Focus
Full time employment: Posting here.
- Joined
- Oct 10, 2009
- Messages
- 699
From Asset Allocation Manager: Over the period 1970-2007, it appears as though a 60/40 U.S./Foreign allocation has produced the ideal combination of lower risk and higher return, providing an annual return of 11.45% over the period compared to the 11.17% you would have gotten with the more traditional 80/20 portfolio. While it may not seem like much, that extra 0.28% adds up over the years.
If you believe this will continue into the future (a big "if," I know) and want to keep things simple, you could invest, say, 60% in Total Stock Market Index (VTSMX) and 40% in FTSE All-World ex-US (VFWIX).
But since more than 40% of S&P 500 revenue comes from foreign markets, should you factor that in and lower the VFWIX investment accordingly? And what about the counterbalance: the percentage of foreign company revenue that comes from the U.S. market? This gets complicated pretty quickly, so should you ignore these factors altogether in the end?