Are you global enough?

A large number of industry-leading brands are foreign.

A mix of countries and currencies can provide diversification benefits.

Having some foreign investments in a portfolio may help reduce overall volatility.

Most of us live surrounded by the evidence of a global economy. Our phones may be from Korea, televisions from Japan, wine from Argentinaeven our coworkers may be located in far-off continents. But while our lives may have gone global, our portfolios may not have kept pace. Data from Fidelity customers suggest that millions of investors have no international developed or emerging market stock investments at all. 1 That may be a missed opportunity.

A fundamental reason to consider international investing is diversification. A big part of choosing your mix is to seek investments that are not perfectly correlatedthat means including investments that provide the potential for gains in one part of your portfolio to offset poor performance in another. That’s true for asset classesstocks, bonds, and cashbut also for countries and currencies. By diversifying, you may be able to achieve returns similar to those of a less-diversified portfolio, but with less risk, or you may be able to achieve greater returns, but with the same amount of risk. Keep in mind, though, that diversification cannot ensure a profit or protect against loss.

Analysis of historical data shows that including international stocks in a diversified portfolio can help to improve risk-adjusted returns and that the diversification benefit was greatest in the range of 20%40% of equities. Of course, data provide just a starting point. All decisions about your investment strategy should be based on your personal goals, situation, and risk tolerance.

You may want to be more conservative or aggressive based on your own situation, but regardless of where you fall on that spectrum, we think there are good reasons to consider making international stock investments part of your overall mix, says Tim Cohen, chief investment officer at Fidelity. A significant international investment exposure gives you access to other economies and opportunities, and may help to diversify your portfolio.

Fidelity has assembled a range of diversified asset mixes that represent a range of risk levels, from aggressive to conservative. In these examples, the stock portion of the portfolios varies, but international stocks usually make up around 30% of the stock investments.

Range of diversified asset mixes

For illustrative purposes only. The purpose of the target asset mixes is to show how target asset mixes may be created with different risk and return characteristics to help align with an individual’s goals and risk tolerance.

Why consider adding international stocks to your mix?