Don't Bet on One Country

US stocks have dominated global markets for the last 15 years, leading many investors to conclude that international diversification is unnecessary. This is recency bias at work. History shows that US and international stocks take turns leading, often for extended periods. A US-only portfolio assumes the recent trend will continue forever — and that's a dangerous assumption.

The Case for Going Global

Reduce single-country risk — The US is about 60% of global market capitalization. That means 40% of the world's publicly traded value exists outside the US. Ignoring it means ignoring some of the world's best companies: Taiwan Semiconductor, ASML, Nestlé, Toyota, LVMH, Novo Nordisk.
Valuation advantage — International stocks (especially emerging markets) currently trade at significantly lower P/E ratios than US stocks. While there are reasons for this (slower growth, different sector composition), the valuation gap is historically wide — suggesting international stocks may be undervalued relative to US.
Currency diversification — When the US dollar weakens, international holdings become more valuable in dollar terms. Currency diversification protects against dollar-specific risks.
Historical precedent — From 2000-2009, the US stock market returned roughly 0% (the "lost decade"), while emerging markets returned about 10% annually. From 1970-1990, international stocks significantly outperformed US. Leadership rotates.

How to Add International Exposure

Total international ETF — VXUS or IXUS. Broad exposure to developed and emerging markets outside the US. Simplest approach.
Developed markets only — VEA or IEFA. Excludes emerging markets for a more conservative approach.
Emerging markets only — VWO or IEMG. Higher growth potential, higher volatility. Includes China, India, Brazil, Taiwan, South Korea.

How Much International Is Enough?

Vanguard and most financial advisors recommend 20-40% of your stock allocation in international. A total world ETF like VT automatically allocates at global market-cap weights (currently about 60% US / 40% international).

If you believe the US will continue outperforming, you might go with 20% international. If you're worried about US valuations or want full diversification, 35-40% is more appropriate. The exact number matters less than having some international exposure.

Key Takeaways

US and international stocks take turns leading. US-only portfolios ignore 40% of global market value.
International stocks currently trade at significant valuation discounts to US stocks.
20-40% international allocation is the standard recommendation. VXUS or VT are simple, one-ETF solutions.