Global equity investing: The benefits of diversification and sizing your allocation

Global equity investing: The benefits of diversification and sizing your allocation
Vanguard Research
February 2019

■ Regardless of where they live, investors have a significant opportunity to diversify their equity portfolios by investing outside their home market. Despite this opportunity, investors on average have maintained allocations to their home country that have been significantly larger than the country’s market-capitalization weight in a globally diversified equity index.

■ In each market we examined, our analysis indicated that volatility was reduced most with an allocation to international equities of between 40% and 50%. While this observation may help investors determine the appropriate mix of domestic and international equities, volatility reduction is not the only factor to consider.

■ This paper concludes that although no one answer fits all investors, global market-capitalization weight serves as a helpful starting point in determining the appropriate allocation between domestic and international equities. In practice, many investors will consider an allocation to international equities well below global market-capitalization weight based on their sensitivity to a number of considerations, including volatility reduction, implementation costs, taxes, regulation, and their own preferences.

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Vanguard has many educational publications and provides usable information to investors. The thematic of world diversification is an ongoing topic with Vanguard in order to help customers but also in order to put Vanguard as a global player in the world of ETF. The quality of the document in your link is that the study is quite recent.
I do not see the volatility as an indicator of the risk but more as an indecision of the market on the future. In this aspect for me volatility is more an opportunity to buy in the dip.
Diversification has the advantage that when you want to invest there may well be a sector of your portfolio that is in a dip and where it is more advantageous to invest.
The document is aimed to US investors who are overvalued in US shares. Be careful as Swiss investor, you may well be even more overvalued in the local market which is only 3% of the global market to the best of my knowledge.
I can only recommend another document from Vanguard about diversification and return versus TER.