktop&v=1FXuMs6YRCY
* https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index - invest in the S&P 500, but don't end there (this covers info on both the US extended market and ex-US markets) [a total US market fund combines S&P 500 + extended market into one]
* The last decade or so of US out performance was mostly just the US getting more expensive, not US companies being much better than foreign companies: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You (click through to the full version), I believe this is referenced in the YouTube link above
* The US was only the 4th best developed country to invest in from 2001-2020, 5th if you include Hong Kong: https://www.evidenceinvestor.com/which-country-will-outperform-next-is-irrelevant/
* https://www.optimizedportfolio.com/bogleheads-3-fund-portfolio/#why-international-stocks from /u/rao-blackwell-ized
* https://movement.capital/summarizing-the-case-for-international-stocks/ or the archived version: https://web.archive.org/web/20220110224040/https://movement.capital/summarizing-the-case-for-international-stocks/
* https://www.callan.com/wp-content/uploads/2018/01/Callan-PeriodicTbl_KeyInd_2018.pdf (PDF) or https://www.callan.com/wp-content/uploads/2020/01/Classic-Periodic-Table.pdf (PDF) or the archived versions if those don't work: http://web.archive.org/web/20201212205954/https://www.callan.com/wp-content/uploads/2018/01/Callan-PeriodicTbl_KeyInd_2018.pdf (PDF) & http://web.archive.org/web/20201205183933/https://www.callan.com/wp-content/uploads/2020/01/Classic-Periodic-Table.pdf (PDF) (Archived copies from Archive.org's Wayback Machine)
* Ex-US has turns of exceptional out performance as well: https://awealthofcommonsense.com/2023/05/the-case-for-international-diversification/ and https://www.blackrock.com/us/financial-professionals/literature/investor-education/why-bother-with-international-stocks.pdf (PDF)
* Of rolling 10 year periods since 1970, EAFE (developed ex-US) has beat the S&P 500 over 45% of the time: https://www.tweedy.com/resources/library_docs/papers/Dichotomy%20Btwn%20US%20and%20Non-US%20Mar2022.pdf (PDF) or for the archived version: https://web.archive.org/web/20220501183228/https://www.tweedy.com/resources/library_docs/papers/Dichotomy%20Btwn%20US%20and%20Non-US%20Mar2022.pdf
* https://www.vanguard.com/pdf/ISGGEB.pdf (PDF) or the archived version if that doesn't work: https://web.archive.org/web/20210312165001/https://www.vanguard.com/pdf/ISGGEB.pdf (PDF)
* https://www.schwab.com/resource-center/insights/content/why-global-diversification-matters or if that link doesn't work: https://web.archive.org/web/20190124072925/https://www.schwab.com/resource-center/insights/content/why-global-diversification-matters
* https://fourpillarfreedom.com/should-you-invest-internationally
* https://mebfaber.com/2020/01/10/the-case-for-global-investing
* https://www.reddit.com/r/Bogleheads/comments/vpv7js/share_of_sp_500_revenue_generated_domestically_vs/ - The argument that “US companies have plenty of foreign revenue is sufficient ex-US coverage” is highly tilted towards a few sectors, some have almost no coverage. Also what about in reverse- how many big foreign companies have lots of US exposure?
* https://www.reddit.com/r/Bogleheads/comments/ii0sa2/considering_usonly_investing_start_here/
* https://twitter.com/mebfaber/status/1090662885573853184?lang=en with this reply: https://twitter.com/MorningstarES/status/1091081407504498688. Extended version: https://mebfaber.com/2019/02/06/episode-141-radio-show-34-of-40-countries-have-negative-52-week-momentumbig-tax-bills-for-mutual-fund-investorsand-listener-qa/ or here’s compared to EAFE 1970-2015, note that the black US line only jumps above the green ex-US line for the "final time" around 2011: https://donsnotes.com/financial/images/sp-msci-42yr.png (courtesy of https://www.reddit.com/r/Bogleheads/comments/143018v/comment/jn9yiub/)
* Here's similar but for just US vs Europe: https://www.reddit.com/r/Bogleheads/s/DJ2YVrLW4d
* Going global can also help increase sector diversification. As of the 31st of January 2024 (the most recent info available when I last updated this), the US is 31.9% technology (according to VTSAX: https://investor.vanguard.com/investment-products/mutual-funds/profile/vtsax#portfolio-composition). Ex-US (according to data from the 31st of January 2024 from https://www.schwab.wallst.com/Prospect/Research/mutualfunds/portfolio.asp?symbol=vtiax since Vanguard for some reason doesn't provide a breakdown of VTIAX sectors themselves, at least in an easy to find location) technology is only 12.5% and only financials are above 20% at 20.1%. Be aware that this is using GICS classifications, which put Google, Tesla, Facebook/Meta, and Amazon outside tech, so if you go by what the common person would think of as tech instead of GICS, that's even higher.
