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I have read in some books that a good investment strategy must be simple. Let's assume that this is true.

In the case of USA, a simple strategy would be to invest in the S&P 500 or the Wilshire 5000.

However, in the EU, it seems to me much more complex to define what would be a simple strategy, due to the fact that such market is made of several different countries (some with a different currency), with different regulations etc.

Thus, if an investor wants to achieve the diversification that the S&P 500 provides, he/she needs to invest in the whole EU, which adds more risks such as currency and political. (or I'm wrong?)

My question is which investment strategy would be regarded as 'simpler', investing in the whole EU market (simplicity through more diversification) or investing in just one developed country such as Germany (simplicity through less currency and political risk, trying to keep diversification by investing in the whole German market)?

  • Whats stopping you from investing in the S&P500? – Daniel Apr 9 at 15:48
  • @Daniel currency risk. I'm aware that the exchange between euro/pound/dollar is not that risky, still I was wondering if is safe enough. The question that is always in my mind is: 'If Benjamin Graham/Warren Buffet/John C. Bogle would write a book about investing if you are european, would the recommend S&P 500 or some european index?' – Martel Apr 9 at 15:50
  • If you want to diversify against currency risk, won´t a €-portfolio be just as bad as a $ portfolio? – Daniel Apr 9 at 15:54
  • Yes and no, because in the end I'm european and I know that (not now, but in 10 years) I will want only euros. So, if in that moment the dollar is weaker compared to the euro than today (something that I think it's unlikely, still I can't see the future) I would lose an uncertain amount of money. – Martel Apr 9 at 16:04
  • And if the $ is Stronger then the €, You would win a certain amount of money .. so? If the €-zone tanks, you will have inflation that makes you loose your money´s buying power just the same ... – Daniel Apr 9 at 16:14
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One simple strategy to invest broadly in the European markets would be to invest in the EURO STOXX 50 index.

Whether this strategy is a good idea or not is of course a different question - in the last 20 years the EURO STOXX 50 has significantly underperformed other indices such as the S&P 500 or the German DAX.

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