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Kyle McIntosh, 1:58 am ET

WHEN DESIGNING a portfolio, a critical decision is how to allocate your money across stocks, bonds and other investments. Within stocks, you’ll need to make an additional choice: How to split money between U.S. and international. A quick survey of finance-related websites turns up recommendations of 25% to 40% for an investor’s foreign stock allocation.

While I agree that investors should have a meaningful percentage of their portfolio in overseas stocks, I don’t think investors should lose sleep over whether they’re at the high or low end of this range. The reason: Companies in U.S. stock funds have significant foreign exposure. Ditto for stocks in international funds.

For instance, the top five companies in the S&P 500—Apple, Microsoft, Amazon, Google’s parent Alphabet and Facebook—represent more than 20% of the S&P 500 index’s value. Based on their most recent quarterly earnings reports, I calculate that these companies on average earn more than half of their revenues outside the U.S. While the foreign sales percentage may be lower for smaller companies in the S&P 500, investors in broadly diversified U.S. stock funds clearly have substantial international exposure.

Similarly, international stock funds offer significant exposure to the U.S. economy. I analyzed the revenue mix of the top five companies in the MSCI EAFE index, namely Nestle, ASML, Roche, LVMH and Novartis. Using recent earnings reports, I calculate that an average 30% of revenues for these companies were earned in the U.S.

While these five stocks only represent 8% of the MSCI EAFE index’s value—it’s a much less concentrated index than the S&P 500—there’s no doubt that international firms have significant exposure to the U.S. economy.

My allocation advice: Instead of trying to perfect your allocation to international stock funds, spend more time making sure your overall allocation to all stocks is correct because that, more than anything, will drive your portfolio’s risk level.

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