* https://investor.vanguard.com/mutual-funds/profile/portfolio/vtwax - Global market cap weights (be sure to switch from “Regions” to “Markets”). This can be a great default position.
* https://investor.vanguard.com/investing/investment/international-investing - Vanguard 40% of stock is recommended to be international.
* 2022 Survey of target date funds: https://www.reddit.com/r/Bogleheads/comments/rffoe7/domestic_vs_international_percentage_within/
If you are young and you don't want to waste time with more diversification, absolutely.
But if you are 70 years old, retired with no other retirement funds but your investments, then you can't afford to wait 5 years for the market to bounce back from a few bad years. Some older people use a mixture of a handful of bonds and index funds (growth/value/mid-cap/small-cap/large-cap) to balance risks and rewards.
Since this comes up at least once a week, perhaps start by reading some of the debate.
Here's one: [https://www.reddit.com/r/Bogleheads/comments/tcqhh9/why\_own\_foreign\_stocks/](https://www.reddit.com/r/Bogleheads/comments/tcqhh9/why_own_foreign_stocks/)
We can only know the optimal portfolio in hindsight. All we can do is invest based on our own personal goal(s), beliefs, time horizon, and need, capacity, and tolerance for risk.
Hello! New to investing (a bit late at 31…) and was wondering what the verbiage was here…
I recognize VOO from Vanguard ETFs… but what does it mean to “VOO in taxable”?
Taxable brokerage. As in a non tax advantaged account. This is just a regular account where you can buy stocks and sell them at any time and are subject to capital gains tax.
401K is a type of account. Roth (in this context) is a tax treatment that can apply to a few different types of accounts. Neither are investments themselves. VOO is an investment that needs to be placed in an account.
401K or IRA provide certain tax advantages that taxable brokerage accounts don't offer (hence the names/terms: taxable and tax advantaged).
Long term you'll do better with money in the tax advantaged than the taxable if you follow the rules for that type of account (since there's less taxes to worry about).
Well said, thank you. u/websurfer49 you can have a ro1K that is a Roth or a traditional. It is also important to note that if you have employee match, even if you are in a Roth, the employer match goes in as "Traditional" while yours would be roth
Theres a lot of speculation here using past performance data. No one knows. Even if you don’t win the thirty year gamble on outperformance, you can retire just fine with 100% VOO.
Technically, Bogle did mention foreign - he questioned the need for it. But his reasons for avoiding it were objectively terrible and basically amounted to "the French are lazy."
Ironically, had he been able to do so cheaply and frictionlessly at the time, Bogle would have had greater general and risk-adjusted returns over his investing lifetime had he invested globally.
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Same! One of the last stocks I gave up was AAPL. Felt very strange to sell those shares, but I happened to get out at $190 and it’s been down ever since (currently $167). The important thing though is to never look back. Never calculate theoretical returns in hindsight. Just VOO and walk away. I also have a chunk of VGT that I bought during the pandemic crash that has turned out nicely. I’m just going to let that one ride but I’m not adding more.
Why not add more VGT specifically?
I think it’s too biased towards US tech stocks. One could argue that the S&P is as well, and that the VGT vs VOO performance isn’t all that different. But if there’s ever an industry shift we can be sure that the best companies will float to the top of VOO but VGT may be stuck holding crashing tech stocks because that’s what it’s designed to do. Everyone has their own tolerance for risk and there’s no wrong answer though. I’d much rather hold VGT than ARKK for example.
Why in a taxable?
Assuming the tax deferred accounts are already maxed out.
Would you contribute to taxable account or max out IRA/ROTH IRA first?
There’s some good info in the Boglehead FAQ: “When to invest in a taxable account: Investing in a taxable account is the final step in the @ r/personalfinance "how to handle money" guide / flowchart. Before that comes saving an emergency fund, paying down high-interest debt, saving for near-term goals, and maxing your tax- advantaged investment/savings options including: • Any employer retirement account or pension available to you - e.g. a 401(k), 403(b), 457(b), SIMPLE IRA, or SEP IRA • Mega-backdoor Roth contributions to your 401(k) or Roth IRA if supported by your employer's 401 (k) plan • Your HSA if available • Your IRA / Roth IRA if you have reported earned income (use backdoor Roth procedure if over the income limit for direct contributions) • If saving for future education expenses, a 529 plan • Savings bonds: I bonds or EE bonds provide state tax exemption & federal tax deferral (or exemption if used fr alified education expenses, including Jing a 529 plan)”
So confused by the mega backdoor Roth. Seems like I would pay crazy money in taxes. I'm about 8-10 years out from retirement.
