[gordon_freeman]

In a similar situation: I basically have just 2 funds in my retirement portfolio: SnP500 index fund (75%) AND Berkshire Hathaway B shares (25%)

from my research I know that in years where SnP500 drops too much (recessionary periods), BRK-B would soften the blow as Value stocks tend to do well in such times. And usually that works for me.

[toomuchtodo]

What about swapping the SP500 for VT (total world equities)?

[throwaway2037]

For those unaware (myself included), VT is the Vanguard Total World Stock Index Fund ETF which "tracks the FTSE Global All Cap Index, covering roughly 9,000 stocks across more than 40 developed and emerging markets."

I see this argument a lot online: "You need more diversity." First, you didn't provide any reason or evidence about why this is a good idea. Second, "more diversity" isn't always better.

The S&P 500 has crushed VT since inception (June 2008). Most people will be surprised to learn that adding smaller cap (domestic) stocks, or international developed country stocks, or emerging market stocks will probably reduce your returns. As an example, you can compare the returns of S&P 500 vs Russell 2000 since 2005 [1]. It is not even close -- S&P 500 crushes again. Also, the vol in S&P 500 was lower than Russell 2000.

My investment philosophy comes directly from Warren Buffett: "Never bet against America". Of the three largest economic zones in the world with free markets (United States, Europe, and Japan), the United States is by far the most dynamic. Ask yourself: In the next 30 years (or more), which of those three regions will grow the most? In my view: Absolutely the United States.

Finally, to people who say that you need international stocks in your portfolio else you are "missing out". You don't. Why? The S&P 500 already has 30% of revenues from countries outside the United States. [2]

[1] https://curvo.eu/backtest/en/compare-indexes/russell-2000-vs...

[2] https://www.spglobal.com/spdji/en/documents/research/researc...

[mafuy]

I do not understand how you can talk about US, EU and Japan but not mention China. Because I'd bet China is in a similar league and has better prospects than any of the three.

[oezi]

China's equities aren't really tradable. If they were it would be nice.

[throwaway2037]

This is incorrect. There are lots of ETFs that now directly hold China A shares. CSI 300 index is the equiv of S&P 500 in mainland China. Also, via HK Stock Exchange, you can buy China A shares via "northbound connect". A broker like Interactive Brokers supports this type of trading and the bizarre/special currency (CNH) required for it. That said, I excluded China because it is not developed and has awful transparency.

[oezi]

And if you look at the composition of the indices and ETFs you realize that you aren't participating in the innovative China, but get typical developing country stocks and very limited exposure to innovation.

Also -10% over the last 5 years vs. +103% for the S&P500

[throwaway2037]

China is not considered a developed market nor "free". Also, in most developed markets, when the economy is strong, the stock market will boom. China has many, many years when the stock market is weak, but the economy is strong. It is hard to be excited about the Chinese stock market.

[toomuchtodo]

https://www.apolloacademy.com/sp-500-concentration-approachi...

> The 10 biggest companies in the S&P 500 make up almost 40% of the index, and if Anthropic, OpenAI and SpaceX are added later this year, the concentration could approach 50%, see chart below. The bottom line is that the S&P 500 basically doesn’t offer much diversification anymore.

> My investment philosophy comes directly from Warren Buffett: "Never bet against America". Of the three largest economic zones in the world with free markets (United States, Europe, and Japan), the United States is by far the most dynamic. Ask yourself: In the next 30 years (or more), which of those three regions will grow the most? In my view: Absolutely the United States.

The next 30 years will not look like the last 30 years, and to be frank, this administration impaired any thesis of the US being at the center of the economic world globally for at least the next decade or two. The ultimate strength of the US economy was that global trade centered around the US. That trade is already reconfiguring around the US, and will continue to do so to de-risk and decouple. How is the US supposed to grow with restricted immigration? 21 states already have more deaths than births and this will continue to all 50 states eventually. India and Africa are the last parts of the world where any growth will be found, everywhere else is in terminal population decline.

https://www.visualcapitalist.com/fertility-rate-of-world-pop...

So! VT reduces your concentration risk from the AI bubble (versus the SP500) while still keeping you exposed to a risk asset class (total world equities) to capture higher returns than you’d get with bonds.

Your backtesting is of no value in this context, the world has changed permanently due to the actions of this administration. Portfolio composition decisions made today are for the future, not the past. Past performance is no guarantee of future results.

Citations:

https://web.archive.org/web/20210104201135/https://advisors....

https://www.morningstar.com/portfolios/experts-forecast-stoc...

https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Ly... (click through to the full version, the last decade+ of US out performance was mostly just the US getting more expensive, not US companies being much better than foreign companies)

https://www.morningstar.com/stocks/you-might-think-industry-... (We see the same results looking at the more recent period of July 1963 to September 2024. US stocks returned 10.64% annually, high-tech stocks returned 11.35%, healthcare stocks returned 11.99%, and both were outperformed by beer, which returned 12.18%, smokes, which returned 14.56%, and guns (defense), which returned 12.77%. Even shops (wholesale, retail, and some services such as laundries and repair shops) outperformed, returning 11.88%)