The Global Portfolio: A Starting Point

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The Global Portfolio: A Starting Point

Rather than adding to and subtracting from your foreign stake based on market performance and risk being whipped around by market winds, a more effective approach is to set a strategic, long-term allocation to foreign stocks and stick with it, making only minor adjustments to rebalance.

Not easy advice

Unfortunately, that’s easier said than done. Even informed observers vary widely on how much to stake overseas, ranging from the "don’t bother" camp to the "all global, all the time" school of thought.

Given the fact that country of domicile doesn’t say a lot about where a company actually does business, it’s tempting to shelve the "foreign versus U.S." allocation question altogether and simply opt for a global markets index fund.

That’s a logical approach, particularly for those who are already index enthusiasts. If you buy into the concept of letting the market decide the size of the holdings in your fund, letting the market decide country weightings is a logical extension of that thought process.

But consider this

And even if you’re not ready to cede complete control of your country allocations by investing in a global stock market index fund, the geographic allocations of the global market provide a good starting point for thinking about your own allocations. Consult the allocations of an index such as the FTSE All-World Index, for instance.