So many of you I guess heard about diversification, and how it’s important to maybe choose ETF or stocks that are outside the US?
Well I want to tell you that for me when you invest in large cap US companies, your are already well diversified. I mean companies like Procter & Gamble, Apple, Microsoft, and many others derive a good portion of their business worldwide. I would characterize this as a GDP economic moat. What do I mean by that? Look at the graphic below.
You can clearly see that US GDP is already 1/4 of the World’s output… Many commodities are labeled in US$, so it’s safe to say that this specific country at least for now has the upper hand in terms of macroeconomic weight.
This is not to say that there are no good investments opportunities outside the US, but if you want to keep your portfolio simple, focused & easy to manage you can select healthy US large cap stocks and you will do just fine.