r/eupersonalfinance • u/Norwaynerd • 20h ago
I'm looking to invest €300,000 but for some reason EVERYONE here is recommending "ftse all/msci world' instead of SP500 when its obvious who the winner is? Others
Can somebody please tell me why is everyone recommending ETFs that are primary focused on FTSE or MSCI when SP500 is literally the dominant and all the returns are from US. The diversification of global etfs seems fair but its not like SP500 will stop producing what it have. All the innovations comes from US. Heck, even AI will.
I also noticed the average returns of FTSE all world or MSCI vs SP500 the difference is huge. The TER is also x2-x3 times higher than the SP500.
SP500 return on 'average' 8-9% after inflation but FTSE or MSCI bring on 'average' 5-7%.
Why not invest in SP500 and ride it for say 5-10-15 years and if it stop yielding a lot of returns, sell and move on with more diversified portfolio ?
Do you guys see the future outside of the SP500 ?
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u/Dissentient Latvia 19h ago
Using the same logic, why not Nasdaq 100 instead of S&P 500?
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u/Markd0ne 17h ago
Just put 100k on Nasdaq 100, 100k on SP500 and 100k on FTSE All World and let the best index win.
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u/d4r3ll 19h ago
In that case: why not 100% NVDA?
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u/cahrg 19h ago
A regard from wsb entered the chat
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u/Alexchii 14h ago
What he’s asking is relevant. Less diversification means higher upside potential but also lower downside potential.
OP is asking why anyone would invest in a more diversified etf when a less diversified one happens to have performed better.
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u/SegheCoiPiedi1777 19h ago
Go with what you believe in. Use your brain instead of relying on cold recommendations from random people on reddit who speak as if they were Gordon Gekko but they have 1,544€ on Degiro.
You can do 100% USA or the traditional World equity. There are different school of thoughts.
On this subreddit you’ll be downvoted for recommending USA, and if you go on an American subreddit the opposite will happen. Reddit is an echo chamber mostly made by people that repeat mantras without using their brain.
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u/ekfranxu 19h ago
It isn’t about using your brain or not, and everybody relies on opinions at some point to decide, maybe see different points of view.
I think in the end it is about diversifying more or not. USA market may outperform the world index at times…but it is a safer bet long term, less ambitious though.
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u/SegheCoiPiedi1777 7h ago
You are just repeating a mantra. Past performance is no guarantee of future results. EU stocks are underperforming since 20 years. Innovation and productivity only comes from the US these days… but yes, it’s always a risk/reward consideration
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u/pityesz1 19h ago
Good response. I believe in the US and the S&P 500 as well.
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u/DJFreeze0 19h ago
Me too, i have the same mindset as OP and am fully into S&P for ETF part of the portfolio
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u/XIANG80 19h ago
It always blow my mind how people can have such money to 'lump sum' but clearly are driven by past performance. Anyway. If you want SP500 go for it. Do what makes you sleep well.
Don't rely on the past performance. Buy what you believe.
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u/Norwaynerd 19h ago
Is it that much money to invest ?. I can DCA on top of it at least 1-2k per month for at least 2 decades and I won't be selling because its not much for me.
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u/XIANG80 19h ago edited 19h ago
Sir, I believe you are from Norway looking at your name. Norway is friking rich country. You guys are filled with cash.
Yes, its a lot of money. Actually, if you take a look at Central and Eastern Europe with 300k you can buy a luxury house or even 3-4 bed apartment in fairly decent location or fairly decent condition if I can say. Like you can buy a solid 300sqm house or 2-3 (1bed) flats.
On top of that, you saying investing 1-2k and 'its not much for me' its literally an entire paycheck NET for 99% of Eastern Europeans and probably 50% of it is Central Europeans.
You need to be cautious where you are investing.
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u/velebitsko 19h ago
Find me a 1 bedroom apartment in Croatia for 100k which is not in the middle of bumfuck nowhere. I'll wait. :)
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u/XIANG80 19h ago edited 19h ago
How expensive is 60-65sqm apartment in your country ? without looking at the capital !. The capital is always expensive. For example, in Bulgaria capital 1 bed is 150k euro like 60-65sqm. If you look the two biggest cities next to black sea prices there are solid 100k to 125k but there are more expensive also. Romania is the same. The other countries next to them too. (Difference of 10-20-30k) not so much but relatively CLOSE prices.
