Global diversification
A single country can lose decades; spreading across the whole world is the calmest choice.
In One Sentence
Instead of betting the family's wealth on one country, own the world's companies all at once.
Why It Matters
Stock markets rise over the long run, but a single country may not. Nobody can know in advance which country will do best over the next thirty years, and a big chunk of Taiwan's market rests on a handful of large tech stocks. Spreading across the whole world is what keeps the premise behind "buying in crashes" standing: that the market eventually comes back. For our family fund, that's exactly what I chose — an index ETF that owns the world's stock markets.
One Number
After Japan's market fell from its 1989 bubble peak, it took 34 years to get back to that high. Using the same rule of investing double after a fall of more than 20%, each dollar invested ended up about 20% ahead in the US, but 11% to 15% behind in Japan (author's backtests · Chapter V).
In the Book
Whenever Chapter V discusses buying in crashes, choosing what to own or asset allocation, it asks you to spread across the whole world. Chapter VI lists it as part of defensive investing.
Go Further
- Broad-market index ETFs From one country's broad market to owning the whole world.
- Buying in crashes Adding more in a crash assumes the market eventually comes back.
- Defensive investing Not betting on a single country is putting "don't lose" first.
- Dollar-cost averaging Dollar-cost averaging then spreads your money across time as well.
- Bubbles Japan's 1989 bubble is a cautionary tale.