S&P500(VOO) VS ACWI

[styxomaniac]

Hello, I would like to share something. A lot of people are suggesting that for beginners or ‘passive’ investors, an All Country (ACWI) index is recommended because it is diversified with 60% US and 40% other countries (~6% Japan). As a novice, I still do not understand the reasoning behind it, especially when I see a graph like below.
For someone reading this who is also new like me and wondering the same thing, I would like to share with you this link https://youtu.be/eIUgjib_fm4?si=6AWap42mzweB1QPe I think he presented the clearest argument for leaning towards a globally diversified portfolio rather than focusing solely on the US, especially if you are retiring soon. However, considering I still have a long way to go before retirement, I might benefit from investing a little bit more in the S&P and small cap value index.

[zeroshiki]

Because there is volatility in putting all your eggs in the US basket. It's as simple as that. Alot of people get seduced by the US market but if we admit that we can't see the future, we also have to admit that there's a possibility that the next big thing might NOT be in the US. Samsung and Toyota aren't part of the S&P500 for example.

[adamu]

I didn't watch the video but

The logic for going global is the same logic as sticking to an index. Without knowing who the future winners are, we just buy everything.

The US being the global imperial power, the productivity of many countries' industries are actually represented in the US stock market. So you'll probably be fine on just the US market. If that ceases to be, it'll be a different story. Then again, we probably won't be using MSCI - a US company -'s indexes either...

[styxomaniac]

Exactly, when America sneezes, the world catches a cold.

[beanhead]

S&P500 only is a perfectly reasonable choice. It is what millions of Americans do, quite successfully.

You just need to understand that there is that risk if the US market does start to underperform the rest of the world.
As pointed out above, you also miss out on other large companies not listed in the U.S. (better that than to miss out on US growth, though).

I overweight the US slightly by buying a combination of All-Country and S&P500 in NISA. No science behind this 'strategy', perhaps just a bit of FOMO.