Why You Have Way Too Much Invested In U.S. Stocks

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Why You Have Way Too Much Invested In U.S. Stocks

Why You Have Way Too Much Invested In U.S. Stocks

June 3, 2014

by Meb Faber

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EXCLUSIVE: KG Funds Shuts Down After 13 Years Of Outperformance

After 13 years at the head of KG Funds, the firm's founder, Ike Kier, has decided to step down and return outside capital to investors. The firm manages around $613 million of assets across its funds and client accounts. According to a copy of the firm's latest investor update, Kier has decided to step down Read More

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Quick question:  How much of your global stock portfolio is in U.S. stocks?  Let me guess: 70%?  80%? 100%?

Below is a chart from the JPMorgan Guide to the Markets. It illustrates the U.S. as a percentage of global market capitalization (46%) and GDP (19%).

Figure 1 – Weights in MSCI ACWI index and share of global GDP

Source: J.P. Morgan Chase & Co.

Even if you are a die-hard Vanguard Bogelhead indexer, you should only have about half of your equity allocation in U.S. stocks.

But few do.

Most investors around the world invest the majority of their assets in their own stock market. This is called the home-country bias, and it occurs everywhere. Below is a chart from Vanguard that details the effect in the U.S., the U.K., Australia and Canada. U.S. investors have approximately 72% invested in the U.S. market.

Figure 2 – Home-country bias

U.S. Stocks

Source: Vanguard

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