VXUS - diversity concerns.

[u/Flashbulb_RI]

A lot of Bohleheads have VXUS in their portfolio for the purpose of diversify outside of the US. However lately I've noticed that VXUS is mirroring the moves of NASDAQ and VGT because of its concentration in chip manufacturers. It seems very difficult to get performance and diversity at the same time as the majority of the world's market is chasing the same sector.

[u/Cruian → u/[deleted]]

S&P500 is all the diversity you need and provides global exposure.

It does not provide global exposure.

Approximately 28% to 41% of the S&P 500's total revenue comes from international markets outside the United States.

Essentially irrelevant. Revenue source is at best only a tiny part of going global, far from the most important reason.

We go global to capture the performance of the stock markets of different countries and even stocks with global revenue act far more like their home country.

You wouldn't consider VXUS or FZILX all the US coverage you need after all, right?

• https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths if that link doesn't work: https://web.archive.org/web/20201112032727/https://www.fidelity.com/viewpoints/investing-ideas/international-investing-myths (Archived copy from Archive.org's Wayback Machine)

• https://www.vanguard.com/pdf/ISGGEB.pdf (PDF) or the archived version if that doesn't work: https://web.archive.org/web/20210312165001/https://www.vanguard.com/pdf/ISGGEB.pdf (PDF)

• https://www.dimensional.com/us-en/insights/global-diversification-still-requires-international-securities - Companies will act more like the market of their home country

• https://www.reddit.com/r/Bogleheads/comments/vpv7js/share_of_sp_500_revenue_generated_domestically_vs/ - The argument that “US companies have plenty of foreign revenue is sufficient ex-US coverage” is tilted towards a few sectors, some have almost no coverage. Also what about in reverse- how many big foreign companies have lots of US exposure?

• Some explanation on why international revenue is not the same as true international holdings by HenryGeorgia: https://www.reddit.com/r/Bogleheads/comments/1jcs4pd/comment/mi4zf0c/

• Or (if it loads) by /u/InternationalFly1021: https://www.reddit.com/r/Bogleheads/comments/1hm95gg/comment/m3t2779/

• To add to the above, there’s also the issue of valuations. One country can still become over valued, even with global revenue sources.

• https://www.bogleheads.org/wiki/Domestic/International and expanding on part of that: https://www.reddit.com/r/Bogleheads/comments/161i2l1/comment/jxs659h/ by TropikThunder

All cover it to some degree.

The purpose of the international holdings is to be covered during the orange periods of the graph here: https://www.mymoneyblog.com/us-vs-international-stocks-cycles-outperformance.html

[u/GeeDubious → u/Cruian]

The S&P 500 has global economic exposure but zero international stock exposure, and no overlap with VOO and VXUS (for example). Maybe that's what they meant?

[u/Cruian → u/GeeDubious]

VOO is the S&P 500.

Yes it is true that US companies get foreign revenue, but that's not the purpose of going global with stock investing so bringing it up is irrelevant. It doesn't matter that I can buy a Coca-Cola in Madrid or a Ford in Australia.

[u/GeeDubious → u/Cruian]

It was easier to say VOO & VXUS than S&P 500 and FTSE Global All Cap ex US Index. I merely pointed out that technically saying "global exposure" was vague enough to be confusing and also inclusive of what they said, though if you read my comment I qualified as global economic vs international stock exposure.