If you’re a U.S.-based investor, it’s normal to want to concentrate your investments in U.S. companies. After all, that’s where you live and work, and U.S. companies have dominated the international competition over the past few years.
But if you invest exclusively in the U.S., or neglect overseas opportunities, you’ll be missing out.
There is a lot to like about European, Asian, and emerging markets investments, especially now. They often trade at lower valuations than U. S. companies, which suggests they have more room for future price improvement ahead. Dividends and income flows are often greater overseas.
Here’s a fact that may totally surprise you. Where do you think the top 50 stocks each year, ranked by market returns, can most frequently be found? If you guessed the U.S., you’re wrong. Take a look at the chart, based on research from American Funds/Capital Group. Most of each year’s top performers are located in Emerging Markets, China, and other non-U.S. stock markets. Bet you didn’t expect that!
The Takeaway: U.S. stocks will naturally make up the core of your portfolio, but make sure to diversify your investments to include a healthy dose of non-U.S. stocks as well. Yes, that diversification helps to even out some of the market’s ups-and-downs, but it can also give you access to some of the rising global stars changing the investing landscape outside our borders.
Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.