u/One_Intention_7666

The S&P 500 (tracked by VOO/SPY) is concentrated in a single country (USA) which can experience downturns. To mitigate this single-country risk, an investor should diversify globally. VT is a total world stock market ETF that accomplishes this in a single fund. The speaker explicitly recommends investing in VT to achieve global diversification and avoid the risks associated with being restricted to only the US market. A globally diversified fund may underperform a US-only fund during periods of strong US market outperformance. It also holds companies in less stable geopolitical regions.

The original poster's strategy of only holding SPY/VOO creates a portfolio that is 100% exposed to the US market. To properly diversify, an investor should add exposure to international markets. VXUS tracks the total international stock market (ex-US). The speaker recommends buying VXUS alongside a US index fund like VOO to build a globally diversified portfolio and reduce concentration risk. International markets can underperform the US market for extended periods. The fund is also exposed to currency fluctuations and geopolitical risks in other countries.