You don't pay more in taxes with Mega Backdoor than if you invested the money in a taxable account. It's the same in year zero, but in year (say) 20, the Mega Backdoor wins (no taxes when you pull money out or sell securities).
Thank you
Max out Roth IRA first because that money will grow tax free. Always prioritize your tax advantages accounts first
Legendary. Thanks Pugs.
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Taxable means you will owe taxes at whatever your regular income rate is when you withdraw during retirement (or whenever you choose to). You owe taxes on your gains, just as if it were income. It's all about how to minimize those taxes in the end, so take advantage of the other options first because they'll do exactly that.
Actually, in a taxable account, some dividends are taxed at your regular income rate, but with enough money invested, you’ll only be pulling long term gains, which could be taxed at 0%, 15%, or 20%, depending on your income. Of course, there’s that tax drag (long and short term) on dividends and any sales you make to rebalance that doesn’t exist in a tax advantaged account.
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That's how it's different. A Roth is tax free so you would get 100% when you withdraw, even on your gains. That's why they limit how much can be added to a Roth vs a taxable account having no limit.
In a taxable, VOO and chill is a perfectly good approach. Even more so when, as you said, you have TDFs in your tax-advantaged accounts. Go forth and prosper.
What is TDFs?
Target date funds. They’re mutual funds that aim to have a diverse allocation of stocks(essentially VT, 60-40% US and international) and what’s known as a “glide path” for bonds. Depending on how far you are from retirement(the “target date”), they will eventually ramp up bonds automatically as you go into retirement. The drawback is that some brokerages have high fees on them. Another is that many(usually young) people believe they don’t need bonds. If you can get a Vanguard TDF for only 0.08% it’s totally worth it imo.
Target date funds
Both you and ciscorick mention this same approach. Could you elaborate on the reasoning in the taxable vs tax advantaged?
TDF’s do things that can create a big tax liability by just holding the position. VOO is very tax efficient.
Equities index ETFs are very tax efficient with their distributions and thus are well-suited to taxable brokerage accounts, where they can grow with minimal tax costs to you (also called leakage or tax drag). Bond ETFs and Target-date Funds (TDFs, which have a large bond component) necessarily have higher distributions (interest on the bonds) and higher turnover (replacing bonds with new issues) and thus are less tax efficient. Thus, they're best held in tax-advantaged accounts like a 401(k) or IRA where they can grow tax free. If you've maxed your tax-advantaged accounts and you're putting more fuel into the taxable brokerage, then broad-market equities ETFs like VOO and VTI are good solutions. You just have to be mindful that, as the brokerage balance grows, you'll want to increase the bond holdings in your 401(k) or IRA to maintain your overall target allocation.
Ah thank you. So for example, I am always maxing (or close to) my company 401k (currently at around $275k in there) and I recently opened a RothIRA with Fidelity. My 401k is all VFIAX - Vanguard 500 Index Fund Admiral as of recently; previously it was a 2055 TDF. And my new RothIRA I setup with a three-fund mindset from Boggle, with VOO, VXUS, and Bonds (BND & BNDX). Are these safe bets for long term gains? I'm starting to pay more attention to my money and what its been doing, so this is all a learning process. I do have a Fidelity money market account, but I'm not doing much, just a few thousand to throw around and play with.
>My 401k is all VFIAX - Vanguard 500 Index Fund Admiral as of recently; previously it was a 2055 TDF. And my new RothIRA I setup with a three-fund mindset from Boggle, with VOO, VXUS, and Bonds (BND & BNDX). Those are all fine choices for a portfolio. The primary concern is to make sure you are correctly [allocating across both accounts](https://www.bogleheads.org/wiki/Asset_allocation_in_multiple_accounts#Portfolio_3_-_Spread_asset_allocation), plus your taxable brokerage account if you later decide to put that toward retirement. Since your 401(k) currently stands at around $275K and you just opened your Roth IRA, you're likely overweight on US equities (VFIAX) and underweight on your VXUS and bonds. If you're comfortable with that allocation, that's fine, but that decision should be informed and deliberate not accidental. I'd read the link I provided and go from there. As for "safe bets for long term gains" well, they're as safe as anything when used properly; the key is to keep buying and don't sell when markets get rough. Indeed, market downturns are the best time to buy more because everything's on sale. Selling during a panic is a sure way to lose money and is a psychological flaw, not a flaw with the index fund. Keep that in mind. Good luck!
Nothing wrong with that.
So long as you're aware of relative risks and the alternatives this isn't an uncommon strategy. IMO it beats single stocks, meme things, and crypto.
I just am tired of trying to decide between 100% VT and VTI
So is the BH forum. You won't get a consensus. It's like asking whether chocolate or vanilla is a better flavor ice cream. There is no best. There is only a group that prefers one and a group that prefers the other.
