US bias portfolio (Germany)

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
Soulforged
Posts: 7
Joined: Sun Jun 06, 2021 6:41 am

US bias portfolio (Germany)

Post by Soulforged »

Hi,

34 years old living in Germany with 3 children and stable job. I started this year investing 100% in stocks, 20 years horizon. Contrary to what most of the people do investing in world I have decided to invest in S&P 500. I know in the future US might underperform, but it could also outperform as it has been down for so many years, so basically I am betting on US.

Currently I also have around 15% on EM, in my opinion if any country will outperform US will be China. I also own around 30% on nasdaq but I might get rid of it, although I think tech companies will continue over performing, I have doubts it will be true in 20 years.

Right now I am also thinking adding some value tilt, probably US and Europe but not sure, I would like to keep the portfolio as simple as possible.

Is there anybody out there also investing on S&P500 instead of developed/all world? I don’t really think EU will out perform US so I am happy just adding EM to diversify a little bit the portfolio.

Any comments besides “how do you know US will outperform world in 20 years?”, thanks!
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: US bias portfolio (Germany)

Post by Da5id »

Soulforged wrote: Sun Jun 06, 2021 6:53 am Is there anybody out there also investing on S&P500 instead of developed/all world? I don’t really think EU will out perform US so I am happy just adding EM to diversify a little bit the portfolio.

Any comments besides “how do you know US will outperform world in 20 years?”, thanks!
Clearly you should do as you wish. But the end part seems to be saying "only comments that reinforce what I've already decided to do welcome"? You appear to have lots of opinions about the future, and considerable confidence in them. And a fair bit of focus on what won in the recent past. IMO of course.
Topic Author
Soulforged
Posts: 7
Joined: Sun Jun 06, 2021 6:41 am

Re: US bias portfolio (Germany)

Post by Soulforged »

Da5id wrote: Sun Jun 06, 2021 7:03 am
Soulforged wrote: Sun Jun 06, 2021 6:53 am Is there anybody out there also investing on S&P500 instead of developed/all world? I don’t really think EU will out perform US so I am happy just adding EM to diversify a little bit the portfolio.

Any comments besides “how do you know US will outperform world in 20 years?”, thanks!
Clearly you should do as you wish. But the end part seems to be saying "only comments that reinforce what I've already decided to do welcome"? You appear to have lots of opinions about the future, and considerable confidence in them. And a fair bit of focus on what won in the recent past. IMO of course.
No, no, sorry if it sounded like that. I meant with some reasoning beyond that common sentence. I am open to change my mind.
User avatar
happyisland
Posts: 915
Joined: Thu Oct 03, 2013 1:36 pm
Location: nos baranca tan stima

Re: US bias portfolio (Germany)

Post by happyisland »

to the OP: I strongly recommend spending some time reading the bogleheads wiki*, with particular attention paid to the "Twelve Pillars of Wisdom".

Those are:
Pillar 1. Investing Is Not Nearly as Difficult as It Looks
Pillar 2. When All Else Fails, Fall Back on Simplicity
Pillar 3. Time Marches On
Pillar 4. Nothing Ventured, Nothing Gained
Pillar 5. Diversify, Diversify, Diversify
Pillar 6. The Eternal Triangle
Pillar 7. The Powerful Magnetism of the Mean
Pillar 8. Do Not Overestimate Your Ability to Pick Superior Equity Mutual Funds, nor Underestimate Your Ability to Pick Superior Bond and Money Market Funds
Pillar 9. You May Have a Stable Principal Value or a Stable Income Stream, But You May Not Have Both
Pillar 10. Beware of "Fighting the Last War"
Pillar 11. You Rarely, If Ever, Know Something The Market Does Not
Pillar 12. Think Long-Term
There are mixed views on this among bogleheads, but my personal opinion is that trying to pick sectors or regions that you think will outperform falls afoul of Pillars 5, 7, 8, 10, and 11.




*I recommend the wiki pretty frequently because it completely changed my life when I found it in 2013, as I started rationalizing my investments and becoming a boglehead. Hope it helps you too! :sharebeer
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: US bias portfolio (Germany)

Post by Da5id »

Soulforged wrote: Sun Jun 06, 2021 7:06 am
Da5id wrote: Sun Jun 06, 2021 7:03 am
Soulforged wrote: Sun Jun 06, 2021 6:53 am Is there anybody out there also investing on S&P500 instead of developed/all world? I don’t really think EU will out perform US so I am happy just adding EM to diversify a little bit the portfolio.

