I want to validate my thinking on global diversification before commiting capital. High savings rate means I will reach my target regardless of allocation, but I do not want to sabotage myself with poor decisions.
I'm in my late 20s, tax-free jurisdiction, 5-7 year horizon to Barista FI.
* Lump sum of roughly 2x annual expenses ready to deploy
* Contribution capacity \~2.3x annual expense
* Tied to startup employment so this contribution capacity is not guaranteed
**Questions**
\- IMO diversification logic does not make sense due to correlations between regions which can spike to 0.9 during crashes, precisely when diversification would help. If everything falls together anyway, what does global diversification actually provide beyond "we do not know who wins next decade"?
\- Ben Felix frames emerging markets as a reverse lottery with negative skew (Rational Reminder Ep 191). 15 years of underperformance despite cheaper valuations. For a 5-7 year horizon, is market-cap weight the right approach or should I tilt toward developed international instead?
\- US valuations are CRAZY, AI stocks driving large portion of S&P returns. Ben Felix argues investors consistently overpay during tech revolutions. How do you reconcile valuation concerns with evidence against market timing? These seem contradictory.
Lump sum deployment: Data says lump sum beats DCA 65% of the time. Does that hold when deploying into historically extreme valuations, or is even asking this a market timing mistake?
Current allocation I am leaning toward:
45-50% US, 35-40% developed international, 10-15% EM, 100% equity for first 3 years. Deploy lump sum immediately.
What would you challenge?