Fishing in a bigger pond – Despite the wide range of investment opportunities available in the US, a look beyond our borders can offer a much bigger playing field: There are about 4x more publicly traded international companies than US equities.¹

Which flavor do you prefer? – Developed-market equities invest in financially mature regions such as Europe and Japan, while emerging-market (EM) equities invest in developing countries and regions such as China and Africa. EM economies typically experience faster economic growth and have an added bonus of demographic tailwinds, which could potentially boost EM stocks, though they do come with increased risks.

Zagging when the US is zigging – While volatility is an inevitable part of investing, foreign markets don’t always rise and fall in sync with US markets. Diversifying with international investments may help investors lessen the impact of volatility across the board. 

Missing the trees for the forest – Although US stocks have had a long run of strong performance, a majority of the world’s top-performing individual stocks have been consistently international (FIGURE 1). On average, 82% of the top-50 stocks globally were from non-US companies.²

A patterned past? – Since the 1970s, US and international markets have traded multi-year periods of outperformance. While domestic investors enjoyed US outperformance for the last decade, well beyond the average time frame of 8 years, international stocks finally outperformed in 2022.³ This suggests the cycle may have shifted. 

A lesson in value – Relative to the US, international stocks are cheaper, pay higher dividends, and have valuations that are well below their historical average.⁴ These characteristics may be a draw to investors who seek to capitalize on their lower prices and potential appreciation. 

The greenback impact – After remaining strong the last few years, the US dollar has generally been weakening. A weaker dollar tends to work in favor of international equities by making borrowing cheaper for foreign companies which, in turn, can help boost profits. 

The more you know – Like all investments, international investing has its own set of risks. Investors may be subject to currency volatility, geopolitical disruptions, and liquidity risks that differ from investments here in the US. To help navigate these risks, it may be beneficial to access international stocks through professional active management.

Choose your own adventure – Investors can invest internationally by tracking a passive index, by using an actively managed fund that uses in-depth research, or through strategic-beta funds that use a rules-based methodology in an effort to outperform passive indices.