Why hold foreign stocks in your portfolio?
Over 40 percent of the world’s stock market value is outside of the U.S. An all-domestic portfolio excludes 40 percent+ of the possible investment choices.
For each of the last 15 years, the U.S. has not been the nation with the top-performing stock market. If you look at 10-year average returns, the U.S. ranks 12 out of 24 countries in percentage gain in native currencies and sixth after taking into account the currency exchange of a strengthening dollar.
As the dollar continues to fall against foreign currencies, positions in foreign stocks and bonds will benefit.
Foreign stock markets tend to do better than the U.S. stock market by one or two percent annually, over long time periods.
Foreign markets don’t move in sync with U.S. markets. Holding 20 percent of your equity portfolio in foreign stocks likely will decrease total volatility.