We recently came across a blog by Lawrence Hamtil which supported one of our long-standing beliefs, the US market offers the best and deepest market to generate returns and minimize risk. It appears investors diversifying by investing in emerging markets have only hurt their risk/return profile over the last 21 years.
And it’s no surprise to us as emerging markets, in many cases, only increase your exposure to the most volatile parts of the market, a segment our process focused on sustainable dividend growth tends to avoid. As Lawrence says, “It is remarkable how similar a portfolio of 60% MSCI USA with 20% S&P 500 Energy & 20% S&P 500 Materials tracks the 60-40 MSCI USA / MSCI EM portfolio over time.”
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