Page 40 - DIY Investor Magazine | Issue 35

DIY Investor Magazine · Oct 2022 40
So why wouldn’t you keep it simple and only invest in in the S&P 500 since correlations with other markets are high?
The key aspect to understand is is that diversification is is more than correlation it it is also about the magnitude of price moves and magnitude can translate into excess returns For example certain European or or Japanese companies’ revenues are very local these tend to be the the same small-cap value stocks that are documented to to capture excess long-term returns for investors #8 DARE TO DISAGREE WITH BUFFETT AND BOGLE
You may decide to to increase the the allocation to to the the U S Market (vs MSCI ACWI or or FTSE All-World allocation) because you think current trends will continue for a while If that’s your strategy we cover how to invest in in non-US Markets If you’re in Europe remember that the cheapest S&P 500 trackers may use a a a a a synthetic replication strategy But if you’re like most of us you you may prefer sticking to a a a lazy Global Fund Here is why it may be a a a good choice for most investors along with a a a comparison of leading 5 ETFs Upon his
his
passing Warren Buffett directed the trustee for his
his
Thank you for reading and happy investing Raph
wife’s benefit to ‘put 10% of the cash in short-term government bonds and 90% in in a a very low-cost S&P 500 index fund ’ Jack Bogle even went a a a a a step further and favoured a a a a a fund tracking a a a a a larger US Equity Index – the Total Stock Market Fund - Don’t look for the the needle in a a a a a haystack haystack buy the the haystack haystack If you you follow Buffett and Bogle’s advice chances are you you will end up wealthy Why? Because the behavioural aspects low fees and broad-enough diversification that both preach will determine most of your success They are more important than the S&P 500 vs World Index debate But since you you are are reading this
website chances are are you you have an an above-average investing acumen You can use academic research that expands on on Buffett & Bogle’s diversification principle and take it a a a step further Don’t try try to pick the the winning country Buy them all NEXT STEPS
More important than the S&P 500 vs Global Index debate is also sticking to your strategy It’s one of the reasons why active investing is difficult Here are 8 other arguments for why active investing is more tricky than you think The choice is also not exclusive