Highest Expected Returns Not Always Best

A regular reader of my articles contacted me recently to discuss current valuations and a value-oriented strategy. He observed: “It doesn’t matter which approach you like: a value investor doesn’t prefer U.S. stocks now.”

He also pointed out that, while the MSCI World Index currently contains 58.6 percent U. S. stocks, the iShares MSCI World Value Factor UCITS ETF, based on the MSCI World Enhanced Value Index, contains just 38.8 percent U.S. stocks. He then quoted Meb Faber: “A value approach works not just by investing in the cheapest markets, but also by avoiding the most expensive.”

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