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Weekly eLetter 2/26/2021 — Time to Re-Think Your Investment Holdings?

Most investors in most countries tend to primarily hold their own country’s stocks in their portfolios. It’s familiar. It’s what they are used to doing. For those of us in the US, that’s been a pretty good strategy for most of the last decade. However, it’s a good idea to look at the comparative markets once in a while, as in the investment world, things do not stay the same forever. With that in mind, have a look at a chart (courtesy FastTrack Charts) comparing the past three years returns on ‘the rest of the world markets’ in red, vs the US S&P500 Index in green.  Of interest, the ‘rest of the world’ is up 43% per year, while the US markets are up 14% per year.  Is it time to look outside the (familiar) box?

World Stocks vs US Stocks

“If you always do what you always did, then you’ll always get what you always got.”
Hmmmm… maybe not.

Speaking of investing the same as we’ve always done (Boy, have I heard that a lot!), most US investors tend to invest in the really big companies that they are familiar with.  Nothing wrong with that.  However, now and then it’s a good idea to see how the smaller companies are doing, rather than just continuing to hold the large companies. Here’s how the US market looks for the past one-year return. I’ve actually started this graph near the bottom of the markets last March.  The Normal very big companies are represented in red, vs the smallcap US companies shown in green.  You’ll note that coming out of the bottom both the large companies and small accelerated at about the same pace- till about October. Since then, the race has gone strongly to the smallcaps.

US Large Companies vs US Small Companies

So, the takeaway: There’s a lot of comfort in doing what we’ve always done, and if it seems that something is working, why change it?  That’s why we look at least once a month at all of the major global indexes to see if we’re still in the strong ones.  You might want to consider that strategy as well.

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