How Much International Exposure Should You Have?
Buying foreign stocks, ETFs, or international mutual funds can be a great way to diversify your portfolio. But first you’ll need to decide how much of your money you want to allocate to foreign investments. In part, the answer will depend on your appetite for risk and the length of your investment horizon. While there’s no “right” answer for everyone, there are a few guidelines that can help guide your decision. Slicing Up the Pie One way to begin is to look at the size of the U.S. stock market in relation to the rest of the world. Picture a pie chart of all the stock markets in the world, with each slice representing a particular country’s stock market. The bigger each market, the bigger its slice of the pie. The U.S. accounts for roughly half of the world’s total stock market value. So if you wanted to divvy up your portfolio in the same manner as our imaginary pie, you would simply invest half of your money in U.S. stocks, and the other half in foreign markets. In practice, however,
