Over invested in US Stocks

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Is anyone else concerned about this?
I am a aware that investing in a global index fund is very much in vogue at the moment but when look at Vanguards global index fund 65% of the fund is invested in US stocks and I get the feeling that the US stocks are overvalued and we are heading for a painful correction.
But what can I do about it - if the US gets hit the rest of the world will take a tumble too.
Is it just me - or is anyone else getting a bit twitchy?

global index funds self correct on the basis of the global market. If US companies fall out of the top 6-8000 then other better companies will take their place.

If you are in global markets I wouldn’t worry at all, if you are in the S&P 500 that’s different but still you should ask yourself if you want to bet against America.

i am worried about this so I have a few different geographic and thematic funds to reduce my exposure to US and the Mag 7. I also have a couple of active global funds which are not tied to an index so can be more flexible about where they invest. I think I’m about 30-35% US overall.

I have diversified my funds too so I’m not do heavily invested in US stocks but I’m not sure it’ll make much of a difference if the US crashes. Where are the safe harbours, the opposite flows? Currency or commodities/precious medals?

If the US crashes, that's going to impact the global economy anyway. Gold is probably the obvious option but that's at record prices anyway isn't it?? My suggestion (and I'm not an expert) is to hold a cash reserve so you can snap up funds at low prices if they do crash

Gold does seem to be the popular one at the moment. I have 20% across gold/ silver and gold/silver miners which is bit higher than most, these are volatile and not for the faint hearted. I agree with holding a cash reserve although I haven’t done that yet. I do have 7% in a bonds etf which can be quickly liquidated to cash if needed and 4% in an absolute return fund which is more stable in theory.

We have really too much sitting in cash atm. We’re at around 40% shares 60%cash and I need to rebalance. I feel as if I have too many Vanguard investments too. I’m not risk averse, I just have a long memory and no company is invincible

Unless you are needing the funds you have invested in the next couple of years I wouldn’t be too worried about what happens in the short term. If you are invested long term it doesn’t really matter. The market corrects and crashes and it also recovers.

no one can predict what the market will do on any given day. It may correct tomorrow or it may grow another 20% this year. Time in the market beats timing the market

Yes I think lots of people are worried about the US being over-valued, meaning that its market cap is higher than it should be and consequently it’s taking up more of your tracker than the underlying value would warrant. The mag7 also mean that it’s less diversified than you might choose.

Definitely lots to be said for holding something else alongside- an ex US fund alongside a global tracker or perhaps US equal weighted instead of standard S&P tracker? I have a couple of UK active funds which pay decent dividends and have very little tech to sit alongside my various trackers.

That said, people have been calling the US overvalued for years and yet it’s still rising. Strange times all round.

I have index funds for India, Latin America, Asia, Europe, Spain, emerging funds, semiconductors (the Spanish one has done amazingly well but I need to add to my portfolio because we have too much cash it’s hard to comfortably invest at the top of the market but following the tariff crisis most of my shares were impacted - most have recovered - except the Spanish fund it just kept doing well. It made me think about alternative investment strategies in the current market of over priced is stocks. It doesn’t feel balanced when the “global”funds are so focused on so few American companies.

That all sounds quite complicated with quite a lot of doubling up.

Would suggest you sit down and think what allocation you actually want then work out how to achieve that as simply as possible. Also consider what your timeline is- if you’re staying invested for at least 5-10years maybe the fact the market seems a bit toppy doesn’t matter.

What's the problem with doubling up?

And I also don't understand why it's complicated - it's just different index funds - nothing complicated about that.

Be careful with the semiconductors. They are an isa proxy for the crypto market so will likely crash a bit in the crypto bear market - which is coming very shortly. Probably by Xmas, defo by Jan.

It depends on your investment goals and the time frame involved.

If it's long term growth - over 10 years or more, then volatility and risk are part of the deal - over time the stock market is likely to beat inflation and its unlikely you will lose capital.
If you want more stability in the shorter term and preservation of capital - for instance if you're likely to need to draw on funds such as accessing an income for a pension or other needs; or if you find the risk seems too great for your tolerance - then you are likely to sacrifice some growth over the longer term.

The usual approach for less volatility and risk is to keep a proportion of the portfolio in bonds or bond-like funds such as a money market fund. There are many discussions about the percentages but 60/40 is oft mentioned.

There are numerous platforms offering low cost products with a mix of bonds and stock market investments based on your risk appetite - including Vanguard.

As an interesting aside - Fidelity analysed its clients' portfolios between 2003 and 2013 and found that the best-performing portfolios belonged to those who hadn't touched their investments (Coincidentally, many of these thriving investors were already dead). Conclusion? leaving your investment alone is probably the most advantageous strategy. Fees from buying and selling eat into profits - and trying to time the market is ill-advised.

We've just pulled out 50% of our stocks in NVDA as its up 46% and it surely cant go much higher!

Loads of the US stocks are hugely inflated.

And the problem is the so called global index funds don’t feel very global and are very tech heavy, they aren’t feeling very diversified.

Exactly!

We've put the 50% in HL Adventurous Managed to get a bit more variety.

Thanks I know that investing in a diversified global index fund is great advice, I'm just doubting the actual diversity of these global funds and the lack of diversity makes me nervous, that coupled with the widely held view that US stocks are currently over-priced makes me want to look at index funds elsewhere.

Interesting study from Fidelity, curious choice of years? Did they get the same results for other date ranges?

2003 - 2013 is interesting because the massive crash of 2008 is slap bang in the middle - I would have thought those who panicked and withdrew in 2008 didn't do very well at all and people do have a tendency to panic sell when the price is low, it takes courage to buy when the price is low.

You’re not understanding how a global fund works. They are looking for the global best performers - and right now that is US tech. The key phrase is best performers, it just happens that they are US tech stocks at the moment. If the US tech sector tanks, they’ll no longer be the best performers and will drop out, to be replaced by the new best performers. Their only criteria is growth.

Global funds don’t look diverse at the moment because economic growth is not diverse across all sectors - US tech is far and away the best performer right now.

Global ex-US funds exist, but if you’d skipped out of US investments this year you would have missed out on a huge amount of growth.

And yes, time in the market beats timing the market.

Thank you for your thoughts, I understand they only rebalance every six months - do you know which months, for your choice of global index?

To your question about doubling up, what PP is probably pointing out is that you have a lot of index funds that cover the same areas- eg India and Latin America plus an EM fund, Spain plus a Europe fund. It's not necessarily bad if it gives you the exact balance you want but a lot of investors fall into it accidentally and then don't realise what their exposure to particular geographies is.

You don't have to be fully in the stock market or at all if you don't feel comfortable currently. Take it (or some of it) out and put somewhere you are more comfortable with. It also depends how long you are investing for, if it's very long term even if there is a big correction it will probably recover, if you are looking more short term you would worry more about big swings.

It’s hard to second guess the market. We have a spread of funds and tend to leave them unless their morning star rating drops and they end up in fourth quartile. We were in invested 2003 to 2013 and our investments are fine, we haven’t needed to access the funds so they remained invested. We continue to invest as a long term strategy and we don’t want too much cash.