Any comments besides “how do you know US will outperform world in 20 years?”, thanks!
Clearly you should do as you wish. But the end part seems to be saying "only comments that reinforce what I've already decided to do welcome"? You appear to have lots of opinions about the future, and considerable confidence in them. And a fair bit of focus on what won in the recent past. IMO of course.
No, no, sorry if it sounded like that. I meant with some reasoning beyond that common sentence. I am open to change my mind.
100% US could work. It isn't the way I've chosen to go, because I don't like making unnecessary predictions about the future. Your original post has some predictions I don't know are warranted, and don't know are needed to invest successfully. Namely

1) US will outperform (betting as if 85% certain, as not buying any international beyond EM to hedge except maybe European Value stocks?)
2) EM (particularly China) will outperform US (15%)
3) NASDAQ will underperform rest of market (dropping 30% to 0%, maybe?)
4) US/Europe Value (may add)

I don't believe you (or anyone) can make any of these predictions with any particular accuracy. I'd advocate personally for some mixture of US/International (including but not only EM) and just maximizing your savings percentage annually (while not forgetting to live your life).

I'm also a bit confused by the 20 year horizon for a 34 year old. Presumably you have a 50-60 year horizon. What happens in 20 years? Retirement? With a 20 year horizon, Value is likely a bad bet. No guarantees the value premium will be there in the future, but there is reasonable data for it (I'm not a fan, but I get it). But if it is, no guarantee the premium will be there for the coming 20 year period which you have set as your "horizon".
northern_james
Posts: 11
Joined: Tue Mar 09, 2021 3:19 pm

Re: US bias portfolio (Germany)

Post by northern_james »

If you would use an all-world fund, you would already have around 60% in U.S., and you would be better prepared for any unexpected developments as the world fund would follow whatever the market does. For example if your prediction comes true and U.S. continues to clearly outperform Europe, then U.S. share in. all-world would rise even more.

However, this year up to now that has not been the case. I have a number of regional stock ETFs (including S&P 500) and the recent best performers are MSCI Nordic (Scandinavia) and FTSE Developed Asia Pacific ex-Japan (good performance in Korea). So I thinkt that to bet everything on U.S. is a bit overdone, isn't 60% U.S. enough of a bet on U.S.? But go ahead and report back in 10 or 20 years!
Topic Author
Soulforged
Posts: 7
Joined: Sun Jun 06, 2021 6:41 am

Re: US bias portfolio (Germany)

Post by Soulforged »

You are right that from the current 80-85% I have on US, being reduced to 60% for developed world is not a big difference, I guess I could live with that and also get exposure to other territory markets. I have to check again the difference between developed world + EM and all world.

Of course in my original posts there are a lot of assumptions that may be wrong and totally subjective, mostly based on last decade. One reason for skipping value would be to keep as simple as possible the portfolio, since there are capital gain taxes in Germany I would avoid selling in order to rebalance, so my idea would be buy the underweighted ETF when rebalancing.

The 20 years horizon it is indeed the expected retirement when I would stop contributing and probably start adding more bonds in the equation, so maybe adding value has no point, I have no idea.

Thanks for the suggestions. :sharebeer
User avatar
tre3sori
Posts: 460
Joined: Wed Jul 24, 2019 3:13 am

Re: US bias portfolio (Germany)

Post by tre3sori »

Soulforged wrote: Sun Jun 06, 2021 6:53 am ... I know... , ... I am betting, ... my opinion, ... I might ... , ... I think, ... I have doubts..., I am also thinking, ... probably ... not sure, I would like, .... I don’t really think..., I am happy ....
Too much subjectivity in the investment process involved. If your investment process will be like your sentences, you will jump in and out of positions and fiddle around with your portfolio because some fund underperforms, or overperforms, or an expert says this or that ...

I always like to post this image when it comes to all US or all international:
Image
For me the result after looking at that graph was: invest in the whole world to minimize regret.
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
User avatar
steve321
Posts: 954
Joined: Sat Sep 09, 2017 9:16 am
Location: Southampton, UK

Re: US bias portfolio (Germany)

Post by steve321 »

I'd say you are making some active bets and taking so more risk; however, as the great Hölderlin sang: 'Wo aber Gefahr ist, wächst Das Rettende auch."
So yeah go for it if you feel confident.
A few years ago I made some big bets on Amazon and Google which paid handsomly, so I'd say trust your hunches.
Success does not bring happiness. In fact, happiness IS success. | 'There are only two tragedies in life: one is not getting what one wants, and the other is getting it.' Oscar Wilde
steveyg50
Posts: 103
Joined: Tue Jul 09, 2019 6:35 pm

Re: US bias portfolio (Germany)

Post by steveyg50 »

tre3sori
Is there a version of that graph that goes back any further than 1972?
User avatar
tre3sori
Posts: 460
Joined: Wed Jul 24, 2019 3:13 am

