The Investment Scientist

Why has an lagging asset class created more wealth?

Posted on: June 19, 2017

If you look at this chart covering the last five years, the red line representing the US market and blue representing international markets, which market do you think would have made you more money? It’s a no brainer right? The US market went up nearly 90%, while the international markets went up less than 30%. Of course it’s the US market, right?

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I thought so too until I reviewed a client’s 401k account recently. I set up his account about five years ago. 

I kept it very simple:  30% of his regular bi-weekly contribution was invested in a bond index fund, 35% in a US stock index fund and 35% in an international stock index fund.

Much to my surprise, when I reviewed his account  the international stock index fund now accounts for  37.4% of his 401k account value, while the US stock index fund accounts for only 33.7%. (The bond index fund now accounts for 28.9%) The international markets, despite doing a lot worse than the US market, have been creating more wealth for him over the past five years than the US market! 

What gives?

I won’t answer that question right now.  Instead, I want you to think about it and send me YOUR explanation.

Schedule a Discovery review with me, or get my white paper for free: The Informed Investor: 5 Key Concepts for Financial Success.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



You may also get his monthly newsletter, or join his Facebook page for regular wealth management insights. Michael's email is info[at]mzcap.com.

Twitter: @mzhuang

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