Global Equal Weight Beats S&P 500 last 20 years!

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invest2bfree
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Global Equal Weight Beats S&P 500 last 20 years!

Post by invest2bfree »

Iam thinking of going Global Equal Weight as follows-

25% - SPY
25% - CXSE (CHINA)
25% - ILF (LATIN AMERICA)
12.5% - BBCA (CANADA)
12.5 - BBAX (AUSTRALIA)


This portfolio beats the S&P 500 handily last 20 years by 3%. Also diversifies the currency risk. I believe that the recent 10 year run in US markets cannot be replicated and investors should be better off adding international.
Skipped Europe\Japan because of low growth demography.

I did a equivalent high cost funds in Portfolio visualizer since the funds above do not have 20 year track record-

https://www.portfoliovisualizer.com/bac ... tion5_1=25

What does everyone think of this?
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by retired@50 »

invest2bfree wrote: Sun Aug 16, 2020 9:24 am
What does everyone think of this?
It's not my cup of tea, but it might contain enough exposure to the worldwide markets to earn a decent return.

I don't like to make predictions about which country or continent will have the best returns, so I own all of them. Best of luck.

Regards,
This is one person's opinion. Nothing more.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by Anon9001 »

I would warn against excluding Europe and Japan due to their low growth demography without realizing European and Japanese companies are multi-nationals. Nestle does not get any significant revenues from Switzerland for example. This would make more sense if you were investing in only mid-small caps as these companies get majority of their revenues locally compared to large caps.
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grabiner
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by grabiner »

invest2bfree wrote: Sun Aug 16, 2020 9:24 am Iam thinking of going Global Equal Weight as follows-

25% - SPY
25% - CXSE (CHINA)
25% - ILF (LATIN AMERICA)
12.5% - BBCA (CANADA)
12.5 - BBAX (AUSTRALIA)


This portfolio beats the S&P 500 handily last 20 years by 3%.
This doesn't look very global. In particular, it's easy to choose countries which performed well over the last 20 years, and get a portfolio which beat the US index. But you want the best returns over the next 20 years, and those could just as well be from any country in the world.

Equal weighting is also poorly defined in a global portfolio; why do you hold the same weighting in China as in all of Latin America, rather than holding the same weighting in China as in each individual investible country in Latin America?
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invest2bfree
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by invest2bfree »

I would warn against excluding Europe and Japan due to their low growth demography without realizing European and Japanese companies are multi-nationals. Nestle does not get any significant revenues from Switzerland for example. This would make more sense if you were investing in only mid-small caps as these companies get majority of their revenues locally compared to large caps.
[/quote]

So what you are saying is that I could just do-
25% - SPY
75% - VXUS

This could just have the same weight as my original post and be truly diversified with Global Companies.
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jason2459
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by jason2459 »

invest2bfree wrote: Sun Aug 16, 2020 10:00 am I would warn against excluding Europe and Japan due to their low growth demography without realizing European and Japanese companies are multi-nationals. Nestle does not get any significant revenues from Switzerland for example. This would make more sense if you were investing in only mid-small caps as these companies get majority of their revenues locally compared to large caps.
So what you are saying is that I could just do-
25% - SPY
75% - VXUS

This could just have the same weight as my original post and be truly diversified with Global Companies.
[/quote]

If you went that route why not VTI instead of SPY?

And if you wanted to cap weight them you'd go 56% VTI and 44% VXUS.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by stan1 »

invest2bfree wrote: Sun Aug 16, 2020 9:24 am Iam thinking of going Global Equal Weight as follows-

25% - SPY
25% - CXSE (CHINA)
25% - ILF (LATIN AMERICA)
12.5% - BBCA (CANADA)
12.5 - BBAX (AUSTRALIA)


This portfolio beats the S&P 500 handily last 20 years by 3%. Also diversifies the currency risk. I believe that the recent 10 year run in US markets cannot be replicated and investors should be better off adding international.
Skipped Europe\Japan because of low growth demography.

I did a equivalent high cost funds in Portfolio visualizer since the funds above do not have 20 year track record-

What does everyone think of this?
This is the first problem with back testing which is persistence. Is there a reason you would expect this to continue in the future? At least with mutli-factor or market cap weighting there's a theory or logic behind why it might persist.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by invest2bfree »

jason2459 wrote: Sun Aug 16, 2020 10:02 am

So what you are saying is that I could just do-
25% - SPY
75% - VXUS

This could just have the same weight as my original post and be truly diversified with Global Companies.
If you went that route why not VTI instead of SPY?