Re: US bias portfolio (Germany)

Post by tre3sori »

steveyg50 wrote: Mon Jun 07, 2021 7:31 pm tre3sori
Is there a version of that graph that goes back any further than 1972?
I don't know of any. Sorry.
Assuming there is a version (Dow Jones Industrial Average was first calculated on May 26, 1896),
and it would show us outperformance of USA. It would only show us the past. Would it tell us much about the future?
I guess there is momentum in regional/national economies. The silicon valley still attracts tech savy people that found start ups which may become the big companies of tomorrow. But new ideas pop up in different regions all over the world. New companies are formed around these ideas. Where will the hotspots of future development be? I don't know. I don't want to miss the opportunity to invest in these companies. So I invest globally. I'm glad that I don't have to weigh the momentum/future productivity of regional/national economies. The market does that for me, better than I could.
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
TheLaughingCow
Posts: 253
Joined: Tue Jul 01, 2014 9:41 pm

Re: US bias portfolio (Germany)

Post by TheLaughingCow »

Sounds a lot like performance chasing.
steveyg50
Posts: 103
Joined: Tue Jul 09, 2019 6:35 pm

Re: US bias portfolio (Germany)

Post by steveyg50 »

tre3sori wrote: Tue Jun 08, 2021 1:33 am
steveyg50 wrote: Mon Jun 07, 2021 7:31 pm tre3sori
Is there a version of that graph that goes back any further than 1972?
I don't know of any. Sorry.
Assuming there is a version (Dow Jones Industrial Average was first calculated on May 26, 1896),
and it would show us outperformance of USA. It would only show us the past. Would it tell us much about the future?
I guess there is momentum in regional/national economies. The silicon valley still attracts tech savy people that found start ups which may become the big companies of tomorrow. But new ideas pop up in different regions all over the world. New companies are formed around these ideas. Where will the hotspots of future development be? I don't know. I don't want to miss the opportunity to invest in these companies. So I invest globally. I'm glad that I don't have to weigh the momentum/future productivity of regional/national economies. The market does that for me, better than I could.
OK thanks. I wondered. I never saw a graph going back further.

But for me, simply all-world index, which as has been pointed out is approx 58/60% US and 10/11% EM in any case. If US and EM outperform I got it largely covered.

I note both Vanguard and Blackrock among other 'experts' are actually predicting US underperformance going forward, and EM, Europe, UK and general global outperformance. Have to take with a pinch of salt but if I were a betting man I'd be more inclined to reduce my US % not increase it.

60% is a lot to have in one country it seems to me. Even an 'awesome' economy such as US.
User avatar
tre3sori
Posts: 460
Joined: Wed Jul 24, 2019 3:13 am

Re: US bias portfolio (Germany)

Post by tre3sori »

steveyg50 wrote: Tue Jun 08, 2021 1:22 pm But for me, simply all-world index
Sorry, I mistook you for US biased OP.
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
steveyg50
Posts: 103
Joined: Tue Jul 09, 2019 6:35 pm

Re: US bias portfolio (Germany)

Post by steveyg50 »

tre3sori wrote: Tue Jun 08, 2021 1:39 pm
steveyg50 wrote: Tue Jun 08, 2021 1:22 pm But for me, simply all-world index
Sorry, I mistook you for US biased OP.
Yeah too many Steve's.
No worries, it's all good info.
xxd091
Posts: 495
Joined: Sun Aug 21, 2011 4:41 am
Location: UK

Re: US bias portfolio (Germany)

Post by xxd091 »

Rather agree with the original poster
After all John Bogle said that for a US investor the US stockmarket in equities and bonds was all you needed
As a U.K. investor I compromised and used a Global Equities and Bond Index Tracker both of which are heavily biased towards the US
Possibly/probably an all US biased investment would have worked better but that’s what I ended up doing
Home bias is a powerful instinct that should probably be severely controlled in non US investors
xxd091
steveyg50
Posts: 103
Joined: Tue Jul 09, 2019 6:35 pm

Re: US bias portfolio (Germany)

Post by steveyg50 »

You would certainly have been better with all-US over last 10 years or so, but what about next 10?

For me the graph showing relative out performance of US/non US is compelling.
There seems to be a cycle going on here.
Will US out performance continue until US is 65 % or more of all-world index?

Given out performance of US for a long period and higher valuations are we due for a 'reversion to the mean'.?

Another thing is - is out performance of US even really the 'US' as such? Is it more an out performance of technology? Is it out performance of the FAANG stocks that now make up 25% of the S&P 500? Will this continue? Are they a bit overvalued? Is it out performance of growth (especially the FAANG,s) and we are due a return to outperformance of value? (seems to be happening).

