The Case for International Investing: Growing Your Wealth Beyond Borders

Most investors gravitate toward U.S. markets—they're familiar and have performed exceptionally well recently. Yet limiting your portfolio to one country—regardless of its strength—overlooks half the global investment opportunity. International markets can expand your investment horizons in ways that can both protect and grow your wealth over time.

Breaking the Home Country Bias

Many investors unconsciously allocate most of their portfolio to domestic securities. This psychological tendency, called "home country bias," creates an investment imbalance that can expose portfolios to unnecessary risk while missing global opportunities.

U.S. markets, despite their size and strength, represent just over half of global market capitalization. This leaves a vast universe of investment opportunities untapped for those who focus exclusively on domestic stocks and bonds.

The Protective Power of Global Diversification

Market performance rarely stays contained within national borders. Different regions often experience their strongest performance during different time periods:

Economic conditions, monetary policies, and market cycles vary significantly across countries. While the U.S. might experience a slowdown, Japan could be expanding, or European companies might be increasing profits. These varying circumstances create a natural hedge within a globally diversified portfolio.

We believe that portfolios with thoughtful international allocations can reduce volatility without sacrificing returns over complete market cycles. This risk reduction occurs precisely because global markets don't move in lockstep.

Capturing Growth Where It Happens

The next decade of market growth may look quite different from the past ten years of U.S. dominance. Several factors point to potential opportunities in international markets:

Shifting Demographics

Many emerging economies have younger populations than developed nations, creating powerful consumer spending trends. Younger populations translate to growing workforces, rising incomes, and expanding consumer markets—all drivers of corporate profits and stock performance.

Valuation Perspectives

International markets currently trade at notable discounts compared to U.S. equities. These valuation differences create potential opportunities for patient investors as these gaps normalize over time—a pattern we've observed repeatedly throughout market history.

Sector Diversity

Different markets offer varied industry exposure. While U.S. markets skew heavily toward technology, international markets provide greater access to financial services, manufacturing, consumer goods, and natural resources. This sector diversity adds another layer of protection while allowing investors to participate in specialized industries with growth potential.

Building an International Allocation

Creating an effective international component requires thoughtful allocation across various market types:

Developed Markets

Countries like Japan, Germany, and Australia offer stable political environments and established regulatory frameworks. These markets provide exposure to global brands, diverse industries, and economies at different stages in their growth cycles than the U.S.

Emerging Markets

Countries like China, India, Brazil, and South Korea represent economies with higher growth trajectories. While these markets come with higher volatility, they offer exposure to rapidly expanding middle classes, infrastructure development, and technological adoption that can drive substantial returns.

The ideal mix between developed and emerging markets depends on your risk tolerance, time horizon, and overall financial goals. We believe allocations of 20-40% to international equities often provide optimal diversification benefits for most investors.

Tax Considerations for International Investors

International investing introduces tax complexities that require planning:

• Foreign tax credits can help offset taxes paid to foreign governments
• Currency fluctuations may impact returns and create tax consequences
• Different account types (taxable vs. retirement accounts) may be more appropriate for different international investments

Working with advisors who understand these nuances helps maximize after-tax returns from international holdings.

The Currency Advantage

Currency diversification represents another benefit of international investing. When the U.S. dollar weakens against foreign currencies, the value of international investments rises in dollar terms—creating a natural hedge against domestic currency depreciation.

This currency effect has amplified international returns during multiple periods in market history, most notably when the dollar declined against major currencies.

Long-Term Perspective Required

International investing rewards patience. While short-term performance may lag or lead U.S. markets, the true benefits emerge over complete market cycles.

Markets rotate leadership. Today's laggards often become tomorrow's leaders as economic conditions, valuations, and growth prospects evolve. This pattern has repeated throughout financial history and creates opportunities for disciplined investors.

The Bottom Line

International markets aren't merely an optional portfolio addition—they represent half the global investment opportunity. By expanding beyond U.S. borders, investors gain exposure to different economic cycles, growth trends, and valuation opportunities that a domestic-only approach misses entirely.

A globally diversified portfolio delivers two powerful benefits: reduced risk through broader diversification and increased opportunity through wider market exposure. Far from being an afterthought, international markets deserve a prominent place in portfolios built for long-term wealth creation.

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