If you spend five minutes on Reddit, you’ll hear the same advice over and over:
“Just buy VOO, set it to auto-invest, and go live your life. VOO represents the 500 best companies in the world. You can’t lose.”
It’s a seductive message because it’s simple. And for the last decade, it’s worked perfectly. But in this post, I’m going to break down the hidden risks of “VOO and chill”, debunk the three biggest myths driving the hype, and show you the math behind why a total market approach, using funds like FSKAX and FTIHX, is a much safer bet for your long-term wealth.
I’ll also share a Fidelity hack most people don’t know about that allows you to do this completely free. So, if you want to build a portfolio that survives a 30-year time frame, here’s why you need to stop following the crowd.
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Myth #1: International Exposure through Sales
Let’s start with the most common myth used to justify owning only U.S. stocks. You’ll hear people say:
“Hey Money Ninja, why do I need an international fund? Apple sells iPhones in Paris. McDonald’s sells burgers in Tokyo. Coca-Cola is everywhere. I already have international exposure!”
On the surface, that sounds logical. But this is what I call “half-truth.” Yes, roughly 40% of the revenue for S&P 500 companies comes from outside the U.S. But sales are not the same thing as economic diversification.
Economic diversification isn’t about where a company sells its products, it’s about where the company is based. When you own the S&P 500, you are 100% tied to the U.S. legal and regulatory system. If the U.S. government decides to pass aggressive anti-trust laws that target tech companies, your S&P 500 fund takes a 100% hit. If the U.S. corporate tax rate spikes, your entire portfolio feels the burn. You have zero hedge.
But when you own a fund like Fidelity Total International Index Fund, ticker symbol FTIHX, you own companies like Heineken in the Netherlands, Samsung in South Korea, or Nestle in Switzerland. These companies operate under different tax codes, different labor laws, and different geopolitical risks. If the U.S. economy enters a period of stagnation or regulatory warfare, your international holdings help buffer the damage.
Plus, you have to consider local competition. Apple might sell phones in China, but they’re fighting for market share against local giants like Huawei and Xiaomi. If you only own Apple, you’re betting they will always win. If you own a total international fund, you own the competitors, too. You’re betting on the global consumer, not just one American company’s ability to dominate a foreign market.
If you only own the S&P 500, you’re risking your entire future on one single government’s ability to stay business-friendly forever. Um, hello tariffs and trade wars. That’s not a strategy, that’s a gamble.
Myth #2: The Currency Hedge
Now let’s talk about something the average person almost never considers: currency risk. When you “VOO and chill,” your entire net worth is denominated in the U.S. dollar. We live in a world where we assume the dollar will always be the king. But if you want to be a money ninja, you have to plan for the “What Ifs”.
If the U.S. dollar weakens compared to the Euro, the Yen, or the Pound, your purchasing power drops. You might see your VOO balance go up in dollars, but if the dollar itself is losing value, you aren’t getting wealthier.
When you own FTIHX, you’re holding assets that are denominated in foreign currencies. This is an automatic insurance policy.
Think about it this way: If the dollar drops 10% next year, the value of your European and Japanese stocks, when converted back to your brokerage account, goes up by 10% automatically, just based on the currency swing. This is a safety net that protects you from a domestic currency crisis.
Myth #3: The Concentration Trap
This is the part of the video that usually makes the S&P 500 only crowd angry. People love the S&P 500 because it’s diversified across 500 companies.
But is it?
The S&P 500 is a market-cap weighted index. That means the bigger a company gets, the more of your money goes into it. Because U.S. Tech has been on a tear for the last decade, the index has become incredibly top-heavy.
Right now, the top 10 companies in the S&P 500 are names like Nvidia, Apple, Microsoft, and Amazon. They make up over 30% of the entire index. VOO is basically a tech fund at this point.
If you have $100,000 in VOO, you don’t really have a broad slice of the United States. You have over $30,000 in just ten stocks. If the AI Bubble pops or if Big Tech faces a massive rotation, your diversified fund is going to drop like a rock.
This is why I prefer the Fidelity Total U.S. Market Index Fund, ticker symbol FSKAX. When you buy FSKAX, you still own the S&P 500. But you also own the other 3,000+ companies in the U.S. market. You own the small-caps and the mid-caps. You own the hidden gems that aren’t yet big enough for the S&P committee to notice.
In the early 2000s, after the Dot-Com bubble burst, the S&P 500 stayed flat or negative for years. But you know what thrived? Small caps and mid-caps. If you only owned the S&P 500, you were dead money for a decade.
The Valuations
Let’s get into why right now is the worst time to be 100% in the S&P 500. It all comes down to the P/E Ratio, which is Price-to-Earnings. Think of the P/E ratio as the price tag of a company’s profits.
Historically, the U.S. market trades at a P/E of about 16. Right now, the S&P 500 is trading significantly higher at 31. That means for every $1 of profit these companies make, you have to pay $31 to own it. That’s an expensive price tag.
Now, look at the international markets. FTIHX is trading at a P/E of about 15. You have to ask yourself: Do I want to buy the expensive asset that everyone is talking about, or do I want to buy the discounted asset that has the same level of earnings, but with a much lower price tag?
History shows that the average person buys what is popular. The smart person buys what is undervalued. Over long periods, the market always reverts back to its average. The expensive stuff eventually cools off, and the cheap stuff eventually catches up.
By holding both, you’re guaranteed to be holding the winner of the next decade, not just the winner of the last decade.
The Zero Fee Hack
So, how do we actually build this? Instead of just “VOO and chill,” I like to use the Fidelity or Vanguard 3-Fund Portfolio. This is the foundation of everything I do.
- FSKAX or VTI gets you the S&P 500 plus the 3,000 other companies that provide the diversification the S&P 500 lacks.
- FTIHX or VXUS gets you the real international exposure, the currency and legal hedge, and the valuation discount.
- FXNAX or BND are bond index funds that keeps you from panic-selling when, not if, the market crashes.
But here is the Fidelity hack I promised earlier. If you have a Fidelity account and plan to stay there long-term, you don’t even have to pay the tiny fees associated with FSKAX or FTIHX. You can use the Fidelity ZERO Funds.
Replace FSKAX with FZROX and replace FTIHX with FZILX.
Your expense ratio is now 0%. You own the entire world for exactly zero dollars in management fees. Over a 30-year time frame, that zero fee keeps an extra $60,000 in your account compared to the average investor paying 1%. That’s a brand-new car just for clicking a different button in your Fidelity account.
Now, I say long term because these funds can’t be transferred outside of Fidelity, so you’ll need to sell it if you switch to a different brokerage, which has tax implications.
The Bottom Line
Ok, I know there will be a number of people that is going to finish this video and say, “But VOO has done so well lately!”
And they’re right, it has, but that’s recency bias. The S&P 500 actually lost money between 2000 and 2010, in what people call the “lost decade”. If you started your career in 2000 and “VOO’d and chilled”, you’d have less money 10 years later.
But you know what went up? International index funds and bond funds.
Domestic, international, and bonds have been winners in different decades, so it makes sense to buy the whole world and diversify against the unknown.
Right now, we have sky-high U.S. valuations, concentrated tech risk, and geopolitical uncertainty. “VOO and chill” is a strategy built for a world that might not exist in 10 years.
On the other hand, a diversified approach is built for any world. Whether the U.S. dominates or the rest of the world catches up, you win. Whether Tech stays king or Energy takes over, you win.
Be a winner, not a loser.