Go to the US forum and the debate of US v International goes on and on..... and on... and its surprisingly bitter sometimes. You can argue its a bit different for a US citizen investing in US I suppose...

My guess would be Vanguard may finally be correct and a period of US underperformance is coming (Vanguard US have been predicting this since 2007 apparently!).

but who knows what the future holds? so am just sticking to all-world personally....
fisher0815
Posts: 155
Joined: Tue Jun 08, 2021 3:10 am

Re: US bias portfolio (Germany)

Post by fisher0815 »

Soulforged wrote: Sun Jun 06, 2021 6:53 am Is there anybody out there also investing on S&P500 instead of developed/all world? I don’t really think EU will out perform US so I am happy just adding EM to diversify a little bit the portfolio.
I think you should own the in Germany available Vanguard FTSE All-World ETF (accumulating version) as a core of your investment portfolio and this is the part you should never change and leave it untouched. Additional you can hold a "play"-portfolio of not more than 10-20% of your total equity allocation. In this portfolio you hold your "bets". Here you have the S&P 500 and EM/CHINA ETF to increase your tilt against that regions.
xxd091
Posts: 495
Joined: Sun Aug 21, 2011 4:41 am
Location: UK

Re: US bias portfolio (Germany)

Post by xxd091 »

“This time it’s different “ is a well worn phrase that never seems to hold up in relation to investing
Betting against the US has been a failing policy for many years
It is the powerhouse of the Western economies
Of course things will change but when?
You will be OK going all in with US investments but most non US citizens compromise and use Global Trackers which of course are mostly composed of US companies
Pays your money and makes your choice
xxd091
seajay
Posts: 1656
Joined: Sat May 01, 2021 3:26 pm
Contact:

Re: US bias portfolio (Germany)

Post by seajay »

Stocks choose their own domicile. Differences in performances between domicile can wax and wane but broadly compare - theoretically, but that will tend to do better overall where capitalism is preferred more over socialism. Doesn't the EU presidency move over to France next year? Where they've already expressed intent to change the first language for the EU from English to French, and France in general is more biased towards socialism. Stocks domiciled where they're less inclined to be 'punished' are more inclined to relatively outperform.
seajay
Posts: 1656
Joined: Sat May 01, 2021 3:26 pm
Contact:

Re: US bias portfolio (Germany)

Post by seajay »

tre3sori wrote: Sun Jun 06, 2021 10:17 am I always like to post this image when it comes to all US or all international:
Image
For me the result after looking at that graph was: invest in the whole world to minimize regret.
To me that reads as Japan's 1980's rising, Sony Walkman's, Yamaha's ...etc. And early 2000's dot com bubble burst. Relatively big dips that were subsequently recovered. In the 1970's/80's for instance Japan's share of global rose from low single digits up to 50% whilst the US declined from 75% down to 25% ... or something like that sort of change. Subsequently Japan gave back much of their share whilst the US rebounded back up to 50%.
Somethingwitty92912
Posts: 490
Joined: Mon Sep 14, 2020 9:43 pm

Re: US bias portfolio (Germany)

Post by Somethingwitty92912 »

Soulforged wrote: Sun Jun 06, 2021 6:53 am Hi,

34 years old living in Germany with 3 children and stable job. I started this year investing 100% in stocks, 20 years horizon. Contrary to what most of the people do investing in world I have decided to invest in S&P 500. I know in the future US might underperform, but it could also outperform as it has been down for so many years, so basically I am betting on US.

Currently I also have around 15% on EM, in my opinion if any country will outperform US will be China. I also own around 30% on nasdaq but I might get rid of it, although I think tech companies will continue over performing, I have doubts it will be true in 20 years.

Right now I am also thinking adding some value tilt, probably US and Europe but not sure, I would like to keep the portfolio as simple as possible.

Is there anybody out there also investing on S&P500 instead of developed/all world? I don’t really think EU will out perform US so I am happy just adding EM to diversify a little bit the portfolio.

Any comments besides “how do you know US will outperform world in 20 years?”, thanks!
Welcome my German friend, I love your beer, women, and cars!

I am a staunch s&p500 supporter. I feel it has significant enough market exposure internationally due to the large companies involved being international ones to avoid tilting In any direction, but forward.

That being said, buying funds outside of your native country can be more costly, and fees can make all the difference. If you currently live in the states, than no fuss no muss.

OTHO, if you still reside in Germany, look at the STOXX fund, or other similar funds. I believe that’s the Europe 600. For the S&P500, you can buy shares in an ETF (exchange traded fund) that track the performance of the S&P500. You can also get EUR hedged versions so you dont have to take any USD currency risk.

Make sure you choose an account holder that is a regulated provider.

Good luck!
Post Reply