Stop Investing In The World Index

Markets are efficient, there is no reason for US stocks to outperform. Yes US companies are Better, you know this, i know this, the market knows this and that why US stocks have Higher PE aka they are more expensive as all the good about the US is prised in to the point we expect the same risk adjusted returns. But being invested in more companies that are fairly priced you get the benefits of diversification, that are having lower volatility with the same expected returns.
Think about it why do you think US stocks whould be expected to produce higher risk adjusted returns than the world and peaple are not selling the world to buy the US, ohh they have done so see the higher PE of US stocks.
BETTER COMPANIES DOES NOT INDICATE BETTER STOCKS !

Very helpful thks

Ruffled a few feathers. 😱

I'm late to the party on this video but a year later it is still totally relevant.

North America = USA, Global Titans = USA, Tech = USA, etc. so unless you're stock picking or going into very niche sectors, backing the USA to harvest income from around the world through globalisation is the way to go.

For anyone considering Europe vs USA, go look at the long time correlation between the GDAX, FTSE and S&P and then look at the divergence and read that in context with the comments from Sasha. It explains it all clearly and simply.

Holy Mother of all terrible financial advices, what an awful take... The ammount of concentration risk for a bit extra return is insane. Go watch and listen to Ben Felix... He states facts, not opinions or "I believe" , "I feel" , "this time is different".

A point to mention...
Most serious dividend focused investors focus on dividend growth, not simply dividends. When dividends grow, all things being equal, capital appreciation grows with the dividend growth. Take $schd as an example... The dividends have grown since inception as has the price. Most dividend investors care about the dividend plus the growth.

The problem is if this happens, and the US just completely dominates the global economy, VT will reflect that. Instead of 60% it’ll be 80% or 90% whatever it is. It’s just the global market cap

Sasha. ...I've said it before, and I'll say it again,
We love you ❤😊x

In my opinion the Core MSCI World index pretty much has your approach in mind but with better diversification and not excluding the big players outside of the United States.

I think you are getting it wrong. The idea of a global fund is that if money move from one place to another you will not feel it in your investment because owning stock across the glob will gurantee that you capture those money in other markets. Also all global indexes are alreade US and developed markets heavy, they are design to only dip a little bit in the emerging markets growth if there is any. Also any huge growth in emerging markets will come at an expense of moving money from a developed market hance you feel the impact on your investment would be minimal. Not to mention the accumulating etfs and low fees that will save you lots of money.

Agreed

this is a great take, thank u

not sure. provided that you invest in stock, maybe using index, it's well proved that when S&P declines, so do the other indexes.

I understand all of your points... but still. Jurisdiction risk.

Yes, it is 'different this time'... because 'past performance isn't indicative of future performance'... See the irony? Global fund fans always point to times when global stocks outperformed US stocks (because they are relying on 'past performance' to guide this decision). They argue that US investors think it's 'different this time'... (you can't have it both ways guys). Personally, I think its different this time- I look around me and I'm surrounded by US companies-iphone/Google/facebook/Tesla's/computers/AI/Coke/fast food chains/ American 4wd's.. At least we can grow food in Oz and dig holes. Phew.

The UK ISA is going to allow an extra £5k of Tax free investment in UK only shares. Would you look at investing in UK for the value it represents presently or keep the money for the next tax year and contjnue to invest in the S&P index? ( I intend to max my ISA across the S&P and World Technology Index anyway.

I expected this to be more about how global index funds aren’t actually very diversified because of the massive US tech stock allocation

are you still as convicted as you where when you made this video? Great content thanks for making it

a Very good point

lol the US economy has imploded before and people forget in 2008 it tanked the global economy along with it and it would again. Either way it’s no reason to hold the entire world index because you’re afraid of single country risk. If that’s the case get out of equities and park your money in treasuries or under your mattress.

No disagreement with the point of not investing in a World index. However, plenty of the biggest companies in Europe get their profits from exports outside of Europe.

Outside the US, every country or area has its bubbles. There's a lot of corruption out there though, plus policy risk, currency risk etc which makes this very hard to capitalise on. I think this is where the active fund managers are still useful knowing the local market knowing which companies are faking it, but you still have to time those markets. India has gone up significantly when will that pop? Who knows. Russia was amazing for 10 minutes or so and nobody could get their money out. China had a mega bubble and popped but might be returning right now, who knows. US it is then, light cigar and relax.

