Index Funds: US vs International

May 23rd, 2018
money
I think the efficient market hypothesis is basically right, in the sense that I'm not not going to be able to beat the average return, and so I'd more or less like to hold an even slice of everything there is to own. Talking to people and reading online, it seems like it's common to invest ~60% in the US and ~40% internationally. Why is that? The US total stock market cap is only about 30-40% of the world's, so I'd think the default position would be to mirror that, perhaps by buying shares in a total-world index. Reasons I've heard for weighting the US higher seem to be based on things like the US having higher returns historically, but that should be priced in.

If anything, I think for Americans overweighting international stocks would make more sense, since we're already very long on the US. Similarly, if there were an index fund that excluded tech I think that would be a good buy for me since I'm effectively quite long there through my investment of being a programmer.

What's going on? Why does "index fund" typically mean "S&P 500" and not "total world"?

(It looks like maybe this is called "home bias" and economists think people shouldn't do it?)

Comment via: google plus, facebook, substack

Recent posts on blogs I like:

Three cheers for the tomboy chaser

Three cheers for the tomboy chaser!

via Thing of Things January 30, 2026

2025-26 New Year review

This is an annual post reviewing the last year and setting intentions for next year. I look over different life areas (work, health, parenting, effectiveness, etc) and analyze my life tracking data. Highlights include a minimal group house, the usefulness…

via Victoria Krakovna January 19, 2026

Why I Don't Think My Braces Were Worth It

A couple weeks ago, I got my braces off. I kind of wish I had never had them, though. When I was younger, two of my teeth were sticking out, and they looked kind of funny. I thought that my teeth were just fine, and I didn't want to get braces. But s…

via Anna Wise's Blog Posts January 3, 2026

more     (via openring)