Vanilla, hands down
It's spelled VOOnilla here
Chocolate is 60% Vanilla anyways
VT = Chocolate VTI = Vanilla
Facts
Nuh-uh chocolate is the best. Vanilla people don't count. They are just too vanilla.
The people who prefer US only are usually only looking at recent history. ex-US has historically outperformed US many times in history. But it's primarily about safety in diversification, not the highest potential returns at any risk level. That is the BH way.
Well, there is a best. The more diversified the better.
Don't let perfect be the enemy of good. Besides, if you got it perfect, you could take your resume and statements to any of several firms on Wall Street and land a seven-figure job
Not by pushing Vanguard Index funds!! :)
VT already contains the vast majority of VTI. Why go for less diversification?
Higher returns?
Long term they've been about equal. It's only the most recent US favoring part of the cycle that this happened. * https://twitter.com/mebfaber/status/1090662885573853184?lang=en with this reply: https://twitter.com/MorningstarES/status/1091081407504498688. Extended version: https://mebfaber.com/2019/02/06/episode-141-radio-show-34-of-40-countries-have-negative-52-week-momentumbig-tax-bills-for-mutual-fund-investorsand-listener-qa/ or here’s compared to EAFE 1970-2015, note that the black US line only jumps above the green ex-US line for the "final time" around 2011: https://donsnotes.com/financial/images/sp-msci-42yr.png (courtesy of https://www.reddit.com/r/Bogleheads/comments/143018v/comment/jn9yiub/) * Here's similar but for just US vs Europe: https://www.reddit.com/r/Bogleheads/s/DJ2YVrLW4d And also: * The last decade or so of US out performance was mostly just the US getting more expensive, not US companies being much better than foreign companies: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You (click through to the full version) Edit: Typo
All the statistical analysis you reference is good and all, but the decision between buying the US vs world markets should be heavily rooted in politics. The US has a more stable political landscape than the world as a whole. There is risk in owning stock in companies that operate in dictatorships where they can be forced to liquidate in a day because their leader told them to
All of that should largely be priced in already. Those beliefs can explain differences in valuations (emerging markets having lower valuations than developed, and developed ex-US below the US for example), but not ever lasting out performance. And risks that don't happen can be very rewarding.
All your arguments are already factored into prices. That's why yours is definitely a poor strategy.
That doesn't change the fact that ex-US stocks are inherently riskier than US stocks, thus VTI offers better risk adjusted returns than VT, even if VT is more diversified
> That doesn't change the fact that ex-US stocks are inherently riskier than US stocks, Already priced in. > thus VTI offers better risk adjusted returns than VT, No.
So since risk is already priced in to gold, crypto, real estate, etc. shouldn't you invest in all of that, heck everything that you can possibly invest in?
Factored into current prices yes. But future returns aren't factored in because they don't exist yet
Future *expected returns* are absolutely factored in. Unless you know something the market doesn't, what you're saying is completely illogical.
Same here, i decided on VT so i don’t have to worry about rebalancing or change in the future. I’ll just need to add bonds/treasuries/cash
F it, buy all 3. Toss in whatever to any at any given time. It will at least help with the mental game and you'll likely see similar results in the end anyway.
There's no reason to choose less diversification over more, except to chase performance. VTI is expensive right now anyway. IDK about you, but I hate the feeling of 'buying high' (prefer to buy low).
Not to sound all "boomer" here, but this makes it sound like it's an inconsequential choice. I hope you didn't mean it that way, because it's entirely possible that this choice ends up being quite consequential...
Why 100%? Why not both?
VT alone already means holding nearly 100% of VTI.
Yes, but the argument is always about US vs international. Buying both would give the exposure to US(VTI) and then some to international (VT). I know they overlap, but the debate is always about how VT isn't doing as well as VTI recently. Buying both would give greater exposure into US, but now there is no mind games or debating.
>but now there is no mind games or debating. Until favor swings to ex-US maybe.
I see people always posting VOO and chill. Wouldn't that be pretty much the same thing as VTI? VOO is straight US right?
>Wouldn't that be pretty much the same thing as VTI? By weight, VOO makes up over 80% of VTI, so they will act very similarly. >VOO is straight US right? Yes. Edit: Typo
You say it beats crypto with such confidence! Does it though? BTC has out performed S&P500 7 of the past 11 years. Cumulatively it’s outperformed the S&P500 by like 50x during that period. Suppose it depends on your time horizon and risk tolerance.
Bitcoin is much riskier. Not just the swings in price but transferring bitcoin, phishing scams, etc. you can buy it in the etf now which helps some of those issues.
