How Much Should I Invest in International Stocks?

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International stocks are an excellent way to diversify your portfolio and reduce volatility. While the risk associated with international investments is higher than domestic ones, the potential return is higher as well. Historically, the common stocks of developed foreign countries have performed similarly to blue chip US stocks. The expected volatility for these investments is about 25%.

International stocks have historically been expensive compared to domestic stocks, but the costs associated with international investments have gone down significantly in recent years. Vanguard’s US Total Stock Market ETF has an expense ratio of 0.03%, and the Vanguard Total International Stock ETF is only 0.09%. For a $100,000 investment, that means you’d have to pay about $90 annually in fees.

Although the optimal percentage to invest in international stocks varies from investor to investor, many experts recommend investing in international stocks at a minimum of 20%. The right percentage will depend on your risk tolerance and personal preference, but international stock allocation can help you increase your investment returns over the long run by minimizing risk.

One of the biggest risks of investing in international stocks is limited access to financial information. Internationally traded companies are subject to different rules and standards for publishing financial information. This means that you may be unable to access important financial information about a company’s financial performance. Moreover, the trading hours and volume of stocks may be limited. In addition, you may be subject to taxation in the country of origin.

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