And if you wanted to cap weight them you'd go 56% VTI and 44% VXUS.
[/quote]


I do not want to cap weight them . Cap weighting is like driving forward looking back ward. I want to create a portfolio based on population demography, future growth potential and GDP for the next 20 years.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by Anon9001 »

invest2bfree wrote: Sun Aug 16, 2020 10:00 am I would warn against excluding Europe and Japan due to their low growth demography without realizing European and Japanese companies are multi-nationals. Nestle does not get any significant revenues from Switzerland for example. This would make more sense if you were investing in only mid-small caps as these companies get majority of their revenues locally compared to large caps.
So what you are saying is that I could just do-
25% - SPY
75% - VXUS

This could just have the same weight as my original post and be truly diversified with Global Companies.
I will post this image again: Image

MSCI ACWI which is 49% USA had only 28% exposure to US Economy. Just follow Global Cap Weights for your portfolio.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by jason2459 »

invest2bfree wrote: Sun Aug 16, 2020 10:05 am
jason2459 wrote: Sun Aug 16, 2020 10:02 am

So what you are saying is that I could just do-
25% - SPY
75% - VXUS

This could just have the same weight as my original post and be truly diversified with Global Companies.
If you went that route why not VTI instead of SPY?

And if you wanted to cap weight them you'd go 56% VTI and 44% VXUS.

I do not want to cap weight them . Cap weighting is like driving forward looking back ward. I want to create a portfolio based on population demography, future growth potential and GDP for the next 20 years.
[/quote]

Cap weighting will adjust to the cap weighting looking forward. Hence the term "the market already priced that in."

If a small cap grows it grows in its holdings with in the index fund. Tesla is a prime example. It's growth has been astronomical and has risen to the number 21 spot in VTI.

Why would I want to equal weight Tesla with some other company it left in the dust.
Last edited by jason2459 on Sun Aug 16, 2020 10:15 am, edited 1 time in total.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by whereskyle »

invest2bfree wrote: Sun Aug 16, 2020 9:24 am Iam thinking of going Global Equal Weight as follows-

25% - SPY
25% - CXSE (CHINA)
25% - ILF (LATIN AMERICA)
12.5% - BBCA (CANADA)
12.5 - BBAX (AUSTRALIA)


This portfolio beats the S&P 500 handily last 20 years by 3%. Also diversifies the currency risk. I believe that the recent 10 year run in US markets cannot be replicated and investors should be better off adding international.
Skipped Europe\Japan because of low growth demography.

I did a equivalent high cost funds in Portfolio visualizer since the funds above do not have 20 year track record-

https://www.portfoliovisualizer.com/bac ... tion5_1=25

What does everyone think of this?
I think this proposal is silly, arbitrary, based on a single backtest that will not repeat in the real world, and rife with behavioral risks that without a single doubt would have prevented you or any other investor from actually implementing the portfolio and receiving that fabled excess return. Looking forward (instead of backward), Where's India? Where's Switzerland? Where's Singapore? The exclusion of certain countries increases the risk that when those countries inevitably outperform your arbitrarily selected portfolio you will recognize how arbitrary it is and you will jump ship or tinker with it and prevent yourself from earning this portfolio's return.

In sum, this is not a portfolio for the long haul. Just buy VT (Vanguard Total World Stock ETF, ER .08) and stop trying to beat the market.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
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invest2bfree
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by invest2bfree »

Where's India? Where's Switzerland? Where's Singapore?

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Singapore is part of bbax. (AUSTRALIA)

Switzzerland is part of Europe was skipped because of demography.


I had to skip India because INDA contains lot of companies which are US centric or Energy centric.
ETFs for pure play Indian Consumer is very expensive.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by nisiprius »

invest2bfree wrote: Sun Aug 16, 2020 9:24 am...This portfolio beats the S&P 500 handily last 20 years by 3%...
Please say "has beaten," not "beats." I know people think this is just a verbal shortcut but I am convinced that a person who keeps saying it eventually starts to believe it.
...Also diversifies the currency risk...
Please do not use the term "currency risk" incorrectly. Currency risk exists when you are investing in something that is not your home currency. When a US investor invests in dollar-denominated stocks and bonds there are many forms of risk involved, but currency risk is not one of them. Currency risk is not "the risk of a currency collapse," it is "the risk of unfavorable exchange rate fluctuations in your non-home-currency investments." As a US investor, all of my international stock investments carry currency risk, none of my US stock investments do.
Last edited by nisiprius on Sun Aug 16, 2020 10:32 am, edited 3 times in total.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by invest2bfree »

Cap weighting will adjust to the cap weighting looking forward. Hence the term "the market already priced that in."

