With 13 years of experience in international equities and having lived abroad for the same amount of time, not to mention my travels to around 60 countries, you might find it surprising that I don’t invest much in international stocks. I’ve come to believe that the risks don’t quite justify the rewards, especially considering the wealth of lucrative investment opportunities right here in the U.S.
If you’re feeling like you’re missing out by not investing internationally, I’d suggest not worrying too much about it. From my perspective, you’re not missing much. In fact, I’d argue that investing heavily in U.S. stocks is more than sufficient. Here’s why:
- Diverse Opportunities: The U.S. market offers a plethora of stocks and other risk assets that allow for ample diversification.
- Familiarity and Comfort: There’s a certain comfort in investing in markets that you understand well and can relate to.
- Valuation Challenges: Valuing international stocks can be tricky due to higher corporate governance and geopolitical risks.
- Predictability Issues: It’s tough to predict which international stocks or countries will outperform.
- Quality and Standards: The U.S. boasts a large number of top-tier companies, whereas accounting standards can vary significantly outside the U.S.
Despite the historical data showing that the U.S. hasn’t always been the top performer in the stock market, the risks associated with international investing, such as geopolitical instability and currency fluctuations, often outweigh the potential benefits. For instance, the performance of international stocks can be highly unpredictable, and while they can serve as a hedge against U.S. market underperformance, the timing and duration of their outperformance are uncertain.
Moreover, the challenges of identifying which international stocks will outperform add another layer of complexity. For example, investing heavily in Hong Kong stocks might seem appealing, but ongoing issues related to China’s policies could continue to impact their performance negatively.
Instead of navigating the complexities of international markets, why not focus on the S&P 500 or select individual growth stocks in the U.S.? This approach simplifies your investment strategy while still offering significant growth opportunities.
For those who still want some international exposure, consider investing in American Depository Receipts (ADRs) of major international companies or in U.S. multinational corporations that have substantial overseas revenues. This way, you can benefit from global markets without straying too far from familiar territory.
In conclusion, while international stocks can offer unique opportunities and diversification, the potential risks and complexities often make them less appealing compared to the robust and familiar U.S. market. Investing domestically not only simplifies your strategy but also keeps you within a market environment you understand better, potentially leading to more informed and successful investment decisions.
