Very well said.Robot Monster wrote: ↑Sat Jul 04, 2020 8:40 amThink of it how you think of insurance. All of the money I've spent on insurance (home insurance, disability insurance, my umbrella policy) has so far had a return on investment of exactly zero. Insurance money that has no return on investment is akin to our faltering ex-U.S. basket.willthrill81 wrote: ↑Fri Jul 03, 2020 9:35 pmThe ex-U.S. 'basket' has certainly 'faltered' since 2007, with a real return of basically zero but with a lot of volatility.Robot Monster wrote: ↑Fri Jul 03, 2020 7:17 pmGlobal investors guarded against the possibility of putting all their eggs in a single basket that falters. They did not experience the risk they were trying to guard against.willthrill81 wrote: ↑Fri Jul 03, 2020 5:46 pm I find it more than a little ironic that many own ex-U.S. stock to, among other reasons, guard against the possibility that a single nation's stocks go nowhere for a decade or longer, as Japan's has done, but for U.S. investors, ex-U.S. stock has done precisely that for the last 13+ years. They experience the risk that they were specifically trying to guard against because they were trying to guard against it. Yes, that's argued to be the price of diversification, but it's still very ironic IMHO.
Imagine two people:
Person A spends thousands of dollars each year on insurance.
Person B does without insurance and instead invests the thousands in the market
One way of looking at it, just looking at historical performance, makes Person B the winner. And the thing is, probably Person B will continue to be the winner, as insurance money typically does not pay off.
Just because Person B's increased risk (by not having insurance) pays off does not mean that was the smart thing to do. Just because the all-eggs-in-one-basket strategy has paid off also does not mean that was the smart thing to do.
(Seems like we have people with two different mindsets in this thread: the "performance mindset" and the "insurance mindset" and perhaps this is the essential reason we're coming to different conclusions.)
I myself am firmly in the "insurance" camp of this debate. This is also why I eschew developed market large caps as they're highly correlated with the S&P500. I invest my international allocation in ex-US small caps and emerging markets to get more bang for my diversification buck.