If a small cap grows it grows in its holdings with in the index fund. Tesla is a prime example. It's growth has been astronomical and has risen to the number 21 spot in VTI.

Why would I want to equal weight Tesla with some other company it left in the dust.
Last edited by jason2459 on Sun Aug 16, 2020 10:15 am, edited 1 time in total.

Iam trying to limit Currency exposure and reduce risk. I do not want no more than 25% in any currency.
If Dollar depreciates 30% and we have stagflation of 70s, my portfolio will protect the investor.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by Seasonal »

Three possibilities:

a) You know more than the market about the future. In that case why are you posting?

b) You do not know more than the market about the future. In that case, why not accept the market's weightings?

c) There's something unique about you that's so different from others that market weightings are inappropriate for you. In that case, what's different?
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by wootwoot »

How does global equal weight perform in other timelines? 50 year, 100 year, etc.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by jason2459 »

wootwoot wrote: Sun Aug 16, 2020 10:44 am How does global equal weight perform in other timelines? 50 year, 100 year, etc.
I would hardly say what was proposed as being global.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by jason2459 »

invest2bfree wrote: Sun Aug 16, 2020 10:28 am
Cap weighting will adjust to the cap weighting looking forward. Hence the term "the market already priced that in."

If a small cap grows it grows in its holdings with in the index fund. Tesla is a prime example. It's growth has been astronomical and has risen to the number 21 spot in VTI.

Why would I want to equal weight Tesla with some other company it left in the dust.
Last edited by jason2459 on Sun Aug 16, 2020 10:15 am, edited 1 time in total.

Iam trying to limit Currency exposure and reduce risk. I do not want no more than 25% in any currency.
If Dollar depreciates 30% and we have stagflation of 70s, my portfolio will protect the investor.
Please see nisiprius' post above yours on currency risk and what you are not achieving.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by whereskyle »

invest2bfree wrote: Sun Aug 16, 2020 10:05 am
jason2459 wrote: Sun Aug 16, 2020 10:02 am

So what you are saying is that I could just do-
25% - SPY
75% - VXUS

This could just have the same weight as my original post and be truly diversified with Global Companies.
If you went that route why not VTI instead of SPY?

And if you wanted to cap weight them you'd go 56% VTI and 44% VXUS.

I do not want to cap weight them . Cap weighting is like driving forward looking back ward. I want to create a portfolio based on population demography, future growth potential and GDP for the next 20 years.
[/quote]

You seem to misunderstand cap weighting. A cap weighted portfolio is arranged according to the market's collective view of the future performance of each stock. While a stock's current market capitalization does in a sense reflect the past performance of the stock, it does not necessarily reflect the past performance of the company. Facebook's market cap is based on investors' expectations of its future performance. If Facebook were to be severely sanctioned or broken up tomorrow, the price would fall and the capitalization would drop because of future expectations, even though Facebook has recently been earning enviable profits. Meanwhile, GE, Ford, Exxon et cetera have all had wonderful past company performance but their capitalizations have shrunk recently as investors have lowered their future expectations for these companies' stock performance. Tesla and Uber, by contrast are companies with no impressive earnings histories, but they have very high capitalizations. Their capitalizations are high because of future expectations, not because of their past performance as companies.

This is all to say that cap-weighting your portfolio is a surefire way to build a portfolio that is forward looking. Straying from cap weighting is a surefire way to build a portfolio based on your speculation that the market's view of the future is incorrect.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by Robot Monster »

whereskyle wrote: Sun Aug 16, 2020 10:14 am
invest2bfree wrote: Sun Aug 16, 2020 9:24 am Iam thinking of going Global Equal Weight as follows-

25% - SPY
25% - CXSE (CHINA)
25% - ILF (LATIN AMERICA)
12.5% - BBCA (CANADA)
12.5 - BBAX (AUSTRALIA)


This portfolio beats the S&P 500 handily last 20 years by 3%. Also diversifies the currency risk. I believe that the recent 10 year run in US markets cannot be replicated and investors should be better off adding international.
Skipped Europe\Japan because of low growth demography.

