Morningstar's International Investing Week
Get our read on global market valuations and performance, strategies for your overseas allocation, plus our favorite investments in foreign developed and emerging markets.
No matter how well-traveled they are, when it comes to their portfolios, investors stick close to home. Compared to a market-weighted global index of the world, Americans were about 30 percentage points overloaded in U.S. stocks, according to a 2012 Vanguard study. The story is the same for Canadian, Australian, and U.K. investors, who showed an even more dramatic home-country bias.
Not that such a preference is without reason. The Vanguard paper cites an affinity for the familiar, concern over higher investment costs and corporate governance in some foreign markets, and a desire to avoid currency volatility, among other factors. The last point has certainly been a headwind for U.S. investors venturing overseas in recent times; as the dollar has gained strength, foreign funds that don't hedge their currency exposure (which is most of them) have felt some pain. In addition, high correlations between U.S. and foreign stocks have led some to question the diversification benefit.
But shutting out international markets means closing the door on a world of potential investment opportunities, including several wide-moat names and topnotch equity managers. And given our increasingly interconnected planet, where about one-third of S&P 500 companies' revenue comes from foreign sales, the world may come to your portfolio even if your portfolio wants to stay home.
During our International Investing Week, May 18-22, we posted new reports on world market valuations, our top overseas picks, best practices for allocating a portfolio to foreign markets, and insights from some of our favorite international managers.
Our Top International Picks
Monday: The State of International Markets Today
We kick off the week with an overview of the global economic picture, a look at market valuations (versus Morningstar's fair value estimates) by region and country, and market performance updates from our U.K. and Australia editors.
Global Economy: Biggest Concerns and Bright Spots
Multiple risks brewing in China may be tempered by continued accommodative central bank policies, says Morningstar Investment Management's Francisco Torralba.
The World Over: Good Values Are Harder to Find
A runup in European stocks has left the region moderately overvalued, while Asia market valuations are even more stretched, according to Morningstar's fair value metrics.
Managers See Reforms Driving Growth in Asia
Top-rated managers say that initiatives in India and China are freeing up capital, promoting growth, and creating opportunities for investors, reports Morningstar Australia's Christine St. Anne.
U.K. Investors Vote Against Uncertainty
Equities popped after Prime Minister Cameron retained power, but valuations may be getting overstuffed, writes Morningstar U.K.'s Emma Wall.
Tuesday: International Investing & Portfolio Matters
Christine Benz offers guidelines for setting your foreign allocation and digs into what international correlations are telling us today. Plus, get perspective on currency risk in your portfolio.
How Much Foreign Stock and Bond Exposure Do You Need?
One-size-fits-all answers are few and far between, but we provide a few guideposts.
Do Foreign Stocks Really Diversify?
Correlations between U.S. and foreign stocks have generally been rising over the past several decades, but that doesn't mean you should shun overseas holdings.
Fretting Over Currencies?
If you're following a long-term investing plan, no need to worry.
Taking a Strategic Approach to Currency Exposure
A strong dollar aside, think risk first when it comes to currency exposure.
Wednesday: Investing in Developed-Markets Stocks
Get a shortlist of Morningstar's favorite developed-markets mutual funds and ETFs, and moat-worthy foreign-based companies trading at a discount. Plus, learn where
David Herro is seeing opportunity today in our latest Manager Insights interview with the Gold-rated Oakmark International (OAKIX) manager.
Morningstar's Favorite Developed-Markets Stock Funds and ETFs
Whether you prefer an active or an index approach, our analysts say these are the best of breed.
Herro: Look to Europe for Value
European multinationals are still some of the cheapest companies in the global universe today, says the Oakmark International manager.
3 Undervalued Foreign Stocks
As a whole, non-U.S. markets don't look cheap, but there are some values.
Thursday: Investing in Emerging-Markets Stocks
On Thursday, we'll highlight some of our favorite emerging-markets funds and ETFs and discuss some of the opportunities we see in developing markets today. Plus, get insight on emerging-markets' recent sluggish performance and current potential from Seafarer Overseas Growth and Income's (SIGIX) Andrew Foster, who has been identified as an Undiscovered Manager by Morningstar analysts.
Morningstar's Favorite Emerging-Markets Funds and ETFs
Top picks for indexing and active-management aficionados.
Investing in Emerging Markets Today
Reforms are stirring up a lot of optimism in emerging markets, but investors should make sure their exposure isn't too concentrated in any one market, says Morningstar's Patty Oey.
Seeking Sustainable Growth in Emerging Markets
Seafarer manager Andrew Foster has outpaced sluggish developing-world markets over the last three years by seeking stable growers.
Frontier Markets Begin to Emerge
But for investors, frontier-markets funds have short track records and carry unique risks.
Friday: Investing in International Bonds
We'll wrap up the week by diving into global and emerging-markets bonds, which have been one of the fastest-growing categories that Morningstar tracks. Scan our list of favorite world-bond funds, review the pros and cons of EM bonds, and hear from Gold-rated Templeton Global Bond (TPINX) manager Michael Hasenstab.
Morningstar's Favorite International-Bond Funds
Our highest-conviction picks in the world-bond and emerging-markets-bond categories.
Hasentab: Flexibility Key in Global Bonds
The Templeton Global manager discusses recent Europe bond volatility, the outlook for the dollar and emerging markets, plus the need for a dynamic approach to international bonds.
Emerging-Markets Bond Funds: What You Need to Know
Why they're attractive, the four variations, and why investors should take a tactical rather than a strategic approach with these funds.
Jason Stipp does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.