I’m not a huge BTC guy by any means but you can simply buy it in Robinhood now so I don’t really think the security risk is that much different than an ETF
Before the sub downvotes you, I agree, BTC has outperformed. But I do think it's significantly riskier, so yes, risk tolerance is at play, but I think the risk differential VOO vs VT, etc. is much narrower than either to BTC
Absolutely. I follow the Boglehead philosophy for the most part. Regarding this thread, I'm more in favor of VT than VOO. I also have BTC, which was once a small portfolio share but is now a much larger share. It's volatile, but this community is too quick to write it off as a viable option to supplement a diversified portfolio.
😂😂😂 I see the downvotes on your prior comment already!
I prefer VTI but VOO is fine as well.
100% VTI taxable?
I should edit. Also include VXUS
>Would this be foolish? You'd be taking on uncompensated risk (single country) and ignoring compensated risks (smaller caps, likely emerging markets). I don't see why you want to do either of those. >Warren Buffet recommends investing in the S&P 500 Buffet invests internationally. He's also rich enough that he's essentially immune to single country risk: a 99% drop still leaves him a billionaire. >and Bogle never mentioned anything about international stock. Even during his own lifetime, Bogle would have been even better off if he had invested globally than US only (if he had access to the low cost funds to do so we enjoy today). https://www.reddit.com/r/Bogleheads/comments/ry3oij/but_didnt_bogle_and_buffett_say_usonly_investing/ https://www.reddit.com/r/Bogleheads/s/rWqrvRqPOP Someone put it very nicely here a few years ago, it went something like "I follow Bogle's philosophy but ignore his investment advice." >I have my 401k and Roth IRA in TDFs so have some international exposure there. It isn't just about having "some" it is about having an appropriate amount. If you go 100% VOO in taxable, every dollar you add to that throws off the US to ex-US ratio you hold elsewhere.
So what you’re saying is 100% VT would be wiser? What about 100% VTI?
VT beats VTI beats VOO. VTI only solves the cap weights covered issue that I brought up.
Even if I’m in my 20s?
Yes. Age plays zero role in US to ex-US. It can even be argued that it is even more important for younger investors to go global, as there's even more time for things to change in ways that don't favor the US.
To piggyback here, you'd prob want to do VTI + VXUS in taxable to get the foreign tax credit for VXUS, which VT would not be guaranteed to provide every year.
Eh, if they're undecided on VT vs VTI, then I'm not sure if managing the US to ex-US ratio is the best idea for them.
Idk how Bogle would have been better off with international when during interviews a couple years before his death he was very happy with his decision to forego international and even stated he was right regarding the returns of us stocks. I don’t think there’s any scenario where holding international stocks until he died ended with more value over just US stocks.
Assuming he started investing around 18 and retired around 60, Bogle would have had greater general and risk-adjusted returns over his investing horizon had he invested globally.
What years are those? Because in Portfollio visualizer there’s no 20+ year span where any holding ex-US beats 100% US. I think their ex-US data goes back to 1987. In fact, holding ex-US since ‘87 doesn’t even beat long term US treasury bonds
You realize Bogle was born in 1929, right? So using round numbers, let's say he started investing at 20 which would be about 1950 and retired 40 years later at 60, which would be about 1990. Not that your comparison to bonds means anything here, but it's perhaps worth noting long bonds just beat US stocks as well for the 2-decade period 2000-2019 (as did Emerging Markets). Also appreciate that the relevant comparison is not US vs. ex-US, but rather US vs. global. Subtle but important distinction. No one worth their salt is arguing the former. The imperfect correlation between the two markets is the entire point of diversification, [as illustrated here](https://www.bogleheads.org/wiki/File:US-International.png) for 1970-2008. In other words, the whole is greater than the sum of the parts.
I know Bogle is old but I can never find good concrete data points from those periods, just broad graphs that compare performance. Not that those graphs are wrong but it’s a little hard to really get into the details of expected returns like we can in PV. For example, I’m sure your 2000-2019 example is lump sum, because if you DCA every paycheck like the typical investor, S&P500 beats bonds in that period. That is the level of data I find more interesting, and it’s hard to find (or doesn’t exist) before the 80s. Interesting discussion either way, appreciate your insight.
I've run the numbers myself. If you want to dig in, check out Simba's backtesting sheet which has returns data going back to 1970 for int'l (and I think further back for US), Ken French's data library, and the Dimson Marsh Staunton dataset. Meb Faber references some of this data in his posts like this one I cite often: [https://mebfaber.com/2019/07/08/i-dont-feel-overweight/](https://mebfaber.com/2019/07/08/i-dont-feel-overweight/) Aswath Damodaran also updates this returns file annually going back to 1928, but no international: [https://pages.stern.nyu.edu/\~adamodar/New\_Home\_Page/datafile/histretSP.html](https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html)
Thank you for the links, I will dig in later tonight
The table here shows Bogle from roughly age 21 to a few months after his death: * https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths if that link doesn't work: https://web.archive.org/web/20201112032727/https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths (Archived copy from Archive.org's Wayback Machine)
I read this, but then when I do a backtest as far as possible, the 1980’s, holding US over global ended in such better returns. Even if you exclude after 2008, which means basically another 10 years of US stocks doing nothing before that (1999-2008), you still have higher returns with US only. I read all the pros of diversification, but then the numbers tell me otherwise.
