I talk a LOT about the S&P 500. The main reason why is it’s a really OLD stock market index with tons of readily available public data. It also includes nearly all of the brand name companies we’re familiar with here in the US. So when doing an analysis of how stock market investing performs over 40, 60, 80, or 100 years, the S&P 500 is an obvious choice.
BUT, over the last 100 years some things have changed. Notably, the US is no longer the only mature economy in the world. The rise of computers, the internet, and instant global communications has made the GLOBAL stock market much more accessible and efficient. That means an investor sitting in the US isn’t bound by only analyzing the value of US stocks, rather they can also look at stocks pretty much anywhere on earth. That means when you buy all those stocks you’re benefitting from the “efficiency” of the global market and guaranteeing yourself your fair share of world market growth!
Just because the US has been the global economic super power the last 100 years, doesn’t mean the stock market growth will be the best the NEXT 100 years. It’s certainly reasonable to think that maybe developing countries or smaller companies will have more future growth to enjoy. We also can’t COUNT on that either, so what do you do? Buy both! The companies in the S&P 500 make up about 34% of the global stock market cap. I like to own the other 66% too!
Here’s some easy ways to invest in the global US stock market. Each ONE of these options invests in the WHOLE pie chart shown.
• Buy VT. Vanguard’s Total World Stock Index ETF
• Buy a target date index fund, like VFIFX (look up the ticker symbol for your age and your brokerage)
• Buy VTI and VXUS. Vanguard’s US and non-US total market ETFs.
• Add VB and VXUS to your S&P 500 index fund. This adds small-cap US and non-US stocks.
So while I love the S&P 500 and use it a ton in examples thanks to it’s long history and convenient data, I invest more globally in the world’s stocks!
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
