Learning Center

Back

International Investing: Opportunity Overseas?

For the past decade, U.S. stocks have outperformed foreign stocks by a wide margin, due in large part to the stronger U.S. recovery after the Great Recession. In general, U.S. companies have been more nimble and innovative in response to changing business dynamics, while aging populations in Japan and many European countries have slowed economic growth.1



Despite these challenges, some analysts believe that foreign stocks may be poised for a comeback as other countries recover more quickly from the effects of COVID-19 than the United States. On a more fundamental level, the lower valuations of foreign stocks could make them a potential bargain compared with the extremely high valuations of U.S. stocks.2–3

Global Growth and Diversification

Investing globally provides access to growth opportunities outside the United States, while also helping to diversify your portfolio. Domestic stocks and foreign stocks tend to perform differently from year to year as well as over longer periods of time (see chart). Although some active investors may shift assets between domestic and foreign stocks based on near- or mid-term strategies, the wisest approach for most investors is to determine an appropriate international stock allocation for a long-term strategy.


Domestic vs. Foreign

Over the past 20 years, stocks in emerging markets have outperformed U.S. stocks but have been much more volatile. Stocks of developed economies outside the United States have yielded less than domestic stocks over the 20-year period, but have outperformed in nine of those 20 years.

Stock performance, annual total returns

Annual total returns (rounded figures): U.S. stocks were minus 12% in 2001, minus 22% in 2002, 29% in 2003, 11% in 2004, 5% in 2005, 16% in 2006, 5% in 2007, minus 37% in 2008, 26% in 2009, 15% in 2010, 2% in 2011, 16% in 2012, 32% in 2013, 14% in 2014, 1% in 2015, 12% in 2016, 22% in 2017, minus 4% in 2018, 31% in 2019, and 14% in 2020. Developed ex U.S. were minus 21% in 2001, minus 16% in 2002, 39% in 2003, 21% in 2004, 14% in 2005, 27% in 2006, 12% in 2007, minus 43% in 2008, 32% in 2009, 8% in 2010, minus 12% in 2011, 18% in 2012, 23% in 2013, minus 4% in 2014, minus 0.39% in 2015, 2% in 2016, 26% in 2017, minus 13% in 2018, 23% in 2019, and 3% in 2020. Emerging markets were minus 2% in 2001, minus 6% in 2002, 56% in 2003, 26% in 2004, 35% in 2005, 33% in 2006, 40% in 2007, minus 53% in 2008, 79% in 2009, 19% in 2010, minus 18 in 2011, 19% in 2012, minus 2% in 2013, minus 2% in 2014, minus 15% in 2015, 12% in 2016, 38% in 2017, minus 14% in 2018, 19% in 2019, 11% in 2020

Source: Refinitiv, 2021, for the period 12/31/2000 to 12/31/2020. U.S. stocks are represented by the S&P 500 Composite Total Return Index, developed ex US stocks are represented by the MSCI EAFE GTR Index, and emerging market stocks are represented by the MSCI EM GTR Index; all are considered representative of their asset classes. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Rates of return will vary over time, especially for long-term investments. Past performance is not a guarantee of future results. Actual results will vary.


A World of Choices

The most convenient way to participate in global markets is by investing in mutual funds or exchange-traded funds (ETFs) — and there are plenty of choices available. In Q1 2021, there were more than 1,400 mutual funds and 600 ETFs focused on global equities.4

International funds range from broad, global funds that attempt to capture worldwide economic activity to regional funds and those that focus on a single country. Some funds are limited to developed nations, whereas others may focus on nations with emerging economies.

The term "ex U.S." or "ex US" typically means that the fund does not include domestic stocks. On the other hand, "global" or "world" funds may include a mix of U.S. and international stocks, with some offering a fairly equal balance between the two. These funds offer built-in diversification and may be appropriate for investors who want some exposure to foreign markets balanced by U.S. stocks. For any international stock fund, it's important to understand the mix of countries represented by the securities in the fund.

Additional Risks and Volatility

All investments are subject to market volatility, risk, and loss of principal. However, investing internationally carries additional risks such as differences in financial reporting, currency exchange risk, and economic and political risk unique to a specific country. Emerging economies might offer greater growth potential than advanced economies, but the stocks of companies located in emerging markets could be substantially more volatile, risky, and less liquid than the stocks of companies located in more developed foreign markets.

Diversification is a method to help manage risk; it does not guarantee a profit or protect against loss. The return and principal value of all stocks, mutual funds, and ETFs fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Supply and demand for ETF shares may cause them to trade at a premium or a discount relative to the value of the underlying shares.

Mutual funds and ETFs are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.


Information provided has been prepared from Broadridge Advisor Solutions sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is provided for informational purposes only, and is not intended for solicitation or trading purposes. Broadridge Advisor Solutions is not an affiliate of Equitable Advisors, LLC. Please consult your tax and legal advisors regarding your particular circumstances. Neither Equitable Advisors nor any of the data provided by Equitable Advisors or its content providers, such as Broadridge Advisor Solutions, shall be liable for any errors or delays in the content, or for the actions taken in reliance therein. By accessing the Equitable Advisors website, a user agrees to abide by the terms and conditions of the site including not redistributing the information found therein.

Securities offered through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC. Annuity and insurance products offered through Equitable Network, LLC and its subsidiaries.

Janice Cobb has earned the Retirement Planning Specialist (RPS) title. The Retirement Planning Specialist title is awarded by Equitable Advisors, based upon the Financial Professional's (FP) receipt of a Certificate in Retirement Planning from the Wharton School, University of Pennsylvania. In a collaboration between the Wharton School and Equitable Advisors' affiliated life insurance carrier, coursework for the certificate was developed exclusively for Equitable Advisors FPs, and the title may be used only by FPs who have completed the required coursework and maintain the title through ongoing continuing education requirements. To verify that an FP has earned and holds the title in good standing, contact us at atretirement@equitable.com. Complaints about an Equitable Advisors FP should be directed to customer.relations@equitable.com.

Securities offered through Equitable Advisors, LLC (NY,NY 212-314-4600), member FINRA/SIPC (Equitable Financial Advisors in MI & TN). Investment advisory products and services offered through Equitable Advisors, LLC, an SEC registered investment advisor.

Annuity and insurance products offered through Equitable Network, LLC, which conducts business in CA as Equitable Network Insurance Agency of California, LLC, in UT as Equitable Network Insurance Agency of Utah, LLC, and in PR as Equitable Network of Puerto Rico, Inc. Equitable Advisors and its affiliates do not provide tax or legal advice. Please consult your tax and legal advisors regarding your particular circumstances. Individuals may transact business, which includes offering products and services and/or responding to inquiries, only in state(s) in which they are properly registered and/or licensed. The information in this web site is not investment or securities advice and does not constitute an offer.

For more information about Equitable Advisors, LLC you may visit equitable.com/crs to review the firm’s Relationship Summary for Retail Investors and General Conflicts of Interest Disclosure. Equitable Advisors and Equitable Network are brand names for Equitable Advisors, LLC and Equitable Network, LLC, respectively.

Link to equitable.com

Privacy Policy

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck