Over the past decade, U.S. large-cap stocks have outperformed many other sectors and markets, helping them become a preferred asset class for many managers. However, some market experts say it is time for investors to consider expanding their portfolios to include international assets. U.S. News & World Report recently spoke with Delegate Advisors Director of Portfolio Implementation Dunkin Allison for his insights on why.
While cheap valuations and improving economies are currently two of the most reported reasons to consider international assets, Allison highlights a third: diversification. Diversified portfolios typically carry less risk than concentrated portfolios over the long-term. An effective way to achieve greater portfolio diversification is the addition of foreign assets.
“Having a global approach is probably the most prudent, just given the diversification benefit,” explains Allison. While many investors have a home-country bias because it’s the market they understand, investing solely in domestic assets is similar to “having all your eggs in any one basket.”
Despite the importance of diversifying, it is still crucial for investors to remain cautious and carefully select the right international markets for their portfolios.