S&P500 Global percentages

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S&P500 Global percentages

Post by oldcomputerguy » Fri Aug 17, 2018 10:36 am

An interesting article on spindices.com discussing how much of the sales of S&P 500 companies are to foreign markets. This might be interesting when deliberating whether one feels the need to have a separate international allocation in one's portfolio.

(Note: even though the article makes it plain that a large percentage of S&P 500 sales are to foreign countries, I have and will continue to hold a position in foreign equities amounting to 30% of my equity allocation, if for no other reason than because it increases the total number of companies I hold in my portfolio.)
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Re: S&P500 Global percentages

Post by TD2626 » Sat Aug 18, 2018 6:25 pm

Foreign companies also have a large percentage of sales to the US. (Lots of people buy gas from Shell or BP or cars from Toyota, Samsung is a major electronics company, etc). This basically means that US company's returns are dependent on the economies of other nations (so that, for example, someone in Europe can buy an Apple device) while foreign company returns are dependent on the economy of the US (if the US economy is strong, consumers purchase more electronics from Sony).

This raises correlations between US and foreign returns, potentially reducing the benefit of diversification. However, it simultaneously could make the case stronger for diversification, as if companies are fully globalized and there are fewer frictions across borders, a portfolio that is concentrated in one country's stock becomes nearly as odd as a portfolio concentrated in one US state's stock.

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