There are plenty of reasons to own international stocks in a portfolio. Some investors want foreign stocks in their portfolios to round out their exposure to the global stock market and widen their investment opportunity set. Dan Lefkovitz, strategist with Morningstar Indexes, estimates that US stocks now represent more than 61% of the market capitalization of the Morningstar Global Markets Index, with foreign stocks representing the remaining 39%. Lefkovitz notes, “Most US investors have nowhere near that level of exposure to non-US stocks.”
Others may want to tilt their portfolios toward international stocks after a period of US stock dominance like the one we’ve seen in the past several years. By June 28, 2024, the return of the average US large-blend fund had trounced the return of the average foreign large-blend fund by more than 7 full percentage points annually over the trailing decade.
But before adding an international fund to …