It's a trend we've seen again and again: Investors' enthusiasm for an asset class seems to ebb and flow with the performance of that market segment.
Foreign stocks are no exception. For example, though there are sound fundamental reasons for investing in emerging markets, it's probably not a coincidence that investors have sent scads of new money to diversified emerging-markets stock funds during the past few years. After all, emerging-markets stock funds have returned roughly 13% per year, on average, during the past 10 years, whereas most large-cap U.S. stock funds have gained less than half of that amount.
But rather than adding to and subtracting from your foreign stake based on market performance, and risk being whipped around by market winds, a better approach is to set a strategic, long-term allocation to foreign stocks and stick with it, making only minor adjustments to rebalance.
Unfortunately, that's easier said than done. Even informed observers vary widely on how much to stake overseas, ranging from the "don't bother" camp to the "all global, all the time" school of thought... read more.
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