1Wk·

S&P 500: too much USA risk? 40% of turnover comes from abroad!

Consensus opinion: "With the S&P 500, I only invest in the USA. That's far too risky for me as I'm only invested in one country."

In truth: 40% of the turnover of companies in the S&P 500 comes from abroad.

$CSPX (+0.28%)
$SPY (+0.21%)

21 Comments

Epi@Epi

1Wk

The argument "SP500 = only USA" has many more and more differentiated views than "40% turnover exUSA". E.G: Taxes, exchange rate effects, refinancing costs, financial market access, investor structure. Some things are advantageous, others are not. And it changes over time.

Anyone who only focuses on the USA is simply violating a central basic rule of investing: diversification!
This is what the criticism of 100% SP500 is really about.

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Basti92@BavarianLion

1Wk

@Epi And that's exactly why I decided against an S&P 500 ETF and went for the $VWRL instead! It also has a lot of USA in it, but in my opinion it's a bit better!

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KingC@RaphGM

1Wk

The GDP of the USA accounts for around 26% of global GDP.
Now, doing 60% of your business with 26% of the world's GDP is not what I mean by diversification.

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Yoshika 🦋.@Yoshika

1Wk

@RaphGM
However, the S&P 500 is not a mirror of US GDP.

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Yoshika 🦋.@Yoshika

1Wk

@Yoshika
Others might also say that diversification does not mean having 100 countries in the ETF, but 100 business models with global access. And that is exactly what the S&P 500 delivers.

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Yoshika 🦋.@Yoshika

1Wk

@Yoshika Country of domicile is a label. Value creation is global. The S&P 500 thrives on precisely this difference.

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The W.@thewolfofallstreetz

1Wk

@Yoshika To the point. Or if you think about it more broadly in terms of non-correlated asset classes, e.g. equities, commodities, bonds, gold, etc.

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Yoshika 🦋.@Yoshika

1Wk

@thewolfofallstreetz
Yes, diversification is not a quartet of countries, but structural work.
And it only really takes effect when business model diversification and asset mix really play together.

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KingC@RaphGM

1Wk

@Yoshika @thewolfofallstreetz

👇
https://youtu.be/1FXuMs6YRCY?si=JrjeDRpnawpUzTi_

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Yoshika 🦋.@Yoshika

1Wk

@RaphGM
Sounds solid at first, but the arguments remain model-theoretical. In reality, capital flows, valuation concentration and tech clusters have long since created a global collective behavior. And country labels don't help here. If you want real risk diversification, you have to find decoupled structures and not just count flags.

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KingC@RaphGM

1Wk

@Yoshika You think you know better than all the researchers who have studied the subject?

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Yoshika 🦋.@Yoshika

1Wk

@RaphGM
Nah, I'm just saying that theory is all well and good, but at some point what counts is how markets actually behave empirically, not how they should behave according to the model.

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KingC@RaphGM

1Wk

@Yoshika the video does not talk about model

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