Episode 450: International Funds, Nomads, New Vanguard ETFs and Portfolio Reviews As Of August 29, 2025
Aug 31, 2025
Dive into the fascinating world of international investments as the hosts dissect the true drivers of stock performance, especially the impact of currency fluctuations. They provide fresh insights into new Vanguard ETFs and answer listener questions about optimizing international portfolios. A Canadian nomad seeks advice, while portfolio reviews showcase diverse strategies and highlight market performance for August 2025. Humor and engaging discussions keep the exploration lively, making complex financial concepts accessible and entertaining.
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insights INSIGHT
Currency Drives US vs International Returns
About 40–50% of the performance gap between US and international stocks is driven by currency moves, not company performance.
That means geographic labels often hide currency-driven returns that overlap with other assets like gold.
insights INSIGHT
Value vs Growth Trumps Geography
Value versus growth is the single most important stock diversification for withdrawal resilience.
Size (small vs large) matters next, and geography matters less than those factors.
insights INSIGHT
US Large Caps Are Already Global
Large U.S. companies already have substantial international revenue, so U.S. large-cap holdings provide implicit global exposure.
Sector and factor differences (e.g., US tech concentration) explain much of the US vs international split.
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In this episode we answer emails from a Mysterious Visitor, Pal and Byron. We review our approach to international stock funds and how to improve their diversification, try to help out a Canadian nomad and discuss some new Vanguard funds.
And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.
Conventional wisdom about international diversification gets turned on its head as we explore what truly drives the performance difference between domestic and international stocks. Far from being about different economies or company headquarters, approximately 40-50% of this performance gap stems directly from currency fluctuations between the US dollar and foreign currencies. When the dollar weakens, international stocks surge; when it strengthens, US stocks lead.
For investors focused on building resilient portfolios with sustainable withdrawal rates, this revelation reshapes diversification priorities. Value versus growth diversification emerges as significantly more important than geographic diversification, followed by size factor (small versus large caps). This hierarchy challenges the simplistic notion that pairing a total US market fund with a total international fund provides meaningful protection.
Large US companies already operate globally, selling into worldwide markets regardless of headquarters location. This makes traditional total international funds less diversified from US large caps than many investors realize. Instead of blanket international exposure, we explore more effective approaches using specific international value, small-cap, and emerging market funds that provide genuine diversification benefits.
The episode also tackles practical implementation questions, including how expatriates and nomadic investors might construct globally resilient portfolios using Irish-domiciled ETFs for potential tax advantages. We briefly examine Vanguard's new ETF offerings and explain why their corporate bond funds hold limited appeal for investors seeking recession insurance rather than income.
Our monthly portfolio review highlights gold's stellar performance (up 31.56% year-to-date) amid dollar weakness, demonstrating the principles discussed throughout the episode. These eight real-world portfolios showcase different approaches to implementing risk parity principles, with performance and distribution data available at riskparityreview.com.
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