US stocks have outperformed just about everything the past 125 years at about 10% per year. Astonishing.
A global portfolio (including US stocks) would have underperformed by about one percentage point a year. Doesn’t sound like much but adds up!
However, only investing in one country exposes the investor to specific risks. Historically, diversifying globally would have increased your Sharpe ratio from 0.37 to 0.42. It would also reduced volatility and drawdowns (the US stock market went down over 80% in the Great Depression).
Diversifying away from the best investment ever doesn’t sound like a good idea, but at least historically, it has been.
