"There are a lot of things that we would own if investors never got to look at them," Michael Batnick said on a recent episode of The Compound and Friends podcast...

"But that's not the real world," he continued. "People line-item their portfolios."

Batnick is a managing partner at Ritholtz Wealth Management. The firm has nearly 4,000 clients and roughly $5 billion in assets under management.

Importantly, the firm isn't a fund manager. It's a wealth manager. That means it works closely with clients to create holistic financial plans. So it sees the nitty-gritty of what investors get right... and what they get wrong.

The mistake Batnick described is leading many investors astray right now. It has created a "brainwashed generation"...

But if you understand what's happening, you can break away – before it costs you your investment returns.

Batnick's point on investors "line iteming" their portfolio is an important insight. Investors don't just think about their portfolio's overall return anymore... They look at the individual returns of everything they own.

And when one of the "line items" stinks, they complain.

Investors aren't stupid. For a decade and a half, experience has taught them that owning anything outside the U.S. is foolish... All it does is cost them money.

The chart below shows the S&P 500 Index compared with non-U.S. developed and emerging markets. And the disparity is clear...

As of early February, the S&P 500 had soared more than 600% over the past 15 years. That's about 4.5 times better than other developed markets... And it's roughly 8 times the return of emerging markets.

The other way to say it is that the U.S. has treated money better. As I explained yesterday, money flows where it's treated best.

So of course, the U.S. is where money has flowed...

The Investment Company Institute ("ICI") tracks money flows for mutual funds and exchange-traded funds ("ETFs"). Last year, investors poured $193 billion into U.S. stock mutual funds and ETFs. At the same time, they pulled $12 billion out of international stock funds.

This is all completely rational behavior. Why would you own foreign stocks when U.S. stocks "always" outperform?

The problem is, if you study history, you realize that hasn't always been the case...

U.S. stocks absolutely stank from 2000 to 2010. Owning almost anything else was a better bet. Take a look...

This is the same chart as above, but during the 2000s instead of the 2010s (and it includes gold for good measure).

As you can see, the U.S. wasn't always the winner. The S&P 500 managed to lose 9% over this period. That's right... It lost money over the entire decade.

Meanwhile, other developed markets didn't manage massive returns. But an overall gain of 17% sure was better than losses over a decadelong time frame.

Emerging markets and gold performed darn well, too... rising 160% and 281%, respectively.

Everyone knew this when I began my career in 2010. Gold was just as hot back then as crypto is today. And emerging markets (namely the "BRIC" markets – Brazil, Russia, India, and China) were the exciting attractions for asset managers.

In short, there was a "brainwashed generation" back then, too... but it was the opposite of today's. Those folks thought investing outside the U.S. was the obvious bet. They forgot about everything else.

Today, we're simply brainwashed in a different direction. But so far in 2025, the "obvious" bet on U.S. stocks isn't so obvious...

The S&P 500 is down about 5% so far in 2025. Meanwhile, emerging markets are up 4%, and developed markets outside of the U.S. are up 7%. And German stocks, as an example, are up 19%.

In short, we have a generation of investors brainwashed against investing outside the U.S. But right now, that's exactly what you want to do.

Don't fall into this trap. The U.S. won't win forever. And owning stocks outside the U.S. is a smart move right now.

Good investing,

Brett Eversole