What Percentage of My Portfolio Should Be in International Stocks 2019?
The question of how much of your investment portfolio should be allocated to international stocks is a common concern for investors. As the world becomes increasingly interconnected, investing in international markets has become more accessible and appealing to many individuals. However, determining the right percentage of international stocks in your portfolio requires careful consideration of various factors. In this article, we will explore the importance of international diversification and provide insights into how you can determine the optimal allocation for your investments in 2019.
Why Invest in International Stocks?
Investing in international stocks offers several advantages. Firstly, it provides diversification benefits by spreading your investments across different countries and economies. This reduces the risk of overexposure to a single market, which can be particularly significant when domestic markets experience downturns. Secondly, international stocks can offer exposure to sectors and industries that may not be well-represented in your domestic market, enabling you to tap into new growth opportunities. Lastly, investing in international stocks allows you to benefit from the potential gains in emerging markets, which have shown high growth rates in recent years.
Determining the Optimal Allocation:
There is no one-size-fits-all answer to how much of your portfolio should be allocated to international stocks, as it depends on your individual circumstances, risk tolerance, and investment goals. However, financial advisors often recommend allocating between 10% to 30% of your total portfolio to international stocks. This range provides a good balance between diversification and minimizing potential risks associated with investing in foreign markets.
Factors to Consider:
1. Risk Tolerance: Investors with a higher risk tolerance may opt for a larger allocation to international stocks.
2. Investment Goals: If you have a long-term investment horizon and are seeking higher returns, a higher allocation to international stocks may be considered.
3. Home Country Bias: Investors with a significant home country bias may choose a higher allocation to international stocks to mitigate concentration risk.
4. Currency Risk: Consider the impact of currency fluctuations on your international investments and whether you are willing to bear that risk.
Frequently Asked Questions (FAQs):
1. Are international stocks riskier than domestic stocks?
No, international stocks are not inherently riskier. However, investing in foreign markets does introduce additional risks such as political instability, currency fluctuations, and regulatory changes.
2. How do I access international stocks?
You can invest in international stocks through mutual funds, exchange-traded funds (ETFs), or by directly purchasing shares on international stock exchanges.
3. Should I invest in developed or emerging markets?
This depends on your risk tolerance and investment goals. Developed markets tend to be more stable, while emerging markets offer higher growth potential but also higher volatility.
4. How can I mitigate currency risk?
You can consider using currency-hedged ETFs or diversifying your international investments across different currencies.
5. Should I invest in individual stocks or funds?
Investing in individual stocks requires more research and monitoring, whereas funds provide diversification and professional management. Consider your expertise and time commitment before making a decision.
6. Do I need to monitor international markets more closely?
It is recommended to stay informed about international events and market trends, but this does not necessarily require constant monitoring.
7. Can I invest in international stocks through my retirement account?
Many retirement accounts offer the option to invest in international stocks. Consult your account provider or financial advisor to determine the available options.
8. How often should I rebalance my international stock allocation?
Rebalancing should be conducted periodically, typically once or twice a year, to ensure that your portfolio remains aligned with your investment goals.
9. Are there tax implications when investing in international stocks?
Yes, there may be tax implications such as foreign tax credits or withholding taxes. Consult with a tax professional to understand the specific tax implications in your country.
10. Can I invest in international stocks directly without going through a broker?
Some international stock exchanges allow direct investment, but it may require additional paperwork and fees. Check with your broker or financial institution for available options.
11. Should I consider investing in international bonds as well?
International bonds can provide diversification benefits similar to international stocks. However, their risk and return characteristics may differ, so consider your overall investment strategy before including international bonds in your portfolio.
12. How can I stay updated on international market news and trends?
Utilize financial news websites, subscribe to newsletters, and follow reputable financial analysts to stay informed about international market developments.
In conclusion, investing in international stocks can be a valuable addition to your portfolio, offering diversification and potential growth opportunities. However, determining the appropriate allocation requires careful consideration of various factors. By understanding your risk tolerance, investment goals, and other relevant factors, you can make an informed decision on what percentage of your portfolio should be allocated to international stocks in 2019. Remember to consult with a financial advisor to tailor your investment strategy to your individual circumstances.
