My belief is that many, if not most companies in the SP500 are already international businesses. As such, I treat the SP500 as a total market investment.
Jack Bogle of Vanguard espoused this view. And I think it was a blind spot in an otherwise brilliant understanding of investing.
OldShooter gave a good intuitive counter argument a few posts back. I'd like to offer math-y counter argument as well.
TL; DR - adding less than perfectly asset classes to a portfolio and rebalancing dampens volatility and of can increase the average return of a portfolio. US has out-performed for the last 15 years or so. What the next 15 years will bring is unkown.
Modern Portfolio Theory's (MPT) central premise is that adding less than perfectly correlated asset classes and rebalancing dampens the volatility of and often increases the overall return of the portfolio vs. the average return of the individual asset classes. IOW, you have to look at how the portfolio behaves as a whole rather than how each asset class behaves individually.
The below Morningstar report has a wealth of information on diversification, unfortunately only going back 18 years. It's really wonky, but look at the graph on page 26 of correlation coefficient of US Total vs. Developed and Emerging Markets:
https://assets.contentstack.io/v3/a...27b0203f76/2023-Diversification-Landscape.pdf
US vs. Dev Mkts ranges from ~0.73 - 0.90, for US vs. Emrg Mkts ~0.48 - 0.88. Looking at this time range, Morningstar concludes that long-term correlations are rising and "this time it's different" - the four most costly words in investing.
Looking at a longer time period (1971 - 2024) for US and Total World Index [so not an apples-to-apples comparison to the Morningstar report, but I couldn't find US vs. Dev Mkts online with a longer range and I'm away from my investing books - see for example Malkiel's
A Random Walk Down Wall Street that does have that data], the correlation is as low as -0.32 as late as 1/93, although it hovers close to 1.00 for most of 10/95 onwards. Not always though, 0.64 in 4/15 and 0.78 in 11/18. And you would expect higher correlations, as World includes USA.
https://www.longtermtrends.net/msci-usa-vs-the-world/
The bottom chart shows correlation. The top chart shows which performed better since 1971. Since ~2008 the US has out-performed World. What will the next 15 years bring? My crystal ball is broken.
I want a portfolio that will do 'well' under a 'wide variety' of market conditions. Thus, I have US Total, Dev Mkts, Emrg Mkts, US REITS, and FI (individual bonds) in the portfolio.