How much should I have allocated in international equities?

I am a long-term and active investor with a usually low risk profile. One aspect of investing I am not knowledgeable on is international equities. How do I allocate international equities in my portfolio? What are the typical risk levels for investing in these equities?

Investing, International / Global, Stocks
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April 2017
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The answer to this question depends on a variety of factors. One size definitely does not fit all. However, regardless of your risk tolerance, a well allocated and diversified investment portfolio should include international equities. I wrote an article called Diversification Isn’t Enough that you might find helpful.

Another important consideration is that international equities encompass a very broad range of investments with varying levels of risk. For example, there is a big difference between a large cap stock based in Germany than a small cap stock in Brazil. I’m not suggesting one is good and the other is bad. Instead, it is a matter of risk. The point here is that these are both “international equities,” but they can have very different risk return characteristics.

If you are an aggressive long-term investor, but sticking to a broadly diversified and well allocated portfolio, 30% international equity exposure would be the limit. If you are on the other end of the risk spectrum and very conservative, you would want to limit exposure to 5%.

Typical risks in international equities include, but aren’t limited to currency, political, and regulatory risks. This is in addition to other risks common to equities. I wrote an article called Investing Decisions And Tuning Out The Noise that can help you stay focused on what’s important and what isn’t.

Please note that this should not be considered investment advice and is only educational in nature. Please be sure to consult with your own legal, tax, or investment advisor regarding your specific situation.

Best of luck!

David N. Waldrop, CFP®

April 2017
April 2017
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April 2017