I did a equivalent high cost funds in Portfolio visualizer since the funds above do not have 20 year track record-

https://www.portfoliovisualizer.com/bac ... tion5_1=25

What does everyone think of this?
I think this proposal is silly, arbitrary, based on a single backtest that will not repeat in the real world
I can see the allure of investing based on the backtest. I can see someone saying, "It's a no brainer, just invest in what's working!". If it's such a no-brainer, why doesn't Vanguard's actively managed international fund invest this way? Compare the holdings by country:

https://investor.vanguard.com/mutual-fu ... olio/vwicx
https://investor.vanguard.com/etf/profi ... folio/vxus
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by ruralavalon »

Beware of making a backrest the sole basis for fund choices or asset allocation. History will not likely repeat itself.

invest2bfree wrote: Sun Aug 16, 2020 9:24 am Iam thinking of going Global Equal Weight as follows-

25% - SPY
25% - CXSE (CHINA)
25% - ILF (LATIN AMERICA)
12.5% - BBCA (CANADA)
12.5 - BBAX (AUSTRALIA)


This portfolio beats the S&P 500 handily last 20 years by 3%. Also diversifies the currency risk. I believe that the recent 10 year run in US markets cannot be replicated and investors should be better off adding international.
Skipped Europe\Japan because of low growth demography.

I did a equivalent high cost funds in Portfolio visualizer since the funds above do not have 20 year track record-

https://www.portfoliovisualizer.com/bac ... tion5_1=25

What does everyone think of this?
That is not global equal weight.

"Low growth demography" is not a reason to exclude either Europe or Asia developed markets.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by Lauretta »

you have a lot in EM (China+Latina America); and I wouldn't neglect Europe nor Japan.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by KyleAAA »

That’s an extremely arbitrary allocation. Not sure why we should expect it to outperform going forward.
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by nisiprius »

I could ask what kind of "equal" 25% and 12.5% are. Having chosen those five categories for whatever reason, why not 20% to each?
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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by ResearchMed »

whereskyle wrote: Sun Aug 16, 2020 10:14 am
invest2bfree wrote: Sun Aug 16, 2020 9:24 am Iam thinking of going Global Equal Weight as follows-

25% - SPY
25% - CXSE (CHINA)
25% - ILF (LATIN AMERICA)
12.5% - BBCA (CANADA)
12.5 - BBAX (AUSTRALIA)


This portfolio beats the S&P 500 handily last 20 years by 3%. Also diversifies the currency risk. I believe that the recent 10 year run in US markets cannot be replicated and investors should be better off adding international.
Skipped Europe\Japan because of low growth demography.

I did a equivalent high cost funds in Portfolio visualizer since the funds above do not have 20 year track record-

https://www.portfoliovisualizer.com/bac ... tion5_1=25

What does everyone think of this?
I think this proposal is silly, arbitrary, based on a single backtest that will not repeat in the real world, and rife with behavioral risks that without a single doubt would have prevented you or any other investor from actually implementing the portfolio and receiving that fabled excess return. Looking forward (instead of backward), Where's India? Where's Switzerland? Where's Singapore? The exclusion of certain countries increases the risk that when those countries inevitably outperform your arbitrarily selected portfolio you will recognize how arbitrary it is and you will jump ship or tinker with it and prevent yourself from earning this portfolio's return.

In sum, this is not a portfolio for the long haul. Just buy VT (Vanguard Total World Stock ETF, ER .08) and stop trying to beat the market.
[emphasis added]

Uhhh... I seriously doubt that this was based on a single backtest :!:

This looks just like the result some serious data dredging, and then posting here on BH (or, worse, publishing in a scientifc journal :annoyed ) the "best result" that one found after lots (and often lots and LOTS) of testing different combinations of <whatever is being studied>.

And the original post's throwaway line about "Skipped Europe\Japan because of low growth demography" is just an artifact of the timing of this thread. For example, had this been done just before Japan's economy tanked, I'm pretty sure Japan would have been included somehow, and possibly very prominently.
This is another "data no-no", of post hoc hypothesizing.
After the fact, it is soooo easy to come up with an explanation that sounds quite reasonable.
Most of us here on BH are quite bright enough to do this well :twisted:

Classic case, in my opinion.

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Re: Global Equal Weight Beats S&P 500 last 20 years!

Post by invest2bfree »

nisiprius wrote: Sun Aug 16, 2020 12:35 pm I could ask what kind of "equal" 25% and 12.5% are. Having chosen those five categories for whatever reason, why not 20% to each?
I would like to group Australia and Canada into one since both have high Financials and Resources. Just part of my diversification ploy to include more currencies.

At the same time they do not entail anything more than 25% based on the population and market size.
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