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Fund Spy

Time to Revisit Your Home Country Bias

Foreign equities are currently trading near their largest discounts to U.S. stocks seen over the past 15 years.

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A version of this article first appeared in the May 2019 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor by visiting the website.

Most U.S. investors’ stock portfolios aren’t global enough. Using total mutual fund assets as a proxy, the typical investor’s equity sleeve has about a 75%/25% split between U.S. and foreign equities. Most professional asset allocators would recommend a greater international weighting; the average target-date fund has about 35% of its stock sleeve overseas, and replicating the global market cap would suggest upping the foreign stake to roughly 45%. Keeping a globally diverse stock portfolio should improve diversification without sacrificing return over the long haul.

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