Quote:
Originally Posted by irish_bob
europeans are far worse than americans for dealing with retirement provision , most european countries have a state pension you can live on even you never paid a red cent in contributions down the years , its an unsustainable situation
americans are at a huge advantage however when it comes to the stock market , the reality is equity investing is rigged in favour of americans over european , let me explain
the s + p went up almost 20% in 2017 , not for someone who lives in ireland or germany , the dollar weakened so much that the return for someone who lives in a eurozone country was not much more than a third of that , add to that if an american bought european stocks in early 2017 , there return was even better than had they put their money in the s + p such was the rise in the euro v dollar
the situation is like this , if the dollar weakens , american companies benefit and the stock market rises , if the eurozone economy improves ( which it has ) , the euro rises against the dollar and this hurts the european stock market in euro terms , this has always been the case even you set aside the fact that the european markets always follow the u.s markets , never once has the european market been in a bull market while the u.s market was going the other way
to conclude , europeans dont see anything like the same benefits from investing in stocks as americans do and thus have on average a far lower level of investment in stocks full stop
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This goes both ways. As a US-based investor, I bought into European equities from the late 1990s through around 2007, and especially loaded-up after the dot-com bust, thinking that because Europe is less tech-heavy than the US, it would be less prone to manias or wild gyrations. I also thought that European manufacturing had a better relationship between labor and management, and was going to be more robust that American manufacturing, being less liable to offshoring or undercutting by Asian competitors. Finally, it occurred to me that precisely because Europeans have to worry less about saving for retirement, for college or for healthcare expenses than do their American counterparts, that European consumers would have more disposable cash, and therefore European companies would have more robust retail sales, and hence rising profits.
All of these conjectures turned out to be wrong. The recession in Europe was far stronger than in the US, even if US financial manipulation was its catalyst. Also, my heaviest stock purchases coincided with the rise of the Euro vs. the US dollar. Many were made when the Euro was trading at $1.4 USD or higher. In dollar-denominated terms, my European equity investment (an index fund) suffered a 72% decline from its 2007 peak to its nadir in the Great Recession. Compare that to the drop in the S&P 500 – it was staggeringly worse!
Even after including compounding of dividends, my European investment is cumulatively just barely breaking even (or possibly slightly negative!) in dollar terms, after 20+ years of buy-and-hold. This is AFTER the recent rise of the Euro and improvement in European stock markets. European equities are by far the worst-performing asset class that I’ve ever held (well, except for local real-estate, but that’s its own topic).
The irony is that if I’d “known” less, and didn’t think about international investing, and had benighted self-limitation in belief that America was an island and that nothing beyond America even exists… if I totally eschewed international diversification… I’d have done better. If I’d not had frequent international travels, getting seduced by beautiful city streets and bustling tourist-attractions and fancy hotels and the outward trappings of prosperity, maybe I’d have avoided Europe as an investment. The lesson is, that sometimes LESS knowledge is better. Sometimes dullness and the wearing of blinders lead to a more lucrative outcome.
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