I don’t know if you’ve followed too much, but U.S. stocks have trounced foreign and emerging market’s stocks over about the last eight to ten years.
It’s left foreign and emerging market stocks looking very cheap relative to U.S. stocks. What I’d say is, don’t give up on the foreign and emerging market stocks.
From 2000 to 2010, they beat U.S. stocks badly, so it’s not really that surprising that the U.S. would return the favor. Over time, international and U.S. stocks have about the same expected return and emerging markets have a higher one. Emerging markets are also much more volatile, so you wouldn’t just buy a big slug of them by themselves.
When coming up with an asset allocation strategy, consider that the U.S. is about half of the global stock market cap. Foreign stocks are about 40% and emerging market are roughly 10%. Often it makes sense to start from there and change allocations according to your situation and the markets.
Don’t avoid international stocks just because they haven’t done well recently compared to the U.S. I would usually recommend some amount and the amount that you have really depends on many factors.
My name is Mike Garry, and my company is Yardley Wealth Management. We are a fiduciary, fee-only financial planning, and wealth management firm in Newtown, Pennsylvania. (That’s in Bucks County). If you’d like to talk about this or anything else, please reach out: 267-573-1019, email@example.com or @michaeljgarry
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