Despite my extensive experience of 13 years working in international equities, living abroad for the same duration, and visiting approximately 60 countries, I don’t allocate much of my investments to international stocks. I believe the risk outweighs the potential reward, especially when there are already numerous lucrative investment opportunities available in the United States.
If you’ve been experiencing some investing FOMO by not investing in international stocks, I say don’t worry about it. You haven’t missed much. If you’ve been wondering whether you should start investing in international stocks, I say it’s probably unnecessary.
This post aims to shed light on why investing in international stocks might be overrated, advocating for focusing solely on U.S. stocks. Here’s a concise summary of the reasons behind this perspective:
Abundance of U.S. stocks and other risk assets available for diversification purposes. Comfort and familiarity in investing in what one knows, understands, and can relate to. Challenges in valuing international stocks due to heightened corporate governance and geopolitical risks. Limited availability of best-in-class companies with varying accounting standards outside the U.S. Difficulty in predicting which international stocks or countries will outperform. Performance Of International Stocks Versus Domestic Stocks
Below is a 2021 graph provided by Morningstar that illustrates stock market returns since 1988. Surprisingly, the United States has only been the top performer four times during this period. In contrast, Austria has claimed the top spot five times, while Switzerland has matched the United States’ performance four times.
This data suggests that solely investing in U.S. stocks may have resulted in underperformance compared to international stocks. However, is it so bad to come in second or third with strong gains? I don’t think so and this data doesn’t go into further detail.
Below is a chart compiled by the Hartford Funds, utilizing
