They're cheap, rallying, and provide diversification. Foreign stocks are rapidly improving their stance, exceeding current stances by U.S. stocks.
Since the start of the year, the MSCI EAFE index of stocks in foreign developed markets rose 13.3%, and the MSCI Emerging Markets index soared 17.7%. Standard & Poor’s 500-stock index with a return of 9.5% is far behind.
But foreign stocks’ recent performance follows a truly abysmal decade, when they returned virtually nothing. In fact, some, like Vanguard founder Jack Bogle, fail to see the reason for risk in a foreign country.
But over longer stretches, foreign stocks have provided close to the same results as U.S. stocks. Plus, foreign stocks and U.S. stocks don’t move in lock step. Says Ben Johnson, a Morningstar analyst: “If diversification is the only free lunch in investing, investors are leaving a lot on the lunch table.”
Read more at Kiplinger.