US Stocks: Are They Actually #1? 🇺🇸❓
With the S&P 500 back at all time highs, it’s time to talk about whether American stocks are actually the best investment. It’s not what you may think.
The reason you’ll see most portfolios be either heavily or entirely weighted into American index funds is because the USA has been the largest dominator when it comes to investing, businesses, and long term innovation. The S&P 500 is one of the most popular index funds for investors as it captures seemingly the “greatest” selection of businesses in the world. You get the top 500 biggest and supposedly “best” companies of the USA that aims to give you market returns. Basically all studies that use a market average return like 8% are basing it off of American indices and nothing else.
So if the American market is the forefront of all investing practices, is there anything possibly better?
Yes there is.
While the S&P 500 has hit all time highs, many other index funds have long gone above their yearly highs and surpassed American returns. Those funds are all International countries and funds outside the US.
As of May 13 based on the image, the USA is almost one of THE worst performing countries YTD (the numbers will have changed as of July, still very low). Above it are all countries that have outperformed so far this year with Poland even giving a whopping 50% return. These are astronomical returns and something you would have missed out on had you only invested in the US.
The performance isn’t limited to short term either. The second image is one of my favourite graphs for showing international versus American diversification. USA is the favourite because more often than not they outperform. However, when international wins, they REALLY win. Take any time period where innovation and economic activity is thriving and the US is winning because they have the largest influence. 2012 onwards or from the early 90s up until 2000, both of these time periods were mass economic boosts (largely due to technology) and so the US thrived because it had the most access and means to. However, when any major disruption threw everything off (1987, 2000, 2008, etc.) then international rockets beyond America. These periods can even last up to a decade or more. Canada for example significantly stayed ahead of the US after the tech bubble in 2000 because most of the Canadian economy is not driven by tech companies but rather other sectors (Resources, Retail, Railways, Banks, etc.) This meant they could stay ahead while the US had to take a lot longer to recover.
It’s not just limited to Canada, many countries will outperform during times of uncertainty or when their country is given the opportunity for success. While the American market is the biggest player for investments, it doesn’t always mean it’s the best. Spreading your investments globally isn’t decreasing your returns (as it’s commonly misconceived) but quite the opposite, it gives you a chance to take advantage of even more returns in the event America is in a lower return period.
Find what works for yourself, every strategy will be different but don’t choose to ignore what’s there in front of you because you’re too stubborn. As always, do your research and happy investing!
