Switching to Europe

[deepvalleys]

Hi fellow Europeans.

Does it make sense to tilt the investment more to the Europe index, or is that thought a result of panic and short term performance chasing? At the moment I'm in a World developed index fund, which is 70% US. I'm thinking of mix in a Europe index fund.

[Valuethinker]

Hi fellow Europeans.

Does it make sense to tilt the investment more to the Europe index, or is that thought a result of panic and short term performance chasing? At the moment I'm in a World developed index fund, which is 70% US. I'm thinking of mix in a Europe index fund.

I would recommend staying with the Global Index.

Indeed I believe that is what the Norwegian State Fund (the oil fund) does as well - with some tilting against fossil fuel producers.

The values in the market are set by millions of trades going on every second, by the most informed investors in the world. With far better access to information, in real time, than you and I have. No one knows how the recent political situation in the USA and world will go.

The argument for Europe, and I overweighted Japan for the same reason, was that it was "cheap" on a Price to Earnings ratio basis, relative to the USA. Indeed, this year, the European markets have done well. But then adding to the European weighting risks performance chasing. If the current new wave of European unity falls apart (the French presidential elections lie ahead) then this might dissipate rather quickly. Longer term, if you read the headlines of Mario Draghi's report on economic growth, Europe has failed to develop the ecosystem that nurtures the next Meta or Google. Other than ASM Lithography, Europe is lacking in multi billion dollar tech cos.

But that's all irrelevant philosophising. In the end, I think it's best just to track the global market index, because that's the average of everyone's best guess.

EDIT. In the spirit of my Japan overweight, if you went 50% global ex USA and 50% USA, that's a very chunky underweight. But it would not be the end of the world -- I would bet in the very long run your performance would be somewhat similar. Or if you say were 10% overweight in Europe (in the total portfolio percentages).

[jocdoc]

If you have a cap weighted world stock index mutual fund or ETF VT it will automatically increase the exUS%. no need to adjust. If I remember correctly VT was 65% US and now it is 63% US due to changing market cap.

[tubaleiter]

It's the very definition of market timing!

Now, if the recent volatility has made you realize that maybe diversification is a good thing, making an considered update to your Investment Policy Statement to change your asset allocation might be appropriate (and probably also consider your equity/bond split).

But just running after the latest country/region/stock/sector/meme to do well is a great way to buy high and sell low. There will eventually be a period of US outperformance again - maybe next week, maybe next decade. After the pendulum swings is exactly the wrong time to react!

[arcticpineapplecorp.]

It's the very definition of market timing!

It's the very definition of performance chasing!

(VTI is down 6% ytd and VXUS is up 6% ytd).

[stan1]

Hi fellow Europeans.

Does it make sense to tilt the investment more to the Europe index, or is that thought a result of panic and short term performance chasing? At the moment I'm in a World developed index fund, which is 70% US. I'm thinking of mix in a Europe index fund.

I'm noting you are in Norway not the US, correct?
I don't know but I just wanted to point that out since it could be relevant to the advice (since this is the non-US investing forum and you are already getting some US specific advice)

[jg12345]

Hi fellow Europeans.

Does it make sense to tilt the investment more to the Europe index, or is that thought a result of panic and short term performance chasing? At the moment I'm in a World developed index fund, which is 70% US. I'm thinking of mix in a Europe index fund.

I'd stay with a global fund, no tilting

small note: why 'developed world' only and not EM? I would recommend adding EM maybe? this is ofc regardless of whatever happened in the last month or two or three etc. if you had asked three months or 1 year ago I would have said the same