Don’t Forget International Stocks

If you broaden your risk examination beyond the stocks you own to think about other financial risks – risks of real estate you own, risks to your income, and risks to your currency exposure, you might realize that many of your eggs are kept in the same US, dollar-denominated basket. Your risks actually stack on top of one another in a correlated way. For portfolio theory to give you the best returns at a given risk, you want to seek out less correlated, or non-correlated, risks.

So, in sum, even if your international stocks have underperformed your US stocks, it doesn’t mean you should give up international exposure in your portfolio. 

To restate, for emphasis: The majority of US investors are woefully underinvested in non-US assets. We are exposed to our own country’s risk to a degree people from other countries – from hard-won experience – would never, ever, dream of being.

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