International Diversification

> Index funds won't necessarily save you. So first off, picking individual winning stocks is hard because new information that determines pricing comes in randomly, so good luck getting information edge on your counter-party: * link Further, <5% of stocks actually make up the vast majority of earnings: * link * link * link Those winning stocks also change over time: what used to be a winning choice can become a losing choice, so it's not like you can really set and forget things. So index funds, buying all companies (especially if you go for more total market, like US Russell 3000), allow you to sidestep all of these risks. You are basically buying companies that service the entire economy, so as long as the economy is doing reasonably well the earnings of the companies will do reasonably well. So yes, the S&P 500 is highly concentrated, but that is not the only index. Diversification is generally not a bad idea: * link * ▶ this video

> Real interest rates in Japan were zero or negative for pretty much all of that same 35-year period, so bonds wouldn't have helped you either. The main thing that bonds would have helped with was in the 1980s: by regularly rebalancing to (say) 80/20 you would have taken profits off the table regularly. Further taking that (e.g.) 80% equities and putting and putting some in ex-JP/in-US would have further helped. Even for US investors the data/research suggests some international exposure leads to better results: * ▶ this video Further, it looks like even in the US it hasn't been "the US market" that has done well, but rather tech specifically: > Looking at this data, there are two distinct periods of extended U.S. outperformance—the late 1990s and today. And what do these two periods have in common? The rise of U.S. technology stocks. Bespoke Investment Group recently created this chart illustrating this phenomenon: > Now that the U.S. technology sector makes up over 30% of the S&P 500 (as it did back in 2000), this begs the question: Is U.S. outperformance just a technological fad? * link So, slightly contra Buffett, you're not entirely "betting on the US" but rather "betting on US tech".

> it took 14 years for s&p 500 to break even if you bought it in 2000 Not if you had a modicum of bonds and rebalanced: * link Or if you had international stocks. This myopia of many Americans to only look at the S&P 500… words fail me. Sheesh. Try some diversification (peer-reviewed citations in description): * ▶ this video

> A slight over simplification, for example s&p was negative 1% per year from Jan 2000 to Dec 2009. Plus the cost of your leverage. For the 2000s, a US-only investor would only have been saved from the S&P500 by having at least 20% bonds and rebalancing: * link Of course if you were not US-only, but rather internationally diversified (and rebalanced), you would also have been fine. Diversification is important, even for Americans (cited sources in the description): * ▶ this video

International diversification is generally a good idea. Good video by Ben Felix citing a bunch of research papers (with DOIs in the description): * ▶ this video