I was on TikTok talking to a young guy about the All World ETF.
He kept thinking that because it said all world, he was diversified. Globally. Job done.
And look, in a sense he is. There's Japan in there. Europe. Emerging markets.
The ETF isn’t techncially lying.
But concentration is what matters.
All World's correlation with the S&P is something like 0.95 on an R-squared basis. So when the US sneezes, your world fund catches a cold. You're also paying more for that package. I reckon on the order of two or three times more expensive, while still being very, very concentrated in the US.
He just didn't get it. Tricky conversation.
Think of food.
You’re trying to lose weight so you reduce your carbs so you’re in what you reckon is a calorie deficit.
But then you add an avocado.
You can have carbs, fats, protein on the plate and call it balanced. Fine.
But if most of the calories are sitting in the fat because of the extra avocado and you’re now out of a calorie deficit, the plate isn't doing what you think it's doing when you look at the macro labels.
Same with All World.
There are regions on the label but the US is doing a huge chunk of the actual work.
So the point isn't never buy All World.
It's intention.
You can get into the world fund if you understand what's driving it. If you don't understand the driver, that's when the confusion shows up further down the line. Drawdowns, doubt, tinkering, the whole lot.
And with this, you may as well just be in the SPX…
One of the big things we teach is how to be intentional about what you're doing.
You can do the theoretically wrong things. But if you understand that you're doing the wrong things, it can just be a test. Or a process adjustment. Or it might end up being the right thing for you. You never know.
What you can't do is buy the label and assume the risk looks like the name on the tin.
If that TikTok chat sounded familiar, hit reply and tell me. Are you in All World because you chose the US concentration on purpose, or because the word ‘world’ felt safe?
PS. find out your investing process score by taking our quick quiz here.
Be honest with yourself too! That’s the most important thing when answering.
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Perfect for if you’re a passive investor in the SPX and want to gain more from your portfolio with little extra work.
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