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Investing Specialists

Why Retirees Should Consider Investing Abroad

Readers say diversification and exposure to good companies call for looking beyond the U.S.

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The last thing many retirees want in their investment portfolios is added uncertainty. Yet, when faced with the question of how much of their money to invest outside the U.S., that's just what many find.

On the one hand, investing in foreign equities and bonds provides diversification benefits. A case in point: The average foreign large-blend fund has gained 11.1% so far this year (as of May 14), while the average U.S. large-blend fund has gained just 3.6%. (During the past five years, however, the picture is reversed, with U.S. large-blend funds averaging 14.2% annual gains and foreign large-blend funds averaging 8.9%.) Yet, foreign equities--especially those from emerging markets--can be more volatile than U.S. equities. On the fixed-income side, foreign economies are often less stable than the U.S. economy and can offer a rather bumpy ride, as anyone invested in European bonds over the past few years can attest.

Adam Zoll does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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