International and US Stocks in a Portfolio

In a recent CNNMoney.com article, “Foreign ETFs to buy now”, The Mole provides investors with useful tips about investing in international funds.

It is recommended to have exposure to international stocks; it is recommended to have exposure to US stocks as well. According to The Mole, there are several reasons why not having US stock exposure is a bad idea. First, the “United States comprises roughly 42% of the world market capitalization”. If you were to not have US stocks in your portfolio, you would be leaving a huge gap in your global portfolio. Second, US stocks have lagged behind the rest of the world. If you invest if international funds now, you are performance chasing and buying high.

The Mole considers a global portfolio with a ratio of two-thirds US stocks and one-third international stocks optimal. A larger percentage of US stocks is recommended because it helps protect investors from currency risk.

The Mole recommends the Vanguard FTSE All World Ex US (VEU) and the iShares EAFE fund (EFA). Both funds have expense ratios under .40%.

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