Brilliant again

The US has only had superior returns historically because so much bad stuff hasn't happened to the US. These returns will not continue because bad stuff not happening to the US is now priced in.
Also, the reason US stocks have grown so much in recent years is because so many people are starting to invest who never used to invest, and most online influencers (plus Warren Buffet) recommend either the S&P 500 or some subset of MAGFA (Microsoft Amazon Google Facebook Apple). Mostly the S&P 500. As a result, the companies in that index have undergone multiple expansion far faster than other companies worldwide, but worldwide companies have equally good fundamentals, so international stocks have higher expected returns.

Personally, I'm mainly invested in IWFQ, plus some IWFV and EMVL for diversification.
IWQU (which is basically IWFQ but dollars instead of pounds, which makes it more comparable with SPY) has only underperformed SPY by a tiny bit, and the difference is not statistically significant, but IWQU has more diversification.

An over-priced but brilliant company is still over-priced.

Spot on, clever lad

Remind me in March if you still think being 100% in US stocks is a good idea.

Has Ramin rejected your advances? 🤣

I hear you…BUT you’re looking at it a little too black and white.

A global equity index fund is 70% S&P anyway.

You’re not missing out on a lot, worst case is you just gain a little less but your money has a safety net.

Silly

I have no idea what is the "neck eye", but I agree with 100% of what you said.

Hello. Still investing in tesla? 😅

I agree, so you must be right

NuBank

JGGI is my main holding . I can’t remember why I bought it in the first place but it’s been fantastic.

Risk of the world splintering into 3 or more mostly independent trading regions

Why allow Facebook Amazon etc to syphon off so much capital from Europe when they can do a china and ban them and have a local clones take the market and keep the money and jobs

Sorry to break your bubble, but if you actually read the literature on the topic, then you will see the investing globally is the smarter and less risky strategy.

the thing is if the US market crashes, all markets are going down.

Still think India and china (assuming they don’t invade Taiwan wreck markets) are worth long game and we will end up with a 2 tier world (USA v china) with India opportunistically playing a balancing act ( like they have with Russia). EU will fade into obscurity and irrelevancy as they battle health costs and public debt.

This is not a good thing. Spreading more decreases your risk while not not changing your expected return that much. Apart from that, the US public debt is crazy high. Europe will be very interesting in the coming year due to low public debts, good value of the stock/etf’s with massive potential growth compared to the US.

The US is already a major part of the World Index and you therefore get good exposure to big tech companies (which have driven recent returns) such as Microsoft and Apple. For the sake of diversification (and because no one knows the future) the average person is far better investing in a world index rather than only the S&P 500. Indeed, I would recommend a World Index that includes small and medium-sized companies so it's only only very large companies you're invested in.

On a personal note, it isn't healthy for consumers to have some dominance by a few large American tech firms, which behave in an anti-competitive way and start over-charging customers and resting on their laurels. I hope we see new tech companies coming and and knocking the current incumbents off their perches (perhaps from countries outside the US).

Backtracking to 1996, Vanguards' Total World Index (which VT comprise ~40% of along with ~60%VTI) outperformed the S&P 500 10 out of 27 years. This may or may not happen again in the next 27 years. Whether or not you decide to invest in international or not, what matters most is consistently investing and staying the course. Either way, you're likely be ahead of people who constantly change investment plans and constantly buy/sell their stocks .

This doesn't make sense. Having exposure to other countries economies isn't the same as having exposure in foreign stocks. Individual stocks should be accurately priced and dont necessarily go up when an economy is doing better.

You may be right, but you're still gambling

By assuming that the USA companies will constantly increase their market share you assume that the rest of the world will just standby and do nothing. I doubt that will happen.

Duhhhh yes❤❤

all those things you said about the US are priced in. the "us companies have global market exposure" is a useless argument because if that's what makes them good -- well non-US companies also have global market exposure.

I’m mostly in agreement with him but don’t think you lose much in terms of risk/reward by holding ~20% of ex-US over the long term in case the U.S. sees an extended period of underperformance. But markets seem so correlated at the large index level it’s an open question how such a globally significant market as the U.S. could falter and not see the rest of the world in similar if not worse shape.