International stocks play a crucial role in diversifying a portfolio and expanding investment opportunities. According to Dan Lefkovitz, a strategist with Morningstar Indexes, US stocks make up over 61% of the global market capitalization, leaving foreign stocks with a 39% share. This imbalance highlights the need for US investors to consider adding international stocks to their portfolios for a more well-rounded approach.
In recent years, US stocks have outperformed foreign stocks, leading some investors to consider tilting their portfolios towards international stocks. However, before making any changes, it’s important to assess your current exposure to international stocks through existing holdings. While there is no set rule for the ideal allocation to foreign stocks, Morningstar’s Lifetime Allocation Indexes suggest a potential allocation of up to 39% in non-US stocks, depending on life stage and investment strategy.
For investors looking to enhance their exposure to international stocks, a curated list of the best international stock mutual funds and exchange-traded funds can provide valuable insights. These top-performing funds, with a Morningstar Medalist Rating of Gold, offer a starting point for further research and consideration.
The list includes a variety of large-cap international stock funds that focus on established markets in Europe and Asia, with limited exposure to emerging markets. These funds encompass both active and index strategies, catering to different investor preferences for value, growth, and diversification.
In addition to large-cap funds, investors may also explore small- and mid-cap international stock funds for a more nuanced approach to international investing. These funds often have a greater focus on emerging markets and offer a mix of actively managed and index-based strategies.
When considering emerging-markets funds, it’s essential to assess existing exposure to these markets and determine the role they play in your overall portfolio. While diversified emerging-markets funds can provide additional diversification, they are typically used as a supporting rather than core investment.
The Morningstar Medalist Rating serves as a valuable tool for evaluating mutual funds and ETFs based on their potential to outperform their benchmarks over a full market cycle. This forward-looking assessment considers factors such as the fund’s parent organization, management team, and investment process to determine its rating.
In conclusion, international stocks offer a valuable opportunity for diversification and growth in a well-balanced portfolio. By leveraging top-rated international stock funds and ETFs, investors can enhance their exposure to global markets and potentially improve their long-term investment outcomes.