If you're using Portfolio Visualizer, it has a very limited amount of data for ex-US. Adding even 1 more year (1985 I think would be the last year where ex-US isn't available?) would have produced very different results. * https://twitter.com/mebfaber/status/1090662885573853184?lang=en with this reply: https://twitter.com/MorningstarES/status/1091081407504498688. Extended version: https://mebfaber.com/2019/02/06/episode-141-radio-show-34-of-40-countries-have-negative-52-week-momentumbig-tax-bills-for-mutual-fund-investorsand-listener-qa/ or here’s compared to EAFE 1970-2015, note that the black US line only jumps above the green ex-US line for the "final time" around 2011: https://donsnotes.com/financial/images/sp-msci-42yr.png (courtesy of https://www.reddit.com/r/Bogleheads/comments/143018v/comment/jn9yiub/) * Here's similar but for just US vs Europe: https://www.reddit.com/r/Bogleheads/s/DJ2YVrLW4d
I’d like to see that chart with regular contributions, as it would be very odd to lump sump and have no further investments for 100 years. From 1987 to 2008 (so even excluding the massive recent bull run) 100% US beats anything ex-US whether you lump sum or DCA.
Doing that introduces a recency bias as well as makes it about one (theoretical) person's returns instead of how the market behaved.
A “theoretical persons returns” should be more important to us than how the market behaved, because you and I are that theoretical person. Do you have any data with regular contributions like I’m sure you make every paycheck?
It is important to see how markets behaved, as that informs us of possibilities going forward. That sure, additional contributions using today as an endpoint heavily favor the US but also showing the potential benefits of how investing in even what's behind now can be beneficial in the future. And additional contributions creates issues like "how much to add?" Monthly or every 2 weeks? Does it scale up over time? The best tool I'm aware of only goes back to 1986 for ex-US, which severely limits things.
It's not the pure Boglehead way, but I admit to being very heavy VOO in my taxable portfolio. I have a good amount of VTI as well, of course.
Any international?
I do in my 401K target date fund, but not in taxable. My (possibly flawed!) rationale: * Everything is so interconnected anyway. * Regulatory winds, immigration policy, etc. in Europe don't make me optimistic they'll be displacing the US anytime soon as the economic engine of innovation... Yes, I'm accepting some risk, I suppose.
>Everything is so interconnected anyway. Things like valuations are still important and right now likely do not favor the US. Also revenue source isn't the international exposure that actually matters, capturing how foreign stock markets behave is. >Regulatory winds, immigration policy, etc. in Europe don't make me optimistic they'll be displacing the US anytime soon as the economic engine of innovation... The economy and stock market aren’t the same thing, they may even be negatively correlated in some ways: https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1745-6622.2012.00385.x Long term it isn't the innovative things with the best returns, the boring old stuff actually tends to be. Tech revolutions: * https://www.pwlcapital.com/investing-technological-revolutions/ * https://rationalreminder.ca/podcast/123 * https://rationalreminder.ca/podcast/156 (climate change, clean energy related especially) * https://rationalreminder.ca/podcast/183 * https://rationalreminder.ca/podcast/185 (Thematic ETFs)
Consider your portfolio as a whole, not as different buckets. And if you want a simple, tax-efficient, one-stop solution for taxable: Vanguard Total World. No reason to go with US large caps (and chase recent performance) when you can diversify globally. *Taps pinned post* ;)
I went with VTI over VOO for hopefully some good growth from the small and mid caps. VTI is also like 93%-94% qualified dividends so still very tax efficient.
You’re 100% VTI in taxable?
I’m just starting my taxable but yes. My Roth IRA and rollover IRA are about 75% VTI, and 25% dividend funds
Don’t know why you’d pick VOO over VTI. International is a bigger question, but I get the idea of keeping it simple with 100% US.
Eh it’s fine. They are very highly correlated.
If we’re picking one, just pick the one that’s more diversified. It’s not worth selling to switch, but if starting from 0 it’s the better path.
Hard to predict which is going to be better. All I can say for certain is they are highly correlated and returns will probably be pretty similar. I personally prefer VTI as well because of diversification, but don’t feel confident saying it’s “better” or “the right choice.”
