I think the efficient market hypothesis is basically right, in the
sense that I'm not not going to be able to beat the average return,
and so I'd more or less like to hold an even slice of everything
there is to own. Talking to people and reading online, it seems like
it's common to invest ~60% in the US and ~40% internationally. Why is
that? The US total stock market cap is only about 30-40%
of the world's, so I'd think the default position would be to mirror
that, perhaps by buying shares in a total-world index. Reasons I've
heard for weighting the US higher seem to be based on things like the
US having higher returns historically, but that should be priced in.
If anything, I think for Americans overweighting international stocks
would make more sense, since we're already very long on the US.
Similarly, if there were an index fund that excluded tech I think that
would be a good buy for me since I'm effectively quite long there
through my investment of being a programmer.
What's going on? Why does "index fund" typically mean "S&P 500" and
not "total world"?
(It looks like maybe this is called "home
bias" and economists think people shouldn't do it?)
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