Why not invest in US stocks?

dunstonh

Was the US an emerging market for the whole of the 20th Century? By the end of the 19th Century the US overtook the UK in manufacturing and it was the worlds largest economy throughout the 20th Century.

The US overtook latish 19th Century but you need to look at scale. The US is so much bigger. Sterling was still the preferred reserve currency until after WWI. The UK was in decline globally and the US had so much scale to grow with few legacy issues. The US is now a mature economy with ageing infrastructure and heavily in debt. Basically what happened to the UK during the 20th Century is starting to happen to the US now.

However, emerging market or not, for whatever reasons your point suggests that the US figures for equities returns and retirement planning withdrawal rates are not appropriate for US investors either, as future US equity returns are expected to be lower than current research is based on.

They will likely be lower than in the past as there is only so much you can squeeze out of orange before there is nothing left. The US has so much scope to get larger. if you look at liveable landspace they have and the low density, they could take significant amounts of immigration and grow the economy there. However, there is no indication that they are going to do that.

Are you saying that for your money the expectation is that in the future, an equities allocation to globally diversified stocks (including the US) and Emerging Markets will match the returns of a US equities heavy portfolio?

You never know which sector is going to be best. Every year it is a different one. It is rare for a sector to be top in two consecutive years. There are periods when the US has been consistently below the other sectors for extended periods. This is why multi-asset sector allocation is considered important.

mozza78

The US equity market has a higher standard deviation than the UK (19% v 14%) so as an investor I would expect a higher return for the increased risk.

jamesd

Longday wrote: »

But rather than plan for and accept lower returns why can a UK investor not have a global tracker fund and another alocation to the S&P or other US equities to add a heavy weighting of US stocks if historically they tend to out perform the UK and mist other markets over the longterm?

You can do that, though do note that the US markets are currently at quite high ten year cyclically adjusted price/earnings levels and that the current level is associated with an anticipated negative investment return over the next eight years. Associated with isn't guaranteed of course and there's ample potentially for them to double again over those eight years instead.

So now in some ways looks like a better time to be under-weight US than over-weight. But not skipped entirely and of course I don't skip it entirely.

marlot

I moved about 20% of my savings to a US tracker about a year ago, partly as a hedge against Brexit. It now looking pretty good, and I'm trying to work out where to invest in next. I don't see an obvious new home for my money.

masonic

mozza78 wrote: »

The US equity market has a higher standard deviation than the UK (19% v 14%) so as an investor I would expect a higher return for the increased risk.

You can't rely on high standard deviation investments to deliver high returns. There are plenty of investments that provide a sub-optimal return for the amount of volatility observed. The UK market is less diversified than that of the US, which is another aspect to risk.

masonic

marlot wrote: »

I moved about 20% of my savings to a US tracker about a year ago, partly as a hedge against Brexit. It now looking pretty good, and I'm trying to work out where to invest in next. I don't see an obvious new home for my money.

You timed the market and got lucky. Maybe it's time to quit while you're ahead and come up with a investment portfolio that you can hold in all weathers and doesn't involve trying to time the market.

AnotherJoe

masonic wrote: »

You timed the market and got lucky. Maybe it's time to quit while you're ahead and come up with a investment portfolio that you can hold in all weathers and doesn't involve trying to time the market.

I don't think it was luck. Had Brexit not happened (in terms of the vote) the pound would not have gone in the reverse direction, so it was pretty much a one way bet. It was good foresight.

I bought into a bunch of housebuilder shares about 3 or 4 days after the vote. It was clear to me that the sell off was completely overdone. I'm now up probably 25% on those. Was that "luck" ? I like to think it was astute investing . I suppose some might say it was astute gambling?

I think its a valid approach to be taking a view on which sectors will do well and investing on that basis. I don't subscribe to the view about the market having perfect information and always at any moment being correct, what's that comment that in the short term it's a voting machine, long term a weighing machine?

So, if you believe that people are voting incorrectly short term, as they did in the panicky few days after Brexit , you can get your money in on the right side of the weighing scales (ok maybe I've broken that analogy now)

We don't know where the rest of the OPs investments are, it may be that 20% US isn't enough.

hutman

jamesd wrote: »

You can do that, though do note that the US markets are currently at quite high ten year cyclically adjusted price/earnings levels and that the current level is associated with an anticipated negative investment return over the next eight years.

Expect the unexpected. Having worked for a major US MNC and its European counterparts - The former's desire to succeed and attachment to performance is quite exclusive. Its the driving force behind the technological innovations we're becoming accustomed to. I would expect the the orange to get bigger.

N1AK

AnotherJoe wrote: »

I bought into a bunch of housebuilder shares about 3 or 4 days after the vote. It was clear to me that the sell off was completely overdone. I'm now up probably 25% on those. Was that "luck" ? I like to think it was astute investing . I suppose some might say it was astute gambling?

I'm sure you do like to think it was astute personally I know that the right decision can be made for the wrong reasons, and that the wrong result can come from the optimal decision, so be it gambling or investment I wouldn't jump straight to the conclusion it was astute based on that alone.

Voyager2002

Longday wrote: »

If currency is the issue, over the longterm surely USD is just as safe a place as GBP to hold investments.

Yes, but I am investing in order to repay a mortgage that is in pounds sterling. It would be terrible if the dollar fell just at the time when the mortgage had to be paid off.