International Equities (Top 4 Reasons To Invest)
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International Equities Are Worth Another Look

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Updated October 5, 2020

Trust Point

We are proud of Trust Point’s century of service reputation of excellence. But, our approach and purpose has always been focused on the future. Not just our own company’s future - but, more importantly, our client’s futures.

4 Reasons to Invest Internationally

Is investing internationally worth it? You likely may be locked into a home bias, not realizing how much this lack of diversification is costing you over the long term. While international equities have lagged their U.S. counterparts lately, there are still some excellent reasons to consider an allocation to investments outside of the U.S.
Financial markets around the world change rapidly in response to news and events and by avoiding international stocks you are excluding a large portion of the global opportunity set. In fact, international stocks represent almost 44% of the global market – a figure too large to ignore.

International equities graph

1. Positive International Outlook

U.S. stocks have had a great run, but will that continue? While we believe the price/earnings ratios for stocks are some of the best indicators of future returns, we also recognize that you must take into account valuations from a fair value standpoint, factoring in global economic and market changes. Based on these valuations, the expected return outlook for non-U.S. stocks over the next 10 years is higher than that of U.S. stocks.

Sources: Vanguard Investment Strategy Group

2 Volatility Reduction

2. Volatility Reduction

Having a mix of international and U.S. stocks has historically tamped down the volatility in portfolios. Of course it’s natural to be concerned about geopolitical risk, but having a mix of U.S. and international can actually reduce portfolio risk.


Adding international stocks to a portfolio can carry diversification benefits because of the less-than-perfect correlations due to differences in economic cycles, fiscal and monetary policies, currencies and sector weighting.
As you can see in the chart, the maximum volatility reduction benefit of adding an allocation to international equities occurs between the 20%-50% range.

3 Exposure to some of the top companies

3. Exposure to Some of the Top Companies in the World

Not all great stocks are found in the domestic markets as companies based outside the U.S. make up nearly half of the value of stocks worldwide.
By only investing in U.S. stocks, you miss out on leading companies found in the emerging and developed markets. in fact, Alibaba, Tencent, and Nestle are names found among the top ten largest companies.

Sources: FTSE Global All Cap Index as of March 31, 2020

4 Higher dividend year

4. Higher Dividend Yield

Another reason to look beyond U.S. borders is the higher-yield-generating opportunities available outside of the U.S. While domestic dividend-oriented strategies have fared well, international stocks can offer favorable dividend values. An international portfolio has historically experienced a higher dividend yield than that of a U.S.-only portfolio.

Sources: Vanguard and FactSet as of March 31, 2020.

Notes: Non-U.S. equities represented by MSCI World Index ex USA and U.S. stocks are represented by the MSCI USA Index from March 31, 1970, through March 31, 2020. Past performance is not guarantee of future results. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in and index. Sources: Derived from data provided by Vanguard and MSCI as of March 31, 2020.

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Trust Point

We are proud of Trust Point’s century of service reputation of excellence. But, our approach and purpose has always been focused on the future. Not just our own company’s future - but, more importantly, our client’s futures.