Investing Strategy
International Diversification: Is It Still Worth It?
International diversification remains relevant because global markets do not move in perfect lockstep over long periods. It can improve diversification even when recent returns differ.
Benefits of international exposure
- Reduces concentration in one market.
- Adds exposure to global earnings streams.
- Can improve risk-adjusted diversification over cycles.
Tradeoffs to understand
- Currency and geopolitical risks.
- Different sector composition versus U.S. markets.
- Periods of relative underperformance can test discipline.
Practical move: Diversification works over full cycles, not every calendar year.
Practical allocation approach
- Set target international range within equity allocation.
- Use broad diversified funds for implementation.
- Rebalance to target rather than chasing recent winners.
Track Global Allocation Balance