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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.

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