What is the Historic Performance of Int'l Stocks (VXUS)

Investing
#1

Hello,
Does anyone know where to find long-term (50-100 yr) performance of the international stock market?

This is a critical piece of the 3-fund portfolio strategy to determine expected performance over 20+ years.
US stocks /S&P 500 long-term performance of 10% is well documented. I am trying to tease out the historical performance of international stocks to then arrive at the anticipated performance of a 3-fund portfolio.
VTI
VXUS
BNDW

#2

Hi @kaseyk

Using the MSCI EAFE Index (developed international stocks), the total return since 1970 is 7.3%. Most of the other international indicies do not have as long of a track record since they were launched more recently.

Historically, International and US stocks have taken turns outperforming. Here is an older Personal Finance Club post that shows this:

I hope this helps! Let us know if there are any other questions!

#3

Yes, thank you Shane.
My point is, it seems like the pendulum between and international and domestic stocks would cause a drag on the whole portfolio and overall, yield much less than the historic, 10% average of domestic stocks. Especially if Bonds were included. A 54% 36% 10% allocation that Jeremy recommends does not match the 10% S&P 500 (domestic) performance that he references over the long-haul. If international stocks were added, it would drag down the returns when domestic stocks are performing well and vice versa when international stocks are performing well so the net effect would be less. What are your thoughts? If I misreading the information?

#4

A couple thoughts from me:

  1. International doesn’t necessarily cause a drag on performance. The longer-term performance numbers have been impacted by the past decade where the US has been exceptionally strong and international has been exceptionally weak.
  2. International also adds diversification to a portfolio since it doesn’t always perform in line with the U.S. stock market.
  3. I agree with you, a three fund portfolio would have a lower expected return (and expected risk) since it is more diversified and include bonds.
  4. Personal Finance Club tends to use different expected returns depending on what is most appropriate! For example, this post below used a 7% rate of return since it was for individuals in a 401K plan that likely increased their allocation to bonds as they approached retirement (e.g., Target Date Fund).

#5

Thank you Shane. What would you expect the long-term return to be on a portfolio with 60% US stocks, 40% Int’l stocks; no bonds?

#6

Most asset managers provide capital market assumptions where they predict the long term return expectations for different asset classes. I just checked a few and they were near 7-9%. JPM and BlackRock provide details on their websites if you would like to reference them!