According to Vanguard Group founder Jack Bogle, U.S. stocks are still the best and investors do not need to take any risk outside of the U.S. for big returns. “I believe the U.S. is the best place to invest,” Bogle told Bloomberg. “I’d bet that the U.S. will do better than the rest of the world. It is a simple bet on which economy is going to be the strongest in the long run.”
In fact, Bogle, who started the first index fund in 1976, put all of his investment in U.S. securities, with stocks and bonds having an equal share of his index portfolio.
One thing Bogle learned from his extremely long career in the investment world is to not follow the crowd. “Every single person I think I have ever talked to tells me I am wrong in this,” Bogle said. “If you believe in the majority, you can just throw my opinion in the waste basket. But on the other hand, I was brought up in this business and I am saying ‘the crowd is always wrong.’”
Since 1993 the S&P 500 Index has jumped more than 421 percent, more than four times the performance of MSCI’s index of world equities excluding the U.S. “I don’t think in the long run [emerging markets] will do as well as the U.S.,” he said. “They are more risky and more sensitive to interest rates, more sensitive to Federal Reserve statements and actions. They don’t have the diversity we have in the U.S.”
Data also show that money flowing into emerging markets and Europe this year dwarfs what is flowing into the U.S. It’s wise for investors to buy U.S. indexes. Why mess with what’s worked? Ignore the crowd and stick with U.S. stocks.