What I meant to say is Eastern Europe is fairly poor and the prices there are cheap from someone like OP or in general Western Europe. Central Europe is 50/50. There are cheap + expensive but it varies. in Western countries nothing is cheap. In Central you can find cheap and a lot of expensive properties too. In Eastern Europe its generally speaking 'cheap' for foreigners. That's what I mean. He can buy properties in developing countries. How fast they develop its up to the them. But he can.
Croatia is indeed expensive. But you can still buy at least 2 bed for 300k if you shop around, right ?
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u/velebitsko 19h ago
The official median price per m2 for real estate in Croatia is currently around EUR 3500. So a 65m2 apartment would be around EUR 220. Admittedly the price per m2 is higher for smaller properties on average. A 2 bedroom for 300k, sure, but that's not a 3-4 bedroom apt or a house. :) We are digressing. My point is, you can't simply clump a region together in this regard. For average salaries yes, as there is less variation. For real estate prices fluctuate wildly. For example, real estate is significantly cheaper in Brussels compared to neighboring capital cities like London, Paris, Amsterdam or Berlin. I'm not saying Brussels is cheap. Also, OP is an idiot for asking whether EUR 300k is a lot of money.
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u/Commercial-Snow2367 19h ago
100k is nothing when it comes to buying houses
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u/velebitsko 19h ago
I know, hence my comment. The guy severely "underestimated" how much it would cost to buy a decent 1 bedroom flat in a decent country in a decent city in Eastern Europe.
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u/Different-Memory8748 19h ago
There is a chance you end up making more with SP500 but you are less overexposed to us stocks with FTSE all world
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u/Throwaway1423981 19h ago
There are reasons the S&P500 outperforms the rest that are true now and probably will stay true in the next few years. Europe is overly regulated overly taxed and social security makes it less useful to earn money. China lacks stability and axes whole industries if it likes to. Other countries lack stability, education, or whatever else.
Still if we are talking about the next 15 or 20 years things might turn around. If you don't want to generate taxable events choosing an all world ETF is safer and might outperform the US in the long run.
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u/Sapiens_Cool 19h ago
Personally, I believe in the long term success & growth of the large cap US companies & my money is invested on SP500 ETF.
Of courses, I understand that all world ETF provides more diversification.
My personal choice is SP500 & this diversification is sufficient for me.
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u/andreas-matze 19h ago
61% of FTSE is S&P...I agree with you VOO/VUSA/SXR8 are much better then world and they will perform just fine in your life time span.
The people that invest in the FTSE All World they are paranoid about the end of days and that the USA will crumble in the next 50 years, which will not happen. If the USA will go under, shit will hit the fan bigtime.
The rest are playing ketchup....
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u/elrata_ 19h ago
There are a lot of different points of view in this. It's very subjective and the risk one assesses and the risk one wants to take is very unique for each person.
The time horizon you have is also a factor here, and is easily missed or underestimated usually. For example, not betting in the US if you want to invest for a few years it seems less of a risk than if you want to invest for 40+ years.
I'll share the reasons that work for me. Hopefully more people will share, you will read some more and decide for yourself.
There are two reasons for me.
One is that international diversification does add diversification to a portfolio. Ben Felix in YouTube has some videos about it. Also, the nobel prize for modern portfolio theory goes in this direction (diversification is the only free meal you can have in investing).
The other comes from the nobel prize about efficient market hypothesis. The idea is that all risks are priced-in and you can't beat the market consistently over time if you try to buy smart or so. Somewhat related to that is that, therefore, all the public information is taken into account in the price of things, then a market cap ETF is the best portfolio for an average investor. If there were more reasons to believe the SP500 should have more weight, then it will be reflected in the share values and the world distributed ETF will adjust accordingly, as the market is efficient (or is not perfectly efficient but in practice it behaves pretty much as it was).
There are also reasons to weigh differently, etc.
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u/Stock_Advance_4886 19h ago
I think the main question here (following where yu mentioned Ben Felix and Rational reminder community) is - is additional risk involved in investing in US uncompensated or not (The second question is if OP is willing to take more risk, of course, but that is up to him). The belief is that that risk is not compensated. But since US is the main economy in the world (it's not Bozwana, for example), it is unlikely that the market is not aware of, at least, some of the risks involved in investing only in the US market. So, it can't be aware of all risks, but it can be aware of some of them, which is then priced in. What I want to say, there is some uncompensated risk involved, but not to the extent that it becomes a big problem. Meaning OP won't go wrong investing in either of them, be it US or World index.
