Quote:
Originally Posted by swanson719
The other option to Jim's plan, though a little higher maintenance in the future, is to find a BRIC fund. Stands for Brazil, Russia, India, China. These are so called "developing" nations - the ones going through what you could an economic growth spurt. The China fund in our Roth has gone up about 8% more than any of our other funds. A lot of people advise "Buy American", but I don't know how applicable that is to investments. Even so, 75% of our investments are American.
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The main reason for concentrating in US based equities is volatility.
The markets already have their own volatility, as I am sure you are aware. Once you invest in foreign stocks, you add another layer (or cause) of volatility- currency fluctuations.
And because one has nothing to do with other, its possible two portfolios with same allocation, but one weighted heavier in foreign currencies (foreign investments) will have the foreign portfolio more volatile, without much added return (if you take on more risk, you want higher returns).
Just because the foreign currency does not move with (or against) the market as a whole is not a reason to make it a 100% diversifier.
I think 25% foreign exposure is a good move. I am 25% foreign myself.