Anyone who has traveled overseas has inevitably experienced one of the core differences in modern infrastructure — the simple power plug. Your favorite electronic device may be impeccably designed and thoroughly tested, but without an adapter that allows it to plug into local outlets it won’t do you much good. Translating the electrical and mechanical needs of the plug to the wall is a critical step in integrating your own devices into an international life.
Portfolio design works much the same way. The vast majority of portfolio ideas are written from the perspective of US-based investors, but for investors outside of the US it can quickly become obvious that the plug included in the box doesn’t fit the local outlet.
For example, “Domestic” and “International” mean very different things to an American investor and a Japanese investor. Many types of financial products from target date funds to world ex-US funds that portfolio authors take for granted in the US don’t exist at all in other markets. Even basic index definitions can be confusing to compare, with completely different index providers in Europe than in the US.
Layer on the effects of local exchange and inflation rates, and even the core data justifying an investing choice loses its original meaning. Describing portfolio ideas on the world stage is complicated.
I have spent a lot of time over the years thinking about this issue. From charts that translate portfolio data to the purchasing power of many different countries to an asset collection including localized ETF options, you’ll find more data for investors outside of the US on Portfolio Charts than on most similar online tools. Today I’m excited to announce a nice upgrade to the portfolios section to expand this approach.
Maybe you live outside of the US and want actionable info on the best portfolio ideas that US-based authors have to offer. Or maybe you’re an investor in the US who wants to harden their portfolios by testing the design intent out of sample in completely different markets. Either way, I’ve got you covered.
Put down the confusing bag of power adapters and pull up a chair. Let’s talk about how to interpret portfolio design intent in any country.
Localized Portfolio Translations at Your Fingertips
The idea of localized portfolio translations isn’t new, as I have been doing that for some time. Go to any portfolio page or browse them all with the Portfolio Matrix, and changing the home country has always updated the underlying definition beyond just the inflation and exchange rate.
It’s an important step for a multitude of reasons. From presenting portfolio ideas using funds you can actually invest in without an exotic international brokerage to accurately presenting the original domestic/international framework from multiple perspectives, translating portfolios to local markets helps to break the American information barrier that has skewed financial education for far too long.
That country-specific translation info was always a little hidden, however, mostly for technical reasons. But along with the recent big update to the charts, now I can also apply some new coding magic to other things, too.
Check out any Portfolio page, and the first thing you’ll notice is an updated asset allocation section at the top. Here is a working version of Bill Bengen’s Richer Retirement Portfolio.
Asset Allocation
Change the home country to translate the portfolio to local asset options.
Asset Notes
1. Bengen specifically recommends 11% large cap blend and 11% mid cap blend. Since I don’t have data for mid caps, I grouped them into the large cap allocation. Note that most large cap funds already cover mid caps.
2. Bengen specifically recommends 11% small cap blend and 11% micro caps. Since I don’t have data for micro caps, I grouped them into the small cap allocation.
Change the home country and you’ll immediately see the difference. Rather than burying the portfolio translations in the performance charts, the portfolio page now features them. And not only do the asset descriptions change to best match the portfolio design intent in the various countries, but the links also change to point to the correct local ETF options to build the portfolio.
Another major change is found a little further down in a brand new section called Comparisons. This is a full Portfolio Matrix that highlights the current portfolio, has home country portfolio translation built into every item on the list, and includes links to every portfolio for deep exploration.
Comparisons
Calculations use localized assets and data for the selected home country.
Learn more about the metrics on the Portfolio Matrix page.
Aside from the utility of quickly seeing how a portfolio stacks up against other options, allow me to point out something here that may not be obvious.
If you scroll back up you’ll notice that the home country in the Asset Allocation section always matches the one in the Comparisons. So the entire page is always in sync. Now glance at the URL in your browser. If you changed it to something other than the USA, the home country is specified in the link. Many of you may not care about that detail, but it lets us do a few things:
- If you share a link to a portfolio page, it will always bring up the portfolio info for your specified home country. So if you want to spread the word about the Canadian Permanent Portfolio or the Italian Pinwheel Portfolio, it’s now super easy to link directly to country-specific info.
- Check out the portfolio names in the Portfolio Matrix. They all link to the country-specific versions of each portfolio for whatever home country you selected. No extra toggle steps required.
- This home country recognition also applies to all performance data on a page.
The end result is that the Portfolio pages are now designed from the ground up to be easily switchable to applicable assets, funds, and data for a dozen different home countries. Basically, they are not just US-centric pages anymore with localized data thrown in. They’re built with global investors in mind.
How the Translation Logic Works
While we’re on the topic of portfolio translations, this feels like a good time to also explain how the logic works. It’s not rocket science, but it’s also not immediately obvious unless you’ve spent as much time thinking about this as I have. So here’s the thought process.
The vast majority of portfolio authors write from the perspective of domestic vs. international assets. In the US that means US funds and ex-US funds, but every home country is different in both domestic and international options. So all interpretations start with that framework by switching the home perspective.
Australian, Canadian, and Japanese portfolios use domestic & international definitions where “domestic” means your own home country and “international” is a broad developed world fund. The same interpretation strategy applies to portfolios in European countries with simple asset types like large cap blend stocks and intermediate bonds. This allows for straightforward translations of things like the Classic 60-40 and Three-Fund portfolios.
For European portfolios with small and value tilts, I take advantage of the more numerous investing options in broad Europe funds and describe portfolios with Europe as the domestic market and the United States as the international market. Doing it that way not only follows real-world fund availability and normal investing behavior but also captures more of the factor-based asset nuance in these types of portfolios. So portfolios like the Ultimate Buy & Hold portfolio will preserve the core factor theme while appropriately switching domestic/international context.
You can see the distinction in the above Richer Retirement example if you switch the home country from the US to Germany to Australia. Germany preserves the small cap tilt while switching the domestic market to Europe and international to the United States. And Australia combines the two domestic funds while preserving the overall allocation.
While it may sound complicated, it’s actually pretty straightforward and consistent once you understand the reasoning. To see the portfolio translations for yourself, just go to any page and flip the home country in the asset allocation section. And if there is ever an automated translation you disagree with, that’s what the Charts are for! Portfolio Charts has tons of tools to model any combination of assets you like.
A Portfolio for Every Investor
If you live in the US, all this effort to translate portfolio design intent to the working perspectives of investors in other countries may sound nice but not all that interesting. I believe it can be very insightful to stress test portfolio theories from the perspective of very different markets like Japan and Italy to make sure you’re not falling too heavily for US bias, but that’s admittedly an advanced topic worth discussing another day. At the very least, I think you’ll find the new portfolio comparisons section quite helpful.
But if you are one of the millions of global investors out there who are hungry for actionable investing ideas and are tired of consuming information written for an American audience, I hope that you enjoy the new functionality and that it helps expand your understanding of smart asset allocation concepts. The tagline for Portfolio Charts is “Find a Portfolio to Love”, and I take it as a personal challenge to advance that mission to distant shores as well. You shouldn’t have to settle for portfolio analysis based solely on US data and fund options.
No matter where you live, please take a moment to browse the updated Portfolio pages and help spread the word about the multi-country functionality. Who knows — maybe you’ll not only learn something new but also lead someone to quality information that can measurably improve their financial lives. Sometimes all it takes to make a real difference is one person willing to share a simple question:
Have you ever wondered how a well-known portfolio might work in other countries?
Portfolio Charts has the data and the tools to provide the answer.
Join the conversation