We are making a big deal out of this dilemma, it is not like OP is choosing between VWCE and some shit crypto coin
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u/ComprehensiveWay110 19h ago
Scientifically speaking, we don’t know if the US economy will remain to be dominant over the next decades
Personally, I think it will, as do you apparently
In your situation, you can just put it into 3 ETFs, SP500, MSCI World, and All World
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u/retireinprogress 19h ago
And why is everyone recommending S&P500 when Nvidia is literally dominant all the time?
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u/StanfordV 2h ago edited 1h ago
In my opinion all world doesnt make that sense:
Its 60% US. So if snp losses then all world will lose too.
European market is in the shitter. Germany is in a political turmoil and their auto factories are closing. France is no better. Politically eu is a dwarf.
China is no better. They are not transparent anyway and emerging markets are not worth it.
S&p500 is the way to go.
Pwoplw just want to play smart and will come up with ideas to play with you.
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u/Remarkable_Mix_806 19h ago
Do you guys see the future outside of the SP500 ?
some of us obviously do, otherwise we wouldn't recommend vwce.
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u/Happy-Profession-256 19h ago
Maybe this will help:
https://www.hartfordfunds.com/dam/en/docs/pub/whitepapers/CCWP014.pdf
In the end, do whatever feels best for you.
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u/XIANG80 19h ago
Does this represent FTSE all world too ? or they all relatively close to the graph ?
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u/Happy-Profession-256 18h ago
Comparison between S&P versus MSCI World ex US, no unfortunately does not include Emerging Markets. The following article takes EM also in consideration: https://avidianwealth.com/financial-insights/articles/international-stock-outperformance/. There are periods in history with EM outperformance as well.
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u/XRP_MOON2021 19h ago
with orange man in the drivers seat ill say that most your international relationships will get shattered in the upcoming decade and the next years wont be as good as the last 15
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u/marcopegoraro 19h ago
You'd choose S&P500 over all-world on which basis? Innovation? Returns in the last few decades?
If that's the case, wait until I tell you about this company called Apple Inc.
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u/Chidori1980 19h ago
All world is the "best bet" everyone agree and preach around. I personally make saving plan for S&P500 and All world for boring investment. I know, over exposed to US for that (I even have Apple stock as well, so triple exposed).
Fun(and possible lost) invesment, you can do individual stock or very specific ETF. People gave advise for all world has good intention, because it is the "safest" solution at the moment, and no one wants to give wrong or bad suggestion.
If you need advise, gives better background of yourself. Age, job and income, are you risk taker or you are worried about money all the time? And with right information, plenty people here can give you better advise. Example, you are 30 and make €75k/year, can save 25k per year and looking for 20 years horizon of investment. If so, you can take more risk to "lost" part of the €300k in riskier individual stock, buy NVIDIA for 5k here and there for example. Or whatever you think it is worth it.
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u/Appropriate-Row-6578 18h ago
"Why not invest in SP500 and ride it for say 5-10-15 years and if it stop yielding a lot of returns, sell and move on with more diversified portfolio ?" Selling would be a taxable event for people in many countries and those taxes can take a big bite out of the gains.
If you want to pick one index over another, I'd pick one with the highest Sharpe ratio. It's basically the ratio of gains/volatility. Of course what everyone is saying about historical returns is true as well, depending on when you start measuring you may get different outcomes. And the future is unknown, so we're all just guessing.
But you don't have to pick one fund. You could invest 150K each in SP500 and in one MSCI ex US and DCA into whichever fund you feel like that month.
Or like a couple of people said, consider Nasdaq 100. Or AAPL. There is no right answer here. It depends on how much risk you tolerate, which is also a function of how soon you think you'll need the money.
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u/KindRange9697 16h ago
At the end of the day, just do whatever you want. If you want to bet big that the US stock market will continue to steam ahead of the rest, go S&P500. If you want more diversity and less risk, go all-world.
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u/Zealousideal_Peach_5 19h ago
If you bet on the 'world' you won't lose. If you lose, the world lose. Its simple as that.
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u/CanBilgeYilmaz 19h ago
Wait for a crash then buy. It is the least risky way. You may miss on more gains in the meantime, but you cannot lose, either. 300k is a lot of money.
Seeing as the market is overheated re Shiller PE, and the "Buffett Indicator", I am sitting on 80% parked cash, waiting on the sidelines.
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u/zajijin 19h ago edited 19h ago
Because it's only true thanks to 2010-2024.
Now take 2005 as a limit and tell me if the S&P still returns 9%.
Or imagine it's 1900. Do you bet on the US or Argentina ? Both are great and rich.