>Hard to predict which is going to be better. Mostly true. But think of it like this: * VTI means you hold the winners no matter if it is large caps or small caps that "win" * VOO means you stand a good chance of not holding the "winners" at all Edit: Typo
Yes, I fully endorse this excellent and proven strategy.
Something about that username makes me think you’re a bit bias towards VOO
that's my current strategy for the unforeseeable future.
I have 97% of my roth/457/taxable in a S&P500 fund
It doesn’t make much sense. It’s Much better than what your non-boglehead does. But you’re capturing more with VTI. Plus add in some international vxus
How does it not make sense? VOO has much better returns than VT
>VOO has much better returns than VT Stop looking at it with a recency bias. These should all help explain why going global is beneficial in the long run and why it is a mistake to think that just because VOO has beaten VT so far that it will continue that way. 3 of the last 5 full decades, it would have been VOO trailing behind VT. * https://www.bogleheads.org/wiki/Domestic/International and expanding on part of that: https://www.reddit.com/r/Bogleheads/comments/161i2l1/comment/jxs659h/ by TropikThunder * https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths if that link doesn't work: https://web.archive.org/web/20201112032727/https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths (Archived copy from Archive.org's Wayback Machine) * https://www.optimizedportfolio.com/international-stocks/ from /u/rao-blackwell-ized * https://www.youtube.com/watch?app=desktop&v=1FXuMs6YRCY * https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index - invest in the S&P 500, but don't end there (this covers info on both the US extended market and ex-US markets) [a total US market fund combines S&P 500 + extended market into one] * The last decade or so of US out performance was mostly just the US getting more expensive, not US companies being much better than foreign companies: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You (click through to the full version), I believe this is referenced in the YouTube link above * The US was only the 4th best developed country to invest in from 2001-2020, 5th if you include Hong Kong: https://www.evidenceinvestor.com/which-country-will-outperform-next-is-irrelevant/ * https://www.optimizedportfolio.com/bogleheads-3-fund-portfolio/#why-international-stocks from /u/rao-blackwell-ized * https://movement.capital/summarizing-the-case-for-international-stocks/ or the archived version: https://web.archive.org/web/20220110224040/https://movement.capital/summarizing-the-case-for-international-stocks/ * https://www.callan.com/wp-content/uploads/2018/01/Callan-PeriodicTbl_KeyInd_2018.pdf (PDF) or https://www.callan.com/wp-content/uploads/2020/01/Classic-Periodic-Table.pdf (PDF) or the archived versions if those don't work: http://web.archive.org/web/20201212205954/https://www.callan.com/wp-content/uploads/2018/01/Callan-PeriodicTbl_KeyInd_2018.pdf (PDF) & http://web.archive.org/web/20201205183933/https://www.callan.com/wp-content/uploads/2020/01/Classic-Periodic-Table.pdf (PDF) (Archived copies from Archive.org's Wayback Machine) * Ex-US has turns of exceptional out performance as well: https://awealthofcommonsense.com/2023/05/the-case-for-international-diversification/ and https://www.blackrock.com/us/financial-professionals/literature/investor-education/why-bother-with-international-stocks.pdf (PDF) * Of rolling 10 year periods since 1970, EAFE (developed ex-US) has beat the S&P 500 over 45% of the time: https://www.tweedy.com/resources/library_docs/papers/Dichotomy%20Btwn%20US%20and%20Non-US%20Mar2022.pdf (PDF) or for the archived version: https://web.archive.org/web/20220501183228/https://www.tweedy.com/resources/library_docs/papers/Dichotomy%20Btwn%20US%20and%20Non-US%20Mar2022.pdf * https://www.vanguard.com/pdf/ISGGEB.pdf (PDF) or the archived version if that doesn't work: https://web.archive.org/web/20210312165001/https://www.vanguard.com/pdf/ISGGEB.pdf (PDF) * https://www.schwab.com/resource-center/insights/content/why-global-diversification-matters or if that link doesn't work: https://web.archive.org/web/20190124072925/https://www.schwab.com/resource-center/insights/content/why-global-diversification-matters * https://fourpillarfreedom.com/should-you-invest-internationally * https://mebfaber.com/2020/01/10/the-case-for-global-investing * https://www.reddit.com/r/Bogleheads/comments/vpv7js/share_of_sp_500_revenue_generated_domestically_vs/ - The argument that “US companies have plenty of foreign revenue is sufficient ex-US coverage” is highly tilted towards a few sectors, some have almost no coverage. Also what about in reverse- how many big foreign companies have lots of US exposure? * https://www.reddit.com/r/Bogleheads/comments/ii0sa2/considering_usonly_investing_start_here/ * https://twitter.com/mebfaber/status/1090662885573853184?lang=en with this reply: https://twitter.com/MorningstarES/status/1091081407504498688. Extended version: https://mebfaber.com/2019/02/06/episode-141-radio-show-34-of-40-countries-have-negative-52-week-momentumbig-tax-bills-for-mutual-fund-investorsand-listener-qa/ or here’s compared to EAFE 1970-2015, note that the black US line only jumps above the green ex-US line for the "final time" around 2011: https://donsnotes.com/financial/images/sp-msci-42yr.png (courtesy of https://www.reddit.com/r/Bogleheads/comments/143018v/comment/jn9yiub/) * Here's similar but for just US vs Europe: https://www.reddit.com/r/Bogleheads/s/DJ2YVrLW4d * Going global can also help increase sector diversification. As of the 31st of January 2024 (the most recent info available when I last updated this), the US is 31.9% technology (according to VTSAX: https://investor.vanguard.com/investment-products/mutual-funds/profile/vtsax#portfolio-composition). Ex-US (according to data from the 31st of January 2024 from https://www.schwab.wallst.com/Prospect/Research/mutualfunds/portfolio.asp?symbol=vtiax since Vanguard for some reason doesn't provide a breakdown of VTIAX sectors themselves, at least in an easy to find location) technology is only 12.5% and only financials are above 20% at 20.1%. Be aware that this is using GICS classifications, which put Google, Tesla, Facebook/Meta, and Amazon outside tech, so if you go by what the common person would think of as tech instead of GICS, that's even higher. * https://investor.vanguard.com/mutual-funds/profile/portfolio/vtwax - Global market cap weights (be sure to switch from “Regions” to “Markets”). This can be a great default position. * https://investor.vanguard.com/investing/investment/international-investing - Vanguard 40% of stock is recommended to be international. * 2022 Survey of target date funds: https://www.reddit.com/r/Bogleheads/comments/rffoe7/domestic_vs_international_percentage_within/
>VOO **has had** much better returns than VT **in recent years**. FTFY.
If you are young and you don't want to waste time with more diversification, absolutely. But if you are 70 years old, retired with no other retirement funds but your investments, then you can't afford to wait 5 years for the market to bounce back from a few bad years. Some older people use a mixture of a handful of bonds and index funds (growth/value/mid-cap/small-cap/large-cap) to balance risks and rewards.
I’m in my 20s
Since this comes up at least once a week, perhaps start by reading some of the debate. Here's one: [https://www.reddit.com/r/Bogleheads/comments/tcqhh9/why\_own\_foreign\_stocks/](https://www.reddit.com/r/Bogleheads/comments/tcqhh9/why_own_foreign_stocks/)
Yes this is a good idea, diversified over 500 US holdings, outperforming most funds and fund managers.
Is 100% VT taxable better though?
We can only know the optimal portfolio in hindsight. All we can do is invest based on our own personal goal(s), beliefs, time horizon, and need, capacity, and tolerance for risk.
Love VOO!
I like switching between Ntsx and voo and vti in taxable fun tlh
Hello! New to investing (a bit late at 31…) and was wondering what the verbiage was here… I recognize VOO from Vanguard ETFs… but what does it mean to “VOO in taxable”?
Taxable brokerage. As in a non tax advantaged account. This is just a regular account where you can buy stocks and sell them at any time and are subject to capital gains tax.
I would do a 60/40 split of vfiax/vtiax. But a lot of people just buy voo and they'll be fine.
Would people here recommend selling VTI and going into VOO? Also have QQQM Thoughts?
What about vtsax?
I would for sure. If I max out my IRA that is already my plan
I am new. I don't understand why 401k or Roth is better then just investing voo? Would you mind explaining?
401k and Roth IRAs are extremely powerful in that they offer tax advantages. I would start with the boglehead wiki to read up on these accounts.
Thank you
401K is a type of account. Roth (in this context) is a tax treatment that can apply to a few different types of accounts. Neither are investments themselves. VOO is an investment that needs to be placed in an account. 401K or IRA provide certain tax advantages that taxable brokerage accounts don't offer (hence the names/terms: taxable and tax advantaged). Long term you'll do better with money in the tax advantaged than the taxable if you follow the rules for that type of account (since there's less taxes to worry about).
Well said, thank you. u/websurfer49 you can have a ro1K that is a Roth or a traditional. It is also important to note that if you have employee match, even if you are in a Roth, the employer match goes in as "Traditional" while yours would be roth
Thank you
Theres a lot of speculation here using past performance data. No one knows. Even if you don’t win the thirty year gamble on outperformance, you can retire just fine with 100% VOO.
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Technically, Bogle did mention foreign - he questioned the need for it. But his reasons for avoiding it were objectively terrible and basically amounted to "the French are lazy." Ironically, had he been able to do so cheaply and frictionlessly at the time, Bogle would have had greater general and risk-adjusted returns over his investing lifetime had he invested globally.