Worth a Thousand Words - Old Peak Finance

Worth a Thousand Words

September 14, 2016

Dimensional-45-year-global-eq-vs-SP-vs-t-bills-1970-2015-300x225

Worth a Thousand Words

September 14, 2016

If a picture is worth a thousand words, here's one that's also worth quite a lot of money.

This chart compares three investments: short-term US government bonds, in green; large US stocks, in yellow; and the global stock market, in blue.

The clear conclusion: being globally diversified pays off.

Specifically, $1 invested in 1970 grew to $349 in the global stock market, but only $90 in large US stocks and only $9 in short-term US government bonds.

This may not surprise some people. But over the last three years, large US stocks, also known as the "S&P 500", have been, by far, the best place to be. So plenty of people ask us: why diversify? Why own small stocks or non-US stocks?

This chart gives you the answer. There are no guarantees the future will look like the past, but I wouldn't bet against this trend.

So before you decide to limit yourself to the kinds of stocks that have done well in recent memory, take a longer look back.

Then, diversify.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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