Global Diversification Strategy
Learn how to diversify your portfolio internationally to reduce risk and capture global growth.
Investing solely in the US market carries concentration risk. Global diversification can reduce that risk and open up broader opportunities.
Table of Contents
1. Overcoming Home Bias
Investors tend to favor their home market. The US represents about 60% of global market capitalization. Don't miss out on the remaining 40% of opportunities.
2. Regional ETFs
Developed Markets: VXUS, IEFA
Europe: VGK, FEZ
Asia: VPL (Japan), FXI (China)
Emerging Markets: EEM, VWO
3. Currency Considerations
Currency fluctuations bring both risk and opportunity. A weaker dollar favors international investments. Over the long term, currency effects tend to be neutral.
4. Appropriate Allocation
Conservative: US 80%, International 20%
Balanced: US 60%, International 40%
Aggressive: US 40%, International 60%
Key Tips
- •Currency-hedged ETFs come with higher costs
- •Limit exposure to emerging markets due to higher volatility
- •Be sure to account for political risk as well
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