Portfolio diversification

[rogermunibond]

Let's hear it for index portfolio diversification this year.  Compared to the S&P 500, non-US indexes and ETFs, such as European, Asian Pacific, or Emerging Market indexes have outperformed the S&P 500 for the first time in ages.  Maybe I'm jinxing it by celebrating.

 

What do you think?  Does non-US market performance repeat in 2026?

[LC]

Depends how far you think Trump will go to devalue the dollar.

[Saluki]

I'm all for diversification if there is a good reason, but I have a big slug of my retirement money in an SP Index fund. 

 

If I were European, then a European ETF would make sense because it's future income that is denominated in the currency in which your obligations are denominated, such as a mortgage, food, clothes etc. But investing in an emerging market ETF without a good reason other than "uncorrelated returns" which might be terrible, is not a great strategy. 

 

Speaking of which, I met an "investor", socially, who manages money for other people and foolishly gave him my contact info. He periodically calls me an more often emails me pitches for silver complete with his analysis of the technicals in the chart.   I'm sure the guy means well and believes in what he's selling, but it's not for me. 

[rogermunibond]

I'm not sure Trump wants a weak dollar.  But there are huge inherent contradictions in his and Bessent's economic policy.

 

The majority of ETFs and index funds exposure to non-US equitites is unhedged and you pay an extra cost for that protection.

 

But as a US investor, I think I'm okay with exposure to other developed and emerging markets on an unhedged basis.

[Trophicdynamics]

Well, I am for diversification once a fortune is built for now I am highly concentrated. If statiscally you want to outperform the market you have to take greater risk to be the the right tail of the distribution curve. Risk can be taken by different means, geographical risk, concentration risk, leverage, currency risk, sovereign risk, macro risk, political risk, Inflation risk, many other types of risk. I try to stay away from thinking about risk to much as it will necessitate me prioritizing safety over returns. The only risk I like to take is concentration risk, and try to stay away from the others. It keeps it simple for me and allows me to focus on the upside more than the downside of a company. 

[Spekulatius]

On 10/8/2025 at 10:03 AM, rogermunibond said:

I'm not sure Trump wants a weak dollar.  But there are huge inherent contradictions in his and Bessent's economic policy.

 

The majority of ETFs and index funds exposure to non-US equitites is unhedged and you pay an extra cost for that protection.

 

But as a US investor, I think I'm okay with exposure to other developed and emerging markets on an unhedged basis.

The weak USD is implicit to balancing the trade budget. There really is no way around a weaker USD to do so.

The push to lower Interest rates amounts to the same thing.

Edited October 14, 2025 by Spekulatius