Diversifying Your Portfolio and Maximizing Returns with International Stock Investments

In a recent post, a financial expert with extensive experience in international equities and investing shared their perspective on why investing in international stocks might be overrated. Despite their 13 years of experience and vast knowledge of global markets, they believe that the risk of investing in international stocks outweighs the potential rewards, especially when there are plenty of lucrative opportunities available in the United States.

The expert highlighted several reasons for their viewpoint, including the abundance of U.S. stocks and other risk assets for diversification, comfort and familiarity in investing in what one knows, challenges in valuing international stocks due to corporate governance and geopolitical risks, limited availability of best-in-class companies with varying accounting standards outside the U.S., and the difficulty in predicting which international stocks or countries will outperform.

They also presented data showing the performance of international stocks versus domestic stocks over the years, emphasizing that the United States has not always been the top performer and that international stocks can serve as a hedge against potential underperformance of U.S. stocks.

The expert also discussed the challenges in consistently identifying outperforming international stocks and countries, as well as the risks associated with investing in international markets, such as geopolitical risk, currency risk, lower market liquidity, and lower corporate governance standards.

They concluded by suggesting that investors may not need to allocate a significant portion of their portfolio to international stocks, as there are plenty of high-quality American stocks to invest in. They also highlighted the option of diversifying with Treasury bonds, corporate bonds, and real estate as alternatives to international stocks.