S&P500 vs All World ETF

[bellshelby]

@lovelygrace Very good point.

Stock (or market) pickers often overlook this. Public information is already priced in. For a stock (or market) to rise, it needs to do better than the current expectations of how good it is going to become in the future.

 

[hannah2403]

@vrogers In the last 60 years sp500 did slightly more then the all word index by a 1%, but all this overperformance came in the last 8 years...
Btw the world is 60 USA, so if the USA will continue to do well also the world will, maybe a little bit less but with less risk

 

[nathan12]

@vrogers

There is no reason to believe it will not.

Markets tend to be cyclical. They never go in one direction for eternity. It’s the natural process of resource allocation optimisation.

 

[catkittycool321]

@lovelygrace to state that there is *no* reason is quite funny, what about:

global software leadership?

global militarly hard power?

constantly growing population?

 

[fredmach]

@catkittycool321 Global software leadership: if tech has thought us one thing, it's that huge change can happen overnight, with immediate consequences. India will be the new silicon Valley in years to come.

Global Military Hard Power: great military dominance brings peace, for everyone, so no added benefits there for being the one nation bearing the cost of world peace.

Constantly growing population: the population of united States is flatlining and will soon peak and decline, simple fact. Check out Hans Rosling.

 

[onepassionate1]

@justiceformyfoot With higher expected returns also comes higher risk.

You can do backtest of portfolios on
Curvo.eu/backtest

Also worth reading articles on:

https://www.bankeronwheels.com/why-you-need-international-diversification/

 

[fateh]

@onepassionate1 Higher historical returns don't mean higher expected returns though, that's a fallacy. All the backtesting in the world won't change that.

 

[onepassionate1]

@fateh Agree, backtest are only a view on the past!

 

[hattington]

@justiceformyfoot All world makes no sense. Why pay weighted average higher fees. And why put 50% of EM exposure in China where you have no legitimate ownership through stocks.

I put 5-10% or so in EM ex-China, which is then largely Taiwan, Korea and India. It costs 25% per year. Then 90% in FTSE Developed by Vanguard at 12bps. This gives me a weighted average of 13%.

FTSE All World costs 20% and incorporates China... Why would you do that?

(This is fees on ETFs traded in the UK)

 

[dariancohen94]

@justiceformyfoot You can also consider the middle ground - just developed world.

 

[brendaj63]

@justiceformyfoot All World won't just diversify your market risk but currency risk as well - given the potential for a declining USD I'd definitely want other currency exposure.

 

[mxkris]

@justiceformyfoot Could you not do both?

 

[gerian]

@justiceformyfoot Another vote for All-World here.

 

[purete]

@justiceformyfoot If you want the short answer go with world.

But before investing and committing for such a long time investment I strongly suggest you to take your time and understand what you are doing with your choice

 

[luvpinky]

@justiceformyfoot Depends on your investment timeframe.

I believe that All-World is a better choice than S&P500 for very long timeframes. FTSE All-World and MSCI ACWI already are 65+% US weighted. And I have no certainty that 15-20-30 years into the future US will still dominate the world of stocks. A weight based all-world ETF will change the weighting automatically if/once this happens.

 

[nct]

@luvpinky Correct

 

[kellip171]

@justiceformyfoot I personally believe the US is a more business friendly climate, with higher relative population growth than EU/EEA, with highest rated educational institutions, and is a global sink for "brain drain"... which all points to future outperformance of its economy and corporations

 

[janetmal]

@kellip171

which all points to future outperformance of its economy and corporations

Even if that is true, it does not mean that the stock market will also outperform. As the saying goes, the stock market is not the economy. As usual, Ben Felix explains this very well in one of his videos.

 

[kellip171]

@janetmal over the long term stocks reflect the performance of the corporations, which is a significant component of the economy.

on a multi year-decade scale (investing duration), which poor economies have had great stock markets and which great economics have had poor stock markets?

 

[janetmal]

@kellip171 They mostly reflect surprises about the performance of the corporations, not the performance of the corporations themselves.

I'm not sure what you mean by "poor" and "great" economies, these are very subjective terms.