Trading stocks is fun - and potentially lucrative. I know this. After all, stock trading is where I cut my teeth in the finance world.
But retirement investing is a different process than trading. The former involves careful selection of global assets, to be sure you have the right mix to withstand any market condition - and yes, that includes big downturns!
Here’s a column I did for Forbes about investing in non-U.S. stocks.
Global stocks have lagged domestics in recent years. Much of that is due to outperformance of the U.S.-based FANMAG stocks: Facebook, Amazon, Netflix, Microsoft, Apple, Netflix and Google.
Not only did this lead to the S&P 500 outperforming overseas indexes, but each of those stocks outperformed the index itself, as the image below illustrates.
For the past decade, US stocks have outperformed global stocks. That is a flip from the decade between 2000 and 2009, when large-cap U.S. stocks suffered in comparison to other asset classes, including non-U.S. large cap equities.
The image below shows performance of the iShares MSCI ACWI ex U.S. ETF, which tracks an index of large- and mid-cap non-U.S. equities, vs. the S&P 500 index.
It’s advisable to hold a diversified portfolio, especially in your retirement accounts. That’s because different asset classes tend to diverge in performance. However, U.S. stocks and international stocks have been showing higher correlation in recent years - meaning their performance is growing more similar.
For the past 50 years, adding International equities to a domestic-only portfolio decreased volatility, while only slightly decreasing the return.
If you are investing in a retirement portfolio, take a minute to evaluate whether you are holding a range of asset classes, including non-U.S. equities from developed and emerging markets.
If you need help evaluating your portfolio, I can help. Contact us here